IBM Signs $1.25 Billion Cloud Deal With WPP, Says More Coming

IBM is enjoying a wave of major technology outsourcing deals from European customers in the fourth quarter and the new contract signings are not over yet, an executive for the computer services giant said in an interview.

Late on Tuesday, IBM announced the third in a string of billion dollar plus contracts, saying it had won a seven-year, $1.25 billion (roughly Rs. 7,738 crores) deal with WPP, the world's top advertising firm, to run WPP operations in the cloud.

On Monday, IBM disclosed a multibillion-dollar deal to provide computer infrastructure services to Dutch bank ABN Amro. And last month, Lufthansa agreed a $1.25 billion contract for IBM to take over the German airline's information technology operations and staff.

Bart Van den Daele, IBM's general manager for strategic outsourcing in Europe, said big contract signings slowed in the depths of the euro crisis but that the region's customers are ready to play catch-up.

"(There's) a new wave of these deals which is still continuing and we see it going forward," Van den Daele said in a phone interview, referring to cloud contracts. He did not specify, however, whether these deals would be similar in scale to the recent billion-dollar plus awards. "Now you see the first results with Lufthansa, ABN Amro and WPP and there will be others," he added.

The common theme among European customers is their growing willingness to embrace the global corporate shift to Internet-based computing, or so-called cloud services, but while demanding several local twists, he said.

IBM seeks to differentiate its offering by focusing on hybrid clouds, which mix together the private, on-premise computer systems for which it has long been known with newer public-facing Internet, mobile and analytics systems, allowing clients to move existing systems to the cloud at their own pace.

This hybrid approach means companies can wait for years before they consider moving their most sensitive core financial systems to the cloud computers. It also gives them the option of never having to move.

Secondly, European clients demand that their data remain stored locally in European data centre, a requirement IBM has met by building seven public cloud data centres across Europe in London, Amsterdam, Paris and one in Germany, with another to follow there shortly.

WPP's deal will allow the London-based company to stitch together the operations of the more than 300 agencies it has acquired through a relentless roll-up of the advertising business over the past decade and more.

WPP signed its contract last quarter but it only went live recently, IBM's Van den Daele said. ABN was signed in the fourth quarter, while Lufthansa was also agreed this quarter but it won't start up until early 2015.

© Thomson Reuters 2014