Nortel inks $3B outsourcing deal

Canadian telecommunications equipment giant Nortel Networks announced last week it has signed a seven-year, $3 billion outsourcing agreement with Computer Sciences Corp (CSC) to manage the bulk of its internal IT operations.

Under the agreement, CSC will provide back-office information technology support, help desk, data centre management, legacy application development and support for more than 75,000 desktops worldwide to Nortel's employees. On October 1, Nortel employees will begin working for CSC's professional services team.

In a statement released last week, Nortel said the outsourcing arrangement would allow the company to focus on developing its Internet business. Last week, the company announced its plans to purchase Web-switching technology firm Alteon Websystems for $7.8 billion in stock.

Though some analysts have questioned the long-term outlook for traditional outsourcing companies that face stiff competition from smaller Internet services companies, Nortel's deal with CSC signals that many big companies are reticent about hooking up with a startup for long-term outsourcing deals, according to Joshua Randall, an analyst at US-based Kennedy Information Research Group. "Smaller e-services firms don't have the capabilities to run a seven-year deal, but [they have] more capabilities to do front-end e-business work," he said.