IBM takes over Electrolux's PCs

Big Blue's Global Services wing begins overseeing about 15,000 computers for the household-appliances maker, as the company looks to tidy up its IT operations.

IBM's Global Services wing has begun overseeing about 15,000 PCs for Electrolux, as the household-appliances maker looks to tidy up its IT operations.

Under a deal signed in June, Electrolux began shifting control of its PCs in Europe, the Middle East and Africa to the IBM unit in September. IBM Global Services is taking over the support duties previously performed in-house by Electrolux's IT group.

IBM Global Services is assuming ownership of Electrolux's PC operations and will also administer the company's local area networks in the same geographic regions. Some of IBM's duties under the five-year contract include handling maintenance and deployment of PCs as well as keeping software on the machines up to date. IBM is also staffing a PC helpdesk for Stockholm, Sweden-based Electrolux.

News.context

What's new:
In Europe and elsewhere, IBM Global Services is taking over the appliance maker's PC operations and its LAN administration.

Bottom line:
As Electrolux cuts costs and gains flexibility, the outsourcing deal will also let Big Blue mold the company and its PCs into the IBM vision of on-demand, or utility, computing.

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As it takes over Electrolux's PCs, IBM Global Services is also working to mold the company and its PCs into the IBM vision of on-demand, or utility, computing--where computing resources such as processing power or storage can readily expand or contract with a company's needs.

Art Cox, Electrolux's vice president of IT, said the company entered into the outsourcing deal mainly as a way to reduce costs and to boost the efficiency of its IT group, which serves a number of Electrolux divisions.

"We looked at the desktop as being nonstrategic to us," Cox said. "We figured since it's not strategic, that we could send it off to a third party. The other reason we did it was to gain some flexibility and to put us in a position where we're standardized across the board. Every PC will be the same. I think if other companies look at (outsourcing)--I think they'll find this is a good approach."

Upfront costs
IBM asserts that such flexibility is something that companies administering PCs in-house may not be able to mirror. IBM executives point out that, based on its contract, Electrolux can quickly add PCs "on demand" for new hires. Whereas it would normally pay upfront to buy new a PC, Electrolux will instead simply adjust the fee it pays IBM. Electrolux can do so because its contract lets it pay IBM based on the number of PCs that IBM is servicing. Under the contract, Electrolux is not required to buy IBM PCs. Electrolux can also vary the number of PCs covered by IBM based on its computing needs, following the on-demand model.

IBM, which first outlined its on-demand strategy a year ago, asserts that companies should be able to treat computing power and data storage like utilities, such as electricity or gas. It has since begun delivering software and services to support the effort.

Electrolux isn't alone in turning to outsourcing. IBM Global Services says that 50 percent of its IT outsourcing contracts include at least some degree of PC management. But the Electrolux deal is an early example of a company allowing IBM to sweep up its PCs in its on-demand vision.

Companies that turn to outsourcing most often do so to cut costs. But they're also more willing to make the move these days because PCs are increasingly seen as less of a strategic business tool and more as a piece of office furniture, said Dean Douglas, vice president of IBM Global Services.

Furniture or not, efficiently managed PCs can boost a company's fortunes by lowering its overall costs, Douglas asserts.

"It becomes another step in the process of trying to rein in the cost of PCs," Douglas said. "PCs are viewed as a commodity. It's not as if you're going to be doing a lot of differentiation based on how you deploy PCs. You do that with the software that's installed on them, so the problem comes down to managing the (PC) itself."

Financial expectations
That is where IBM wants to step in. IBM Global Services will work to spread the same software image--or collection of operating system, driver and application software--across all of the PCs it manages. It will also oversee future software updates and PC replacements, and it promises to take care of these tasks for less money than a company would otherwise spend.

Typically, companies expect to be able to save at least 15 percent to 20 percent before signing on the dotted line, Douglas said.

"I don't think anyone's going to outsource for less than 15 percent savings," Douglas said.

Outsourcing, IBM Global Services says, is also a way to adapt PCs to IBM's on-demand computing environment.

Although the approach is not as immediate as other on-demand techniques such as providing companies with services that allow them to tap IBM's computing power or to automatically boost data storage space, PC outsourcing can allow companies to refresh existing computer hardware on a more rigid schedule or add new PCs quickly for new employees without making large capital expenditures, Douglas said.

In this case, "what on-demand really does is give customers the ability to address their front-end costs," he said. "What you end up with is the PC is not a discrete hardware device, it's a service like a cell phone. People don't think of a cell phone as a hardware device. They think of it as a service."

Risks still exist
There are still risks involved with such outsourcing, however.

Companies take a chance on at least some disruption when shifting from one method of managing their PCs to another, especially if communication between the company doing the outsourcing and its contractor is not clear, said Bob Sutherland, an analyst with Technology Business Research.

But "big companies can see (outsourcing) as an opportunity," Sutherland said. The "thinking about PCs has shifted. A few years ago companies were spending $4,000 for a PC, and there wasn't one on every desk. Now it's a game of managing the long-term costs (of PC ownership). There are a lot of hidden costs behind just the price tag of a unit."

Ultimately, Sutherland said, both companies stand to gain, if IBM can manage PCs without losing its shirt and can save its customers some money on their end.

If all goes well for Electrolux, the company can opt to extend its contract with IBM for another two years. It may also consider expanding the arrangement to Australia, North America and South America, Cox said.

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