Auto-parts maker hitches wagon to IBM

IBM will manage computers and other information technology resources for auto-parts maker Visteon in a new 10-year, $2 billion services contract.

Visteon, whose staff of 77,000 is spread across 180 locations

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around the world, said Wednesday that it has tapped IBM's Global Services division to handle a wide range of tasks that include administering computers and computer networks, creating new software applications, and handling disaster-recovery plans.

The Dearborn, Mich., manufacturer is looking to the IBM contract to help it cut costs, interact more efficiently with suppliers, and focus on its own products, which include automotive electronics and interiors. The Ford Motor spinoff will also transfer a small number of employees to IBM as part of the deal.

"Our alliance partnership with IBM will enhance the quality of our IT services and improve our speed to market," Mike Johnston, Visteon's president, said in a statement. "This agreement gives us flexibility by making our IT expenditures variable, which allows us to adjust services to meet our business demands."

IBM will assume the role of Visteon's IT department under the deal, said Duffy Gaynor, vice president of strategic outsourcing for IBM Global Services' automotive process and petroleum units.

"We basically become their key IT operations worldwide," he said.

But the deal reaches beyond just planning networks and fixing broken PCs, IBM says. Big Blue expects to help move Visteon off Ford Motor's IT systems and transition it toward a utility-based computing model. Through a contract, Visteon will get a certain amount of computing power or data storage from IBM and use more if the need arises.

"Once we get to that (independent) state, we'll help them move to a utility-based model," Gaynor said. "The client will have the flexibility through the contract to be able to in effect pay for what it uses."

For IBM, which won a $5 billion deal with J.P. Morgan Chase in December, the Visteon contract is the latest in a series of multibillion-dollar arrangements highlighting the trend of large companies outsourcing and procuring their IT services as a utility.

The high-tech giant argues that more and more companies will forgo spending on things such as building computer networks and maintaining desktop PCs in-house, choosing instead to outsource those duties and pay for them with a monthly check.

It's a trend that IBM sees as a key to its success as it moves to diversify its own business from hardware such as servers. In addition, Big Blue is attempting to take outsourcing a step further with a new initiative it has dubbed Computing On Demand. This on-demand strategy, which ties a number of company initiatives together with IBM Global Services, focuses on developing products and business processes that allow companies to buy and use computing resources like a utility, which automatically adjusts to their needs.