Compuware's initial contract runs for five years, with extension provisions.
Investment banking firm BancBoston Robertson Stephens estimates the Ford contract will contribute $100 million per year to Compuware's revenues following an 18-month ramp-up period. However, the company does expect to reap a smaller, yet undisclosed, amount of revenue next year from the deal.
Responding to the contract news, six Wall Street analyst firms reiterated their "buy" or "strong buy" ratings on Compuware's stock, which was up 4 percent in midday trading.
In a report, BancBoston Robertson Stephens said the deal should allay investor concerns about Compuware's ability to generate revenue after Year 2000 revamping contracts dry up. However, the firm doesn't expect the company's future outsourcing deals to rival this one.
"We do believe that significant business exists in the $30 million to 50 million range," the report states. In the coming year, Farmington Hills, Michigan-based Compuware plans to add professional services staffing to prepare for anticipated 40-percent growth in that area.
Under the Ford contract, Compuware will run the automaker's applications such as manufacturing, marketing and sales, product development, purchasing, finance, and human resources.
The deal frees up 1,600 Ford employees who will now be reassigned to strategic business development roles, the company said. In early pilots to test the new system, the company reported increased productivity and faster software delivery. Ford's goal is to reduce implementation time and cut annual costs by 30 percent.
Compuware, with fiscal 1998 revenues of more than $1.1 billion, competes in a crowded enterprise software market that has a projected value of $50 billion this year. That market is driven by continuing investments in mainframe systems, replacement of older computer systems, and the Year 2000 issue, which is leading companies to replace and fix noncompliant systems.