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IBM signs $1.6 billion contract with NiSource

Under the ten-year agreement, Big Blue will take over the natural gas utility's tech and business support functions.

IBM will provide business and technology outsourcing services to power company NiSource under a 10-year, $1.6 billion deal.

Big Blue will take over the natural gas utility's technology and business support functions starting July 1, the companies announced Tuesday. The project will result in operational costs savings of about $530 million for NiSource and its subsidiaries, IBM said.

Under the agreement, 572 NiSource employees will be absorbed by IBM or its subcontractors. Another 445 NiSource employees will lose their jobs by the end of 2006. The Merrillville, Ind.-based gas company will spend $35 million in severance packages and an equal amount in transition costs.

In addition to taking care of information technology functions, IBM will run NiSource's human resources, finance and accounting, supply chain, customer contact, billing and collections. This is intended to help NiSource manage overall costs and free up additional capital for investment in its core gas and electric operations, the companies said.

"IBM will work with NiSource to apply business insight, technology expertise and global delivery capabilities to optimize business performance and create long-term economic benefits," Maureen Sweeny, vice president of business transformation outsourcing at IBM, said in a statement. "This relationship is a strong example of the type of new partnerships and on-demand business value IBM is targeting in the marketplace."