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Dell lands Boeing services deal

The PC maker says it has signed a five-year pact with the aerospace giant to provide professional services to the company's Integrated Defense Systems business unit.

Dell reported on Monday that it has signed a five-year deal with aerospace giant Boeing to provide professional services to the company's Integrated Defense Systems business unit.

Under the deal, Round Rock, Texas-based Dell said it would provide support services for desktop computers, notebook computers and workstations at the 78,000-employee Boeing division. The agreement also includes software distribution, systems installation, and repair and support services. Boeing is one of Dell's largest computer hardware customers. Financial terms of the deal Monday were not disclosed.

According to Dell officials, Boeing will pay less under the contract for certain services as time passes, part of the computer maker's growing pledge to offer fixed-price information-technology services. Vito Fabiano, vice president of Dell's managed services business, said the company would offer Boeing price breaks on maintenance tasks as they become cheaper for Dell to perform.

"You see a lot of press releases with deal values that aren't very accurate," Fabiano said. "In this case the highest price the customer could potentially pay is the price you see on the first day...we think this is one of the best ways we can win contracts against our competitors with three-letter names."

Dell first announced last year that it would begin offering customers fixed-price services agreements as it fights to win consulting contracts against rivals such as IBM and Hewlett-Packard. Among the tasks the company has said it would target with the offers are functions such as moving data to new storage equipment or installing new servers.

While the set-pricing model remains relatively unusual, analysts think that Dell might be able to increase its services revenue by tacking the deals onto its growing hardware business. Other companies--most notably Cambridge Technology Partners, which Novell eventually acquired, have offered fixed-price contracts.

Dell has not traditionally had a major presence in the consulting market, but the company is increasingly playing up its abilities as it continues to expand business that's related to servers and other backroom hardware. Boeing currently runs so-called supercomputers, or high-performance computing clusters, that are built on Dell technology.

Fabiano said that Dell will continue to push the fixed-price model and that the strategy has helped the company get closer to its goal of doubling revenue over the next few years. Dell's consulting business currently accounts for $2.5 billion of the computer maker's $35 billion annual revenue, not including an additional $1.5 billion in warrantee agreements. The executive said the consulting effort is currently growing twice as quickly as Dell's computer hardware business.

"This is the Dell model brought into services: Drive out costs wherever you can and extend them to the customer," Fabiano said. "A customer like Boeing is very savvy about its supply chain, and we're letting them look at IT services the same way they look at inventory."