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IBM sambas to Brazil for IT services

Big Blue signs an IT outsourcing pact with Brazilian telecommunications company Embratel, another sign that the technology services market is continuing to shine.

IBM has landed a 10-year information technology services contract with Brazil-based telecommunications company Embratel, another sign that the IT outsourcing market remains fertile.

Big Blue said Tuesday it plans to work with the carrier to consolidate and manage all of its IT infrastructure, which is expected to save Embratel more than 30 percent of its current IT costs. For its part, the carrier will provide telecommunications services to IBM and its customers under the deal.

"With the trend in (converging) technology among communications, IT and content, our customers will benefit from state of (the) art technology from both companies," Shamim Khan, a vice president of strategic affairs at Embratel, said in a statement.

Financial terms of the deal were not disclosed.

IT outsourcing deals, which involve a business farming out control of tasks such as applications development or tech support, have been seen as a bright spot for IT services providers. Gartner has forecast that the IT outsourcing market in North America will jump from $101 billion in 2000 to $160 billion in 2005. The market research firm has warned, though, that half of IT outsourcing projects will be considered unsuccessful in 2003 because they have not delivered the expected value.

IBM's services unit competes against companies such as Electronic Data Systems, Computer Sciences and Accenture.

For the Embratel deal, IBM said the IT infrastructure operations will include mainframe computers, a storage infrastructure of 110 terabytes and 27,000 pieces of additional equipment such as PCs, laptops and printers.

The agreement will cover 11,500 users throughout Embratel's facilities.

The Brazilian company offers telecom services such as voice, high-speed data transmission, Internet, and satellite data communications services.

Revenue in IBM's services wing grew 17 percent year-over-year in the fourth quarter, to $10.6 billion. IBM acquired consulting and technology services company PwC Consulting last year. For the Armonk, N.Y.-based company as a whole, fourth quarter 2002 revenue from continuing operations reached $23.7 billion, up 7 percent year-over-year.