IBM Signs $1.6 Billion Contract With NiSource

IBM on Tuesday said it has signed a $1.6 billion agreement to provide business and IT services to natural gas distributor NiSource Inc., a deal that IBM said takes it to new markets.

Under the 10-year deal, Armonk, N.Y.-based, IBM will begin delivering "business transformation and outsourcing services" on July 1. Over the course of the contract, NiSource's 15 primary operating subsidiaries are collectively expected to reduce operating capital costs by $530 million.

The agreement has IBM operating a broad range of business support functions for NiSource, including processes within the areas of human resources, finance and accounting, supply chain, customer contact, billings and collections and IT.

A total of 572 NiSource employees are expected to become workers of IBM or its subcontractors. NiSource, based in Merrillville, Ind., will eliminate an additional 445 jobs by Dec. 31, 2006.

The deal reflects IBM's move to markets other than traditional IT, such as "business performance transformation services," the company said. BPTS is a market where companies look to outside vendors to improve and manage business processes, such as human resources, payroll and order to cash. IBM chief executive Sam Palmisano has said companies are expected to spend $500 billion on BPTS.