IBM Signs $908M Deal With Air Canada

IBM Friday inked the largest services contract in its history--a $908 million, seven-year partnership with Air Canada to develop E-business and customer-service applications for the airline industry.

Air Canada expects to cut $130 million from its internal IT costs during the life of the contract, and to earn new revenue from jointly developed solutions. IBM will invest in various Air Canada venture capital and technology projects.

Both companies have some experience in travel and technology: IBM's Global Travel and Transportation unit has been a key infrastructure provider to the travel industry, and Air Canada was a shareholder in Galileo International, which distributes inventory from airlines, hotels, and car-rental companies to travel agents and Web sites. Galileo on July 1 agreed to be acquired by Cendant Corp., parent of Howard Johnson and Avis Rent-A-Car.

IBM, meanwhile, has been focusing all year on developing collaborative endeavors with industry insiders. It's working with Pfizer Health Solutions and Microsoft on a system to link 150,000 high-volume medical practices in a network of billing, prescription, scheduling, and receivables applications. It's also working with cancer research company MDS Proteomics to develop a mammoth database of human proteins.

For IBM, the point of collaboration "from a risk-management point of view is not so much about the financial risk of entering a new market as about the risk that we'll miss a great opportunity, or build technology that doesn't hit the mark," says Carolyn Kovacs, VP of IBM's life-sciences practice. "We see partnerships as a way to be an early entrant into important growth businesses by being out there working with companies that can lead our thinking."