Qantas Airways Hands Over IT Management To IBM

Qantas Airways Ltd. has signed a 10-year, $445 million outsourcing pact with IBM Global Services that will create a utility computing environment expected to help with the airline's effort to slash more than $1 billion in operating expenses over the next two years.

Most of Qantas' 400 application servers, which are running at less than 50% capacity, will be migrated to an IBM data center in Sydney, where they will become part of a shared infrastructure used to deliver access to utility computing. Some 80% of those servers will be transitioned from Unix platforms to Linux. On the services side, IBM will provide a help desk that will integrate all of Qantas' IT service providers. That includes coordinating problem-resolution and change-management processes across all service providers; managing a portion of Qantas' IT procurement; and oversight of Qantas' IT security.

Mike Ward, who heads up travel and transportation strategy and change services for IBM Global Services, says IBM hopes to establish similar relationships with Qantas' partners, which could allow airlines to use shared servers and coordinate aircraft fleet usage to create more efficient flight connections, among other things. "It wouldn't be difficult to predict a situation that's not that far off in which efficiencies are shared across these alliances," he says.

The deal looks good on paper, says Henry Harteveldt, VP of travel research for Forrester Research. "What it really reflects is that Qantas is saying, 'Look, we're an airline, not an IT company. We're going to focus on what we do best, which is fly airplanes.'" But a deal like that does include some risk, and if properly negotiated, Harteveldt says, should ensure fast response times, redundant systems availability, and the ability for Qantas to recover some of its ceded server capacity if needed. "Qantas can't outsource to IBM and just sit back," he says. "They can't put his on automatic pilot. They need to fly this plane." Qantas, which is based in Australia, could not be reached for comment on Monday.

Qantas is an airline -industry success story, having turned an after-tax profit of $245 million on revenue of nearly $4 billion for the first six months of its fiscal year, ended Dec. 31. It turned a profit of $235.2 million on revenue of $7.8 billion for its 2003 fiscal year.