Keane Lands Multimillion-Dollar Outsourcing Deals

The turn of the century is just a little more than 10 monthsaway, and vendors that had reaped much of their revenue fromyear 2000 projects are shifting gears. Year 2000 workaccounted for 37% of Keane Inc.'s $1.1 billion in revenuelast year, but the company is now winnowing that down withlarge applications-management and -development outsourcingcontracts, such as the five-year contract it announcedyesterday with SuperValu Stores Inc. The agreement, whichKeane president Brian Keane says is "worth over $20million," ironically follows a decision by the supermarketchain to close one of its less profitable stores because, inpart, it would have cost too much to bring that store'ssystems into year 2000 compliance.

Under the contract, Keane will provide support andenhancements for SuperValu's mainframe legacy applications,including its homegrown applications for distribution,warehousing, and logistics. In addition, Keane plans toreplace most of the company's "significant" applicationswith purchased packages as well as to replace its mainframesystems with a mixed Windows NT and Unix client-server environment.

Next week, Keane is expected to announce an applicationoutsourcing agreement with Dominion General InsuranceCompany of Canada, based in Toronto. Unlike SuperValu,Dominion already had a relationship with Keane for year 2000services. Under terms of the contract, a five-year dealvalued at more than $10 million, Keane will support andmaintain Dominion's existing legacy systems. The contractwill allow Dominion to concentrate on new technologies andpackaged applications that will eventually replace itslegacy applications. Analysts expect Y2K revenue to accountfor 15% to 17% of Keane's revenue by the fourth quarter ofthis year, and about 20% to 25% of its total revenue for theyear.