IBM, Amex in services pact
Companies enter seven-year, $4B technology services agreement.
February 25, 2002: 12:20 p.m. ET
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NEW YORK (CNN/Money) - IBM and American Express Co. have entered a seven-year information technology services contract that the companies valued at roughly $4 billion.
American Express - whose business operations include travel-related services, financial advisory and banking services - said the deal will help it save "hundreds of millions of dollars" in IT costs over its term.
Under the agreement, which becomes effective March 1, IBM (IBM: down $0.45 to $98.00, Research, Estimates) will provide American Express with "utility-like" access to its computing resources, dispensing them under a model similar to telephone or electricity services.
American Express (AXP: up $0.89 to $34.54, Research, Estimates) will retain its core technology competencies, including IT strategy, strategic technology relationships, application and database development, and the management of its businesses' technology portfolios.
But for the most part, its technology infrastructure, which it claims processes roughly one billion transactions every day, will be shifted to IBM's Global Services division, an American Express spokeswoman said.
American Express, whose fortunes are closely tied to the worldwide travel industry, has been struggling financially in the wake of the Sept. 11 terrorist attacks on the United States and a recession that has caused a sharp downturn in the travel industry.
In January, the company reported a quarterly profit that had fallen more than 50 percent from the same period a year earlier. It also recently laid off 6,800 employees and consolidated some of its facilities.
IBM has agreed to offer roughly 2,000 American Express IT employees comparable positions, and the company expects that only a few employees will actually lose their jobs as a result of the shift.
"It will be a very small number, fewer than 20," said American Express spokeswoman Molly Faust.
American Express's U.S. technologies operations will be shifted to IBM in March. Its international technologies operations will be gradually shifted over beginning in May. 
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