Qantas flies high with new IBM deal

By Paul Smith | Thursday, October 01 2009

New seven-year outsourcing deal for technology program delivery work is understood to be worth about A$200 million.

Qantas has finalised the details of a new seven-year outsourcing deal with IBM for technology program delivery work, which is understood to be worth about A$200 million.

The IBM contract is part of a broader program of cost cutting at the airline known as Q Future, in which Qantas is aiming to save $1.5 billion over the next three years. The savings include $500 million in the present financial year, including $100 million from information technology changes.

The deal caused unrest involving the Australian Services Union when news of the arrangement was first relayed to Qantas IT staff in late August.

At the time 180 airline employees received job offers from IBM as part of the deal. They were informed that if they refused to take them up, they would either be offered redeployment within Qantas or redundancies.

Qantas denies that the IT work will be sent offshore and says the employees will be offered jobs with IBM Australia. The union says Qantas is taking a business risk by outsourcing its technology, and could end up spending more money on external suppliers.

Qantas' executive manager of corporate services and technology, David Hall, says the airline's ageing technology needs a mammoth overhaul.

"Qantas today reflects the burdens of a legacy business," he says. "We have over 300 different systems, over 400 applications and some 27 external providers, and we have 375 direct employees involved in governance, architecture, managed services and program delivery. We know we can do better."

Hall says he is confident that the IBM deal will provide significant benefits to the airline. A spokeswoman says IBM has been selected for program delivery because it can provide increased efficiencies and improved customer experience.

IBM's Global Business Services managing partner for Australia and New Zealand, Katie Bambrick, says about 180 Qantas staff will move over to IBM and most of the work will be serviced in Australia.

Qantas is seeking to run a leaner technology department, similar to offshoot budget airline Jetstar. Qantas spends 3 per cent of its revenue on IT and Jetstar spends less than 1 per cent.

Jetstar chief executive Bruce Buchanan says there are no plans to share systems.