IBM Scores 7-Year, $1.2 Billion Outsourcing Contract with Lufthansa For IT Services

IBM can celebrate inking a lucrative contract with Deutsche Lufthansa AG to deliver IT infrastructure services for the company and the its Group affiliates. It's a seven year contract worth 1 billion euros (over $1.2 billion in U.S.currency), subject to the approval of the Lufthansa Supervisory Board and antitrust authorities.

Assuming the deal gets finalized, IBM's first order of business will be to optimize the airline's IT processes to increase efficiency. That alone is expected to generate an estimated cost savings by of an average of approximately 70 million euros (around $87.7 million) annually for the Lufthansa Goup, or 490 million euros (around $614.3 million) through the life of the contract, IBM says.

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"Outsourcing the IT infrastructure to IBM will strengthen the competitiveness of the Lufthansa Group as a whole. The transformation plan will directly improve our cost base. Together with IBM we will have access to the latest IT technologies not only to lower our cost but also to continue digitalizing our business processes in order to increase efficiency and customer focus," said Simone Menne, Member of the Executive Board and CFO at Deutsche Lufthansa AG and Chairperson of the Supervisory Board of Lufthansa Systems AG.

IBM will also focus on getting the Group's IT infrastructure ready for cloud computing, at which point it will bring in leading technologies in areas such as business analytics, mobile computing, and social business. What it all boils down to is a multi-stage transformation of the Lufthansa IT landscape.

The agreement also calls for IBM to manage Lufthansa Systems' entire data center operations, help desk and printer services, and individual infrastucture services.