C&W scraps £1.8bn IBM deal five years early

Cable & Wireless (C&W) has scrapped its 10-year £1.8bn global IT outsourcing contract with IBM five years early as the troubled telecoms company battles to cut costs.

C&W gave IBM notice earlier this month that the deal for the support of its IT infrastructure, customer service systems and electronic billing, which was signed in 1998, will now finish at the end of this year.

silicon.com can reveal that IBM staff employed on the C&W contract were officially informed of the decision in a letter last week.

Around 1,000 staff were initially transferred from C&W to IBM under the terms of the original agreement and a source told silicon.com their future is now uncertain with C&W yet to make a decision on whether it will bring any of the IT staff back in-house or outsource to another service provider.

C&W is also currently suing IBM for £128m for overcharged IT services in the UK and US. Mediation in December last year failed to resolve the dispute and a preliminary hearing is scheduled for around September.

C&W confirmed it has given notice on the contract based on "commercial" reasons.

A spokesman told silicon.com: "We have terminated the contract. We have a contractual right to terminate it and have done so in the ordinary course of business and it is a decision based on commercial grounds and our business needs now and looking forward."

IBM declined to comment.