Sidebar: Gap Checks Out on Managing IT Internally

Computerworld - Retailer Gap Inc. and IBM announced last week that they have signed a 10-year IT outsourcing deal valued at approximately $1.1 billion.
The San Francisco-based clothing retailer, which operates stores under brand names such as Gap, Banana Republic and Old Navy, is hiring IBM in an effort to streamline its IT operations and reduce costs. As part of the deal, about 400 Gap IT workers will be transferred to IBM's payroll.
IBM will manage the mainframes, servers and networks that support Gap's corporate offices and its 2,850-plus North American stores. The retailer will also hand over control of its help desk and deskside support operations, and the deal calls for IBM to install a new wireless network for Gap's stores.
Gap declined to make CIO Michael Tasooji available for comment on the outsourcing deal. IBM also wouldn't provide an executive for a telephone interview.
The estimated value of the outsourcing deal is approximate because some of the costs assessed to Gap will be based on its actual consumption of IT services. In addition, the contract includes a provision designed to keep Gap's costs down while ensuring that IBM's fees don't become "significantly higher" than the market rate for the services being provided, according to a filing that Gap submitted to the U.S. Securities and Exchange Commission.
To help accomplish that goal, the agreement allows Gap officials "to periodically perform benchmark studies ... to determine whether IBM's price for the services is consistent with the then-current market standards," the SEC filing said.
Most enterprise outsourcing contracts now include benchmarking provisions, with the cost usually split between the user and vendor, said Chris Engle, who heads Gartner Inc.'s benchmarking service.

Read more about Outsourcing in Computerworld's Outsourcing Topic Center.