Hertz extends IT outsourcing contract with IBM

IBM has driven out from Hertz Corp. headquarters with an early extension to the IT outsourcing relationship the companies have had since 1993.

Hertz, the world's largest rental-car company, will pay $154 million over six years to have IBM continue to provide a variety of IT services, the companies announced today. The contract extension comes about one year before the current contract was set to expire.

IBM manages IBM mainframes at Hertz's data center and provides application development and application management for Hertz's claims management and equipment rental units, said Claude Burgess, vice president of technology and e-business at Hertz. IBM also provides disaster recovery services to Hertz.

One difference with this renewal is that some of the application management and development work will be done by IBM employees in India, whereas previously, all of that work was done in the U.S., he said.

The long and substantial outsourcing relationship with IBM is a rarity for Hertz, a company that, according to Burgess, manages most of its IT tasks internally.

Hertz chose to extend the contract because IBM continues to provide good, consistent service and a knowledgeable staff with little turnover. "They are consistently graded highly by users," Burgess said.

"IBM has a long history with us. We do a lot of one-off projects, and we use IBM as consultant. If we're going to look at something new or different, IBM is certainly one of the first people we look to for advice and assistance," he said.

For example, Hertz tapped IBM recently to evaluate how the system it uses to provide quotes for car and heavy-equipment rentals to various points of sale can be improved so that quotes can be provided faster and more efficiently.

"Anything that touches [rental] rates obviously touches customer service, so we've asked IBM to take a very close look at that system and offer advice on potential re-engineering," Burgess said, adding that the retooling project, if it gets under way, would fall outside of the outsourcing agreement announced Wednesday.

While separate, this consulting project is an offshoot of the outsourcing relationship, said Buddy Meyers, IBM's managing principal for travel and transportation industry consulting.

IBM is exploring various business and technology improvements for the rate system, such as new pricing methods and supply chain concepts that could improve the utilization of rental assets, with the ultimate goal of improving the delivery of Hertz services and increasing customer satisfaction, Meyers said.

Hertz, a subsidiary of Ford Motor Co., has more than 7,000 locations in more than 150 countries. Hertz had revenue of $4.9 billion in 2001.


Copyright © 2002 IDG Communications, Inc.

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