Sprint Sues IBM Over Failed Outsourcing Deal

OVERLAND PARK, Kan. (AP)--Sprint is suing IBM, saying Big Blue did not live up to its claims three years ago that it would save the telecommunications company money by taking over some of its computer programming.

Instead, Sprint said the deal ended up costing the company. It claims International Business Machines Corp. (IBM) now owes Sprint at least $6.4 million for 119,000 hours of uncompleted work - or 57 years for a single employee.

In a lawsuit filed this week in U.S. District Court in Kansas, Sprint/United Management Co. - a subsidiary of Sprint Nextel - said IBM didn't provide "contractually promised productivity improvements for 2005."

IBM, according to court documents, said Sprint is using an incomplete formula for measuring productivity and the amount of hours owed. IBM spokesman Scott Cook declined to comment on the suit.

The suit focuses on a five-year, $400 million contract that went into effect in 2004. The deal, which was extended by a year, called for IBM to develop and oversee software applications for the Overland Park-based company.

Sprint transferred around 1,000 of its computer workers to IBM as part of the outsourcing agreement.

The suit claims IBM missed "by a wide margin" its target of improving productivity by 6.4% in 2005. Sprint used a complex formula to come up with the 119,000-hour figure and said that IBM agreed to the formula when it signed the contract and two "industry expert organizations" have said the formula is valid.

Despite the disagreement, Cook said "our overall relationship with Sprint is healthy."

Sprint spokesman David Gunasegaram said Sprint has pulled back some of its IT duties but is still using IBM to perform some computer functions through a contract that's good through 2011.

IBM is also managing customer service for Sprint through another five-year, $2 billion contract.

Gunasegaram added that Sprint is still interested in outsourcing some of its functions.

(END) Dow Jones Newswires"

Posted to the site on 26th May 2006