Biz game in the mainframe: T-Systems buddies up with IBM

Subject to German competition authority approval, natch

IBM is to buy Deutsche Telekom's ailing maniframe unit, according to multiple sources.

IBM's new mainframe

IBM talks 'emerging, high value segments' – so you know the Q3 numbers aren't great


A docket on Germany's competition authority website that appeared on New Year's Eve refers to an "acquisition" by IBM Germany of certain "assets of T-Systems International GmbH" in the "IT services" and "IT outsourcing" sector.

IBM is reported by IT Zoom to have paid €860m for the business, currently housed in Deutsche Telekom's subsidiary T Systems.

However, T-Systems told The Register: "This is not a sale of the business segment."

"T-Systems will continue to offer the services in the market and supply them to the customers, while IBM will provide a share of the services."

T-Systems is in the throes of a painful restructuring, reducing its footprint from 100 cities to just 10, and last June, boss Adel Al-Saleh confirmed that 10,000 would be shaved from the company's 37,000-person headcount.

Big Blue told us: "IBM and T-Systems plan to enter into a services agreement in the field of mainframe services. Existing customer contracts will remain unaffected. T-Systems will continue to offer mainframe services, but will subsequently provide these services with IBM."

Hundreds of T Systems people are reported to be transferring under the new mainframe deal, with Handelsblatt claiming 400 employees would be moving to IBM. We have asked both vendors for comment about that number.

The German business paper reckoned the T-Systems volume going to IBM will be worth around €800m over 10 years.

In Deutsche Telekom's Q3 2018/19 financial report, T-Systems was identified as the source of write-downs that kept the telco's earnings growth to 6.2 per cent. Senior VP for investor relations Hannes Witting noted that most of the headcount reductions were scheduled for 2019.

Meanwhile IBM's Technology Services and Cloud Platforms - where the bulk of its business is done and where the real mainframe money can be found - was down 2 per cent on the year last quarter. Big Blue will announce its Q4 results on 22 January.

The deal with IBM is subject to regulatory approval from Germany's competition watchdog, the Bundeskartellamt Office, but if it gets the go-ahead, the tie-up is due to take place in May. ®

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