by CIO Staff

Sprint, IBM in Court over Outsourcing Deal

May 26, 20062 mins

Sprint has filed suit against IBM for allegedly failing to meet “contractually promised productivity improvements for … 2005,” causing the telecommunications company to lose money instead of save it as a result of their outsourcing deal, The Kansas City Star reports.

Sprint contends that PC giant IBM owes it compensation for roughly 119,000 hours of uncompleted work, or 57 years of employment for a single individual, and the telecom firm is asking for $6.4 million, according to the suit filed in U.S. District Court in Kansas, the Star reports.

At the center of the suit is a 2004 five-year contract worth $400 million, in which Sprint hired IBM to provide IT services, according to the Star. That contract was later extended to include software application development and maintenance, and about 1,000 Sprint IT workers were shifted to IBM, the Star reports. IBM was to provide the support “through the use of IBM personnel or IBM subcontractors located both in the United States and abroad,” according to the Star.

Sprint claims IBM missed the targeted 6.4 percent productivity increase in 2005 by “a wide margin,” but IBM says the formula used to derive the amount of uncompleted work, and in turn, the amount of damages owed, is not complete, the Star reports.

Though Sprint has shifted some application development back within the company, IBM still does some IT work for the telecom firm as part of a contract that’s valid until 2011, a Sprint spokesperson told the Star.

IBM also handles customer service support for Sprint under another five-year contract worth $2 billion, and that contract will likely be extended, the Star reports.

The Sprint spokesperson told the Star that the company plans on sticking with IBM for outsourcing services in the future.

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