Sprint Nextel Sues IBM Over Outsourcing Deal Gone Bad

May 25, 2006 (04:05 PM EDT)

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Outsourcing may be one of the hottest trends in technology, but Sprint Nextel Corp. is so unhappy about one outsourcing contract that the company is suing.

Sprint Nextel filed a lawsuit in the U.S. District Court of Kansas, this week, claiming a deal with IBM failed to live up to expectations. The lawsuit seeks more than $6 million in damages, according to a report in the Kansas City Star.

The lawsuit is not the first indication the telecommunications company was not satisfied with the five-year, $400 million outsourcing contract. Sprint Nextel recently revised its outsourcing agreement, reducing the amount of work allocated to IBM and rehiring some of its former technology workers.

More than 4,500 workers were affected in a bid for cheaper outsourced customer service call center support in the United States and abroad. That five-year contract, which has not been threatened, cost $2 billion.

Another 1,000 IT workers transferred from Sprint to IBM under a contract to provide software applications maintenance, according to the Star. Sprint held the agreement before merging with Nextel, and the CIO who struck the deal in 2004 and left the company later. Current CIO Richard LeFave came from Nextel.

Though the lawsuit claims IBM owes nearly 120,000 hours of work and failed to increase productivity by 6.4 percent, Sprint acknowledged that IBM disagrees with Sprint's claims.

Representatives of both companies said the companies continue to maintain a relationship, and other contracts have been extended.

"We cannot comment on specific lawsuits, but IBM continues to have a significant and healthy relationship with Sprint," IBM Spokesman Scott Cook said during an interview Friday.

Matt Sullivan, a spokesman for Sprint Nextel, said Friday that the two companies are still working on the original agreement and the lawsuit is limited to work performed in 2005.