CP Rail offloads IT infrastructure in $200M IBM deal

The Canadian Pacific Railway Tuesday said it would take the ongoing overhaul of its IT infrastructure to the next level through a seven-year, $200-million outsourcing agreement with IBM Canada.

Executives said about 100 employees in CP Rail’s IT department had been offered positions at IBM at the same level of compensation and benefits and would be given an enhanced career path in IT. CP Rail said it would move its mainframe and data facilities in Calgary and Toronto to IBM facilities in the same cities.

CP Rail vice-president of information services Allen Borak said the IBM deal will include management of the servers, storage and emergency recovery planning at Canada’s second-largest railway. This will free the company’s remaining in-house IT staff to continue development work on application development to better forecast, track and map the delivery of goods. CP Rail said some 2.5 trillion bytes of data move through its systems every day.

“”Cost was a major driver — we had done a lot of good things to try and achieve cost take-out, but we had reached a point where we could not take it much lower in-house,”” Borak said.

Some of the CP Rail’s major application development work will be aimed at improving the management of its intermodal trains, locomotives which carry steel containers filled primarily with consumer goods from Asia, which also move on ships and trucks. Last month CP Rail said was beginning a considerable expansion of its intermodal service by acquiring 5,500 new double-stack cars, extending track sidings in northern Ontario, making longer trains and adding locomotives in the middle of each train.

“”We want to speed of flow of our IT architecture and broaden the access to it,”” Borak said. The company will continue to develop in-house customer-facing applications.

CP Rail began a major revamp of its IT strategy almost seven years ago, when it committed $350 million to a suite of more than 20 projects. This included the implementation of SAP enterprise resource planning technology, electronic data interchange to automate train planning and an HR system linked to the corporate intranet.

The company was an early adopter of what are now standard IT projects, including the deployment of wireless LANs and handheld devices, and the installation of global positioning systems on locomotives that transmit their location by satellite to a database at a base station. CP had also moved away from its proprietary integrated office system, Merlin, and moved to more common Windows platforms.

Earlier this year CP Rail executives visited IBM’s DeveloperWorks conference in New Orleans, where the company said it was in the third year of its four-year plan to centralize its security architecture.

“”We are quite well along in the project and IBM will assist with that as well,”” Borak said.

IBM Canada president Ed Kilroy said the agreement would see CP Rail work with Big Blue’s Centre for Transportation Innovation in Boulder, Colo. The two companies will study the interconnections of freight cars, locomotives, facilities, track and train crews and develop IT-enabled business processes to make it easier to transport goods and services over railways. The IBM centre already provides these sorts of services to U.S. rail operator Burlington Northern Santa Fe, but Kilroy said there were many other clients outside the rail industry.

“”This agreement goes beyond traditional outsourcing,”” he said. “”It reflects a trend in Canada and elsewhere where we see customers want more than just an outsourcing company but a business partner with deep industry knowledge.””

Kilroy said IBM’s acquisition last year of PricewaterhouseCooper’s consulting unit has given the company considerable expertise in a range of vertical markets, which has helped attract a growing number of outsourcing clients. Recent multi-year wins include TD Bank Financial Group, MDS and National Bank.

Those blue-chip clients made the difference when CP Rail weighed its options, Borak said. He said he hopes the use of the IBM centre’s computing environment will further reduce costs, make rail cars more productive and ease logistical challenges for shippers.

“”What really stood out was IBM’s track record,”” he said.

Comment: info@itbusiness.ca

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