Gap Inc. has signed a 10-year, $1.1 billion IT outsourcing deal with IBM, the San Francisco-based clothing retailer said in a Securities and Exchange Commission filing today.

Under the deal, IBM must meet certain performance standards that if not met, give Gap the right to cancel the contract. Gap also has the right to renew the deal for up to three more years after the initial period expires. The estimated cost for the outsourcing deal is approximate because some of the pricing will be based on actual consumption of IT services. As part of the agreement, Gap included a provision to keep its costs down while ensuring that charges don't become "significantly higher" than the market rate for these services.

The Gap, which operates more than 3,000 stores, hired IBM to streamline its IT operations and reduce costs. The move will include transferring approximately 400 Gap employees to IBM's payroll, according to the filing. As part of the deal, IBM will support data center, server and network outsourcing for Gap.

Source: 1, 2Prashanth RaiTag(s):IT+Services