The logo for IBM is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 27, 2018.
The logo for IBM is displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 27, 2018. Reuters/Brendan McDermid

The Australian Federal Government has inked a massive $1 billion deal with multinational tech company IBM. The five-year contract is expected to deliver more than $100 million in savings for the government over the course of the agreement.

Human services minister Michael Keenan said the deal would allow the entire government to secure the best possible prices of information and communication technologies (ICT) for all departments and agencies. This would prevent different pricing structures across the government, as what currently happens when agencies negotiate individually with major suppliers.

“As a major buyer of IBM’s products and services, the deal enables us to maximise the return on our ICT investments and ensures that taxpayers are always getting the best possible value for money,” Keenan said in a statement. “The deal has also been structured to enable small and medium-sized firms to engage with IBM through channel partner arrangements to ensure they also benefit.”

The government hopes to reduce its annual ACT cost by 10 percent with the new agreement by capping IT contracts at $100 million. Small to medium enterprises will also benefit from it as it is expected to free up about $650 million, apparently by redirecting the savings from the major vendors.

However, as IT News notes, the $100 million savings is insignificant compared to the nearly $10 billion a year the government spends for IT. IBM is said to hold 2,175 contracts, more than $4.2 billion, over the last 10 years.

There are four major agencies that partner with IBM today, namely, Department of Human Services (DHS), Australian Taxation Office (ATO), Department of Defence (DOD) and Department of Home Affairs (DHA). The deal will also apply to more than $300 million of existing contracts with IBM.

“This agreement is a testament to our forty-year partnership with the Australian government. It shows trust and belief in our ability to transform and provide world-leading capabilities, leveraging our investments locally in AI, blockchain, quantum and cloud. We look forward to helping the Australian government to redefine the digital experience for the benefit of all Australians,” David La Rose, IBM Australia managing director, said.