When John Varney, chief technology officer (CTO) at the BBC in London, signed off this autumn on a massive, 10-year IT outsourcing deal worth nearly £1.7 billion with Germany's Siemens AG, he raised the welcome prospect of saving the pioneering UK public broadcaster £26 million a year. The decision, however, also raised a few eyebrows among his global peers, especially in the US.
"It's a disruptive deal, revolutionary for this industry," says Mitchell Linden, head of what used to be the BBC Technology North America unit in San Francisco. "Now everyone is intensely curious. We have US broadcasters, media companies and multimedia suppliers like Apple all wanting to find out what we did, why we did it and what we are going to do in the future."
What the BBC did is significant. Encouraged by pressure from the British government to cut costs and divest, the company signed the Technology Framework Contract, which gives Siemens' Business Services full responsibility for maintaining and developing the BBC's UK IT infrastructure – including networks, servers, desktops, telephones, broadcasting systems, channel platforms and distribution, IT support for 53 overseas news bureaus, and its Web site (www.bbc.co.uk).
The £26 million annual cost savings isn't the only reason the agreement is important to the BBC, though. One of the main tasks for Siemens, says CTO Varney, will be helping the organization move away from tape storage and toward making programs digitally on desktop PCs, something he believes will "revolutionize the use of technology in making and distributing programs." Such a development would make the company's content immediately accessible on multiple digital platforms – everything from the Web to mobile phones. Providing content on multiple platforms happens to be a major challenge facing the entire broadcasting industry.
As part of the deal, Siemens also gets the BBC's 1,400-person BBC Technology unit for a reported £130 million. The German company renamed the unit Siemens Business Services Media Holdings and plans to turn it into a global centre of excellence for media technologies. The new group intends to launch a "whole new proposition" for the media sector early next year, according to Siemens' head of media strategy and innovation, Vikas Agrawal, and Craig Dwyer, the chief marketing officer for the new group.
While the BBC and Siemens both claim the deal is the first of its kind in the broadcast media industry and a "transformational moment" in terms of scale and market significance, turning today's curiosity among other global broadcasters into tomorrow's contracts for the new group is another matter.
"This may mean other broadcasters look at outsourcing more seriously as an option," says Jamie Snowdon, research director of European services at IDC in London. (IDC is a sister company of Macworld's publisher.) But before it's likely to change the media industry as we know it, the venture, he adds, "needs to be a success."