Axon wins AirNZ support contract

Telecom subsidiary Gen-i has lost its desktop and server support contract with Air New Zealand to rival IT services firm Axon.

Gen-i general manager Chris Quin said while he was disappointed, the work accounted for only about $5 million of the $30 million a year Telecom gets from the airline for information and communications technology services.

"We will continue to do system support and application support and development," Quin said.

"It is still a very big relationship."

It is not clear yet whether any of Gen-i's 80 staff at the airline would transfer to Axon as part of the deal, but Quin said given the growth in the rest of the Telecom IT services business - $70 million in new contracts since it bought Gen-i last July - the company would want to retain as many people as it could.

Axon managing director Matt Kenealy said negotiations on the details of the contract start this week.

He said Air New Zealand was looking for innovative approaches to its IT environment.

"We suggested some things as part of our bid, but we are not sure which they will choose to go with," Kenealy said.

Gen-i held the contract for seven years and looked odds-on favourites to win a roll-over.

Its knowledge of Air New Zealand's systems and the fact it had infrastructure in place meant it should have been hard to beat on price. But it was coming under pressure from Air New Zealand chief executive Ralph Norris's demands for innovation and contestability as ways to drive cost out of the system.

Sources said Gen-i's case was not advanced by a last-minute meeting between Norris and Telecom's chief executive, Theresa Gattung, at which Telecom's $13 million annual travel spend was raised.

Axon will take over management of Air New Zealand's 4500 desktops and servers as well as specialised equipment such as ticket printers and luggage labellers.

Oxygen was also on the short list.

Chief executive Mike Smith said his firm would continue to compete for infrastructure services contracts outside its parent company Carter Holt Harvey.

He said to make outsourcing work, services firms must be willing to change the rules.

"We have taken $20 million out of the cost of running IT for Carter Holt, so we have a heritage in this area," Smith said. "We have ... automated a lot of what we do and developed good systems and processes. We are looking to leverage that."