IBM UNIT TO HANDLE SP'S INFORMATION SYSTEM

IBM UNIT TO HANDLE SP'S INFORMATION SYSTEM

Southern Pacific Rail Corp. hopes to save $100 million over the next decade by turning over its management information systems work to an International Business Machines Inc. subsidiary.

The contract signed Monday will pay Integrated Systems Solution Corp. (ISSC), of White Plains, N.Y., nearly $50 million a year, said Thomas J. Matthews, SP's vice president for administration.San Francisco-based Southern Pacific now spends about $60 million for the functions it will be getting from ISSC.

Contracting out the programming and operations of data processing is designed to reduce operating expenses and to obtain the most current technology in a rapidly changing field.

The $10 million annual cost reduction is worth three-tenths of a point improvement in the ratio of operating expense to revenue. SP's operating ratio was 100 in the third quarter, and the management is committed to bringing the ratio below 90 by the end of next year.

"This agreement is one of the key elements of SP's larger plan to reduce its cost structure, improve customer service and maximize its profitability," said Edward L. Moyers, SP's president and chief executive.

"It allows us to concentrate on the business of running a railroad, while providing SP customers and employees with the most advanced information services and organization available," he said.

The 350 Southern Pacific information technology workers have known for the past year that the company was planning to go outside the company for the work. Software systems application employees may transfer to ISSC under the agreement between the two companies.

About 45 employees who operate the hardware, though, will lose their jobs as the mainframe computers will be switched over to an IBM co-host system in Boulder, Colo., within four months.

The IBM subsidiary won the contract in competition with the Electronic Data Systems, a subsidiary of General Motors Corp., and Perot Systems Corp. of Dallas, H. Ross Perot's company. All three bidders submitted final contracts to the railroad and the final choice was made within the last few weeks.