Drinks business giant Diageo has signed a seven-year outsourcing agreement with IBM Global Services to completely overhaul its worldwide information systems infrastructure.

Terms of the agreement are not yet finalised, but it will focus on IBM's On Demand strategy for the provision of infrastructure and services.

An analyst told vnunet.com that the value of the agreement would be between $400m and $500m over the period.

London-based Diageo confirmed that some of its staff will transfer to IBM as part of the deal.

IBM beat Computer Sciences Corporation in the final run-off, after Hewlett Packard (HP), a major supplier of servers to Diageo, had been eliminated. Some HP systems will be consolidated into IBM hardware and software.

Diageo's aim is to create a secure, efficient and flexible global e-business infrastructure. This includes consolidating data centre and server systems into a single operating environment.

Stratos Sarissamlis, vice president of technical research services at analyst Meta Group, told vnunet.com that this is a major win for IBM for two reasons.

"First, there is some consolidation in the [premium drinks] vertical sector with only four to five global players. Diageo picked up very quickly on the need to transform its environment to become global," he said.

"Second, it saw the opportunity to capitalise on the on-demand cost and pricing structure, an area in which IBM is pushing the market."

Diageo was formed in 1997 in a merger between Guinness and Grand Metropolitan. It has since moved away from a mix of food, drink and hospitality to focus exclusively on the premium drinks market.

Brands include Guinness, Smirnoff, Johnny Walker, Captain Morgan and Baileys.

The company claimed that the agreement would underpin its drive for consistent and sustainable growth by providing a simpler, more efficient and more flexible information systems structure.

A Diageo spokeswoman told vnunet.com that terms of the agreement had not yet been finalised, and that IBM and Diageo were now in a consultation period.

"Once Diageo became truly a drinks organisation it was vital to operate anywhere in the world," she said. "I can confirm that some Diageo staff will transfer to IBM, but the numbers are not yet decided."

Diageo employs around 24,000 people and reported in excess of £11bn in turnover last year.