_!_sema_!_bei Olympia m.t.

Until the 1994 winter games in Lillehammer, Norway, IBM's involvement with the Olympics had been primarily as a hardware provider, according to Michael Payne, director of marketing at the IOC in Lausanne, Switzerland. Systems integration, timing and score reporting were handled by other companies. After the Norway games, IBM pitched the IOC on the one-stop-shop concept, saying it had the expertise to handle the whole portfolio and build a Web site with real-time scores and updates.

The IOC liked the idea and agreed to grant IBM exclusive marketing rights in exchange for the (mostly charitable) donation of IBM's products and services.

The 1996 summer games in Atlanta marked the first year that IBM took on a larger role doing systems integration. Scores were often reported late or erroneously. Reporters around the globe, counting on IBM's technology for up-to-the-second information on scoring and athletes, were let down. There was plenty of blame to go around between IBM and international and local Olympic committees, since the latter shared integration responsibilities. But it was IBM that had to accept responsibility for this public relations disaster.

Before the 1998 winter games in Nagano, Japan--during which the technology worked flawlessly--IBM and the IOC tried to renegotiate their deal through the 2008 games. Both sides wanted to renew, but IBM wanted to provide the entire technology infrastructure plus have exclusive marketing rights on Olympics.com.

During this time, the IOC was becoming aware of the mission-critical nature of technology to the games and was growing concerned about cost. The IOC felt it would be more cost-efficient to go back to working with a consortium of companies, each working on its particular area of expertise.

``IBM told us they weren't interested in being a hardware sponsor. They said they're only willing to go forward if they can do everything,'' says Payne.

The other hangup had to do with Internet marketing. IBM built and maintains Olympics.com, the official Web site of the games. It's all IBM, with its signature blue background and IBM logo in the upper right corner. The IOC wants other sponsors and partners to be involved with its Internet presence.

``The IOC views the Internet as a medium and all of the sponsors should be involved in various forms,'' Payne says. ``Kodak with digital imaging, for example, or electronic payment systems. IBM says, 'It's our category.' We say this isn't any one company's category.''

One executive familiar with the controversy said that Xerox (NYSE: XRX - news) wanted to give its Internet address in an advertisement, but IBM objected. ``There was intense frustration,'' says the source.

IBM says it has ``broad marketing rights in all categories,'' says Eli Primrose-Smith, vice president of worldwide Olympic and sports marketing at IBM in Somers, N.Y., adding that IBM donates all of its products and services in exchange for exclusive marketing rights.

``We were providing all the information technology but [the IOC] wasn't going to increase our marketing rights,'' she says. ``What they had in mind going forward did not give us the marketing value we wanted.''

It was a difficult decision for IBM to pull out; chairman Louis Gerstner even got involved. After all, IBM will lose worldwide exposure and a plum opportunity to show off its technology to hundreds of millions of television viewers and Web surfers.

Having marketing rights is crucial, considering how much IBM spends on the games. IBM will not disclose how much it spends but characterizes the investment as ``huge.'' The laundry list includes hardware, software, services, integration processes and moving 1,500 employees and 4,000 volunteers to Australia for a month.

After parting ways with IBM, the IOC doled out contracts for the 2002 games. Paris-based Sema Group (Nasdaq: SEMA - news) will have the most crucial role as systems integrator for the next eight years; timing and results reporting have gone back to SMH Swatch and Seiko; and Gateway (NYSE: GTW - news) will be the hardware provider.

For IBM, it's very difficult to calculate any increase in sales as a result of its mammoth involvement in the games. The company uses the games as a venue to host existing customers and show off its capability, as well as roll out the red carpet for potential customers.

``It's hard to say if we didn't have the Olympics that we would have lost any deals, but salespeople have said it's very valuable to customers,'' she says.

IBM isn't sweating its departure from the games. It still provides the technology behind major sporting events like Wimbledon, the four Grand Slam tennis tournaments, The Masters golf tournament and the National Basketball Association and National Hockey League finals.

For its part, the IOC says it's aware that partner companies use the games as a sales tool.

``We're dealing with companies [promoting] marketing agendas,'' says Payne.

Indeed, companies use the global stage to market their skills. Running the Olympics ``is the ultimate test of our knowledge, and customers are impressed,'' says Tidu Maini, senior vice president of Sema and a member of its board.

The bottom line is that companies don't make a lot of money by providing technology to the Olympics. But that won't stop them from fighting over the rights to do so.