Siemens Business Services (SBS) will start running day-to-day IT functions at the BBC next month as part of its £2bn, 10-year outsourcing contract with the corporation's technology unit.

The deal will see the supplier manage IT services and 28,500 PCs at 267 sites across the BBC network, as well as 1.7 billion page impressions on the bbc.co.uk web site and 95,000 hours of digital TV output per month.

In preparation for the UK's switch to digital TV by 2012, SBS will also take over much of the BBC's broadcasting technology, including digital coding and satellite distribution, and the management of 128 broadcast channel streams. It will also help to build a digital archive capable of handling terabytes of new content each week.

'We will be creating and passing on savings of £20m per annum, which will go back into the BBC so it can invest more in great TV programmes,' said Barry Yard, SBS executive director for the BBC.

Some analysts view the BBC's partnership with SBS as an early indication that the media and entertainment industries plan to outsource a range of IT functions, to cope with major business changes resulting from digital convergence.

'Most broadcasters do not have the skills or desire to operate end-to-end solutions in the new media world,' said James Healey, senior media and entertainment analyst at Datamonitor.

And analyst Gartner estimates that outsourcers could benefit from a potential £35bn in technology contracts as the entertainment and media industries look to outsource IT support and content distribution to focus on producing new content and marketing their services.

There have been a number of other outsourcing deals in the industry in the past year, as broadcasters look to shed overheads. Vodafone has outsourced European content distribution to Accenture, 3G mobile operator 3 uses SBS to provide its football goals coverage, and the Discovery Channel has awarded transmission services to Ascent Media.

John Varney, the BBC's chief technology officer, says a sharp business realignment to digital programming and content making was a key reason behind the outsourcing of the IT services provided to the rest of the corporation.

'The BBC worries about content, quality and production - that's what we are here for,' he said. 'We realised we needed to achieve economies of scale and the ability to invest heavily in technology over five or six years. It was a hard decision, but that is why we outsourced.'

A key technology challenge for entertainment firms will be the construction of a digital infrastructure capable of handling content creation, storage and distribution, says Datamonitor.

'The future of the media world is going to be focused on much more fragmentation and digitalisation, and this will require digital platforms,' said Healey. 'Hosting and content distribution is an easy win for outsourcing firms, as is deep archiving.

'Moving to digital archiving has massive requirements that broadcasters themselves don't want to manage.'

The BBC plans to digitise its production process by 2010, and hopes to cut costs by more than 10 per cent by reducing formats and creating a smoother flow of content through the organisation.

'Our target is 2010, but we can make significant inroads by 2008,' said Varney.

But by outsourcing, media and entertainment companies could be in danger of handing over some of the intellectual property (IP) that has in the past given them competitive edge.

'There is a complex innovation environment at the BBC,' said Varney. 'There's innovation from BBC Technology, and other innovations that come from BBC research and development.

'IP such as digital desktop editing has been passed to SBS, but we're going to retain a whole set of IP in virtual studio production that is unique.'

The BBC's technology projects at a glance

*Siemens Business Services took control of BBC Technology on 1 October 2004, following approval by the Department of Culture, Media and Sport

*The BBC plans to digitise its entire production process by 2010 and expects to cut costs by more than 10 per cent as result

*BBC Broadcast is providing Channel Five with disaster recovery support in a five-year deal, which will allow the channel to transmit its programmes from Broadcast Centre in White City

*BBC Worldwide is offering direct access via the internet to some 10,000 moving image clips from the BBC and CBS News archives

*The corporation has begun trialling commercial broadband TV service interactive Media Player (iMP), which allows viewers to download encrypted BBC programmes to a PC

*Chairman Michael Grade wants to introduce an interactive annual general meeting to enable licence payers to hold governors to account