IBM finalising BPO deal with Procter & Gamble

Procter & Gamble is in final, exclusive negotiations to award IBM a business process outsourcing contract to provide human...

Procter & Gamble is in final, exclusive negotiations to award IBM a business process outsourcing contract to provide human resources services to its employees.

As part of the contract, IBM would handle services such as compensation, payroll, employee relocation and travel. No details about the duration or value of the contract were provided.

P&G has decided to outsource these business functions to reduce costs, improve delivery and redirect resources to its core business, said P&G spokesman Damon Jones.

P&G also talked to Accenture and Convergys, but IBM stood out. 

"IBM came forward with the best total package in terms of financial value, ability to deliver high-quality services on a global scale and ability to continually innovate to bring future efficiencies to our business," said Jones.

The contract will run between five and 10 years and have a multimillion-dollar value, Jones said.

P&G estimated that around 700 of its employees will be transferred over to IBM, although that figure needs to be finalised. Jones expected the contract to be signed "in weeks".

Earlier this year P&G outsourced the management of its IT infrastructure via a 10-year $3bn contract to Hewlett-Packard.

In a typical BPO engagement, complete business functions, such as payroll and billing, are outsourced along with the IT tasks that support them. Thus, BPO projects are broader in scope than the typical IT outsourcing engagement, which concerns itself with IT tasks but not with business functions.

Human resource functions are by far the most outsourced business process, according to Gartner, which in June predicted that companies will increase their spending on human resources BPO this year to $46bn, an increase of 18% from 2002. Gartner predicted HR BPO spending will continue growing in 2004, reaching $51bn.

Another company farming out tasks to IBM is Boeing, which awarded IBM a three-year contract estimated at $160m to manage its corporate-wide voice communications network, which is used by almost 150,000 Boeing employees.

IBM will provide Boeing with, among other things, support for telephony systems and applications, voice mail, audio conferencing and operator services. IBM will also work with Verizon Communications to implement a voice management system for Boeing users in the US.

Juan Carlos Perez writes for IDG News Service

Read more on IT outsourcing