Johannesburg, 17 Sep 2003
The 10-year, $400 million business transformation outsourcing (BTO) deal last week in which global consumer packaged goods giant, Proctor & Gamble (P&G), outsourced its human resources (HR) processes and management to IBM`s Business Consulting Services division, represents a proof of concept for South African organisations considering outsourcing non-differentiating business processes.
So says IBM SA partner, business consulting services, Wilhelm Krige.
"Although the Proctor & Gamble deal is about human resources, the benefits of BTO - in which business processes and not just IT are outsourced - apply across all business disciplines.
"BTO is about having the world-class technology and business skills to integrate, transform and manage a customer`s core business processes along with the underlying IT - while being accountable for delivering business and financial value.
"It`s about having the scale to provide the right skill sets at the sort of value points that allow you to manage a customer`s business processes more effectively and cost-efficiently than the customer can in-house.
"And, it`s about being able to invest in technology innovation to address customer gaps in expertise.
"The problem is that South African companies tend to think that BTO is appropriate and affordable only if you are the size of P&G. Actually, any organisation of any size anywhere in the world can tap into the economies of scale and international reach of a company like IBM."
Under the P&G agreement, IBM will support nearly 98 000 P&G employees in close to 80 countries, providing services such as payroll processing, benefits administration, compensation planning, expatriate and relocation services, travel and expense management, and human resources data management. IBM will also provide application development and management of P&G`s HR systems, leveraging P&G`s existing leading-edge global SAP implementation and employee portal.
Approximately 800 P&G employees will be offered employment with the IBM HR BTO team, which, along with IBM Business Consulting Services` Human Capital Practice, comprises one of the world`s leading HR professional services organisations.
IBM will take operational responsibility for three HR shared service delivery centres in San Jose, Costa Rica; Newcastle, England; and Manila, Philippines; along with professionals in more than 25 other countries. They will be integrated in into IBM`s global network of BTO service centres.
The agreement will enable P&G to improve services and reduce HR costs through process transformation, technology integration and best practice. It will improve decision-making by giving executives real-time access to employee reporting information that is consistent, accurate and standardised. It will deliver employee services in a more real-time, flexible, on-demand manner.
And, P&G will pay for the services it uses, when and where it uses them. This on-demand delivery model will enable P&G to quickly respond to changing business conditions - increasing or decreasing its service capabilities as business needs change.
The P&G deal results directly from IBM`s acquisition in 2002 of PwC Consulting, which brought specialised business skills and disciplines into IBM as well as creating access for IBM to new markets.
In less than a year, the acquisition has paid off in global business transformation deals with companies like Nextel, BP, Ericsson, UTC, Avnet and P&G - covering disciplines such as finance, customer care, procurement, HR and learning.
"With the PwCC acquisition bedding down so well, South African customers can be confident that if they tap into IBM`s BTO, they are following a proven, low-risk, high-benefit path to profitability," says Krige.
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