RealTime IT News

IBM Seen Snatching BPO Pact with P&G

IBM has entered into exclusive negotiations to finalize a business process outsourcing (BPO) contract with consumer products maker Proctor and Gamble , an IBM spokesman confirmed Thursday.

James Sciales of IBM told internetnews.com that P&G is in exclusive talks with Big Blue's Global Services division on a contract for IBM to take over management of P&G's employee services activities. The two sides hope to have a long-term deal formalized over the next several weeks, Sciales said.

A spokesman for P&G was not immediately available for comment. Details on the potential size of the contract, or how many years it would be slated to run, were not released but published accounts suggested the multi-year deal could be valued around $500 million.

When it is finalized, the deal could potentially serve as something of a rejoinder to IBM's systems rival Hewlett-Packard , which recently won a coveted $3 billion, 10-year IT outsourcing contract from P&G.

HP's deal calls for it to manage the company's IT infrastructure, data center operations, desktop and end-user support, network management and some applications development and maintenance support for P&G's global operations in 160 countries.

In IBM's case, Big Blue would be actually managing processes from the company's employee services division, such as compensation, administration of benefits or payroll.

Analysts that cover outsourcing call BPO a hot growth in the IT industry, in part because companies are increasingly moving to outsource whole business operations, even processes that were once viewed too sacrosanct to offload to an IT outsourcer.

P&G's moves to outsource much of its IT operations is being closely watched by the IT sector as a bellwether customer. EDS once came close to snagging a back-office, multi-year outsourcing contract from P&G worth an estimated $7 billion. But P&G instead decided to break the contract into pieces, including this one, the HP deal and two others.