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IBM Acquires Equitant in BPTS Play

Looking to expand its financial services reach and consulting engagements for business transformation, IBM announced Wednesday the purchase of order-to-cash outsourcer Equitant.

The deal puts more industry expertise in the hands of the Armonk, N.Y., company's business consulting services (BCS) division and its business performance transformation services (BPTS) strategy. BPTS is a major initiative to marry business and technology services that started with the buyout of PwC Consulting for $3.5 billion in 2002.

Chris Gattenio, a spokeswoman for Equitant, said no jobs at its offices in Dublin and Stamford, Conn., will be affected by the acquisition. She also said the deal, which is expected to close in March pending regulatory approval, won't affect its customer base, which includes Microsoft , Cisco Systems , HP and Lucent Technologies . Financial terms were not released.

"We really believe that IBM now gives us and our clients access to their global reach, their industry-leading services, business transformation consultants, IBM research," she said. "They have phenomenal resources that now our clients will have access to."

Order-to-cash is the part of the financial process that covers a customer's purchase of a product or service, from the moment it is ordered to receiving payment. In between the two activities, Equitant provides software and services to handle activities like order capture, dispute resolutions, billing, collections and financial reporting and analysis.

The software, called O2C Direct, is broken into five parts -- OpenPay, AR Collect, Collaborative Dispute Resolution, Executive Dashboard and Cash Application Enabler -- and is available for view online by its customers.

As an outsourcer and consultant, Equitant assesses a company's financial processes and determines how O2C Direct would help their operations. It then takes over management, either on or off site.

IBM will roll Equitant's expertise into its own services, outsourcing and BPTS offerings, which will, in turn, help its own customer base. Big Blue has been touting the opportunities in the BPTS sector, especially since launching new BPTS offerings from its BCS division last year.

The Equitant deal is the latest in a string of moves IBM has made recently as it looks to build out more BPTS contracts.

Last month, IBM announced a three-and-a-half year contract with U.K. insurer Norwich Union (NU), which calls for IBM to help roll out a new "pay-as-you-drive" auto insurance program.

Dubbed the first of its kind in the industry, the plan is to enable NU to use real-time analytics and supercomputing systems in order to understand the precise risk incurred by individual drivers, and then offer them variable rate insurance contracts based on precise risk and individual customer characteristics. In the process, officials said, the engagement is expected to help transform NU's enterprise.

Mike Adler, a managing partner within IBM's BCS division, called the deal one of the largest pure consulting contracts IBM has ever signed. Although he declined to provide a value on the contract, analysts have pegged the deal at around $100 million.

It includes a plan called Process Improvement, which will analyze and improve existing business services and manage the deployment of new processes to enable Norwich Union to deliver services more efficiently.

In addition, Business and Architecture work is slated to focus on how the new real-time systems will be built. The third leg of the deal includes work on how to deliver the services and systems, both externally and internally.

Adler noted that it's not as though NU is starting from scratch in transforming its legacy systems. But in this case, the engagement with IBM means both will be looking at the company's value chain and seeing where to plan for change.

"It might be something that calls for developing a service oriented architecture in order to help systems interact better with legacy systems," he said. But in general, he added, "the challenges in the insurance industry are that legacy systems are so antiquated, much of the customer knowledge is baked into the code. So when you want to launch a new product, or respond to regulatory needs," it's a much slower process. "We understand Web services and SOA" as a way to build real-time functions into legacy systems, he added. "So we're certainly going to complement each other."

IBM also recently purchased Liberty Insurance Services from RBC Insurance of Canada, and struck a deal with RBC for assisting in contact center management, policy administration, claims management and payment receipt and reconciliation.

At the time of the announcement in November, IBM said the industry would seek to cut costs and improve efficiency by outsourcing and that it expected life insurance processing to be a $2 billion market by 2005.

In the deal with Equitant, IBM's Donniel Schulman, a vice president in its BCS group, said the clients are looking for value in partnering with companies that can transform, manage and operate finance and administration operations over a sustained period.

IBM, which competes with providers such as Accenture in the BPTS sector, said it took in more than $3 billion alone in BPTS revenues in 2004. Erin Joyce contributed to this story.



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