P&G picks IBM in $400M HR outsourcing deal

Consumer products maker Procter & Gamble Co. has signed a 10-year, US$400 million employee services outsourcing deal with IBM.

In an announcement Sept. 9, IBM said it will provide payroll processing, benefits administration, travel and expense management, and other human resources services to some 98,000 worldwide employees of Cincinnati-based P&G under the contract. The services will be provided through P&G's existing SAP software and employee Web portal.

About 800 P&G employees will be offered jobs with IBM's Business Consulting Services division under the deal. No layoffs will be a consequence of the deal.

The contract is scheduled to begin Jan. 1, when IBM will take operational responsibility for three P&G service delivery centers in San Jose, Costa Rica; Newcastle, England; and Manila, as well as other staff members in more than 25 other countries. The workers will be integrated into IBM's existing global network of Business Transformation Outsourcing service centers.

The deal is the third of four that P&G has planned for its operations. In May, P&G signed a 10-year, $3 billion IT services outsourcing contract with Hewlett-Packard Co., and in June, the company inked a five-year, $700 million facilities management outsourcing deal with real estate management business Jones Lang LaSalle Inc. in Chicago.

Damon Jones, a P&G spokesman, said the deals will help the company reduce costs and increase the level of services by working with companies that specialize in different areas. "It gives us access to a greater pool of innovation," Jones said.

The fourth outsourcing component will come next year, he said, when P&G will hire a vendor to do its accounts payable and purchase order management.

Last year, P&G was in a series of negotiations with several vendors, including Plano, Texas-based Electronic Data Systems Corp., to outsource much of its IT operations. Eventually, the company chose to end ongoing talks with a single vendor and look at a multivendor approach to its outsourcing.

P&G's brands include Pampers disposable diapers, Tide laundry detergent, Bounty paper towels and Pringles potato chips.

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