Under terms of the deal, the IT services giant will manage the majority of Colgate-Palmolive’s $3.2bn annual indirect spending across approximately 70 countries worldwide, as well as providing accounts payable services in Europe and North America.
The financial details of the contract were not disclosed, but a spokesperson for IBM told Computer Business Review that the deal was worth a little less than $250m and was the biggest deal the company had signed in the space so far. In the last six months, IBM has secured procurement outsourcing contracts with fragrance company Coty Inc, consumer products giant Unilever NV, and electronics manufacturer Solectron Corp. Procurement outsourcing also formed part of IBM’s $1.6bn multi-tower outsourcing deal with US utility NiSource Inc signed in June 2005.
According to the spokesperson, IBM is set to announce more wins in the procurement sector within the next 60 days, although these will be smaller in scale than the recent signings.
The scale of IBM’s own spending has been a significant factor in the company’s recent success. In all, the company’s internal procurement organization has about 5,000 staff located in 80 countries worldwide. According to Patrice Gilles, head of Equaterra’s procurement practice, this has enabled IBM to demonstrate to customers that it is able to handle large amounts of indirect spending, and to say to them that if we can do it, you can do it too.
In contrast, Gilles said that Accenture, a major rival of IBM’s in the procurement market, doesn’t have the same level of internal spend to draw on. Despite this, Accenture has enjoyed some recent success in the space, including winning a contract with the Bank of Ireland last December, and Gilles said the company is working on several deals in the sector at the moment, mostly in services industries such as banking.
