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November 29, 2005

IBM wins major procurement outsourcing deal

IT services giant IBM has won a five-year procurement business process outsourcing deal with Coty Inc, the world's largest fragrance company.

By CBR Staff Writer

The procurement BPO market is one to watch, despite currently being much smaller than other horizontal BPO areas, such as human resources, and finance and accounting. Analysts forecast the annual growth rate of the procurement BPO market in the next five years to be between 20% and 26%, and a recent IDC report said the market is already substantially larger than previously thought.

Coty, whose brands include Davidoff, Rimmel, and David & Victoria Beckham, is privately owned with annual sales approaching $3bn. IBM will take over its procure-to-pay functions, which will involve identifying suppliers for Coty’s indirect spending, using its scale to drive the best price, issuing purchase orders, and taking responsibility for accounts payable work. The deal covers goods and services such as travel, facilities management, technology, telecommunications, marketing, and logistics.

IBM would not disclose the size of the deal. Miles Quinton, VP business transformation outsourcing at IBM, told ComputerWire that the work would be carried out in three centers: Greenock, UK; Bangalore, India; and Endicott, US.

Quinton said IBM is seeing increased opportunities in the procurement area, especially from consumer products companies keen to outsource non-core operations and focus on brand development. Companies are much more interested in getting beyond simple stuff like ‘pens and paper’ procurement and are increasingly looking at additional areas such as facilities management, he said.

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