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Ibm Outsourcing: How Will Ibm Benefit From Outsourcing Hr Functions To Fidelity?

951 words - 4 pages

In early July 2002, IBM and Fidelity Investments announced an outsourcing agreement that will have IBM outsourcing the administration of its pension, employee health plans, and other human resource services to Fidelity. Also, the two companies will enter a partnership on selling human resources payroll and benefits outsourcing services to other clients. Of the numerous benefits that IBM will enjoy from this deal with Fidelity to handle a large portion of their human resources, there are three that seem to be significant. They are the joint venture between IBM and Fidelity, the reduction in the number of employees while saving money and improving employee services, and the more focussed vision IBM will have on their core business.IBM and Fidelity both believe that the market for the outsourcing of human resource functions will be growing fast in the future. If this is true, the results could be very lucrative. Estimates show that the outsourcing market could be worth $43 billion by 2005 and could continue to grow at more than 20 percent per year there after. The other reason for this agreement is to demonstrate their outsourcing experience to prospective clients."Before the Fidelity announcement, we had an ongoing national practice for HR," points out Towney Kennard, vice president of alliances for IBM Global Services. "We now have an alliance with Fidelity in the marketplace. We can use the IBM experience as a major proof point that these are the benefits we delivered to our employees and company. We can talk to our customers from an experiential point of view. We believe that a number of large enterprise customers will be very interested in what IBM did and why we did it. If we believe they should do what IBM did, we will engage Fidelity after an initial consulting period. If the customer should decide to go with Fidelity, we will then come in and help with the transition period. We believe it's a great opportunity for our two companies."ƒ¡ This provides motivation to both IBM and Fidelity to make the operation run efficiently while saving money.They began this transition by transferring 450 human resources employees from IBM to Fidelity. These employees will handle the majority of the HR functions for 260,000 IBM employees and retirees. The same 450 employees that worked in the IBM Employee Service Center in Raleigh, N.C., became Fidelity employees and continue to work out of the same building as they did when they were IBM employees. This allowed for a seamless transition for both management and employees, while allowing employees to remain in North Carolina. While the Employee Service Center continued to provide the same human resource transaction and administrative support to current employees and retirees in the United States. This agreement did not do away with all human resource functions within IBM, just a significant portion. IBM will still have large base of employees that will accomplish daily human resource functions, such...

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