IBM Sells its CRM BPO unit to Synnex – A Case of Leaving a Commodity Market Behind?


I have a special place in my heart for Call Centre and CRM operations. The first consulting I ever did was in 1999 for the call centre operation of a major Australian insurance firm. I was tasked with imparting the importance of customer segmentation and helping staff embrace the “new” technology of email as a communication tool. Following this, in 2000, my first report as an analyst was on the then fledgling Call Centre BPO market in the Asia Pacific region.

The announcement today (Sept. 10 2013) that IBM has sold its CRM BPO business to Synnex, specifically the Concentrix division of the distributor, reinforces how commoditised the market is. When IBM bought Daksh in 2004 it was a commoditised market, but now the scale of the commoditisation is unstoppable as technology finally grips it and labour arbitrage dynamics change.

The financial numbers reported around the deal highlight the commoditised character.

  • Revenue =  $1.2B
  • EBITDA = $120M

Price – US$505 million.

Not too many banks will give you 20% for your money. This highlights two potential drivers for the transaction for IBM:

  • IBM needed the cash (unlikely)
  • IBM saw the market zooming towards further commoditisation with limited upside

Clearly, capioIT believes the second reason to be paramount. IBM is investing in higher value assets through software and services. Similar to the x86 server market, there is only one future for CRM BPO that IBM considers. Consolidation.

It can leave the “people” side of CRM outsourcing to the new chosen partner, Synnex and concentrate on value add in automation, social media and analytics all driven by the integration of software and services. This continual shift feeds into increased demand for asset based services and outcomes based pricing, both of which are essential for IBM’s evolved business model.

From a broader IBM perspective there are some interesting impacts.

  • Engagement with IBM CRM has been important for several accounts. This has helped “recapture” IBM as a strategic provider in selected customers.
  • Several  IBM delivery locations around the world (Ballarat – Australia, Auckland – New Zealand, Cairo – Egypt) have a strong presence and history with CRM BPO.

The most important element is the increased focus of the overall IBM BPO capabilities following the divestment. I have a long held belief that 4-5 different BPO offerings spreads capability to thin regardless of scale. For example Accenture largely avoids CRM, HP is selective with offerings by region.

This will allow IBM to focus more executive time and strategy on maximising opportunities in the less commoditised markets of:

  • Human Capital Management
  • Financial Performance and Operations
  • Supply Chain Management

Bottom Line – IBM has structured a deal where the executives can all talk “Win-Win”. Synnex  and Concentrix gets scale, IBM gets out of an increasingly commoditised market shifting to automation. The key variable is the transition for customers. Clearly both parties will look to ensure that their customers actually experience excellence to ensure business continuity. As ever only time will tell.

If you require further information, please contact Phil Hassey,  Founder capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. Phil may be contacted by email below,

phil@capioit.com

About capioIT - Phil Hassey

If you require further information, please contact Phil Hassey, CEO of capioIT. capioIT is an advisory firm focused on helping organisations to understand emerging technology as the world becomes Digital. Phil may be contacted easily in the digital and real world. phil@capioit.com +61422231793
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10 Responses to IBM Sells its CRM BPO unit to Synnex – A Case of Leaving a Commodity Market Behind?

  1. No One says:

    So will there be job cuts to those 45000 ibm employees?? Who are presently in ibm gps by new management??

    • Hi No-one, (if that is your real name …. )
      Thanks for the question, in honesty it is difficult to say if there will be job cuts. I would argue that the IBM resources are of a higher order than the Synnex people, though as I mention, it is a commoditised market so that is a limited value. There will no doubt be some consolidation of skills and overlap as there is with most mergers, but from outside it difficult to accurately predict the impact on jobs. If it is confident of strong growth then there is also a chance that the layoffs would be limited as they get a bench to enable growth,

      Thanks
      Phil

  2. Patrick Leo says:

    Hello, I am part of IBM GPS that handles Finance. It is such a good move that IBM sees to focus more on cloud computing and analytics which is more relevant for shared services environment.

    I hope Concetrix will be able to manage what IBM already had and even leverage it into a higher level.

  3. Ratan says:

    Hi,

    My wife works in IBM GPS so I am a little worried about her job as still recession is not over and this news is a mix of separation and welcome as earlier I too was a part of Daksh when IBM took over and now I am working in other organisation. Is there any plans for retention of current employees.

    • Hi Ratan,
      Thank you for you comment. Please understand that I do not work for IBM. I am an independent industry adviser.
      I cannot speak for Synnex or IBM, about their investment and recruitment activities in the future. However, Synnex has bought a business that is clearly profitable and one that it sees a clear future in. To meet these goals they will need employees.
      I hope this helps
      Phil

  4. PV says:

    This is going to be a very challenging deal for Synnex to integrate. What they are getting is the complete IBM Daksh business along with the rest of IBM’s global CRM business. To run the business effectively, the newly hived off entity has to return to its Daksh roots … drive customer centricity, have strong business leaders run business units and ensure that sales and delivery are not separated from each other. It needs entrepreneurial leadership of a very high caliber, strong HR leadership (which was stripped away when Daksh was completely integrated because HR got verticalized within IBM), strong finance leadership (well rounded business CFOs) and very strong account management. Finally, right now there is chaos all across the employee ranks … they need to see strong leadership giving them clear messages on the way forward. Yes – there will be challenges, that is not the issue … the real problem is lack of visibility to competent, long term leadership and clarity of messaging.

  5. Code says:

    I personally think it was a good move for IBM to give up. IBM has messed it all up for years. Not only the clients in UK but for many by manipulating DATA to prove they are still worth holding onto. I hope synnex will do a better job than what one did under IBM’s false flag and corrupt management that strives for their own benefit than Clients success.

  6. Pingback: IBM Sells x86 business to Lenovo for US$2.3B – Another good deal for old friends | capioIT – Trusted Advisors in Emerging Technology

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