Introduction
The success of any business venture is characterized by its ability to manage its assets, with respect to features such as the members of staff, the expenses incurred during the production process of its products as well as its distribution stratagems. The reason why most business entities and conglomerates fail to thrive in the long term is due to poor mismanagement of various core sectors hence leading to the redundancy for income generated and in an increase in the cost of productivity. The overall result is the decline in the trajectory of the business entity. Such was the characteristic of the business magnate Procter and Gamble famously known for its production of brands such as Pampers and Always that have seen it gain dominance in the world.
The firm noted a decline in its trajectory characterized by low returns, mismanagement of its human resource segment as well as deterioration of the management of intricate details related to the relocation of services, compensational planning, and processing of payroll. Therefore, it embarked on the integration of a plan that involved amalgamating IBM business magnate as an outsourcing entity to prevent the deterioration for revenues generated by the firm. It is from this perspective that the paper provides an in-depth evaluation and analysis of the details pertaining the Outsourcing contract between the Client; Procter and Gamble and the supplier IBM Conglomerate.
Executive Summary
The key outcomes relevant from the Procter and Gamble and the IBM conglomerate outsourcing contract was the improvement in the functionality of the client concerning Procter and Gamble and the increase in returns by the parent company. The other realized importance of the agreement was the support of the number of workers present all over the world by the supplier. The employees who are more than 97000 in number in more than 80 countries show that the vendor possesses the necessary might that is required in such a contract. Key features of the agreement have been subject to analysis concerning dates of the contract, provision of information on the type of contract, duration, key participants and the results of the bidding process. Information has also been provided regarding the perspective of the client on the sourcing model, retained capabilities, risks present as well as value expected from the contract. Details on the supplier perspective have also been under provision as well as the recommendations and conclusion.
Outsourcing Project Overview
The contract with respect to outsourcing, between Procter and Gamble and IBM, was subject to incorporation at the beginning of the year 2004 and was announced on 9 September 2003 (IBM, Business News Room, 2003). The details pertaining the contract on the duration of the engagement was that it would take a period of 10 years hence would conclude in the year 2014.
Stone, Scholl, and Cruz (2003) implore that the outsourcing contract was a business process outsourcing. The above means that as a BPO, Procter, and Gamble in its contracting of the services of IBM demonstrated that the contract was to be based on the provision of services by a third party regarding delivery of set objectives.
The primary services outsourced from the engagement included provision of the processing of financially oriented tasks such as payroll and the administration of remunerations for the members of staff working at Procter and Gamble (Galbraith, 2008). The other services subject to the provision by IBM was setting up of stratagems that would govern the expatriates working in various parts of the world as well as ensure that their needs have been addressed. Companies that were underperforming and oriented to Procter and Gamble due to mismanagement of their human resource would also be subject to evaluation pertinent to the integration of the partnership. Such an assessment was to be conducted by the IBM business entity. Other services to be outsourced include features such as allocation of all necessary traveling expenditures, and the assessment of the workers regarding their credibility based on their performance on the companies.
The outcome of the bidding process was the allocation of the outsourcing contract to IBM business group as it demonstrated that it had the resources required for the management of the human resource department as well as increase the performance of the firm concerning the Procter and IBM business entity.
The expected results from the partnership are a gradual transformation of the client especially as IBM would take responsibility of the three most important departments oriented to the delivery of the products. These include regions such as Costa Rica, England, Philippines, San Jose as well as manage the expatriates working in more than 25 nations around the world where the client has established dominance (IBM Business News, 2003).
Other expected results from the partnership are the transformation process of the Procter and Gamble business entity that will allow for a recognizable reduction in the expenditure related to its human resource department. Other factors allowing for the progress includes the amalgamation of technology, better handling of the workers; a factor that leads to an improvement in the decision makes the process of the various departments of the client. The management too has access to consistent, standardized, and precise information from the members of staff, which is attributed to the integration of better management practices by the IBM group.
According to Oshri, Kotlarsky and Willcocks (2011) Procter and Gamble’s success in its provision of services has been because of its engagement in outsourcing as one of its primary objectives. The company has a vast number of staff and exhibits dominance in more than 50 countries in the world. Its core products include commodities such as Pampers, detergents such as Ariel, Always, Charmin, Tide, Olay, and Crest. Some of the products have been very successful globally due to the proper management exhibited by the business entity. Some of the outsourcing contracts in which the company has actively participated into include its contracts with firms such as HP, IBM, and the Jones Lang LaSalle. The HP business entity was instrumental in facilitating the success of all internet technology based operations (IBM Business News Room, 2003). The IBM group was responsible for the provision of all necessary human resource services associated with the staff as well and their transport expenses (Galbraith, 2008). The Jones Lang La Salle was responsible for managing the physical assets such as offices and major technical centers.
Sourcing Model
Various models can be used in the outsourcing of services from a business entity. In this case, the Procter and Gamble business entity preference were the utilization of the onshore offshoring model as its primary source model coherent with the business process outsourcing stratagem (Galbraith, 2008). According to Oshri, Kotlarsky and Willcocks (2011), the onshore offshoring model is characterized by the presence of a third party whose function is the provision of critical services. These services are had previously been under the management of the firm, under the guidance of the members of the executive. However, the outsourcing contract bestowed unto IBM business group makes it easy for the parent company, in this case, Procter and Gamble to manage such segments.
The onshore offshoring model also leads to the ease of management of services related to finance, the human resource with respect to the members of staff as well as other business units in the department. Ghemawat (2007) argues that the onshore offshoring model is influenced by the presence of entities such as operational extents, an in-depth knowledge on specific areas of expertise, the innovation stratagems that are to be integrated and the presence of resources from both the supplier and the clients.
One of the weaknesses relevant to the parent company upon the integration of the outsourcing contract was the relevance of a formidable task of the management of its human resource, the integration of technological advancement, as well as the financially oriented activities. The firm is so huge to the extent that it was impossible for a single company to work efficiently on all of the stipulated requirements. Robinson and Kalakota (2004) argue that Procter and Gamble's business entity, therefore, resulted in another stratagem such as subdividing the contract into pieces that were more manageable.
One of the strengths, which the company will experience after the integration of the contract, is an easier management of some of the staff of the client. The IBM business entity will take responsibility of some of the facilities belonging to Procter and Gambler especially in their management. Such an endeavor will result in the provision of services by a happier human resource as their needs would be met promptly. In addition, the firm was guaranteed of a decline in its expenditure hence leading to a maximization of its profits.
Another weakness of the engagement of Procter and Gambler in involving IBM through the outsourcing contract is that it is often difficult for a smooth transition coherent to the introduction of change in an organization. For instance, it proved cumbersome for the continuous standardization of process with respect to the management of necessary pacts. The alignment of resources to conform to the newly established form of partnership between IBM and Procter and Gamble was also faced with a rough transition (Stone, Scholl, and Cruz, 2003).
Retained Capabilities
Some of the retained abilities exhibited by the Procter and Gamble business group include the relevance of contract facilitation. In the facilitation of contracts the stakeholders with respect to both client and supply must ensure that they meet all objectives as well as ensure that there is the proper relationship between them.
The other capability that was retained includes the relevance of contract monitoring. The process involves the evaluation of critical components such as an analysis of all costs incurred, the incorporation of benchmarking, conduction of negotiations that may involve amending policies based on observation of the performance of both the supplier and the client.
The building of suitable relationships ought to be imperative as far as the parties are to engage in the contract with respect to Procter and Gamble and IBM participating in the outsourcing endeavor. Finally, the other retained entity is associated with Business system thinking. The entity involves the improvement of the processes involved in the conduction of business activities as the contract will involve the cohesion of IBM and P&G conglomerates, therefore, resulting in a change in the way business functions are conducted.
Risks involved in Outsourcing Project Deal
According to IBM News Room (2003), one of the risks present is associated with Human resource challenge. The above arises from the fact that Procter and Gamble will leave the management of its human resource under IBM. The risk that may present itself would be the failure of IBM meeting the stipulated objectives thus leading to losses as well as a human resource that is mismanaged.
The supplier challenge is another risk; that may present itself from the engagement into the terms of the contract. For instance, the caliber of the client to be handled by the supplier is extensive and requires commitment as well as presence of resources to manage all stipulated sections established in the contract. IBM was therefore given an enormous task considering that it was the first time that it had engaged in such a partnership, and was required to meet all expectations.
Value Expected
Some of the values in anticipated by the client include the provision of the necessary administration support by the supplier. In addition, IBM is also expected to provide the necessary support regarding planning the salaries and remunerations of all members of staff working for the client. In addition, Ghemawat (2007) implores that IBM is also expected to provide crucial services regarding the welfare of the expatriates. Lastly, it is anticipated that some of the staff working for the Procter and Gamble business entity will be integrated into IBM to work for the firm in order to transfer the skills they obtain in the business to the parent company.
Supplier Perspective
The supplier with respect to IBM indeed made the best choice in selecting Procter and Gamble as its client concerning the outsourcing contract. According to Gospel and Sako (2010) one of the business entities IBM is one of the biggest conglomerates in the world that deals with the provision of consultancy-oriented services. In addition, the firm with respect to the supplier has more than three hundred thousand members of staff around the world providing their services to the firm. Procter and Gamble are another company, which has been in existence for almost five decades and as a result has gained a solid reputation as one of the firms that provide quality services. The engagement of these two firms to each other is, therefore, mutual and interdependent (IBM Business Newsroom, 2003).
Advantages and Disadvantages
Gospel and Sako (2010) argue that one of the benefits of engaging with Procter and Gamble conglomerate is that it will lead to the increase in the capability of the supplier in the handling of large processes with respect to management of the human resource department as well as monitoring of the performance of another business entity. Owing to its immense number of staff and its relevance in more than one hundred countries, which is almost double the presence of its client in the world, then IBM becomes the ideal company in the provision of its services to the firm. In addition, the company is also renowned for its integration of knowledge relating to technical management, which is also coherent with the attractiveness of the regions in which its client exhibits dominance. The firm’s managerial expertise associated with IBM and the skills of the client when amalgamated brings together the resource and experience of giant corporations, which is imperative for the success of both firms.
Risks
One of the risks relevant to such an engagement resides from the fact that Procter and Gamble is a large business entity and therefore such a contract associated with requiring the services of IBM will require the firm to improve its efficiency and capabilities. Such an engagement provides a forum in which IBM has to prove that it is capable of handling the responsibilities assigned to it. However, failure of the firm concerning the client to deliver quality products and regression in returns may lead to the decline in the trajectory and performance of the supplier (Stone, Scholl, and Cruz, 2003).
Values Expected
Some of the benefits anticipated from such a partnership between IBM and Procter and Gamble are the cooperation of the client with respect to the provision of all the necessary documentation regarding its employees and operations. The reason is that ceterus Paribas, for the next ten years, these two firms will be interdependent of each other and the failure of either of the firms would result in a decline in the performance of the other.
Recommendations and Conclusion
In consideration of the risks and the results to be attained by the client, it would be imperative for the customer to set up stratagems that ensure that its position is safeguarded. For instance, the company with respect to Procter and Gamble could guarantee that it diversifies its partnerships by including other companies to engage in the outsourcing endeavor. Such includes its amalgamation of HP to deal with data entry and other technological oriented functionalities.
IBM as the supplier also ought to ensure that it extracts value from its association with Procter and Gamble. Such includes integrating measures to ensure that there is cohesion between the members of executive working for the client and its members of the executive. The striking of balance is also imperative to result in the form of a win-win situation.
For instance, IBM, Procter, and Gamble would benefit in that IBM would attain dominance or recognition from the nations in which its client is in existence. At the same time, it would learn or gain experience from its ten-year interaction with the billion-dollar company on how it manages its systems. Therefore, at this stage of the relationship, I would only review the details pertaining the contract and the expected benefits of the two firms. I would also advocate for cohesion between all stakeholders particularly in the onset of integrating the partnership to allow for a smooth transition. Contingency plans must also be established if expected outcomes are not realized before the end of the contract.
Reference List
Fenny, D., Lacity, M. and Willcocks, L.P., 2005. Outsourcing Providers.
Galbraith, J.R., 2008. Designing matrix organizations that work: How IBM, Proctor & Gamble, and others design for success. John Wiley & Sons.
Ghemawat, P., 2007. Proctor &Gamble and IBM Outsourcing: The AAA Triangle.
Gospel, H. and Sako, M., 2010. The unbundling of corporate functions: the evolution of shared services and outsourcing in human resource management. Industrial and Corporate Change, 19(5), pp.1367-1396.
IBM News Room (2003) P&G and IBM sign $400 Million employee services Outsourcing agreement. Available at: https://www-03.ibm.com/press/us/en/pressrelease/5819.wss (Accessed: 7 January 2017).
Oshri, I., Kotlarsky, J., and Willcocks, L.P. (2011) the handbook of Global Outsourcing and Offshoring: second edition. Second ed. Basingstoke, Hampshire: Palgrave Macmillan.
Robinson, M., and Kalakota, R., 2004. Offshore Outsourcing: Business models, ROI, and best practices. Mivar Press.
Stone, L., Scholl, R.S., and Cruz, G. (2003) IBM, P&G deal adds momentum to BPO trend. Available at: https://www.gartner.com/doc/409357/ibm-pg-deal-adds-momentum (Accessed: 7 January 2017)
