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10/7/2011
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IBM Lands $80 Million Air Canada HR Deal

Big Blue’s portfolio of tech-enabled business services is helping customers like the Montreal-based airline move back-office functions to the cloud.

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IBM's expansion in the HR outsourcing market continued Thursday, as the company inked a deal worth $80 million to provide a range of human resources services for Canadian flag carrier Air Canada.

Under the agreement, IBM will provide the airline with systems and administrative support for employee travel, benefits, payroll, time management, data management and other functions. IBM will also provide application support for Air Canada's underlying HR systems.

Services will be delivered from IBM data centers in Montreal, Saint John, NB, and Manila in the Philippines. The agreement builds on an existing information technology outsourcing deal Air Canada has with IBM.

"The search for a services provider for Air Canada's HR operations centered on finding a vendor with a strong services offering, a commitment to drive transformation, and a proven ability to ensure delivery and lower costs," said Kevin Howlett, Air Canada's senior VP for Employee Relations.

[ IBM also is winning hardware deals. Read IBM Tops Oracle, HP In Data Center Win. ]

IBM has steadily built up a portfolio of HR technology and services to challenge industry specialists like Dell's Perot Systems unit and Xerox's ACS unit, as well as standalone players like Xcel HR and ADP. Big Blue's offerings in the market include HR reporting and analytics tools, recruitment services, and compliance support.

Many of the company's HR tools are available through the cloud with on-demand, variable pricing, enabling customers to reduce capital expenses associated with HR functions. The build-out has helped IBM win lucrative HR services deals with a number of corporate giants, including American Airlines, Unilever, and Canadian Pacific.

"Taking advantage of leading Internet technology, analytics, and more efficient business processes can help them provide the best level of services and improve the overall employee experience," said Mark Levy, general manager for HR services at IBM.

High-margin business services represent the end game in IBM's now decade-long shift away from commodity hardware like PCs and commercial printers. The company has built a business technology stack, including middleware and analytics, that can be used not only by customers directly but also by IBM itself to run business operations on behalf of clients.

The effort appears to be paying off. IBM's revenue from business services, including HR outsourcing, grew a healthy 9% in the most recent quarter and accounted for about 18% of total revenue. The company is scheduled to report third-quarter earnings on Oct. 17.

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