IBM Cements $1 Billion Outsourcing Deal With Cemex
Debt-laden concrete supplier says hand-off of tech and back office systems to Big Blue will slash operating costs by $100 million per year.
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Building supplies giant Cemex, which specializes in concrete and ready-mix cement, on Monday said it will transfer a number of IT and back office functions to IBM under a ten-year deal that's worth up to $1 billion for Big Blue. That's also the total amount Cemex said it expects to save by outsourcing to IBM.
"This agreement with IBM will enable Cemex to focus its on its core businesses of cement, ready-mix concrete, and aggregates, improve its financial position, and respond more quickly to changing market needs," said Cemex CEO Lorenzo Zambrano, in a statement.
Under the deal, IBM will manage Cemex's IT operations at the company's headquarters in Monterrey, Mexico, and around the globe. Covered areas include infrastructure management, and application maintenance and development. A business process outsourcing (BPO) component of the deal calls for IBM to takeover and run Cemex's finance, accounting, and human resources systems.
"IBM's state-of-the-art IT infrastructure, business processes, and applications will help Cemex achieve its goals of becoming more competitive," said Bruno Di Leo, IBM's senior VP for sales and distribution.
Cemex is recovering from losses sustained during the housing market meltdown, and is continuing to look for ways to cut costs. It carried $17.2 billion in debt as of June 30. Company officials said they hope to save $100 million per year, starting in 2014, in IT and back office costs through the deal.
Reuters reported that the deal would impact between 1,000 and 2,000 Cemex employees, from a total workforce of about 42,000 in 50 countries, but Cemex VP Roberto Chaverri, on a conference call with reporters, said no decision has been made on job cuts. "We are in the early stages of planning," said Chaverri. "It's fair to say that we don't have the final numbers yet."
Cheverri will transition from VP for corporate IT to VP for vendor management as a result of the company's decision to outsource the bulk of its tech operations.
An IBM official said some Cemex tech workers will transfer to Big Blue as the deal moves forward. "Our objective is always to retain talent, so when we bring talent on board from some of the firms that we're helping with their transition and transformation, many of these employees want to tell us that they have as good or greater IT opportunities working for IBM," said IBM Global Technology Services general manager Bob Hoey, who also spoke on the call.
The deal marks a key win for IBM's outsourcing unit, which of late has suffered from slow growth and the loss of some high profile contracts, including Disney and the National Football League. Chaverri said Cemex considered 17 vendors for the work, but ultimately settled on IBM after internal reviews and working with outside sourcing consultants.
At this year's InformationWeek 500 Conference, C-level execs will gather to discuss how they're rewriting the old IT rulebook and accelerating business execution. At the St. Regis Monarch Beach, Dana Point, Calif., Sept. 9-11.
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