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IBM, Sunoco In 'Secret' Outsourcing Pact

Big Blue will take on back office and tech operations for the oil company, but neither party is talking openly about the arrangement.
Officials at Sunoco are keeping a tight-lipped silence over a deal to hand off technology and business operations to IBM.

The oil giant buried word of the contract in its second-quarter financial report. Sunoco "reached an agreement with IBM to outsource some back office processes, including information technology, finance and accounting transaction processing, and indirect procurement," Sunoco disclosed in the report.

"This arrangement marks another important step in Sunoco's continued expense reduction program, which is critical to improving the company's competitiveness," Sunoco said in the report, filed last week.

Beyond that, Sunoco isn't saying anything about the deal. Media reps at the Philadelphia-based company ducked repeated calls from InformationWeek, and IBM officials also did not respond to requests for comment.

But given Sunoco felt compelled to disclose the agreement in a regulatory filing, it's likely considered "material," or significant. IBM has said it signed 15 outsourcing deals in excess of $100 million in the second quarter. Sunoco last year spent about $90 million on IT and employs roughly 250 tech personnel under CIO Peter Whatnell. As for how many of those workers, as well as those in Sunoco's finance and procurement departments, will be impacted by the deal, Sunoco isn't saying.

Also not clear is how IBM will interact with Sunoco's existing outsourcers. Just last year, the company signed a four-year, $34 million contract extension with India-based Wipro's Infocrossing unit. Under that deal, Infocrossing is to continue managing Sunoco's UNIX, Windows, and IBM mainframe environments while providing storage services. Infocrossing senior VP Vince DeLuca told InformationWeek Friday that his company's contract with Sunoco is unaffected by the IBM deal.

Sunoco also works with AT&T Services and CompuCom. The company hired consulting firm EquaTerra earlier this year to identify other areas that might be ripe for outsourcing.

Sunoco is in the midst of a shakeup. Last week it posted second-quarter profit of $145 million, after losing $55 million during the same period a year ago. Going forward, it's looking to further boost profits by focusing more on oil retailing and logistics. To that end, it's announced plans to spin-off its SunCoke Energy coal unit next year.

Sunoco employs about 10,000 workers in the U.S., with about 4,000 of those in the Philadelphia area.