IBM Sells Off BPO Services Biz To Synnex For $505 Million
September 16, 2013 Timothy Prickett Morgan
Big Blue is always rebalancing its workforce, which is a euphemism for layoffs at the company, and it is also looking to add to its portfolio of products through acquisitions or internal development as well as divesting itself of products it no longer feels are core to its business. Last week, IBM’s Global Services did a divestiture, something we don’t see very often.
Specifically, IBM sold off its business process outsourcing services business to a company called Concentrix, which is a wholly owned subsidiary of Synnex. According to Synnex, this business generates more than $1.2 billion providing customer care/CRM services to around 170 clients worldwide. Those customer care services are available in 40 languages and through 40 delivery centers on six continents. This CRM/BPO business represents about a $55 billion market, so this is but a tiny slice of the pie, but one that Synnex is eager to own. The addition of IBM’s CRM/BPO business to the existing one at Concentrix will push up the latter to being a top 10 provider, with over 45,000 employees operating in 50 centers around the globe with around 300 customers.
It is not clear how many IBMers are being moved over to Concentrix under the deal, but Synnex said that the deal would add around 55 cents in earnings per share to its bottom line in the 12 months following the deal, so Big Blue is not selling this off because it is a money loser. Synnex did not say how large Concentrix would be in terms of revenue after the deal closes, and it is hard to guess.
Synnex is paying IBM $430 million in cash and another $75 million in stock to acquire this CRM/BPO business, and the transaction is expected to close in a few months subject to the usual rubberstamping by antitrust authorities. IBM is not getting out of the BPO services racket, so don’t get the wrong idea. The plan is to focus on BPO services and applications for finance and administration, procurement and supply chain management, human resources, and mortgage origination and servicing. As part of the deal, Synnex will ink a multi-year deal and Concentrix will become a business partner of IBM’s for outsourcing CRM services. That seems to mean IBM Global Services will be able to resell those services, but the announcement was worded vaguely.
Synnex, of course, is a massive expert in business process management and supply chain management; it was founded in 1980, has 12,500 employees who work at the corporate level, and generated $10.3 billion in sales. The company competes with Arrow Electronics, Avnet, Ingram Micro, and TechData in the IT distribution business, and it has more than 20,000 resellers, system integrators, and retailers sitting downstream from it. Products from Hewlett-Packard that are resold by Synnex to its downstream partners have accounted for between 35 and 38 percent of total revenues in recent years. So it would not be surprising to see IBM work a deal on this distribution front with Synnex. About two-thirds of business at Synnex is done in the United States.