firm Monday announced a seven-year, $32.4 million deal that will see IBM Canada Ltd. manage its data centre environment as well as a system migration to a Retek retail software-based environment. The transferred Aldo staff will be the “”seed”” personnel for an IBM Retail Solutions Centre. This centre will be a shared service environment supporting multiple customers with the same core applications to keep them in a current state and manage measured service levels. Last month, IBM formed a similar relationship with Toronto-based ManuLife Financial Corp. to create a Solutions Centre for the insurance industry with the University of Waterloo.
Aldo spokeswoman Martine Nadeu said the company was impressed by IBM’s knowledge of the retail market.
“”We need to concentrate on our core business,”” she said. “”In order to be successful — we have global challenges of course, and we have international objectives as well — it makes even more sense for us to go through a migration from legacy systems to a platform that is open and that enables evolution as well.””
Mark Langlois, manager of business development for IBM Global Services’s Application Management Services team, said the company wants to move away from effort-based outsourcing where customers bill the outsourcer for work by the hour.
“”The efficiencies (in that model) were handicapped by the infrastructure that customers had on their site,”” he said. “”They didn’t have good tools or methods or even the technology — the proper wiring or connectivity — we couldn’t deploy all of our muscle.””
The outsourcing market has matured, Lanlois said, so that new value is improving the maturity in the environment, driving out expensive systemic. IBM believes it makes sense to do this in industry clusters like retail, he added.
“”They’re almost all using the same packages,”” he said. “”Lots of people are using Retek, PeopleSoft, J.D. Edwards. In a one-to-one relationship, they’d have to support a workforce of people who would be able to hopefully keep them at world-class standards for managing Retec, for example.””
Rina Granofksy, an analyst with Toronto-based J.C. Williams Group, said Aldo was out of step with the findings of recent research on large retailers.
“”Outsourcing was pretty much a non-event,”” according to her data she said. “”It’s really not happening. It’s happening mostly in network management and a little bit in daily operations and warehouse management (but) it’s not widespread by any stretch.””
Most organizations are put off by the prohibitive costs, Granofksy said, but Langlois said companies like Aldo could be guaranteed a lower total cost of ownership. Some organizations are also put off by handing over control of core functions to another partner, but Langlois said the Retail Solution Centre would be appease those concerns.
“”They make the decisions on what they want their company to do, and we do all of the ‘how,'”” he said. “”In some relationship — and the Aldo one would be a great example — we’re bringing management consulting to the table, but it’s honestly just advice. We’re there to help them understand what’s taking place out there, (but) they have people who must be the owners of those business functions.””
“”They don’t access all the information,”” Nadeu added. “”There are contract and confidentiality clauses. Everything has been put into place so that we don’t have to worry about that.””
Montreal was chosen for the Retail Solutions Centre because it is a low-cost area, Langlois said, and the bilingual capabilities of employees there would help the firm sell its outsourcing services to other customers. There are at least 12 other prospects on IBM’s radar, he said. The Retail Solutions Centre is one of six such centers IBM wants to launch by spring of next year.