Kraft Signs HR Business Process Outsourcing Deal With IBM

January 28, 2009
Kraft Foods has signed a multiyear HR business process outsourcing agreement with IBM, marking the first such deal to be announced in several months.

Under the terms of the agreement, IBM will take over workforce administration, payroll, compensation, recruiting, learning and talent management for the Northfield, Illinois-based food company.

Bruce McConnel, an IBM spokesman, could not disclose the length of the deal or the contract value. Renee Zahery, a spokeswoman for Kraft, was not immediately available for comment. Kraft has 103,000 employees in 180 locations worldwide.

The announcement of the Kraft/IBM deal comes at a time when most employers are opting for outsourcing transactional HR processes, such as payroll and workforce administration, rather than jumping into multiprocess HR BPO deals, observers say.

“I think we may see more of these kinds of deals in 2009 than we did in 2008, but I still think they will largely be around transactional processes,” said Neil McEwen, managing consultant at PA Consulting.

For the most part, employers have shied away from transformational, multiprocess HR BPO deals because there had been so many implementation problems with the early deals of this kind, observers say. And Kraft is no different in this regard, said Phil Fersht, an analyst with AMR Research.

“Kraft has been evaluating this for some time,” he said. “I think it’s been close to three years.”

Not only is the deal a huge boon to the HR BPO market, but the fact that Kraft allowed IBM to announce it will help the market greatly, McEwen said.

“Companies have been very tight-lipped about these deals,” he said. “This announcement might send the message that it’s OK to do this.”

—Jessica Marquez

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