IBM sells customer care outsourcing unit for $505 million

IBM sheds its customer care outsourcing unit for higher-profit business opportunities

Citing low profit margins, IBM has sold its customer care outsourcing business to Synnex for US$505 million, the companies said Tuesday.

Synnex will combine the IBM business with its wholly owned subsidiary Concentrix, which operates in a similar field. Synnex will pay approximately $430 million in cash and $75 million in stock for the IBM business.

"One of the most exciting things about this acquisition is being able to broaden our knowledge and vertical industry depth by the talent that is coming across from IBM," Concentrix President Chris Caldwell said in a teleconference.

IBM spun off the business unit as part of a long-running effort to shift its focus to areas in which it would make larger profit margins. It follows its divestiture of other relatively low-margin businesses, such as PCs, hard drives and point of sale (PoS) systems.

"This agreement is good for IBM as it furthers our focus on growing our software and cloud-based CRM [customer relationship management] solutions as part of [our] continuing shift to high value and innovative spaces," said Lori Steele, general manager of IBM Global Process Services.

Despite the sale, IBM says it will remain in the field of business process outsourcing (BPO), in which it runs entire business functions for some customers.

To that end, in 2012 IBM purchased Kenexa for $1.3 billion to strengthen its human resources business process services. And a year earlier it bought Emptoris to boost its portfolio in supply chain management services.

IBM will still have a foot in the customer care market as well, by selling software, consulting and other services that employ analysis software to personalize customer care.

Concentrix will become an IBM business partner and the companies will pursue business opportunities together, they said.

Concentrix runs customer care call centers on behalf of businesses such as banks, insurance firms and health care companies. It also provides front and back office services for retail stores and banks, and processes claims for insurance companies.

The IBM deal should bring it greater economies of scale, Caldwell said. With the acquisition, Synnex expects Concentrix to become one of the 10 top providers of CRM BPO services, a market that generates more than $55 billion in work annually, according to Synnex.

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is Joab_Jackson@idg.com

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Joab Jackson

IDG News Service
Topics: business issues, IBM, Mergers and acquisitions
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