P&G Eyes New Outsourcing Era - ' What'

What's in It for ACS

Landing Procter & Gamble would be the largest deal yet for the company founded as an information technology services firm by current chairman Darwin Deason in 1988. Under current chief executive Jeff Rich, ACS has focused on developing the business process market. Acquisitions—including the $825 million purchase of Lockheed Martin's processing unit, IMS, last summer—helped the company grow from 16,000 employees in early 2001 to more than 35,000 today. Buying IMS made ACS the leader in providing BPO to state and local governments. Landing P&G's Global Services Business would do the same thing for ACS in the corporate market.

ACS essentially would be buying P&G's processing and data center operations and personnel for $1 billion in ACS equity. (EDS, the other finalist for the job, dropped out in early July, citing the high price P&G was asking for its assets.) The financial structure involving equity participation in the contractor by the customer is not uncommon. But the scale of this deal, which could make P&G the largest shareholder in ACS, is unprecedented.

Almost all of the people handling P&G's business processes and information systems would stay on the job, at least for a while. "We don't want to nuke management and just bring in ACS people—we need that management talent," says ACS chief operating officer Mark King. The P&G business would be split roughly 50-50 between business processes and information technology services. The BPO side includes human resources and benefits, financial operations and pensions. The information technology outsourcing includes the basic data center, support and computer technology used to support those operations.

But the deal means far more than an enormous new customer for ACS; it is meant to be a launching pad for further growth. "We look at this as the acquisition of a BPO platform, and will apply it to other customers," says King. "We would be bringing on board over 5,700 employees, along with proprietary processes and systems, with two-thirds of the people outside the U.S." ACS, now doing business in 47 countries, would be in 62 countries if the deal goes through. The company is already pursuing business like the human resources work of General Motors' European operations to leverage its potential new assets. The upstart company's rise as BPO gains momentum is reminiscent of CSC's (Computer Sciences Corp.) ascent during the early days of data center outsourcing.

Scholl stresses the importance of P&G managing its BPO contract carefully—a caveat she extends to all potential BPO customers. "You have got to be focused on how you are going to manage these services, not just hand them off," she says.

t's a balance that more and more companies will be seeking in the months to come.