What three important benefits will IBM receive from outsourcing their HR functions to Fidelity and how will they benefit IBM?

On 2 July 2002, Fidelity Investments of Boston and IBM of Armonk, N.Y announced and agreement under which IBM will outsource the administration of its pension program and health and welfare plans, as well as a broad range of its Human resources and payroll services, to Fidelity Employer Services Company (FESCo). FESCo is a business unit of Fidelity Investments. IBM has transferred approximately 750 of its own HR employees to Fidelity, where they will initially have the same responsibilities of servicing IBM's employees and their $56.5 billion pension plan.

This sets a new trend in the business world, where every step is taken to reduce operating costs and maximize profit. The three major benefits that IBM hopes to realize with this partnership are an increase in professional services for their employees, a decrease in costs associated with not having to manage a health care and pension program for 800,000 people, and an increase in new customers by offering its outsourcing HR skills to other businesses.

Yamato IBM research centre

FIDELITY JONES

Facility at Somers

Of these the biggest benefit is that IBM Global Services and Fidelity announced that they are forming a relationship to market HR payroll and benefits outsourcing services. Areas of joint cooperation will include providing clients with consulting services around evaluating and implementing HR and benefits outsourcing solutions.

So the blueprint of the deal looks like this: IBM hands over all of its pension, health care, and human resource program to Fidelity Investments. IBM also throws in 750 of their own human resource people who transition from being IBM Blue to Fidelity Red. This allows IBM to concentrate on its core business of technology and not have to worry about employee satisfaction or trivial things like that. In the mean time, IBM and Fidelity begin to see that this partnership has additional value...