Air Canada outsources HR to IBM

$80-million, 8-year deal to manage broad range of services
By Danielle Harder
|Canadian HR Reporter|Last Updated: 11/08/2011

IBM has landed an $80-million, eight-year deal to manage a broad range of Air Canada’s HR services.

Under the agreement, IBM will manage the Dorval, Que.-based airline’s HR contact centre, employee data management, employee travel support, recruiting services, benefits administration, leave management and payroll — many of the functions the technology firm is already providing to American Airlines in the United States.

Outsourcing these types of services allows an airline to focus on other business strategies, said Mark Levy, general manager of human resources and learning solutions at IBM.

“(Air Canada’s) not in the business of providing transactional services,” he said. “That’s not a core competency they want to invest in.”

IBM is taking over from two previous service providers. In 2004, Air Canada outsourced some of its HR functions when it signed a seven-year deal with Exult, which was later acquired by Hewitt. Last year, the airline also contracted out its payroll services in the United Kingdom to NorthgateArinso.

The latest contract with IBM expands the number of HR functions being outsourced by Air Canada, including a new HR portal.

The portal is available to the airline’s 36,000 employees through the Air Canada website and allows them to manage a range of HR issues — everything from changing their address to altering the names of dependants for health and insurance benefits.

“These are highly mobile employees at Air Canada,” said Levy. “They may not have access to a computer terminal in off hours, for example. So some of the mobility we provide is attractive.”

The portal will also feature a chat function that allows instant messaging to avoid delays in getting answers.

Air Canada will benefit from enhancements IBM has made through its experience with American Airlines, said Levy.

The U.S. airline spends a lot of money on employee training and IBM has developed systems to re-use some of it.

“We’ve been able to stretch their dollar further,” said Levy.

IBM has built up a portfolio of HR technology and services as part of a business shift from hardware towards software and services.

“Companies want end-to-end solutions,” he said. “On the scale that we drive, we’re able to provide them at a better cost than companies can do internally. They may need a specialist a few times a year to solve a problem, whereas we can leverage one specialist over several clients.”

The added benefit is an outside provider often brings “oversight and discipline” to a client by forcing it to think about the functions it’s providing, said Levy.

The recent deal builds on Air Canada’s previous relationship with IBM. The tech giant has worked on kiosk-based check-in services within airports and with other customer self-service strategies via the Internet and mobile devices.

IBM was interested in providing HR outsourcing to the airline to build on its market in the transportation industry, said Levy. IBM was also enticed by the changing needs of the airline industry, which are forcing Air Canada to constantly reinvigorate itself, he said.

Air Canada declined to comment on this story.

Danielle Harder is a Brooklin, Ont.-based freelance writer.

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