CPR inks $200-million contract to outsource to IBM

Canadian Pacific Railway Co. (CPR) and IBM Canada Ltd. announced this month a multi-million-dollar, seven-year agreement which will have IBM operating and enhancing CPR’s railway infrastructure.

CPR offered several reasons for handing over its IT systems, including wanting to focus more on the customer side of its business, and wanting to take advantage of IBM’s expertise in the transportation industry.

Allen Borak, vice-president of information services at CPR in Calgary, said during a conference call that over the past five years the company has completely renewed its suite of applications and IT infrastructure, and is now ready to let IBM take over.

“We are now taking the next important step, one that will enable CPR to harvest its IT to derive maximum value from it for our customers and for our shareholders,” Borak said.

He added that CPR was also drawn to IBM’s Centre for Transportation Innovation in Boulder, Colo., which is included in the $200 million contract, and hopes to derive expertise from the centre to reduce costs, make its assets including railcars and locomotives more productive “and find new opportunities to enhance services for shippers.”

Ed Kilroy, president of IBM Canada in Markham, Ont., said this agreement between the two companies goes beyond traditional outsourcing and reflects a Canadian and worldwide trend. “Customers want more than just a technology company to provide technology support, they want a business partner with deep industry knowledge and expertise,” he added.

Kilroy said that with its acquisition of PricewaterhouseCoopers last July, along with its Centre for Transportation Innovation, IBM is equipped to give companies more than just technology support.

“CPR will benefit from the innovative business solutions developed at this centre, leveraging the deep industry expertise of highly skilled professionals from all parts of the IBM organization including IBM research, IBM Labs and IBM Business Consulting Services,” Kilroy added.

He said the centre will look at initiatives including building customer loyalty and supporting CPR’s efforts to lower distribution costs by simplifying management of its supply chain.

CPR employees who lost their jobs because of the outsourcing agreement have been offered an equal contract with IBM Canada, Borak said. He added that these 100 or so employees are not included in the 820 workers that CPR announced earlier this year are being laid off.

This is not the first major IT initiative at CPR: In February 2002, CPR inked a 10-year, US$20 million agreement with DMR Consulting (since acquired by Fujitsu) to implement a massive train yard inventory system dubbed TYES. The company also embarked on a bid to overhaul its billing systems, a major factor behind its train-to-truck deal with Toronto-based Consolidated Fastfrate in 2001.