Canada Post and CGI negotiating to create IT firm

Although still in the nascent stages, Canada Post Corp. and CGI Group Inc. have announced Wednesday they are creating a jointly owned IT company.

Representatives from both companies could not provide any further details, other than to say that the Montreal-based IT services firm has been selected by Canada Post to form an as yet unnamed firm that would provide e-business solutions to the Canada Post group of companies (including Purolator Courier Ltd. and Progistix Solutions) as well as other postal organizations worldwide.

This announcement is a result of a request for proposal that was launched in the spring of 2000, said John Caines, spokesman for Canada Post in Ottawa.

“We hope to help (CGI) help us establish a new IT service for the Canada Post group of companies. It will help us reduce our IT services costs, which you can well imagine are pretty high,” Caines said.

“We are looking also at improving the ability to deliver some timely IT solutions that will meet our business objective, which is to become a better run company and cut our overhead costs. It allows us to expand into international markets.”

CGI spokesperson Eileen Murphy tentatively expects a company name and president to be announced sometime early 2002.

“This company will create products it can sell (worldwide), as we’re seeing other companies do. In selecting CGI, we’re financially strong, we have resources Canada wide, and we have end-to-end solutions – we can do basic desktop support and we can develop applications,” Murphy said.

“At this point we have projected annual revenues to be $200 million. Together we will be developing new products that will generate net new revenue to the company.”

According to Lars Goranson, vice-president of services research at Toronto-based IDC Canada, it is easier for private-sector firms such CGI to maintain and develop skills than for a public sector company like Canada Post.

“Outsourcing is a trend that is growing in acceptance, particularly in times of economic slowdown. It is clearly a way of managing costs downwards in most cases. More importantly, it will allow Canada Post to leverage some of the specialized skills.”

“The problem with someone like Canada Post, is obviously they can’t go to market. Only through a partnership with an (IT firm) can they take it to market. CGI has a captive audience in its other outsourcing clients, and they might well benefit from what’s being developed.”

“I personally don’t think that Canada Post is going to start selling a whole bunch of services to other organizations worldwide,” said Jason Bremner, senior outsourcing services analyst at IDC.

“That being said, I understand that Canada Post is very well regarded around the world . . . but generally speaking this is going to be mostly for Canada Post and internal Canada Post organizations.”

Canada Post Corp. in Ottawa, is at

CGI Group Inc. in Montreal, is at

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