Wipro secures $143 mn outsourcing deal from Levi Strauss

Levi Strauss to cut around 500 jobs as part of restructuring excercise

Information Technology services major Wipro has bagged a $143 million five-year outsourcing deal from Levi Strauss as the US-based denim apparel maker looks to cut 500 jobs in a restructuring exercise.

The move, first announced in March, is expected to generate net annualised cost savings of $175-200 million, once fully implemented. Levi Strauss & Co has entered into a Master Services Agreement with India’s third-largest software services firm to outsource “certain global business service activities within the functional areas of information technology, finance, human resources, customer service and consumer relations.”

Earlier this week, Levi had said that its next phase of the global initiative includes “elimination” of around 500 positions primarily reflecting the outsourced services as well as a further reduction of management layers, an increase in spans of control, the removal of duplicative roles and other structural changes.

“The initial term of the agreement is five years with activation of certain components of the outsourced services commencing during the first quarter of 2015. The company has the right to renew and extend the agreement for up to two additional one-year periods. The company will pay Wipro for the services through a combination of fixed and variable charges, with the variable charges fluctuating based on the company’s actual need for such services. The company expects to pay Wipro a minimum of approximately $143 million over the initial term of the agreement,” Levi said in a regulatory filing to the US SEC.

Earlier this week, Levi had said that its next phase of the global initiative includes “elimination” of around 500 positions primarily reflecting the outsourced services as well as a further reduction of management layers, an increase in spans of control, the removal of duplicative roles and other structural changes. “The company anticipates the elimination of positions will be substantially completed within the US within the second half of financial year 2015 to accommodate the transition of Outsourced Services to Wipro.”, it said.

Wipro will provide support for certain business services within information technology, finance, human resources, customer service and consumer relations, it added.

The San Francisco-based jeans maker said it expects to incur restructuring and related charges in the range of $45-55 million, the majority of which will be recognised in the fourth quarter of 2014. The charges consist of cash expenditures principally related to severance benefits, retention bonuses and consulting fees. In a statement, Levi said: “In this next phase of the productivity initiative, approximately 500 positions will be eliminated, primarily due to the decision to partner with Wipro.”

Wipro will provide support for certain business services within information technology, finance, human resources, customer service and consumer relations, it added.