HRO Insight
NelsonHall's HR Outsourcing Insight newsletter provides commentary and insight on key HR outsourcing industry developments and vendor actions which impact your sourcing decisions. Now complemented by HRO Insight blog - updated daily.
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Latest Edition: March 11, 2010
Contains commentary and insight from NelsonHall analysts on key HR outsourcing industry developments that impacted your sourcing decisions
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GP Strategies Announces Q4 2009 Revenues Down 8.2% to $57.8m
GP Strategies has announced Q4 2009 revenues, for the period ending 31 December 2009, of $57.8m, a decrease of 8.2% compared to Q4 2008.
Q4 2009 revenues (and revenue growth) by activity were:
- Manufacturing and BPO $28.6m (+0.5%)
- Process and Government $12.4m (+2.5%)
- Energy $5.8m (-3.9%)
- Sandy Training and Marketing $11.1m (-32.7%).
Full year 2009 revenues were $219.2m, a decrease of 18.2% compared to full year 2008.
Analyst comments:
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NorthgateArinso Acquires Convergys' HR Management Business for $100m
NorthgateArinso has announced its agreement to acquire the HR Management unit from Convergys for $100m, with $85m in cash due at closing. Another $15m will be paid over three years. NorthgateArinso will be acquiring Convergys' global HR service delivery assets and client portfolio and plans to offer employment to Convergys' 2,300 HRM unit employees.
The acquisition is expected to close in the second quarter following regulatory approvals.
The combined company will have almost 8,000 employees, an expanded network of services centers, and an established large market and midmarket client portfolio covering the U.S, the U.K., and Continental Europe with a growing number of clients in Asia/Pacific and Latin America.
Analyst comments:
NorthgateArinso is known for its strength in multi-national payroll capabilities, technology platforms and systems integration services. It had solid FY 2009 revenue growth of 22%, especially in the U.K. and Continental Europe. This is a major move for NorthgateArinso to establish the size and quality footprint it has wanted in the U.S. market for some time and could its increase top line revenues over 50%.
NorthgateArinso will be acquiring the HR client portfolio of Convergys for a reasonable price. Convergys has recently completed restructuring its underwater deals with two major clients and has negotiated renewals or extensions for many of its most visible deals to remove any outstanding liabilities and commitments, for example with the State of Florida (5 year extension valued at $185m) and Texas HHSC (2-year renewal). Convergys has largely completed the extensive write downs that have totaled more than $600m in the last two years and will be handing over a smaller but more stable revenue stream that should be operating at break-even or higher. (Convergys is removing $250m in expected HRM revenues from its 2010 guidance.)
NelsonHall considers this as good for Convergys, NorthgateArinso and the HRO industry.
Convergys is relieved of an asset at a fair valuation that it has spent two years stabilizing for sale, having incurred major losses in its existing contracts due to very high levels of customization of client services. The nightmare excursion into multi-process HR outsourcing is now over and will no longer be a major drain on company resources.
NorthgateArinso will be gaining sales and delivery capability to enable it to begin to develop a major presence in the North American market together with marquee clients like DuPont, Johnson & Johnson, and the State of Florida albeit on a legacy delivery model.
Current Convergys HRO customers will benefit from NorthgateArinso's provision of a more certain future and HR outsourcing roadmap. While these organizations have highly customized individual instances of SAP that can not be easily or quickly migrated to the more standardized multi-tenant approach of NorthgateArinso, they do at least have an ongoing roadmap for the future and may be able to conduct a gradual migration to this model on a geographic basis or to incorporate new functionality. However, in the main, these clients will remain a separate legacy business for the foreseeablle future.
The HRO marketplace benefits from a new large full service vendor positioned to compete in the large market in North America against IBM, Accenture and ACS.
Blending the two delivery organizations will be a challenge. Northgate is moving aggressively into platform based HRO services primarily with its euHReka services, while the Convergys delivery organization is supporting a number of one-off legacy customized services. However, NorthgateArinso has major ambitions in the U.S. and needs the local knowledge and expertise of Convergys personnel in selling and delivering its euHReka services. In particular, the current, largely European, form of euHReka lacks benefits administration functionality, which is a core requirement for the U.S. market, and the acquired Convergys delivery capability should assist NorthgateArinso in developing this capability within the euHReka service much more quickly than would otherwise be the case.
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Accenture Awarded 5-Year Multi-Process HR Outsourcing Contract by NBN Co Limited
Accenture has been awarded a 5-year multi-process HR outsourcing by NBN Co Limited, the organization established to design, build and operate Australia's wholesale-only National Broadband Network.
The services to be provided by Accenture include:
- Employee HR administration & records management
- Recruitment administration
- Performance & rewards administration.
Analyst comments:
Accenture, one of the largest HR services and multi-process HRO (MPHRO) providers, who began providing MPHRO services to BT in June 2000, had been relatively quiet in terms of new HR services contracts announced since 2007. This contract award helps to answer that Accenture is committed to the continuance of providing HRO, including MPHRO services.
This contract also underscores the importance of having global services delivery capability, including in-country service capability, which Accenture has in Australia, where other clients are supported, including Sandvik, of whom Accenture was awarded a 10-year MPHRO contract with in November, 2004.
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Workscape Awarded Benefits Administration Contract by kgb
Workscape has been awarded a benefits administration contract by kgb, a multi-country directory assistance and information services company based in New York City.
kgb selected Workscape's Outsourcing Benefits Administration (OBA) solution and with the addition of communication services to aid employees in making appropriate benefit elections and enrollments.
Analyst comments:
Workscape launched OBA Enterprise in April 2009 and the results are paying off for Workscape and its customers. OBA Enterprise is designed to simplify the process of evaluating, selecting and enrolling in health and welfare benefits. This is a value-added solution for employees because an important part of the enrollment process is knowing what benefits options to select. Having the communication service to educate employees is an integral component. Further, having a personalized new hire enrollment statement is an important part of the onboarding process. With all of the benefits options today, including still confusion over understanding what consumer driven healthcare is, Workscape will be able to help its clients make informed decisions.
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HR Access Increased Revenues by 9% in 2009
HR Access, a European HR services provider of HR applications, outsourcing and consulting services, has reported revenue growth of 9% for 2009.
HR Access added almost 90 new customers for its HRa Suite 7 solution including the Arab Tunisian Bank in North Africa and companies in Germany, France and Spain. New customers for HRa Suite talent management modules include Mediapost, SCP and the French railway company SNCF. With the addition of these new clients, HRs Suite 7 applications will be supporting more than 2 million employees.
HR outsourcing services sales also increased, up by 12% in 2009. HR Access is now approaching 60 clients for its outsourcing services combing underlying HRIS and applications support, including Ebm-papst in German and Groupe SOS and France 24 in France.
Analyst comments:
Formed by Fidelity in 2003, HR Access has grown to more than 600 clients in over 50 countries and now has 1,000 employees and expects to continue to add staff in its Northern Africa services centers, especially in Tunisia.
As an interesting note, more than 80% of customers who contracted for HRa Suite 7 payroll services also added the Talent Management modules. Talent management, along with RPO and Learning experienced revenue declines in 2009 as employers focused on cost cutting and many experienced staffing declines. It is good to see adoptions of talent management applications, which can help manage a workforce that is under pressure to balance goal setting and performance management while retaining some focus on optimizing use of compensation, development and retention.
HRO Insight: January 29, 2010
Contains commentary and insight from NelsonHall analysts on key HR outsourcing industry developments that impacted your sourcing decisions
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Primacy Relocation Acquired by Realogy Subsidiary, Cartus
Primacy Relocation has been acquired by Realogy subsidiary, Cartus.
Primacy, based in Memphis, TN, has 700 personnel in the Americas, Asia, and Europe. Cartus has 2,500 personnel and is based in Danbury, CT.
Financial terms of the acquisition were not provided.
Analyst comments:
The acquisition of Primacy enables Cartus to challenge SIRVA as the leading global provider of relocation services. Additionally, as Primacy is a major provider of relocation services to the government, it enables Cartus to target the U.S. government. Now that healthcare reform has been put on hold in the U.S., the economy and creation of jobs is now a top priority for the Obama administration. Expect for the U.S. government to be creating additional jobs as well as incent the private sector to do so, thus fostering additional growth in mobility services.
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TriNet Launches Benchmarking Dashboard to Help Small Businesses Improve Competitiveness
TriNet has launched a benchmarking dashboard to help small businesses improve competitiveness. The dashboard will be included as part of TriNet's standard services offering at no extra charge.
Dashboard information will be extracted from TriNet's database of 8,000 small business clients so that small business owners will be able to compare their:
- Company growth
- Compensation
- Employee turnover
to that of small businesses within their industry and across all businesses in the U.S. If client metrics are below average, TriNet will recommend how to improve.
In addition, TriNet has launched tools to help employees manage their health. Through online tools, employees can:
- Identify areas where their health may be most at risk
- Develop a plan to mitigate the risk
- Track how employees are doing in meeting their health objectives
Employees will also receive:
- Health coaching
- Learning modules for diabetes and cardiovascular diseases prevention
- Personalized meal and exercise planning
Analyst comments:
TriNet is providing a very important offering at no extra cost to its small business clients. Obtaining and retaining talent in small businesses is just as important as it is for medium to large sized organizations and now buyers will know how they compare to the industry. Providing the dashboard at no extra charge is also of significance. In NelsonHall's HRO Analytics market study published in Q3 09, higher level analytics, such as in the form of a dashboard, that provide actionable results with recommendations how to improve, are normally charged extra for.
TriNet has as history of introducing a number of tools that provide buyers with business intelligence. Such prior offerings have included:
- An accounting dashboard offering a view of company payroll by month or quarter, that can be segmented by company, department, or down to the individual employee level
- A human capital management dashboard enabling customers to view and sort information related to headcount, employee tenure, average salary, and hires/terminations
Expect for TriNet to continue introducing new analytics and for other vendors to take notice and begin incorporating increased levels of analytics as part of their services offerings without additional charge.
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Edvantage Group Partners With KnowledgePool to Enhance Managed Learning Services
Edvantage group has partnered with KnowledgePool in the U.K. to enhance its managed learning services offering.
KnowledgePool's training suppliers and training administration will be integrated with Edvantage group's hosted eLearning platform. Customers will be able to obtain both eLearning and instructor/classroom led training courses.
This blended learning service is available to customers now.
Analyst comments:
This partnership is a win-win for both Edvantage group and KnowledgePool, but most importantly for customers who can work with one vendor to fulfill all of their learning needs. KnowledgePool, one of the top managed learning services vendors in the U.K. in terms of revenue, will benefit due to the increased demand for eLearning. Edvantage group benefits as instructor led training is still a significant portion of the learning services market that clients require for their learning.
This is Edvantage group's 3rd partnership announced in the last 30 days, the others being:
- Saba on December 21, 2009 to enhance its eLearning services
- Ossidian Technologies to offer eLearning courses to its clients in the telecom industry
Look for additional learning partnerships to take place globally as providers seek to offer multi-learning services capability to meet client needs.
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Pinstripe Awarded Sixteen New RPO Contracts in 2009
Pinstripe has been awarded sixteen new recruitment process outsourcing (RPO) in 2009, of which six are named and include:
- Agilent Technologies
- Coleman
- Critigen
- Princeton HealthCare System
- RJ Reynolds
- VWR International.
Analyst comments:
The addition of 16 new clients in 2009 speaks well for Pinstripe and the strength of the RPO industry. As Sue Marks rightfully points out, buyers are turning to RPO to meet their ever-changing workforce needs. The value of RPO being that providers can quickly scale up and down to meet changes in demand while internal recruiting departments struggle with needing to downsize or be stuck with high fixed costs when hiring is low and then when demand picks up, having to quickly hire their own internal staff to meet demand.
2009 was also an important year for Pinstripe as both the contracts for Agilent Technologies and VWR International included hiring outside of the U.S. in Canada, Mexico, Puerto Rico and in the case of Agilent Technologies, in Brazil as well. The ability to provide global RPO is an emerging critical success factor as buyers are increasingly seeking one vendor to manage all of their hiring needs.
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Hewitt Incorporates Participant Advocacy Services Within its Absence Management Service
Hewitt Associates has added participant advocacy services to its absence management service.
The new service pairs each employee taking an extended absence with a trained participant advocate, who advises them on potential benefits-related access-to-care, eligibility, and billing issues.
Analyst comments:
Absence management services can both help employees navigate the often complex benefits and health care programs which can result in an overall lower cost of absence and a faster return to work, potentially a win-win for the employee and employer.
Hewitt has been able to successfully integrate its 2008 acquisition of LCG absence and disability management services as evidenced by the addition of 16 new clients to its previous base of c. 60 clients.
Absence management is a high growth service within the field of benefits administration, as employers pressured by the down economy look to reduce overall labor costs.
Buyers have a wide choice of vendors, from specialty absence management vendors and insurance companies to HRO vendors from Kronos to Hewitt and Mercer. Offerings can range from basically leave of absence and FMLA claims processing to full offers that include clinical decision support, claims administration, return to work support and advanced analytics to identify opportunities for improved solutions.
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Salary.com Adds Financial Services Industry Job Models to its Competency Library
Salary.com has added Banking and Financial Services Industry Job Models to its job model and competency library.
Analyst comments:
Salary.com maintains a rapid and continuous pace of enhancements and updates to its HR SaaS offerings. Service enhancements in the last two months include:
- Adding the SkillsManger skills assessment and gap analysis module to its talent management software portfolio
- TalentManager expanded employee development and career planning, writing assistance for performance reviews, and added a new interface for employee self services
- CompetencyManager added manufacturing industry job models to its job model and competency library
- CompAnalyst added merit modeling analysis, market pricing capabilities and new reporting tools.
One of the benefits of SaaS for HR is the ease of access to updates and enhancements with minor improvements included at no extra charge. New service modules come designed as plug and play and can be added easily and at less cost than paying 100% of the cost to integrate new services into a client-customized system.
Buyer questions to ask when considering an HR SaaS offering include; examples of recent and planned service enhancements and whether they were included at no charge to current clients and how enhancements or upgrades that do cost additional are handled. Ask about the age and planned life span of the service platform and how migration to a new platform, if needed, is managed. If the services are offered on more than one platform, by client size for example, what happens if a client outgrows the platform's normal parameters?
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Hewitt Recaps HR 2009 Awards in Benefits and Multi Process HRO
Hewitt summarized many of its 2009 awards showing wins in all areas of benefits administration, a stabilization of its HRO business, and a surge in point solution sales, bringing its services to more than 21m participants globally.
Benefits administration -- 15 new clients for services including DB, DC, health and welfare, absence management, and three clients for TBO (total benefits outsourcing). Hewitt now has more than 300 benefits administration clients.
HRO -- two new HRO multi-process contracts
Point Solutions -- 177 awards from both new and existing clients for services including;
- Absence management
- Advocacy services helping employees resolve health care and retirement claim issues
- Claims and appeals management and audits
- Dependent audits
- Flexible spend accounts
Analyst comments:
Hewitt issued a end of year summary of notable new mid and large client wins and renewed and expanded business with current clients.
The two new HR BPO clients include a global energy company win earlier last year and a recently signed long term contract with a Fortune 100 client. Additionally, Hewitt successfully renewed each of its current MPHRO clients going through renegotiations in 2009. Hewitt is finally turning the corner on years of drag on its earnings as significant progress was made in stemming the losses in its HR BPO division, where losses were reduced from $83.3m in 2008 to $5.2m in 2009 against $479.7m in revenues.
Having quietly reentered competition for new MPHRO business in 2009, Hewitt is now targeting 3-4 per year new North America or U.K.-based clients willing to start with two or three HR processes covering geographies with a high concentration of employees.
The solid activity in benefits administration helped Hewitt keep segment revenues even in 2009 at $1.5bn, offsetting declines in project work and covered participants as clients reduced their workforce and budgets. Absence management was among the benefits point solution sales, indicating Hewitt has been able to leverage its April 2009 acquisition of LCG, a small clinician-based absence management provider.
Hewitt's increase in point solution activity for dependent audit, absence management, and flexible spending accounts is in line with NelsonHall market growth estimates. We see Health and welfare services outpacing the growth of overall benefits administration, which included the more mature DB and DC segments. Even as we progress through the recession recovery period buyers will remain cost conscious and services like dependent audits and leave of absence support that can show a bottom line ROI impact on total labor costs will grow faster than the overall HRO market.
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Patersons HR and Payroll Solutions Launches Free Employee Self Service Offering
Patersons HR and Payroll Solutions has launched a free Employee Self Service (ESS) offering.
In 2009 Patersons began providing its HR offering free to its buyers of international payroll, but now this has been expanded to include ESS.
With Patersons ESS employees can:
- View and update personal information
- Initiate leave of absence
- View payslips
Customers can also buy Manager Self Service which includes online approval capability of requests.
Analyst comments:
Companies of all sizes have benefited from ESS and MSS to save time and money and improve employee satisfaction.
The free HR offering and ESS/MSS are part of Logon2, Patersons global HR and payroll system. Logon2 is available in 30 countries and the self service capabilities are multi-lingual, so clients can use this across their entire company.
In Q4 2009 Patersons announced a self-service portal, allowing employees to access and submit expenses from anywhere to managers who can approve them anywhere at any time.
As seen by NelsonHall in its recent payroll market analysis to be published by end of January, an increased number of SaaS HR services, including ESS and MSS are being provided alongside payroll, but Patersons is the first ESS seen to be provided for free and buyers will take notice.
Although Q4 2009 revenues were down in comparison to Q4 2008, revenues were up 6.8% compared to the prior quarter of Q3 2009 and Q3 2009 was slightly better than Q2 2009 signaling stabilization and a return to growth in 2010.
GP has been proactive, acquiring three Learning providers during the last five months:
Option Six to enhance its learning services capability in the software and pharmaceuticals industry
Milsom Industrial Designs Limited to enhance its learning services capability in the U.K. and continental Europe.
Combined, the three acquisitions bring c. $29m revenue in 2009. Combined with GP's ability to continue to win new learning services contracts, expect for 2010 to be a growth year for GP.