Who’s On First and What’s on Second in HRO? A Quick Look at the Xerox/ACS Marriage

The times and the players are a changing in the world of BPO and especially multi-process HRO (MPHRO). Much like the classic baseball comedy bit by Abbott and Costello, it’s hard to figure out who is on which base and who is leaving the field.

This week’s big BPO news is Xerox’s acquisition of ACS in a cash and stock transaction approved unanimously by the ACS board. The transaction is expected to close in Q1 2010, and it includes the ACS human capital management (HCM) and HRO service lines.

There are major plans for synergies, in terms of both internal cost reductions and go to market opportunities. Xerox is expecting significant new revenue growth through integration of its intellectual property with ACS’ services to create new solutions. Xerox also plans to leverage its global brand and client base to help scale ACS’ business in Europe, Asia and South America.

Yesterday’s announcement stated ACS will continue to operate as an independent organization, and that for an interim period, ACS will be called ACS, a Xerox Company. Hmmm…sounds a lot like the transitional ”EDS, an HP Company.” Initial branding aside, can the separation hold for long given the already announced intention to integrate and leverge capabilities and services across Xerox and ACS? Time will tell if they follow the EDS example of initial separation to establish stabilization and detailed plans, followed by full integration and disappearance of the ACS name.  

By NelsonHall estimates, the HCM business line will constitute almost 5 percent of the revenue of the combined $22 billion business. ACS is a major HRO player that has the bases covered anyway you look at it:

•  4th largest global Benefits Administration provider with almost 8 million participants

•  5th largest in terms of global MPHRO

•  7th largest in terms of global Learning revenue

With the acquisition of ACS, Xerox definitely joins the ranks of big league BPO players, and Xerox expects this deal to be a “game changer” to expand its business well beyond its roots in document management. But the HRO big league has been a pretty tough game for the early MPHRO entrants. Some have already left the MPHRO playing field, including Fidelity and ExcellerateHRO, which has been absorbed into HP. 

So there is room on the field, but not a lot of time to figure out the rules for the next generation of HRO. All the players, old and new, single and multi-process, are looking to bring their “A game” as we emerge from the recession. Strategies have changed, technologies have advanced, investments made, delivery capabilities fine-tuned and partnerships strengthened.

I hope ACS and Xerox stay in the game. We need enough strong teams to make a competitive league of providers that can play at all levels, from small, mid and large market to single country and multi-national HRO.

Let’s play ball!

Linda Merritt, Research Director, HRO, NelsonHall

Explore posts in the same categories: benefits administration, benefits administration outsourcing, hr outsourcing, hro, HRO providers, learning outsourcing, multi-process hro, nelsonhall

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3 Comments on “Who’s On First and What’s on Second in HRO? A Quick Look at the Xerox/ACS Marriage”

  1. Naomi Bloom Says:

    Lot’s to think about here that might lessen your enthusiasm (and Xerox’s) for staying in the HRO business. The benefits admin platform ACS acquired from Mellon which acquired it from PwC and Buck Consultants (which was also acquired by Mellon and then sold to ACS in the same deal) is going to need ongoing, major investments to keep up with the regulatory activism applied to health and welfare benefits as well rising customer expectations when competing with providers with more modern platforms. And what about those Buck Consultants (high-priced, specialist actuaries and plan designers), who were already feeling uncomfortable crammed into ACS (low-priced, highly repeatable production line services). Will Xerox be able to compete for talent against a beefed up Mercer, Towers Watson, Hewitt etc.? Is ACS making its margins on its global, comprehensive HRM BPO deals? What will happen to those deals when the cost to service escalates as a result of regulatory activism and rising customer expectations for more social and content-rich user experiences? Has ACS’ single tenant PeopleSoft-based middle market HRM BPO offering caught fire? Perhaps it’s as terrific a fit as you describe, but I don’t think I agree. What am I missing?

    • Linda M Says:

      Thanks for your comment Naomi. As you point out, it is a challenge to play in the HRO major leagues. There is constant pressure to innovate and add new value, create differentiation from competitors and compete for talent – all while being in a still maturing industry in a very difficult economy.

      Will the Xerox acquisition of ACS be a home run, a base hit or will it be called out at first base? Clearly Xerox has big plans for its new partner. The question is whether the value and synergy will also be there for ACS’s Human Capital services.

      My view is that we need enough committed, talented and well-equipped players to have a viable league of competitive teams on the field.

  2. HRO Employee Says:

    I am not sure whether ACS is going to sustain the competition that its getting from major HRO players like Hewitt.

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