Hewitt Gets Back on the Bicycle

I listened to Hewitt’s Q4 and fiscal year 2009 earnings call last week. It was rolling along in the same vein as others this quarter: explaining declining revenues, the impact of foreign currency, being cautiously optimistic that we have seen the bottom of the recession and offering conservative guidance of low to mid single digit growth in fiscal year 2010.

Then the call started to get more interesting. First, there was relatively good news on the HRO front, with a loss for Q4 of only $2 million. That is quite good when in the same quarter last year its loss was $21 million. (For more on Hewitt’s earnings analysis, see this week’s NelsonHall HRO Insight newsletter.) Then Russ Fradin, Hewitt’s CEO, mentioned in his highlights segment that the company had just signed a major new multi-process HRO (MPHRO) client.

My ears perked up. MPHRO? Hadn’t Hewitt pretty much backed away from this space after spending much time and effort to terminate, restructure and renegotiate problem contracts it had inherited from its acquisition of Exult? As if that hasn’t been enough of a challenge, it was also hit with the liquidation of two major retail clients, Mervyn’s and Circuit City.

In addition, Hewitt dropped that it has quietly onboarded several new clients in 2009! Now I was sitting up straight. And it was a good thing I was sitting, because Russ went on to say Hewitt was “getting back on the bicycle,” and were targeting adding three to four new MPHRO clients per year.

By the way, in a follow-up call I found that the new MPHRO deal is a competitive win and the client is a major global beverage company.

The news disclosed during the Hewitt call reminded me of one of the premiere U.S. Olympic-level velodromes for bicycle racing and the home of gold medal winner Marty Nothstein.

Some of the cycle races are just what you would expect, all out speed races from start to finish. Other races are as much about strategy, positioning, timing and knowing your competitors moves as they are about stamina and speed. And in racing at this level, top technology in equipment is a must. These bikes bear little resemblance in features or cost to the Scwhinn’s many of us had in childhood.

This is good news, not just for Hewitt, but for large market clients. A robust field of viable providers ensures choice and spurs competitive pricing and innovation. Welcome back, Hewitt.

Make room on the field and let the racing begin. May all the competitors win!

Linda Merritt, Research Director, HRO, NelsonHall

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