Accenture and Unilever Renew Major MPHRO Contract for Five More Years

Linda Merritt, HRO Research Analyst, NelsonHall

Let’s wrap-up 2012 on a high note for HR BPO with news of Accenture’s award of a 5-year multi-process HRO (MPHRO) contract renewal from Unilever. When orginally announced in 2006, the 7-year contract was the single largest HRO deal signed with an estimated value of $1bn.

First Generation HRO

The focus of the first generation Unilever contract was largely on cost reduction (20% – 30%) and creation of a unfied global HR operating environment of systems and services across 100 countries and 20 languages. Unilver had already begun the tranformation process by introducing shared service centers in key areas to capture some of the early gains on its own as part of its One Unilever program to reduce the cost of back-office services including HR, F&A, and IT. It then moved to HRO to make further progress in efficiency, cost, and to gain a single source of the truth in reporting and mearsurement capabilities.

Second Generation HRO

Accenture will continue to support ~130,000 Unilever employees operating in more than 100 countries through its global delivery network including multiple centers across the U.S., Europe, and Asia Pacific. MPHRO services include:

• Core HR administration
• Payroll administration
• Recruitment
• Learning services covering content sourcing and development, program planning and delivery, and learning system hosting
• Management and administrative services.

As is common with renewals, there are some expansions of scope and a greater focus on improvements, in addtion to a desire for further cost reducing efficencies.

Accenture will be introducing service improvements to drive greater efficiencies and improve the user experience and align the services it delivers with Unilever’s Talent Agenda. New elements include:

• Introducing a more proactive recruiting approach, including the expanded use of social media (Accenture itself has been using LinkedIn and Twitter to recruit staff for a few years now)
• Expanding the scope of the learning services delivered by Accenture to include professional skill-building modules in the curriculum to support Unilever’s focus on developing future leaders; learning programs will make greater use of virtual instructor-led training (VILT), which is in line with Unilever’s sustainability agenda
• Evolving in performance metrics to go beyond traditional operational SLAs to include metrics focused on the client’s desired business outcomes.

It is a good quarter when you can announce a major MPHRO deal, whether it’s new or a renewal. For FY Q1 2013, Accenture’s revenues were $7.2bn, up 5% in local currencies; EPS were up 10% to $1.06; and operating income was up 7% to $1.05bn. Outsourcing brought in $3.26bn in revenues, and $3.3bn in new bookings. A good quarter indeed!

Happy holidays from the NelsonHall HRO team: Gary Bragar, Amy Gurchensky, and Linda Merritt.

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Surprise, Surprise (not): Cost Reduction Reigns as Top HRO Driver in 2010

Although reduced service delivery costs are not always the key reason companies outsource to third parties, it comes as no surprise (and really, why should it?), that the overriding issue which continues to concern HR departments in 2010 is the ongoing need for HR service cost reduction.

NelsonHall’s just published research report, “HR Issues and Outsourcing Intentions,” found that 78 percent of the 120 buy-side HR executives interviewed – with a nice cross-section of participants from the banking, consumer products, healthcare, high-tech, insurance, media, pharmaceuticals, retail, telecommunications and utilities industries – ranked the corporate requirement for reductions in HR administration costs as their number one issue. Other issues and challenges 2010 HR departments are facing include providing support for organizational restructuring and retraining, of course while reducing HR costs, and standardizing HR processes and providing improved HR information in an environment in which there is little management support for internal investment in HR technology.

This need for cost reduction with minimum investment is having a major impact on the manner in which organizations are approaching HRO. A full 60 percent of our buyer interviewees stated cost decreases (“maintenance of our current services and systems, with only minor changes/additions”) was their main HRO need and expectation over the next 12 to 18 months.

Overall, organizations are seeking average cost reductions of approximately eight percent from their HR services during 2010. However, they will be seeking significantly higher cost reductions from their outsourced HR services. Consequently, they will negotiate with their providers for further cost reductions within existing HRO contracts, and engage in additional HRO deals that focus on both process standardization and cost reduction.

As a result, we’ve seen an increasing number of announcements of new standardized service offerings, particularly in the small and medium enterprise (SME) market. For example, earlier this week Sweden-based Aditro, an outsourcing provider of payroll and HR services to Nordic countries, announced a packaged payroll service for SMEs that includes a standardized payroll service with pre-defined service levels, enabling clients to receive the benefits of outsourcing, but at a lower price.

In an upcoming blog we’ll speak in detail about uptake of SaaS-based vendor hosted applications, another topic we covered in detail in our “HR Issues and Outsourcing Intentions” research report. But, given the extensive nature of the report, (it’s more than 176 pages!), there are many other areas we can also try to cover in future blogs. Interested in hearing more about the key issues HR departments are facing relative to HR service delivery, and initiatives planned in response to these issues? Level of satisfaction with current HR service delivery? Expectations from HRO, including benefits sought and attitudes toward use of hosted HR platforms and offshore service delivery? Let us know!

Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall