Posted tagged ‘human capital management’

ADP Puts HRO Strategy into Action

September 15, 2011

Strategy is not a plan, it is action. A strategy defines what actions a company will take to achieve its goals. With the just announced acquisition of Asparity Decision Solutions, a privately-held supplier of patented employee benefits decision support tools (DSTs) and analytics, ADP provides a good example of strategy in action.

It is part of ADP’s strategy for growth to expand the depth and breadth of its benefits outsourcing services. It is also core to ADP to provide clients “insightful solutions that drive business success,” and “turn knowledge into insight.”

ADP’s acquisition of Asparity is an all around win-win. This is an excellent fit for ADP, which continues to expand its value proposition by enhancing its benefits and human capital management business process capabilities in a manner well suited to its strengths. Together, ADP and Asparity will be able to provide knowledgeable insights into managing the rising cost of health care and link its services to creating broader business value.

Asparity provides web-based proprietary technology to Fortune 1,000 companies and public-sector organizations, including the Federal Employee Health Benefits program. Its interactive DSTs include personalized data to engage and assist employees in making complex health care and benefits selections. All the more important given the changes and challenges in navigating health options and costs that are increasing for employees as well as for employers. Employers receive in-depth data to analyze employee health care actions and conjoint analysis is available to determine prioritized employee preferences, both of which can help employers manage total health care costs.

The addition of Asparity is one more in the steady execution of its strategy. In 2010 it acquired Workscape and its enriched benefits capabilities. Also, ADP has just formed the new benefits Strategic Advisory Services Group to help mid- and large-market clients maximize the value of the in-depth benefits data and analysis that ADP will be able to provide.

ADP is moving into the kind of consultative service arena that can create business results well beyond lowering HR operating expenses, and enabling it to establish itself as a strategic business partner in balancing the total cost of benefits with the impact on talent management and the bottom line.

According to NelsonHall’s 2010 benefits market analysis ADP including Workscape is among the top ten providers in both participants and revenues. These new strategic moves, if well executed, should strengthen ADP’s growth in a very competitive benefits outsourcing market.

Other HRO vendors that continue to think of ADP as “only” a payroll provider may well be surprised when it pops up as a serious competitor in their market. How aligned are your actions with your strategy?

Linda Merritt, Research Analyst, HRO, NelsonHall

The HRO Need for an HCM Maturity Continuum

January 26, 2011

HRO service providers need to assess potential and current clients for business development just as clients assess vendors.  Evaluating HR organizational and enterprise leadership human capital management (HCM) maturity would help both buyers and providers select appropriate HRO and technology investments now and in the future.

My hypothesis – HRO vendors have more business development opportunities with a maturing client HR organization and enterprise that values and invests in its HCM capabilities.

For HRO service providers, HR is usually the direct client and knowing HCM maturity of the HR organization and the business is valuable in the initial sale and on-going relationship and revenue growth of the client relationship. Gauging client HCM maturity can guide the HRO services set selection and approach to winning and growing the business – and even determine if the opportunity is worth pursuing.

For HRO buyers, knowing realistically where you are and where you intend to go is important when selecting service providers.  The lowest cost provider of basic HRO technologies and services may meet today’s pressures for cost efficiency, but may not be able to help you improve HCM results and business outcomes in the future.  This can lead to disruptive changes in vendors and technologies or a network of vendors and services that does not sufficiently enable best in class performance for HR or the business.

There are pieces and parts available in many places and in many guises to develop a working HCM maturity model.  A wealth of internal knowledge is waiting to be tapped across the HR and HRO communities as well as within organizations.

Aberdeen Group’s “The 2011 HR Executive’s Agenda” report, which is based on findings from 439 organizations, states that HR is still spending too much time on tactical activities.  At the same time, the uncertain economy and focus on efficiency is the top HCM driver at 52%, which may then focus HR on tactical activities!  HR process standardization and automation are seen as top solutions, providing opportunity for HRO.

The second and third most important HCM drivers at 33% each are also good news for HRO: the return of interest in organic growth goals and perceived scarcity of key skills in the marketplace.  As NelsonHall has reported, increasing spend on RPO has already taken off and there is renewed interest in talent management solutions.

How HR balances conflicting drivers to be efficient and less tactical while investing in growth initiatives and upgrading the talent base may depend on the maturity of the organization itself and the enterprise leadership it supports.  “The 2011 HR Executive’s Agenda” is about and for HR executives, but it is also applicable to HRO and is helpful in understanding elements of HCM maturity.  Are you ready to assess the HCM maturity continuum and align HR service delivery investments with multiple and often conflicting business needs?  If you are, 2011 should be a good year!

Linda Merritt, Research Director, HRO, NelsonHall

Getting HRO Deals Done Today – Start Yesterday

October 13, 2009

This week ACS announced a five year deal with Ford Motor Company to provide Total Benefits Outsourcing (TBO). While financial details were not released, it is a major contract that will provide all three benefits administration services – defined benefit, defined contribution and health and welfare – to more than 400,000 U.S. Ford employees and retirees.

What allows a major deal to get done in this still tough economic environment, especially in the automotive sector? If a deal can get done there, a deal can get done anywhere.

Ford is the only U.S.-based auto company that has not sought special government financial assistance. Alan Mulally, Ford’s CEO since the fall of 2006, has driven a focus on Ford’s cars and trucks. Bill Ford Jr., Chairman and family representative, selected the industry outsider from Boeing because he saw the need for the same type of business and cultural turn-around Mulally led at Boeing. Under Mulally, Ford has sold off non-core brands like Land Rover and Jaguar, and invested in not just needed model refreshes to core brands like Ford and Lincoln, but in new technologies and means of manufacturing to lower the cost of production and support faster responses to changes in the global marketplace.

Continuing focus on the core and cost pressures has brought new, open-minded thinking to what can be outsourced, breaking the mental barriers on what must be internally managed. That opened the door for Ford to outsource TBO for the first time.  Throughout the competitive vendor selection process, Ford had several clear objectives including a partner with a record of quality and progressive thought-driven innovation and investment, and one who would offer an “evergreening” of technology. Of course cost was also an issue, and Ford considered both long-term cost avoidance – what it would need to invest to continue to offer current state services in-house – and short-term cost savings – reductions in current spend.

TBO was already a big part of ACS’ Human Capital Management (HCM) Solutions services’ revenues. It is also a major growth focus under Rohail Khan, ACS’ Executive Managing Director Total Benefits Outsourcing. ACS has committed to investing $50 million through 2011 in upgrades to and expansions of its HCM offerings, technology and global customer service center network. According to Rohail, more than $20 million has already been invested in technology and capabilities that strengthen TBO. He considers the underlying technology design, which enables faster and lower cost changes and enhancements, as a key to strategic advantage and a means to protect profitability.

Having already made investments, enhancements and upgrades, ACS was test drive ready. Ford kicked the tires and selected ACS as the competitor who best demonstrated a match for its objectives.

However, to leverage its fast start off the line, ACS will need to address concerns about the Xerox acquisition. When the HCM unit becomes part of “ACS, a Xerox Company,” will it be considered a non-core unit like Jaguar at Ford, or will it be a strategic business line that is invested in and vitalized?

NelsonHall’s October BPO Index continues to show that buyers have revised strategies and budgets, as have providers. The Index further indicates buyers are on the path to getting deals done in 2010; they are identifying BPO opportunities (25 percent), expect to issue RFPs (48 percent) and make awards (37 percent). 

Competing for major deals starts way before the RFP arrives. Which services will be offered within a bundle and will be strong enough to stand alone against best-of-breed providers, and what investments will add both to competitive advantage and sustainable internal margins? Those best positioned to take advantage of the economic recovery and new growth opportunities will have already vetted strategic plans, made the investments, and now have shiny new cost competitive and compelling services offerings ready to roll off the lot.

The question is not just what you are doing today, but what did you do yesterday?

Linda Merritt, Research Director, HRO, NelsonHall

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

September 29, 2009

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