First Year+ Strong for ACS, a Xerox Company

With a year and a half passing since Xerox acquired ACS, Xerox has appropriately defined its new tagline: “Services-Led, Technology-Driven” with revenues roughly split equally between its Services segment and its Technology segment. Of Xerox Services, BPO is leading, accounting for 55% of revenues. The remainder of its Services revenue is ITO (12%) and DO (32%).

Within BPO, its four segments are HR, F&A, customer care, and transaction processing. Focusing on HR specifically, ACS is doing well according to information shared at yesterday’s Industry Analyst Meeting in NYC.  In total, the company has secured 44 HR services deals in the past 18 months.  Its first HRO deal since the acquisition was closed was a 5 year H&W services contract with P&G in March 2010.  

Some recent HRO highlights include signing a long-term TBO contract with a wireless telecommunications company, winning its largest ever learning services contract with a pharmaceutical company, and leveraging the ACS and Xerox relationship to win a multi-process HR outsourcing (MPHRO) contract from a competitor. 

Serving more than 11m employees and retirees worldwide, the company is focused on “consumer-driven solutions” or viewing the client employee as the end-consumer.  Part of this initiative includes its client collaboration group, FutureThink, which began piloting last year and has recently expanded. 

Its plans for geographic expansion are ripening.  The company has made great progress with its first target, Europe, with revenues increasing 10% and pipeline growth up more than 100%.  Approximately 90% of this pipeline improvement is the result of Xerox synergy.  Another positive is a recent MPHRO win from this region. 

Aside from Europe, ACS is targeting Latin America, specifically Brazil and Mexico, and Asia.  In Latin America, the company has a good market presence due to its acquisition of ExcellerateHRO last year. 

Additional acquisitions and partnerships can’t be ruled out either, especially for building out service capabilities.  Finally, to support all this growth, ACS has made investments in CRM, expanding its India and Malaysia centers.

Eighteen months since the acquisition has closed, Xerox has demonstrated a successful integration of ACS and signs are pointing to a positive future for HR services.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

Does HRO Stifle Innovation?

A question since the earliest days of HRO has been, what about innovation? We all want cake and want to eat it too, and that’s what buyers have always wanted: lower costs, improved performance, and innovation in HR business process management. Even when a deal was structured for the lowest cost pricing and standard SLA performance, clients soon asked “where’s the innovation?”

Knowing if a service provider is a market leader in HRO innovation is important to some clients, especially those companies that use innovation as a competitive advantage. Perhaps an equally important question is can an innovative company risk using HRO and will it help or hurt?

The Forbes List of The World’s Most Innovative Companies may help us determine if HRO providers can be innovative and if HRO is being used by innovative companies. The list is based on an “innovation premium” which is defined as “the premium the stock market gives a company because investors expect it to launch new offerings and enter new markets that will generate even bigger income streams.”

First, can HRO providers be innovative? Well, ADP (#87) is on the list of the top 100 that includes the likes of Apple, Google, Amazon, and Starbucks. Infosys (#15) is on the list and it also offers HRO services. Congratulations to both ADP and Infosys!

Next, can innovative companies risk using HRO? Yes, they can and they do. Here are some of the top 100 companies on the list known to use HRO and their vendor partners. Notable is IBM HRO with at least three clients on the list: P&G, Kraft, and Avon Products. IBM HRO focuses on large market HRO and clearly can be a valued partner in HR transformation with leading innovators.  Other partnerships include Unilever with Accenture; KAO with ADP; Kellogg and PepsiCo with Aon Hewitt; and Agilent with NorthgateArinso. RPO providers are also represented with the triple threat of The RightThing providing RPO support for Amazon, Campbell Soup, and Praxair. I am sure there are many more connections to HRO among the top 100. Congratulations to all, let’s have a piece of cake in their honor!

According to the newly published “The Innovator’s DNA,” the 3P framework for innovation is people, processes, and philosophies that foster innovation as everyone’s job and there are key leadership skills and behaviors than can be developed to weave innovation DNA into the company. Of course HRO, even at its most innovative, cannot make a client an innovator. That must come from within. HRO can support each element of the framework for innovation and become an enabling partner to clients that are innovative or those that are striving to be.

Do you have an innovation premium? Is your HRO service provider capable of enhancing your journey of innovation?

Linda Merritt, Research Analyst, HRO, NelsonHall