Posted tagged ‘Towers Watson’

A Closer Look at Benefits Administration in H1 2012: Part 1

August 21, 2012

Amy L. Gurchensky, HRO Research Analyst, NelsonHall

Earlier this year, I wrote a two part blog about how the benefits administration market was poised for a good year. Part 1 highlighted Q1 earnings results and part 2 focused on other signs indicating success such as acquisitions, hiring, and surveys.

Halfway through the year, signs are still indicating that 2012 will be a solid year for many benefits administration service providers.

 Aon Hewitt: For Q2, its Outsourcing segment reported organic revenue growth for the third consecutive quarter. In fact, the 6% reported was the company’s highest organic revenue growth rate for Outsourcing in several years. While Outsourcing revenues consist of more than just benefits administration, much of its growth was for benefits-related point services such as dependent eligibility audits. Its active employee exchange is set to be launched in Q4, which will begin to realize revenues in 2013.

Towers Watson: Towers Watson’s Benefits segment has been consist with positive organic revenue growth beyond the last four quarters. It’s Technology and Administrative Solutions segment revenues grew mid-single digits for the period ending June 30th and its pipeline is very healthy. The company’s Exchange Solutions segment, which was created after the acquisition of Extend Health, has had strong sales with a record number of participants enrolling, exceeding the 30% previously forecasted.

Mercer: Organic revenues for Mercer’s Outsourcing segment had another positive quarter, but were lower than reported in Q1. The suite of health care exchanges it launched earlier this year, which includes a retiree medical exchange, is expected to have ~500,000 employees enrolled across all three exchanges in 2013. 

Morneau Shepell: Canadian-headquartered Morneau Shepell has reported double-digit revenue growth for the last four consecutive quarters. In Q2, its pension and benefits outsourcing segment, which makes up ~25% of its revenues, had the largest contribution along with its health management business. Its growth is from new client wins, and its acquisition of SBC Systems has led to new business in the U.S.

According to the NelsonHall HR Outsourcing Market Forecast: 2012 – 2016, the projected growth rate for the benefits administration service line is modest compared to areas still experiencing rapid growth like RPO. Since benefits administration is the largest revenue generator in HRO, even moderate single-digit growth will add billions more to its total.

Later this week, look for more benefits administration mid-year updates from TRO and H&W service providers in Part 2.

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

Countdown to the 2012 HR Technology Conference

July 10, 2012

Gary Bragar, HRO Research Director, NelsonHall

This year’s HR Technology Conference is just twelve weeks away. It will be held in Chicago from October 8–10. Be sure to check out the agenda, especially the new outsourcing track, which includes the following presentations:

  • Cisco Uses RPO to Hire Up to 15,000 a Year, presented by Mark Hamberlin, VP of HR Global Staffing at Cisco and Rebecca Callahan, President of Randstad Sourceright
  • Ericsson Outsources Global Payroll in Manila, presented by Mark Howes, HR Director of Asia Pacific at Ericsson and Mary Sue Rogers, Global Managing Director of HR Managed Services at Talent2
  • Benefits in a Time of Uncertainty, a panel discussion including Artell Smith from Aon Hewitt, Brian Johnson from Fidelity Investments, Norbert Englert from Mercer, Gail McKee from Towers Watson, and Tom Maddison from Xerox Corporation
  • Whirlpool Leverages RPO to Transform Talent Acquisition, presented by Lynanne Kunkel, VP of HR at Whirlpool North America and Rudy Karsan, CEO of Kenexa.

I’ve attended the conference the last two years and continue to find it an invaluable investment of my time to:

  • Attend presentations
  • View technology exhibits
  • Network with peers.

Presentations: In addition to Outsourcing, session topics include:

  • Strategic View
  • Talent Management
  • Social in the Enterprise
  • Workforce Analytics and Planning
  • HCM and Workforce Management
  • Recruiting
  • Expert Discussions.

Whether your company has outsourced or continues to do everything internally, there are bound to be several sessions that will teach you how to improve HR in your organization and be a better business partner. When I was on the buy-side prior to joining NelsonHall, I would attend such HR conferences to:

  • Learn about the broader industry
  • Think about how our HR outsourcing contract compared to others
  • Get ideas on improvements we could make.

Technology Exhibits: Since technology is changing so rapidly, it is often difficult to keep up with new applications that are available. The conference is a great way to get exposed to a broad-range of recent innovations, e.g., ADP’s Mobile Application, talent management offerings, etc. You can stop by any booth and see a demo; there is no pressure and vendors are excited about their new products and services and are happy to show you.

So here is your chance to make a difference at your organization; you might stumble onto a better, more user-friendly technology for example. Even if you are not the decision-maker, you can always tell your organization about it when you return and request a customized demo. Alternatively, if you are already outsourcing, you might see something that you don’t have and can bring it to your provider’s attention.

Network: The conference provides an opportunity to expand your network with others including HR practitioners, buyers, providers, analysts, etc. I also like to meet individually with companies I do business with and others I want to learn more about. In addition to the daytime events, there are evening socials too. HR deserves to have fun!

As a reader of my blog, you are entitled to a discount. Register for the conference and enter promotion code HRO12 to save $500.

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

Asia Pacific, Talent2, and HRO

June 15, 2012

Asia Pacific is the emerging market of the most interest to HRO service providers, especially RPO vendors. Most of the big names in HRO/RPO are building or expanding scale there to take advantage of the higher than average growth rates. ADP and NorthgateArinso are well-established in the region, and Futurestep, GP, Kenexa, ManpowerGroup, Mercer, and Towers Watson have all made recent acquisitions in China, Hong Kong, India, and Australia as the fastest way to get more feet on the ground in this expanding market.

Still considered an emerging market, some Asia Pacific countries are already mature including Australia and Japan, while others are truly experiencing the first rush of growth. Each country has different needs and challenges and HRO service providers need to bring a lot of service line experience and local knowledge to the table. While one industry needs a high volume of entry-level employees to meet demand, another, a bit further on the maturity scale, needs management-level employees with the experience to manage and continue growth of a more complex enterprise.

Newer entrants should not forget that there are regional providers already on the ground; one of the largest is Talent2, which covers the entire area and a bit beyond. Talent2 has continued its solid pace of contract wins across the Asia Pacific region. An example from the public sector is contractor procurement and management for 13 agencies of the Queensland government. In the private sector, contract wins included payroll, RPO, and learning, and cover Australia, China, Hong Kong, Japan, Malaysia, and even the Middle East.

With ~1,700 employees, Talent2 supports 30 countries in 30 languages from its 46 offices and service centers located across 19 countries. With its scale and services it should be no surprise to find that Talent2 is, according to NelsonHall, the HRO leader in Asia Pacific.

Perhaps it is reasonable then that Talent2 has attracted interest from investors wanting to take it private. Morgan & Banks Investments (MBI) and Allegis Group have entered into an agreement to acquire the company, which will remain operationally as Talent2 if the deal is successful. MBI represents current major stakeholders and Allegis is already a Talent2 RPO partner. It will be interesting to see if privatization allows Talent2 to fuel even more growth in and outside of the Asia Pacific region.

Linda Merritt, HRO Research Analyst, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

M&A Activity in Benefits Administration: Round 2

March 12, 2012

Following the benefits administration merger and acquisition (M&A) frenzy of 2010 that resulted in some major consolidations including Aon Hewitt, Towers Watson, Xerox/ACS and ExcellerateHRO, to name a few, are we poised to see round 2?

The second wave actually began in early 2011 and tends to consist of the more established providers, in their own right, acquiring Tier 2 health and welfare (H&W) administration companies in the U.S.  Examples include:

  • Towers Watson acquiring Aliquant in January 2011
  • Sedgwick, a leader in the leave of absence administration market with ~20% market share, acquiring the productivity solutions unit of Nationwide Better Health in May 2011
  • Morneau Shepell, the leading total benefits outsourcing (TBO) provider in Canada, acquiring SBC Systems Company in January 2012.

As of last week, we can now add ADP to this list since it signed a definitive agreement to acquire SHPS Human Resource Solutions—a subsidiary of SHPS, Inc. ADP has actually been making key acquisitions to strengthen components within its benefits administration offering for the last 18 months. It started with Workscape, which added compensation management services, and was followed by Asparity Decision Solutions for decision support tools and analytic capabilities.

Now, the SHPS acquisition strengthens ADP’s leave administration and reimbursement account administration offerings. The HSA and HRA components will be especially important considering the rising cost of health-care and the transition toward high-deductible health plans paired with these health savings accounts.

The H&W acquisition trend is also expanding beyond the U.S. It started in September 2010, when Capita – a U.K.-based HRO vendor providing total retirement outsourcing (TRO) exclusively in the U.K. – acquired FirstAssist Services Holdings for £12.5m. Then it continued when Mercer acquired REPCA – a brokering and advising firm for health and benefits (H&B) plans – to strengthen its H&B administration offering and advisory services in France.

The remaining question on my mind is whether U.S.-based TRO providers such as ING, Great-West, T. Rowe Price, etc. plan to jump on the H&W acquisition bandwagon to provide a one-stop shop for benefits administration like Fidelity Investments.

I’m eager to see who will make the next M&A move in benefits administration.  In the meantime, it’s always fun to hear about cross-selling opportunities that resulted in contract scope expansions.  Stay tuned.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

The Evolution of TBO Deals: Part II

March 8, 2012

In my blog earlier this week, I outlined four approaches that have led to the creation of TBO deals. Let’s take a look at some examples for each approach. As you read through, note the aspects that apply to the evolution of any HRO deal and client relationship.

The traditional big bang approach: Approximately 15 years ago, Aon Hewitt was awarded a TBO contract by 3M that includes defined benefit (DB), defined contribution (DC), and retiree health and welfare (H&W) administration services. Recently, the TBO contract was expanded to include H&W administration for active employees and its retiree healthcare exchange services. In total, Aon Hewitt serves 80,000 active employees (30,000 in the U.S. and 50,000 internationally) and >25,000 retirees.

The big bang approach version 2.0: An example of this approach is Mercer’s TBO contract with an unnamed automobile manufacturer. Mercer had a long-term relationship with this client for retirement, health and benefits (H&B), and communication consulting services. This client has five locations in the U.S. that have separate benefit systems for its ~25,000 employees. The majority of its pension and H&B plans were administered in-house, while some were outsourced. Mercer was subsequently awarded the TBO contract to streamline operations and provide a consistent employee experience throughout the company.

The mass consolidation approach: Until November 2010, Office Depot relied on three different service providers: Vanguard for 401(k) and deferred compensation plans; NorthgateArinso — as a result of the Convergys acquisition — for H&W administration; and Morgan Stanley for stock-plan administration. Fidelity was consequently awarded this TBO contract and is serving 17,000 participants for retirement savings plans and 20,000 participants for H&W services.

The step-up approach: A recent example of this type is Towers Watson’s contract with The Dow Chemical Company. Towers Watson began administering Dow’s DB plan ten years ago. In 2009, after Dow acquired ROHM and Haas, it began to administer H&W services for ROHM and Haas’ ~12,000 employees and retirees. As of February 2012, Towers Watson will be administering H&W services including annual enrollment for 66,000 participants at Dow.

The demand for TBO services will continue and will likely take the shape of the latter two approaches discussed above. The overarching lesson is that HRO service providers can end up with a TBO or MPHRO deal with long-term growth from multiple starting points.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.