Long-term contract renewals: the real litmus test

ConvergyslogoFollowing hot on the heels of our recently debated issues regarding the future health of the HR Outsourcing industry, I was delighted to see Convergys renewed its multi-scope HRO engagement with Avaya today for a further five years.   I have some personal experience of this engagement from its transition a few years’ ago, when Avaya moved onto a global hub-and-spoke model underpinned by SAP’s HR platform, that included a complex global payroll roll-out.  Convergys is also in the midst of global transitions with both DuPont and Johnson & Johnson (both signed after Avaya), and the successful – and lengthy – Avaya renewal spells good news to these more recent adopters of HRO seeking reasurance that their firm chose the right HR deployment model.

In my view, you can only truly judge the success of an outsourcing business when the initial wave of adopters renew for long periods.  We have discussed many of the issues this industry faces, but the ultimate proof is in the pudding, and so far, we are seeing the early adopters choose to remain in an HRO delivery environment.  These are the companies which have worked through the early complexities and found their status quo with their service providers.  I’d like to congratulate both Convergys and Avaya’s HR leadership for their renewed relationship and finding a successful balance.

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3 Comments

  1. Posted April 25, 2008 at 7:30 am | Permalink

    Great post Phil and I second the kudos to Avaya and Convergys. This is a much-needed shot in the arm for the HRO market.

  2. Posted April 25, 2008 at 12:52 pm | Permalink

    Mark,

    It’s interesting that those HRO buyers, like Avaya, that already had HR shared services in place have had greater success in moving to a full HRO solution than those firms with de-centralized inhouse models. Clearly, moving from a shared services to HRO environment is far less painful for many firms, as they already have some common processes and standards implemented. HRO deployments, in many cases, are simply amplifying the complex change companies with limited standardization (and fragmented technology platforms) need to go through to reach a less costly and more efficient HR deployment environment. And guess what? The provider ends up taking the fall for the ensuing complexity. Too many buyers today are unwilling to invest in HR standards, and HRO is one way to achieve them with the investment borne by arbitrage and self-service technology platforms,

    Phil

  3. Posted April 25, 2008 at 4:58 pm | Permalink

    Excellent point Phil. As you and I recall from the “early days” of HRO, one of the most compelling value propositions was that HR had exhausted all internal considerations for optimization and standardization, and thus the only logical next step was to benefit from the economies of scale that multi-employer environments (i.e., HRO providers) would offer. I agree the the leap from decentralized, highly fragmented, non-standardized processes to HRO is perhaps too broad a jump than this more progressive model.

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