{"id":1720,"date":"2010-03-04T15:53:00","date_gmt":"2010-03-04T15:53:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/northgatearinso-buys-its-way-to-top-spot-in-enterprise-hro-and-it-only-cost-them-100m\/"},"modified":"2010-03-04T15:53:00","modified_gmt":"2010-03-04T15:53:00","slug":"northgatearinso-buys-its-way-to-top-spot-in-enterprise-hro-and-it-only-cost-them-100m","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/northgatearinso-buys-its-way-to-top-spot-in-enterprise-hro-and-it-only-cost-them-100m\/","title":{"rendered":"NorthgateArinso buys its way to top spot in Enterprise HRO – and it only cost them $100m"},"content":{"rendered":"
\"\"<\/a><\/p>\n

Mike Ettling, NorthgateArinso CEO<\/p>\n<\/div>\n

So one of the worst-kept secrets in the HRO business finally came to fruition today, when the British HR services provider NorthgateArinso\u00a0acquired Convergys’ HRO business for $100m.<\/em>\u00a0<\/p>\n

By\u00a0our calculations, that gives the newly-formed entity a 15% market share of the enterprise HRO market (engagements with firms greater that 15,000 staff).\u00a0 We’ll confirm this fact when we\u00a0update our HRO market landscape in a couple of months.\u00a0<\/p>\n

The merger\u00a0effectively moves them above IBM, Accenture, ACS and Hewitt into the leading position in the market\u00a0from an employees-served perspective; not a bad day’s work from a British payroll firm that acquired an upstart Belgian SAP-payroll integration shop.\u00a0 This also\u00a0elevates NorthgateArinso firmly into the high-end of the enterprise HRO\u00a0business, in addition to\u00a0the mid-market scrap with the likes of ADP and Ceridian.<\/p>\n

Why this merger\u00a0makes a whole load of sense<\/span><\/strong><\/p>\n

Payroll-centric HRO is in high demand.<\/strong>\u00a0\u00a0\u00a0 As we revealed in our industry study last month<\/a>, there is renewed appetite for\u00a0HR services as\u00a0businesses limp their way out of recession.\u00a0 This is especially the case where payroll is at the heart of the customer requirement and customers need a solid mix of software implementations expertise, backed up by low-cost processing capability (near shore and offshore) and HR domain expertise.\u00a0 So this acquisition is timely.\u00a0 It’s also been a long time in the works, and NorthgateArinso has clearly thought long and hard before making the plunge.The US market was the gap in NorthgateArinso’s armoury.<\/strong>\u00a0 NorthgateArinso could have made an alternative play into the benefits outsourcing\u00a0arena and bid for the likes of ExcellerateHRO or ACS’s HR business, but it’s decided to stick to its knitting and fill out the one yawning gap in its armory – it’s ability to win US business.\u00a0“We\u00a0were winning too many of the\u00a0international components of deals, and customers\u00a0kept the US services inhouse”,\u00a0 CEO Mike Ettling (pictured)\u00a0told\u00a0us earlier today.\u00a0 Convergys gives them US strength and depth in spades.\u00a0 The highest concentration of multinationals are still in the US and their\u00a0expenditure dominates the HR services market.\u00a0\u00a0 Moreover, Convergys’ international presence is quite a snug fit with NorthgateArinso’s business (the addition of Sao Paolo and Budapest, along with a promising Asia\/Pac benefits business are good additions to have for the future).<\/p>\n

Convergys’ woes appear to be behind them.<\/strong>\u00a0Only two of Convergys’ 21 clients had contrived to be unprofitable, but these are now in a much healthier position, having been ring-fenced and restructured.\u00a0 NorthgateArinso will have the challenge of delivering on Convergys’ promises, but they’ve looked long and hard at the issues here, and know what they’re letting themselves in for.\u00a0 Moreover, $100m is a great price for a strong book of business.\u00a0 Even if one of those\u00a0two remaining deals is problematic, they can deal with it.<\/p>\n

Both SAP and Peoplesoft (Oracle)\u00a0clients can be serviced.<\/strong>\u00a0 While Northgate has enjoyed expanding the Arinso EuHReka business, which focuses on an SAP-based SaaS\/BPO delivery model, the Convergys element really does beef up the company’s Peoplesoft capabilities.\u00a0 And, unlike the unrealistic promises being made by some of\u00a0its competitors, Northgate is being\u00a0refreshingly realistic that it will not attempt to develop genuine multi-tenancy around Peoplesoft.\u00a0\u00a0That would be no\u00a0easier to\u00a0achieve than\u00a0healthcare reform…<\/p>\n

The Bottom-line:\u00a0 Great buy for NorthgateArinso at a great price, but the hard work begins now<\/span><\/strong><\/p>\n

Noone denies that old-world HRO turned into a bit of a train-wreck, where many contracts became unprofitable and providers struggled to ring-fence them and re-structure them.\u00a0 Convergys and others were guilty of taking on some deals that brought down executives, upset Wall Street and cast a dark shadow over the HRO industry.\u00a0 However, smart firms like NorthgateArinso are sticking to their knitting and focusing on global client work they know they can deliver profitably.\u00a0 The global payroll market opportunity is massive – CFOs cannot function properly when they can’t have a handle on their global employees, and our research\u00a0repeatedly reinforces\u00a0this desire\u00a0to improve the effectiveness of global operations<\/a>.\u00a0<\/p>\n

NorthgateArinso now truly has a strong foothold with multi-national opportunities, however, their real\u00a0challenge starts now.\u00a0 They now\u00a0have to compete even more aggressively\u00a0with the likes of IBM and ADP,\u00a0where they will need to bring the best out of their existing client portfolio to prove they can truly take on that missing piece – the US market.\u00a0\u00a0 Convergys gives them a bigger engine, now they have to fine-tune it to a performance level noone’s really\u00a0attaining\u00a0in the HR services\u00a0industry right now.\u00a0 Here’s a chance to make HR services\u00a0history – they now need to shore up their management and delivery talent to achieve it.<\/p>\n","protected":false},"excerpt":{"rendered":"

Mike Ettling, NorthgateArinso CEO So one of the worst-kept secrets in the HRO business finally came to fruition today, when…<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[48,79,80,87,91],"tags":[315],"ppma_author":[19],"yoast_head":"\nNorthgateArinso buys its way to top spot in Enterprise HRO - and it only cost them $100m - Horses for Sources | No Boundaries<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.horsesforsources.com\/northgatearinso-buys-its-way-to-top-spot-in-enterprise-hro-and-it-only-cost-them-100m\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"NorthgateArinso buys its way to top spot in Enterprise HRO - and 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