ACS Wins HRO Deal With GlaxoSmithKline

By Staff Report

Feb. 13, 2007

Affiliated Computer Services has won a 10-year, $171 million HR business process outsourcing contract with pharmaceutical giant GlaxoSmithKline, marking the provider’s first announcement of an HR BPO deal in two years.

The win, which came as a surprise to many HRO observers, shows that the market is still open to all the major providers.

“Over the past several months, it really looked like it was a two-horse race between Accenture and IBM for big, global deals,” says Phil Fersht, an analyst at Everest Group, a Dallas-based sourcing advisor. “But this shows it’s still a five-horse race.”

Under the agreement, ACS will offer benefits administration, payroll and oversee self-service portals and integrated online tools for GlaxoSmithKline’s employees in the U.S. and the U.K. GlaxoSmithKline has 100,000 employees worldwide, and analysts estimate that the contract covers 45,000 to 50,000 workers.

ACS spokesman Kevin Lightfoot could not provide comment about the deal. Calls to GlaxoSmithKline’s press office were not returned.

ACS has struggled with its HRO business over the past few years, experts say.

“Everyone knows that they have had some difficult times, so this contract is a big vote of confidence for them,” says Neil McEwen, an analyst at PA Consulting Group.

ACS’ last major announced HR BPO win was two years ago, when it was awarded a seven-year, $120 million HRO contract with Delta Air Lines. However, that deal hit some hurdles, experts say.

Just last month, ACS agreed to make two cash payments of $6.6 million and $1.1 million to Delta “in settlement of certain disputes regarding Affiliated’s performance of the services,” according to a motion filed January 11 in U.S. Bankruptcy Court in New York.

ACS has done a lot of work to improve its HRO business over the past several months, and this win demonstrates that, Fersht says.

Even though the deal isn’t big in terms of contract value compared to the likes of the Unilever/Accenture deal or DuPont/Convergys deal, both of which were worth more than $1 billion, it’s still a significant deal for ACS, experts say.

The win also shows the battle for HRO contracts is really between IT providers and consultants, and the winning model remains to be seen, IDC analyst Lisa Rowan says.

ACS has been offering IT services to London-based GlaxoSmithKline, and that relationship apparently helped it to win the HRO deal, Rowan says.

“Lately it’s been the consulting model that has been winning much of the HRO business, but this shows that IT is still in it,” she says.

Jessica Marquez

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