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Beware Those Joint Ventures
As the HRO industry has transformed and changed, a number of service-provider joint ventures have arisen. Partnerships and joint ventures pose their own sets of problems for companies that contract with them and various marriages of providers have not been enduring. The problems of doing business with a joint venture are complex and difficult to assess. For one thing, the handoffs of service from one provider partner to another are sometimes ineffective or incomplete. Then, when the company tries to enforce a service-level agreement, the providers may point their fingers at each other. It falls to the client company to assess the true root cause of the problem and then allocate responsibility. Some of these problems can be solved by forcing the provider partners to adopt a prime contractor with a subcontractor approach. In this setting, the client has one primary provider and all the other providers become subcontractors to that provider. The prime contractor is responsible for managing all the other providers, for policing their performance and their service levels. Having a prime contractor gives the client one throat to choke when there is a serious service problem. What the prime-sub approach does not remedy is a fundamental difference in cultures that may exist between the partners. That difference can produce serious problems in service transition and problem solving. We can see those differences clearly in select provider joint ventures. One of the recent major joint ventures was of Towers Perrin and EDS in the provider known as ExcellerateHRO. Here, two strong and very different cultures sought to join and provide HRO services. The deal was a late entrant to HRO and it didn't last. A variety of service problems kept the partnership from increasing its service profile and, a short while ago, ExcellerateHRO left the market. Historically, Convergys contracted with Deloitte to provide systems integration and transition services. That strategic alliance seems to have ended as well and, certainly, transition handoffs between the two firms were often difficult for clients. Knowledge transfer between the parties was also problematic. Both firms have gone their own ways in the marketplace, although they might still cooperate in the future. One of the earlier cooperative ventures was Exult's use of Hexaware/CaliberPoint to handle HRIT integration and systems installation. That seemed to have better results for the client, perhaps because the former was new to the market and the latter had developed deep expertise in PeopleSoft, Oracle, SAP and other HRIT platforms. CaliberPoint and Hexaware are still providing those services, while Exult has since been sold to Hewitt. HR executives should always consider a relationship's durability pre-deal and whether the stated advantages will really outweigh the problems sure to occur. The operating history of these relationships to date would suggest that they will not. Lowell Williams is executive director of HR Advisory Services for EquaTerra, a BPO consulting firm based in Houston. He can be reached at lowell.williams@equaterra.com. January 1, 2010 Copyright 2010© LRP Publications |
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© Copyright 2012 LRP Publications. All rights reserved.
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