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The Convergys/Northgate Union
NorthgateArinso (NGA), based in Norcross, Ga., announced in early March its purchase of most of the HRO business presently conducted by Cincinnati-based Convergys, and the news of that transaction focused the entire industry on the sustainability of the business. For NGA, this move is partly about breaking into the U.S. marketplace in a big way, and the acquisition brings some of the largest marquee clients into the company's portfolio for the first time in North America. There is something in this transaction for everyone -- for the shareholders of these two companies and for Convergys clients as well. Under the able leadership of both Karen Bowman and John Gibson, Convergys had developed a first-rate group of clients with unchallengeable credentials as major proponents of HRO. DuPont and Johnson & Johnson had joined companies like Avaya, Whirlpool and Selectron on the commercial side, and state governments in Florida and Texas also had major parts of their human resource efforts administered by Convergys. But the Convergys' service-delivery model had some significant problems. One area of concern centered around recognition of revenue when transitions were only partially complete. The accounting rules followed by Convergys were a significant issue as global-transition schedules involving 20 or more countries stretched out and Convergys incurred costs without being able to recognize offsetting revenue. The second major problem was that Convergys used partners for systems-transition work, and the clients would often find themselves dealing with multiple parties over HRIT systems-integration problems. At the same time, NGA had established a solid brand and sound reputation as an able integrator for SAP-based HR services, and had some substantial clients receiving non-HRIT services as well. In spite of able leadership, NGA had failed to establish itself as a major provider of services for large clients in the U.S. market. Given its heritage and experience base on the European side, NGA could clearly demonstrate technical prowess for SAP-based customers and had built up some non-SAP-based services as well. So how will this marriage work? And what's in it for each party? An existing Convergys client gets deep in-house technical prowess and some of the best systems-integration skills in the HR business. Clients also get an ultimate shareholder that can afford to invest for the long term. NGA gets instant traction in the difficult-to-penetrate U.S. marketplace. It also gets people, quality service centers and deep U.S. compliance bench strength in HRO. There is something here for everyone. While the industry can mourn the loss of a major, global player like Convergys, NGA will now assume a role and dimension that it did not have before. As the HRO industry matures, there will continue to be players that do not stay in the business for the long term, but this particular evolution provides a new platform for a now very strong provider with equal footings in both Europe and the United States. 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. April 1, 2010 Copyright 2010© LRP Publications |
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© Copyright 2012 LRP Publications. All rights reserved.
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