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Multi-Vendor Woes Abound

Friday, September 2, 2011
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In the last two years, we have seen a steady trend in HR services away from a unified, central provider toward multiple providers supplying services across multiple functions. The result of this trend is often an unfortunate burden on the HR team to manage multiple providers while the employees and retirees tell us that the "right hand does not know what the left hand is doing."

In part, this is due to technology interfaces, but it is also due to single services that do not integrate on a functional level with other dependent services. When an HR team wants to use multiple providers, there is an inevitable shift of burden back to the company to ensure that interfaces and handoffs work properly.

One of the early promises of comprehensive HR outsourcing was having "one throat to choke" when problems occurred. There was speed and efficiency in trying to get to the root of the problem with one provider. Pushing against that idea were the following issues -- which over time, have become the dominant focuses of HR services contracting today:

* One provider concentrates the risk of catastrophic failure,

* One provider makes the contracting and transition process longer and more complex, and

* Company HR and procurement departments do not have the bandwidth to deal with a single provider for comprehensive services without forming a dedicated deal and transition teams.

Those are all legitimate and valuable concerns, but one should not think that taking smaller bites of the same apple means multiple providers don't pose other and sometimes equally worrisome problems. For example, an employee who signs on to the HR portal page to simply update benefits data must go to three or more different links.

It is not uncommon to find three or four different providers involved in the benefits alone, and while each provider may be "best of breed" for that single benefit, the employee experience may be quite negative due to multiple interface actions.

A related but tangential point is that it's often very hard to effectively communicate about employee benefits when each provider has its own tools. Very often, it is technologically impossible to make the providers' tools and graphics work on an organization's operating system, so the benefit can remain hidden and poorly understood.

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Using multiple providers helps to clearly illustrate the risks and burden of poor workforce analytics, inconsistent reporting and formats, multiple interfaces for simple tasks, and lengthy and poorly understood online interactions. Anecdotal evidence also suggests that call-center time and activity are increased by using multiple providers.

The ease of contracting with multiple, smaller providers may present apparent advantages for an HR team and its procurement advisers.

Yet, it is not at all clear that those advantages are worth the ongoing burden of policing multiple providers or the serious deficit for employees and retirees of having to live with poorly integrated services. It takes longer to build integrated, "one-stop-shop" services in HR, but doing that may be well worth the added burden.

Lowell Williams is a director in KPMG's Shared Services and Outsourcing Advisory group, based in New York. He can be reached at lcwilliams@KPMG.com.

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