After a long hiatus, ACS is back in the human resources BPO business, and according to its CEO Lynn Blodgett, aiming to become the leading vendor in the space.
Speaking to Computer Business Review, Blodgett said its recent deal with GlaxoSmithKline signaled the end of a self-enforced absence from the large multi-process BPO market. While he said he doesn’t expect to return to the deal-making frenzy of a few years ago, he said that by the end of the summer, by which time ACS may be well on its way to being a private company, he hopes ACS will be in a position to seriously pursue three to four contracts at a time.
Having won some of the largest deals in the market place such as Goodyear, Motorola, and General Motors, ACS then made the aggressive move of acquiring Mellon for $405m. A few months after the deal was completed, Blodgett, who was then head of the outsourcing practice, called a halt to further contract signings.
The move came just as it and its rivals, most notably Hewitt, were starting to realize that the implementations of these deals were more complex than originally thought. About 16 months ago I said ‘Stop! don’t sell any more multi-scope HR’- the clients are immature in terms of outsourcing that kind of work. They just haven’t done it before, they may have done payroll and benefits but not all the other stuff; and our immaturity in terms of solution and process. That’s not just us, its IBM, Accenture, Exult/Hewitt, we’ve all certainly taken our lickings, we really have, and some of that is down to immaturity, on pricing, on timetables on lots of things. And we were at the stage where we were not getting out of the HR business, we were right when we bought the Mellon dealm but we could not proceed recklessly. We had to stop.
Questioned about the wisdom of the Mellon buy so soon before pulling back from the market, Blodgett said, The board asked me the other day, ‘How would you rate the Mellon acquisition?’ and John Rexford [current CFO] went through about six metrics and he said I would do that deal again and again in my sleep.
Since it pulled back, Blodgett said the company had concentrated on developing its project management skills, creating a central corporate level project management office and a corporate project management methodology that everyone at the company had to follow and it spent $40m on its HR technology platform. It didn’t completely stop looking at contract opportunities though, and Blodgett said it went close before being beaten to the $1bn Unilever contract by Accenture.
It also had to fix some problem contracts, such as its deals with Delta Airlines and General Motors Europe. The former was renegotiated and scaled back, while the latter cost it millions to fix. It was a very difficult contract, it was very expensive, we lost tons of money, but we stuck to our guns and got it done. And what we got is a $40m customer that’s grown to a $150m customer, and we got a great European platform, he said. We knew that if we fought our way through it there was very few vendors with pan-European payroll for example.
With a new more thorough due-diligence process, ACS won the GSK deal in February worth $171m over 10 years. Determined to learn from previous mistakes, Blodgett said: We’re watching it like a hawk.
Blodgett said it is also in the mix for a big multi-national deal which it would be comfortable taking on should it be selected. We are very very bullish on HR, and we intend to be the leader in the HR, he said.