Convergys Employee Care, a human resource (HR) outsourcing services provider, and Avaya, a global provider of communications networks and services for businesses, are building a new kind of outsourcing relationship. As of June 15, 2003, Convergys handles Avaya's HR and payroll processes in 49 countries around the world. In addition, the companies are working together to develop strategy and software to create a joint HR solution that has global reach.
"We both have skin in the game. We're both committed to making this work. It's a true partnership," says Steven Melamed, director of HR Global Services for Avaya, based in Basking Ridge, New Jersey.
Given the promising fusion between the two companies, you'd never know that two years ago Avaya decided to stop using Convergys as its HR outsourcing service provider and bring its HR department in-house.
Here's the history: When Lucent Technologies decided to spin off Avaya, Melamed was told he had to outsource every HR process. He selected Convergys. Once the company got its own momentum, however, it decided to bring the HR function in-house. To service its world-wide employee base, Avaya developed global employee service centers in the UK, Singapore, and the U.S. (in Dallas, Texas.)
Why Avaya Returned to Outsourcing
Avaya was happy with the competency of its international HR staff. Employees in nearly 50 countries - they speak 20 different languages -- were happy, too. "But our internal costs inflated each quarter," says Melamed. In addition, Avaya was unable to deploy a consistent platform to manage its HR function globally. "We run a global business, so we have to manage our HR as a global business," Melamed observes.
"We discovered why Lucent decided to outsource in the first place," he adds. "It's a lot easier to define and manage service level agreements (SLA) than do this internally."
So Avaya changed course and returned to the HR outsourcing fold. It went back to Convergys, which had done a good job of controlling costs domestically. At that time Convergys was interested in expanding its HR practice outside the US. "They wanted to create a global HR outsourcing footprint. They were willing to hire our people. That made a good marriage," Melamed says.
"It's hard to run a cost-effective HR operation in dozens of countries where each has its own political, economic, and tax rules," says Peter Hirano, Convergys' vice president, strategic planning and marketing for Employee Care. "A decentralized HR structure would reduce the bottom line by millions of dollars each quarter." Avaya created operational efficiencies by consolidating the work in global service centers. Convergys then improved the process.
How Convergys Is Wringing Cost from the Process
Convergys is using technology and automation to wring cost from the process. Self-service HR is a major component of its solution. "The HR staff at Avaya would have had a hard time getting dollars from their IT budget to develop a self-service platform," Hirano points out. "We have found when self-service is integrated with contact management, workflow, and knowledge management tools, it increases the ability to measure the effectiveness of HR programs and overall workforce trends."
No one is more excited about the results than Melamed. He says the relationship with Convergys now is totally different from their first contract. Then, Convergys was just a supplier of needed services. Now it is a true partner - and maybe even a future profit center. "Signing the second outsourcing contract with Convergys was the least contentious outsourcing contract I've ever signed," says Melamed.
Currently, the two companies are using the Guilford, UK, location as a joint business and operational facility that will serve as the primary HR hub for the European region, mirroring the US hub in Jacksonville, Florida. They believe multinational corporations will be interested in their offering. "Until now, the HR outsourcing market has been country-specific," points out Hirano. "Now companies will be able to buy HR services across a geographic region under one contract. This is truly global HR administration."
Lessons from the Outsourcing Journal:
- Service providers can wring cost from a global process through automation and technology. Using a standard platform lowers cost.
- Outsourcing partnerships work when both partners have skin in the game and can enjoy bottom line improvements.
- HR service providers can deliver automation like self-serve HR that individual companies could not afford to do.
- An integrated service delivery model provides companies with measurable HR services that provide insight into workforce trends and facilitate key management decisions.