What a difference a year makes. Last year’s list featured 22 contracts, many of which were modest compared with 2005’s top deal totals. Take a look and you will see that HRO has become a mainstream business tool for the world’s biggest and brightest organizations, in both the private and public sectors.
What a 2005 list! DuPont, British Telecom, Marriott, Wachovia … it’s a virtual who’s who of global giants. And they are all using HRO in the same way they would use any other business tool. HRO has become just another blade on the CEO’s Swiss army knife. There it is, HRO, fitting nicely, between the bottle opener and the corkscrew.
When we built 2004’s list of 22 top deals, the names were nowhere near as well known as the 2005 roster. Oh sure, some of them such as Bank of America, Levi Strauss, and Best Buy had household names. But TXU, Cinergy, Visteon, Northwestern Memorial, Air Canada, and Finnair were regionally known rather than national brands. Sandvik was heavily niched—they make heavy equipment like the stuff that dig diamond mines—as was ABB and Rohm and Haas. And then there was IHG, a holding company for hotels.
In addition to being a brand name-heavy list, 2005’s top deals represent a whole new wave of HRO usage. Companies are increasingly turning to HRO in conjunction with, or as a result of big corporate events.
Let’s go down the list. DuPont had repeatedly missed its earnings targets, which caused top management to seek the real-time data and transparency you only get with an outside provider. Wachovia’s merger and acquisition string made HRO virtually the only way to rationalize a Byzantine tangle of HR and benefits policies. Mervyns turned to HRO to help make itself competitive in a suddenly brutal West Coast retail market. PHH Mortgage was spun out of Cendant, and it found itself an HR orphan in need of an HRO mommy. Eastman Kodak’s film business got killed by digital photography and used HRO to find badly needed corporate economies. And then there is Delta Airlines, which suffered the ultimate corporate event by getting sucked into the engine of a Chapter 11 filing. HRO can even help patients that have crashed on the tarmac.
Nearly one-half—count seven—of the top deals are manufacturing companies that are all under price and profit pressure from overseas manufacturing and can use all the help that HRO can provide to maintain competitiveness. Others such as Marriott, PepsiCo, Duke Energy, Omnicom are all leaders in their market and see HRO as a way to preserve and extend their leads. For a number of these companies, cost savings was actually not the No. 1 factor for selecting HRO. Simplification and automation of their business process were more the driver.
Regardless of their motivation, the 2005 leaders have, perhaps unknowingly, conspired to evolve HRO from a bleeding-edge innovation to a ho-hum, business-as-usual practice. With that, we greet the HRO leaders of 2005. Welcome to normal.