The recent HR outsourcing agreement between Convergys and InterContinental Hotel Group may not have been among the biggest deals of the year, but many believe it is a sign of things to come.
Under the six-year deal announced December 6, the Cincinnati-based HRO provider will oversee HR data administration and payroll services for InterContinental’s 1,300 employees in the Asia-Pacific region. Financial details of the deal were not disclosed.
While there have been a number of global deals that include the Asia-Pacific region, there have been few Asia-Pacific-only HRO deals.
But analysts expect that to change as more companies expand into the region as a way of cutting costs and setting up a global presence.
“When you look at the demographics of most companies, many don’t have a lot of people in this area, so it’s still a limited market,” says Jason Corsello, an analyst at Yankee Group. “I expect you will see more of this in the future.”
The Asia-Pacific region remains a small but growing part of InterContinental’s global business, says Alex Berry, vice president of worldwide sales for Convergys’ employee care business.
“And ultimately we hope to prove ourselves in this region, and that would lead to other opportunities with InterContinental,” he says.
Charles Yap, a spokesman for InterContinental, could not provide immediate comment. The company had 21,986 employees as of the end of 2005, according to the firm’s annual report.
Convergys receives numerous calls from employers looking to outsource their HR processes in the Asia-Pacific region, but often the deals are too small to be cost-effective,
The InterContinental deal represents “a nice sized opportunity,” he says. “[Deals with companies that have] under 500 employees in the region tend to be cost-prohibitive.”
For that reason, Convergys and other providers are being selective about what Asia-Pacific-only deals they agree to take on, says Robert Brown, an analyst at Gartner Group.
The big global deals are going to continue to be Convergys’ focus,
“The trick isn’t to focus on meeting the demand; it’s focusing on the right demand,” he says.