In 2005, Wachovia signed a seven-year deal with Hewitt to oversee payroll, call center, benefits administration and various learning processes for its 90,000 employees. The contract, which was one of a slew of wins for Hewitt in the wake of its Exult acquisition, was valued at $450 million, according to research firm IDC.
Now the Charlotte, North Carolina-based financial services company will take everything but benefits administration and customer service back in-house or to other vendors.
“Based on a shift in Wachovia’s corporate outsourcing strategic model where they plan to move to a potential blend of in-house and outsourced solutions, and the nature of our contract, both companies agreed this was the best decision for our respective organizations,” Hewitt spokeswoman Amy Wulfestieg said in an e-mail.
Wachovia does not yet have a timetable for when it will make a decision about how the remaining HR processes will be managed and which vendors it will tap to oversee some of those processes, Wachovia spokeswoman Christy Phillips-Brown said.
The Wachovia/Hewitt deal was consummated in Hewitt’s glory days, when both buyers and vendors had high expectations of the HR BPO model, experts say.
“I believe that this was one of those deals signed in the heyday with entirely too much optimism on both sides,” says Naomi Bloom, an industry consultant.
Since then, Hewitt has admitted to struggling with its HR BPO business. “They haven’t made a mystery of the fact that they had gotten bogged under by a number of the contracts that they signed in the months after the Exult deal,” IDC analyst Lisa Rowan says.
Many of these deals were “lift and shift” transactions, where the buyers expected the vendor to just take over all of their HR processes and do them at less cost. The Wachovia contract was one of these deals, according to one person familiar with the arrangement.
It might actually be a relief for Hewitt to be able to offload some of this work and focus on what it does best, which is benefits administration, Rowan says.
“If I had to get out my crystal ball, I would say they are going to go back to their sweet spot and just do benefits administration going forward,” she says.
But Hewitt maintains it is sticking to the business. “Hewitt remains committed to the HR BPO business and we view it as an important element of our overall growth strategy,” Wulfestieg said in the e-mail. “Progress in working with our clients has been slow as we carefully balance the objectives of our customers while also doing what is right for our shareholders and associates.”
But whether Hewitt will be able to turn around its HR BPO business at the pace that shareholders want still remains to be seen, says Jason Corsello, vice president at HR technology consulting firm Knowledge Infusion.
“Shareholders are getting impatient,” he says.