BP Renews HR Business Process Outsourcing Contract With Hewitt

Two years after Hewitt Associates announced that legacy client BP was not going to renew its HR business process outsourcing contract, the London-based energy company has reversed its decision and re-signed.

Hewitt inherited the $600 million BP contract when it purchased Exult in 2004. At the time it was the biggest HR BPO contract of its kind, covering payroll, relocation severance and benefits administration for BP’s 100,000 employees globally.

But in 2006, Hewitt’s HR BPO business was struggling as the provider was having troubles implementing all of the deals that it and Exult had signed.

In a December 2006 earnings call, Hewitt CEO Russ Fradin announced that BP wouldn’t be renewing the contract. The companies signed a two-year renewal while BP looked for a new provider, but that search was unsuccessful, according to a source familiar with the discussions. Now, BP has returned to Hewitt.

Under the terms of the agreement, Hewitt will deliver “a range of HR services” to BP employees around the world, BP spokesman David Nichols said. Officials at BP and Hewitt would not disclose which processes and geographies are included in the contract or discuss the length of the deal. However, the source familiar with the discussions said the new contract will be scaled down from the original agreement.

“It’s going to be core HR processes,” the source said. “All of the expat admin and recruitment has been brought back in-house.”

For Hewitt, winning back BP is a huge vote of confidence, particularly given the difficulties the firm has had on the HR BPO side in the past couple years, observers say.

“This is a significant boost for Hewitt’s HR BPO business and it signifies better times for them,” said Phil Fersht, an analyst at AMR Research. BP’s decision also is evidence that the cost to switch HR BPO providers for a large deal like this is too much for the company to absorb, he said.

Mike Wright, HRO sales and product development leader at Hewitt, declined to comment on the specifics of the BP deal, but he said that Hewitt is actively looking to close HR BPO deals.

“We are working very hard to find more clients and close more deals,” he said. “That is part of our plan for ’09.”

—Jessica Marquez

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