By Jeff Croyle, Partner, TPI
By now, you’ve probably heard that EHRO and Cardinal Health are terminating their HRO deal and that EHRO is getting out of the “utility-based, multi-process HR” business. It is important to understand that EDS/HP is not exiting the HRO space; instead they will continue to pursue customized HRO solutions. And EHRO will still be in the benefits administration business. Following are my thoughts on the announcement.
EHRO started as a joint venture between EDS and Towers Perrin in 2005; 3 months ago Towers Perrin sold their 15% stake and EDS is now the sole owner of EHRO. (EDS itself was purchased last year and now is a wholly owned subsidiary of HP.) Separate from EHRO, EDS has a few HRO and payroll clients yet there was never an effort to integrate EDS and EHRO clients onto the same platform, leverage investments or share best practices. Many of EDS’ HR clients were “lift and shift” operations whereas EHRO tried to build their client base leveraging the platform built to support Cardinal Health. It is safe to say that neither approach was very successful for either EDS or EHRO. EDS has decided that going forward they will only support customized solutions, leveraging EDS’ core strength in technology buildouts (and doing it under the EDS brand instead of EHRO). This approach is contrary to the direction taken by most other HRO providers that are interested in leveraging their investments by building a “one-to-many” platform.
Taken by itself I don’t see the EHRO announcement as having much impact. EHRO has never had the scale or track record to have an impact on the HRO market and we don’t see there being much of a demand from buyers interested in totally customized solutions with large upfront investments. But coupling this news with Fidelity’s recent announcement that they are also getting out of the HRO market, it’s clear that firms are still struggling to make money in the multi-process HRO space. Luckily for buyers, the India-heritage BPO firms are more than willing to step in and fill the competition void with EHRO and Fidelity’s departure from this space.”
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