IQcatalyst

Ameren awards benefits outsourcing contract to ACS

Affiliated Computer Services, Inc. announced a benefits outsourcing contract providing defined benefit and health and welfare administration for Ameren Corporation. Ameren Corporation is among the nation's largest investor-owned electric and gas utilities. The largest electric utility in Missouri and the second largest in Illinois, Ameren companies provide energy services to 2.4 million electric and nearly 1 million natural gas customers throughout its 64,000-square-mile territory.

Under the terms of the five-year agreement, ACS will administer Ameren's pension and health plans for 24,000 participating employees and retirees.

Source(s): ACS

Outsourcing myths (post 3 of 5)

Myth # 5: Because many outsourcing providers are usually independent contractors, specific performance standards in outsourcing contracts are inappropriate. Many outsourcing contracts set minimal performance standards, and companies often accept form contracts provided by outsourcing companies. Without detailed standards, however, companies can have difficulty realizing their expectations and maintaining their standards for quality of patient services.

Suggestions: When negotiating contract terms, make sure that the contract includes performance standards that reflect the compnay's expectations.

Myth # 6: As long as the contract requires the outsourcing company to buy insurance and indemnify the company against claims, the company is safe. Recent changes in the insurance industry have greatly increased the cost of liability insurance. As a result, many companies, including outsourcing providers, are moving to alternative insurance vehicles. These alternatives are not always as safe as they appear. One popular policy is the matching deductible policy, which is basically self-insurance. If the outsourcing company does not have the assets to self-insure, then it is essentially without coverage. Overseas captives also are popular, but they can be difficult to reach in litigation. These types of coverage choices by the outsourcing company can be problematic for the company: If claims develop, the company may find little or no coverage available from the outsourcing partner.

Problems also could arise if obligations are limited to a local affiliate of a national outsourcing chain. If business were to turn bad, the local affiliate could simply close its doors, leaving the company in a serious predicament if the contract included no provision to force the parent company to make up any losses the company might suffer.

Suggestions: At a minimum, require certificates of coverage, establish insurance requirements in the contract, demand that the company be listed as an additional insured, and have clear rights of indemnity against the outsourcing provider. Also, negotiate for the right to have notice prior to any cancellation or modification of the insurance policy (including modification of the aggregate or the payment schedule), and investigate the aggregate amount of the insurance coverage to verify that it is sufficient to cover all the liability at all the points where the outsourcing partner may be doing business. To the extent possible, negotiate for additional protections.

Recognize that indemnity is only as good as the entity standing behind it, so when choosing an outsourcing provider, make sure the provider has the financial wherewithal to meet its obligations (including future anticipated capital contributions in the case of a joint-venture). If you are negotiating with a local affiliate of a national outsourcing chain, see if you can get the parent company to guaranty the affiliate’s obligations.

Quintiles awards RPO contract to Kenexa

Kenexa, announced that Quintiles Transnational Corp., has selected them to provide outsourced staffing solutions for its Japan location.

Quintiles Japan, headquartered in Tokyo, is a provider of development, commercial and financial solutions to pharmaceutical and biotech companies operating in Japan, the world's second-largest pharmaceutical market. The three-year agreement, is focused on managing clinical staffing operations in Japan.

Quintiles has 18,000 employees and offices in more than 50 countries.

Source(s): Kenexa

Outsourcing myths (post 2 of 5)

Myth # 3: Outsourcing contracts are usually plain vanilla and are not subject to regulatory requirements. Few contracts are free from regulatory scrutiny and risk. Outsourcing relationships, like most corporate contracting, can raise a number of significant regulatory issues including questions of compliance with anti-kickback, self-referral, licensure, and antitrust laws, to name a few. If the outsourcing relationship is not structured appropriately from the start, the company can suffer bad outcomes ranging from financial losses due to payment problems and unenforceability of the contract to regulatory interventions or fines and even criminal imprisonment of responsible individuals. 

Outsourcing arrangements that involve joint ventures can be particularly problematic from a regulatory standpoint. For not-for-profit organizations, for instance, an ill-considered joint venture could jeopardize the organization’s tax-exempt status.

Suggestions: Take great care to structure outsourcing contracts to satisfy all applicable regulations. If the outsourcing arrangement is structured as a joint venture, for-profit entities should consider whether it is possible to consolidate the revenues of the joint venture for accounting purposes, and not-for-profit organizations should be careful to structure the joint venture to ensure that it does not compromise the organization’s tax exemption.

Myth # 4: Once an outsourcing contract is signed, the company can turn the process over to the provider and expect a seamless transition. Poor integration is one of the most common complaints in outsourcing relationships. Companies often are surprised to find that the outsourcing company is not adept at managing the transition to the new arrangement. Horror stories abound: Consider the hospital system that outsourced its billing office and found itself with almost no collections for several months. The hospital system never recovered financially and ultimately closed its doors.

One of the quickest roads to client dissatisfaction, and to financial distress, is a lack of integration in systems among the company, its clients, and the outsourcing company’s professionals. Similarly, incompatibility in information systems can present unexpected obstacles to an effective transition. Other potential shortcomings of outsourcing providers include poor communication, poor customer service, scheduling mishaps, failure to comply with the company’s internal procedures, and lack of understanding of the company's capabilities.

Suggestions: No matter how experienced the outsourcing provider may seem to be, appoint someone to manage the transition process internally. Also, before moving ahead with the agreement, openly investigate compatibility issues with the outsourcing company, taking note of potential integration problems and informing the company of all procedural considerations that it would be expected to abide by, and of any special capabilities of the company that should be accounted for in the arrangement.

TCS profits remain strong

Tata Consultancy Services Ltd., said profit in the April-June quarter rose 37% from a year ago, as new outsourcing contracts helped offset the impact of a stronger rupee and higher salaries.

Mumbai-based TCS said it won six customers, including a leading Asian telecommunications company, with contracts valued at more than $100 million each for the current financial year ending in March 2008. In all, the company added 54 new clients through the quarter, the company said in statement, without naming its customers.

The rupee´s strength _ it rose about 6.6% through in quarter _ hurts companies like TCS that make most of their money from software and back-office work outsourced by western countries, especially the United States.

Net profit rose to $291 million in the April-June quarter, up 37.4% from $187 million in the same period a year ago, the company said in a statement. In dollar terms, however, profit growth was estimated at 55 percent. Revenue rose to $1.28 billion from $900 million.

The earnings numbers, which conform to U.S. accounting standards, beat forecasts as analysts had expected a bigger impact on the company´s margin because of the rupee´s strength and salary hikes from 12 to 15% that came into effect in April. TCS has been able to sustain net margin by improving productivity and containing the changes in exchange rates through hedging.

Growing business in non-U.S. countries, especially in Britain and Asia, also helped the company offset the impact of a weak dollar. TCS has been charging 3 to 5% more on new contracts. It added 5,512 new employees, taking its total staff close to 95,000.

Source(s): AP, TCS

Infosys to acquire Philips F&A BPO unit?

Infosys Technologies is set to acquire Royal Philips Electronics finance and accounts business process outsourcing unit for $200m over five years. India's second-biggest software-maker will be taking over all the costs of this acquisition, similar to the manner in which rival Tata Consultancy Services bought the operations of UK's Pearl Group insurers. The acquisition will add to Infosys current BPO unit, which has close to 11,000 employees.

Philips has its finance and captive operations in Chennai, Warsaw and Bangkok with a total headcount of 1,500. Philips said it could neither confirm nor deny the news regarding the possible takeover of its finance and accounts BPO.

Infosys chief executive S Gopalakrishnan had recently said that on the BPO side, if the Indian rupee continued to appreciate the company would have to look at new markets. He had also said: 'Any target company has to 'meet our criteria' and should want to be acquired.' The company has a current cash reserve of $1.5b.

Infosys BPO, formerly Progeon, contributed to 36.7% of Infosys' most recent quarterly revenues.

Source(s): Business Standard, Hemscott.com, Infosys

Philips awards payroll contract to Randstad

Randstad Holding said it has signed a memorandum of understanding with Philips Electronics Netherlands, a division of Royal Philips Electronics NV, to take over the salary administration activities currently performed by Philips' salary administrator, Philips CIAN. Financial details were not disclosed.

Randstad said that Philips Cian handles the administration of salaries to 42,000 workers in the Netherlands at different Dutch companies, including Philips' Dutch operations. The company also said that, under the outsourcing agreement, current employees of Philips CIAN will continue to perform their duties from within the Randstad Group.

Source(s): Thomson Financial

Outsourcing myths (post 1 of 5)

Outsourcing can be an excellent strategy for for many, if not most companies. It can enable them to expand into new areas, save costs, and reduce administrative hassles. This strategy also involves significant risks, which can be exacerbated if exectuives do not take sufficient time to examine their assumptions about such arrangements.

Misconceptions form the basis of the outsourcing myths that many exectives too willingly accept today.  This post and the four subsequent ones, focuses on 10 of the most commonly accepted myths. By recognizing the fallacies in each of these myths, executives can take advantage of important opportunities to fortify their outsourcing arrangement against risk.

Myth # 1: The most important factor in selecting an outsourcing provider is cost-efficiency—get the lowest price for the broadest scope of services possible. Obviously, price and scope of services are important. But intangibles such as reputation, quality of service, and depth of experience are also critical. The two most important risks that a company faces when it enters an outsourcing relationship are profitability risk and liability risk, and these can dramatically affect the ultimate cost.

Profitability risk includes the financial losses a company could suffer as a result of a bad outsourcing relationship. Such losses could derive from delayed and lost collections, tarnished reputation, lost referrals, damaged morale, and personnel turnover. A company can lose significant income when outsourcing turns sour, and recovering the financial losses later can be difficult, if not impossible.

Liability risk includes the potential liabilities a company can suffer as a result of the actions of its outsourcing provider. In particular, such risk can be of a regulatory nature. Outsourcing companies are unregulated, and an outsourcing company’s noncompliant activities could become a regulatory problem for the facility.  Further, in many situations companies can have vicarious liability for the actions of outsourcing providers. 

Suggestion: When deciding how to outsource a service, remember that intangibles are key. Take time when considering the contract price to also identify the potential profitability and liability risks.

Myth # 2: The best way to select an outsourcing provider is to have the CFO make the decision. The CFO may well be the appropriate person to lead the process, but the issues raised by an outsourcing relationship cross multiple departments. A company's risk manager, for example, may end up dealing with the results of the outsourcing relationship long after the relationship has ended. Also, morale issues can develop quickly if business unit leaders are surprised with a significant new outsourcing relationship or are required, without being consulted, to use an outsourcing provider that delivers inconsistent service or that they perceive has a poor reputation.

Suggestions: Use a selection process that includes representatives from the administrative, financial, legal, risk management, and compliance departments. Solicit input from the business units, or in the very least, lay the groundwork to ensure that business unit leaders remain informed of the process.

Source(s):

Employers expect to build up their benefits

Slightly more than 60% of employers expect to build up their benefits offerings over the next five years, with a surprising part of the that anticipated growth being led by small employers, according to a recent retirement trend study.

According to the study, while retiree benefits offerings are more prevalent at the largest employers, smaller employers say they will expand the amount of benefits they provide to their retired workers.

For example, more than two-thirds of employers with between two and 499 employees that currently provide retiree benefits plan to increase the amount of these benefits over the next five years. Some 40% of companies overall currently offering retiree benefits such as medical, dental or life insurance expect to expand these offerings during the next five years.

According to the research, the three most widely offered post-retiree benefits are:

• Medical insurance, 31%;
• Life insurance, 22%; and
• Dental insurance, 18%.

In terms of health care costs in retirement, 61% of all employees ages 21 and older say they are very concerned. The study also suggests a spiked interest in long-term care, with 46% saying that was the case.

Meanwhile, more than half (58%) of employees are very concerned about having enough money to make ends meet, with 35% of those ages 51 and older saying they live paycheck to paycheck. Nearly half (48%) of these workers say that 70% or more of their monthly household income goes to paying bills and living expenses, which makes saving difficult.

Source(s): PlanSponsor.com, MetLife

Starbuck's awards HRO contract to Convergys

Convergys Corporation has entered into a multi-year contract with Starbucks Coffee Company to provide global human resources business process services, beginning with Starbucks North American operations.

Under terms of the contract, Convergys will provide human resource (HR) administration and payroll services for Starbucks partners in the United States and Canada, along with benefits services for Starbucks partners in Canada.

The goal is to help Starbucks build a single global platform for HR services to support Starbucks’ rapid global expansion.

Source(s): Convergys