Exult’s staff exulted when it signed its human resources (HR) contract with BP in 1999. Last year the California supplier saw its business accelerate, thanks to repeat business, according to Chairman and CEO Jim Madden. “The size of our contracts doubled with the addition of new clients including Bank of America and International Paper,” he reports.
Madden says Exult’s customers are traditional companies, some more than 100 years old. That’s a sign that BPO has indeed become accepted at the top levels of American business. He says BPO has expanded beyond “the early adopters” who could tolerate a higher risk and is now in an “early mature phase” where outsourcing is seen as a proven benefit instead of a risk. “Companies realize they don’t want to tie up their best people preparing training manuals, handling administrative matters and implementing technology. Instead they want to concentrate on strategy and partnering with the business units,” he observes.
Today buyers view BPO outsourcing as a valuable business tool. “They’re saying, ‘Let’s give our HR administrative work to a trusted partner who can give us better service than we would get if we did it ourselves,” says Madden. Companies outsource non-core business processes to:
- Gain access to and avoid the capital costs of latest technology.
- Turn what are largely fixed costs today into a variable cost function.
- Gain the scale advantages of being part of multi-client delivery.
For example, Madden reports John Brown, CEO of BP, took the leap and agreed to outsource to the new supplier because he knew his 50,000 employees “would gain e-literacy and wanted to take control of their own HR transactions.” The oil company didn’t want to invest in building that technology when Exult already had a working model.
Contract Backlog Grows
The tragedies of September 11 have made companies sharply aware of the importance of implementing best practices in HR and to continue to focus on being as effective and efficient as possible. Now, more than ever, they want to outsource HR and concentrate on their core competencies. “We have added $1 billion to our contract backlog since September 11. We now have more than $3 billion in long-term contracts,” Madden reports.
Since Exult has been so successful, the CEO expects and welcomes other start-ups and existing providers to follow its blueprint for success. “I think there will be more players adopting our model,” he predicts. “We’ve made the stage more legitimate from a financial investor perspective, which is good for the BPO concept and the outsourcing industry.” He says the Exult model is based on:
- A singular focus on process outsourcing.
- An experienced management team.
- A strong balance sheet.
- Research and development investment.
- Taking accountability for the process even when there are third parties.
“When we wake up in the morning, this is all we think about. HR outsourcing is all we do,” says Madden.
Lessons from the Outsourcing Journal:
- BPO outsourcing has become accepted at the top levels of American business. Now companies 100 years old realize outsourcing can help them.
- Companies outsource to gain access to tools and technology.
- Exult’s success has created a blueprint for other start-up suppliers. More players may enter the BPO field this year.
- Successful BPO providers have a singular focus.
