Shared Services, Shared Opportunities.

• Author: Marshall, Jeffrey
• Position: Outsourcing alliances - Statistical Data Included

Some shared-services programs, like a huge one being developed at Bank of America, are being structured more like strategic alliances than conventional outsourcing deals.

There's an intriguing corporate "takeover" playing out these days in Charlotte, NC., where diversified personnel services firm Exult Inc. is assuming responsibility for administration of much of Bank of America Corp.'s human resources and administrative services, including payroll, accounts payable and travel-related expenses. The 10-year contract, announced last fall, carries a fee of $1.1 billion and has been called the largest in the history of HR outsourcing.

But, as the two companies are quick to point out, this deal is really about "shared services" and is a strategic alliance as much as an outsourcing arrangement. In effect, the Bank of America staff currently performing these functions is being "transitioned" to Exult, with the full hand-off expected by the end of September. At that time, Exult expects to have at least 680 people working in a Charlotte center, doing benefits and HR administration for Bank of America as well as several other companies in the United States and in the United Kingdom.

For BofA, the decision frees up capital to invest in core business areas. "We're generating a pretty significant cost savings in personnel and reinvesting in areas that provide increased value, like e-commerce, asset management and our capital markets group," says Kelly Hartis, a vice president for corporate affairs with the giant bank. In fact, Exult has guaranteed the bank that it will see savings of 10 percent a year in the areas Exult will be taking over -- and if Exult fails to generate those savings, it will have to eat any costs to ensure that number.

BofA also gains a big new potential customer base: the half-million or so employees of other Exult clients. As part of the alliance agreement, the bank has an entree to sell financial services to workers at those companies, which include BP Amoco and Unisys Corp. These two companies have also signed multi-year contracts with Exult, with total fees pegged at $600 million and $300 million, respectively.

Client Service Center

Exult's partnership approach takes shared services a step beyond its initial configuration of bundling support processes and nonstrategic activities into a separate organization that treats those processes and activities as the core of its own business. Exult's strategy is to establish four...