Wachovia is shifting HR functions that it outsourced in 2005 to Hewitt Associates back in-house or to other vendors. HR head Shannon McFayden said the bank will transition tasks such as payroll, pay-related customer service and human resources technology back to Wachovia or to other vendors. Benefits administration and benefits customer service will stay with Hewitt. Moving HR functions back in-house will take up to 18 months. Bank spokeswoman Christy Phillips-Brown could not comment on Hewitt's performance, but Wachovia and Hewitt "agreed this was the best decision for our companies." Hewitt spokeswoman Amy Wulfestieg said the company will work closely with Wachovia in the transition and looks forward to "building on our long-standing partnership together."
Wachovia is taking back a number of HR processes it had outsourced to Hewitt Associates, a potential blow for the BPO provider. The contract, which was one of a slew of wins for Hewitt in the wake of its Exult acquisition, was valued at $450 million. The deal was consummated in Hewitt’s glory days, when both buyers and vendors had high expectations of BPO. “I believe that this was one of those deals signed in the heyday with entirely too much optimism on both sides,” says Naomi Bloom, an industry consultant. Since then, Hewitt has admitted to struggling with its HR BPO business. “They haven’t made a mystery of the fact that they had gotten bogged under by a number of the contracts that they signed in the months after the Exult deal,” IDC analyst Lisa Rowan says. Many of these deals were “lift and shift” transactions, where the buyers expected the vendor to just take over all of their HR processes and do them at less cost. The Wachovia contract was one of these deals, according to one person familiar with the arrangement. It might actually be a relief for Hewitt to be able to offload some of this work and focus on what it does best, which is benefits administration, Rowan says. “If I had to get out my crystal ball, I would say they are going to go back to their sweet spot and just do benefits administration going forward,” she says. But Hewitt maintains it is sticking to the business. But whether Hewitt will be able to turn around its HR BPO business at the pace that shareholders want still remains to be seen.