The company has been said to have been in the running for the Johnson & Johnsons contract for some time now. A Convergys spokesperson was unable to provide any additional details on the scope of the contract. But given a deal of this size, it’s probably safe to say that it covers at least a good part of Johnson & Johnson’s global workforce and includes the full range of HR services, such a payroll administration and processing, benefits administration, and possible compensation services and recruiting services a well.
Johnson & Johnson spokesperson Bill Price told Computer Business Review that the deal covers administrative and transactional services related to HR, and that it was too early to speculate what impact the deal will have on different regions.
In 2006, a Johnson & Johnson HR executive said that the company had narrowed down its choice to three unnamed vendors, and media reports cited IBM, Accenture, and Convergys as the three contenders. Price said he was unable to comment on this speculation.
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The win is a huge boost for Convergys. The company’s HR outsourcing business, known as its Employee Care is the smallest of its three business units, contributing $65m in revenue for the first quarter of 2007 – the unit is also Convergys’ fastest-growing, up 24% on the quarter. But Convergys’ billing operation generates about three times as much revenue, or $186m for Q1 – a slight decline due to the loss of its Cingular contract. And the core customer care business took in $469m for the quarter, roughly 70% of the company’ total revenue.
Convergys said the $1bn dollar deal will have a significant impact on Convergys’ revenue and earnings beginning in early 2009. Sure, this is 18 months or so off, and by that time, the company says it will have its HR business in the black. But $100m in annual Johnson & Johnson revenue will keep the business growing fast in the near term.
Convergys, like many other HR players, has seen a slowdown in signings recently following the market troubles of 2006. It signed a contract with InterContinental Hotels Group in December, but the deal covered only payroll and data administration for the company’s Asia-Pacific region. Earlier this month Convergys announced a five-year contract extension with Fifth Third Bancorp, the 21,000-employee, Cincinnati-based bank.
