Conducting a Make Versus Buy Evaluation for a Best-Fit HR Sourcing Model

Executive Summary

A Top 5 Canadian bank wanted to evaluate the optimal sourcing model for its human resources (HR) function. It engaged Everest Group to conduct a make versus buy assessment, and when the decision was made to outsource HR services, Everest Group developed the specifications, prepared the RFP, and crafted the necessary service level agreements (SLAs) for the third party relationship. Everest Group also assisted in the evaluation of potential service providers, and supported the negotiation and contracting phases. The client achieved C$30 million in savings, significantly improved services, and improved time to market.

The Client’s Challenge

The bank, with approximately 35,000 employees in Canada and the United States, had initially planned to build a shared services capability for its HR function to reduce HR services delivery costs and improve service quality. It engaged a Big 5 consulting firm to develop a plan for implementing shared services, along with an estimate of the investment required to execute the plan. As the investment required to build an internal HR shared services capability was significant, the client engaged Everest Group to conduct a make versus buy evaluation.

Insight to Action

Using its proven methodology and expertise to fully analyze the HR shared services plan and required investments, Everest Group determined it was in the bank’s best interest to outsource HR services delivery to a third party provider. As a result, the client then engaged Everest Group to assist in developing the short list of potential providers, building the specifications, service levels and RFP, selecting the service provider, negotiating contract terms, and preparing the final contract documentation.

Impact

Everest Group’s assessment of the optimal sourcing strategy enabled the client to defer the substantial investment required to establish its own HR shared services organization. By engaging an external provider for transactional service delivery, the client realized significantly improved service levels through self-service functionality, legacy system migration, new systems, etc., and was able to divest itself of a considerable amount of risk. The remaining internal HR service organization was able to focus on linking HR strategy with corporate strategy, and ensuring the programs and strategies in place aligned with the bank’s organizational goals and objectives. The client recognized C$30 million in savings, including an upside of six – ten percent per year, based on agreed-to economics. Due to the success of this initiative, the bank subsequently engaged Everest Group in numerous additional projects.