HR Cost-Management Software Vendor Lands $6.4 MillionHR Cost-Management Software Vendor Lands $6.4 Million

IE-Engine Inc., a maker of software that helps companies analyze the costs of their human-resources services and health-care benefits, will receive an infusion of $6.4 million in financing this week from venture-capital firm Adams, Harkness & Hill.

It's the third round of funding for the privately held developer. The money will be used for future development of the company's products and enhancement of its sales and marketing programs, says Brent Bannerman, IE-Engine founder and chief marketing officer. Earlier investors include Kodiak Venture Partners and RBC Capital Partners.

On Feb. 3, the company will release version 6.0 of its Human Resource Cost Management software. IE-Engine's software helps companies analyze the costs associated with and performance of vendors that provide HR benefits and services, such as relocation and outplacement services and health-care coverage.

Health-care benefits are among the biggest employee costs for companies, says Jay Corscadden, an Adams, Harkness & Hill partner. "IE-Engine solves an integration problem, helping companies to see the underlying factors contributing to health-care costs and how to address that while keeping quality of employee benefits competitive," he says. "This is the last cost bastion for many employers." For many companies, "there hasn't been a lot of discipline over health-care spending," he says.

The U.S. Centers for Medicare and Medicaid Services released a report last week saying that in 2001, health-care spending in the United States rose 8.7% to $1.4 trillion, the largest level in history. The report says health-care spending increased more than three times faster than the U.S. economy's 2.6% nominal rate of growth. Health-care spending averaged $5,035 per person in 2001, up from $4,672 in 2000. For many companies, the cost of offering employee health-care benefits is increasing at double-digits rates, Corscadden says.

The IE-Engine software helps companies evaluate how well their HR service providers are meeting their contractual commitments and can help companies better tailor their benefits packages. For instance, the software can help a human-resources department survey employees via the Web about how satisfied workers are with the health plans offered by the employer's HMO or gauge how employees will react to changes in benefits such as a reduction in the number of annual doctor visits covered in the plan.

ABB, a provider of power and automation technologies to the utilities industry, began using IE-Engine software last summer to create and manage a Web-based request-for-proposals process for ABB to decide what health plans and HMOs should provide health benefits to employees in North Carolina.

Once HMOs responded to ABB's RFP, the software scored and ranked all proposals based on ABB's needs, helping ABB to better analyze costs and benefits before making its benefit choices, says Mike Scarpa, ABB's manager of employee benefits. "This eliminated most paperwork, made us more efficient and saved us a great deal of time," Scarpa says, adding that ABB will use the software for future health benefits RFPs.