Paper Vendor Outsources HRPaper Vendor Outsources HR

Like many businesses facing weak sales and shrinking profits, International Paper Co. is turning to service providers to trim costs without sacrificing efficiency. The $28.2 billion paper-product manufacturer earlier this month signed a 10-year, $600 million deal to hand off its human-resources operations to business-process outsourcer Exult Inc.

Exult will oversee the Stamford, Conn., company's payroll management, benefits administration, call-center management, relocation and outplacement services, and HR information services for 70,000 employees and 80,000 retirees. About 200 International Paper HR and IT employees have been offered positions at Exult, and the outsourcer will take over the manufacturer's HR operations center in Memphis, Tenn.

Exult will develop personalized Web pages for employees and retirees, dubbed myIP.com, from which they'll track personnel information, career training and job requirements, internal communications, and other HR-related information. The system will be integrated into International Paper's SAP system to tap back-end data.

International Paper hired Exult because of its guaranteed cost-savings, experience in managing third-party vendors, and reductions in business IT spending, says Paul Karre, VP of human resources. "We plan to execute a service delivery model that evolves around a self-service HR process. Exult provides us the ability to move faster and farther down that route than we could on our own," he says.

While Karre wouldn't discuss specific figures, he says International Paper expects to see "significant cost savings" as a result of the Exult deal. International Paper needs to save every penny: In June, the company said it would cut its total workforce by 10%, or 3,800 positions. This month, it reported a third-quarter loss of $275 million; a year ago, it reported net earnings of $135 million for the same period.

International Paper joins a growing number of companies turning to outsourcing to cut HR costs. Financial-services firm Bank of America Corp. late last year signed a 10-year, $1.1 billion contract to outsource its HR operations to Exult. In March, the Canadian Imperial Bank of Commerce, a $15.2 billion financial-services firm in Toronto, outsourced its HR needs to EDS Canada in a deal valued at $156 million.

"Human resources has traditionally been a paper-intensive process with a tremendous amount of inefficiencies," says Paul Hamerman, Giga Information Group research director. He says that Exult uses Web-based technology to extend to an employee's desktop many processes that can vastly improve the efficiency of HR processes.