Consultant Sees Benefits Outsourcing Growth

July 21, 2010 ( – A consulting and research firm predicts that deals in the benefits administration outsourcing (BAO) market will grow by 12% to 18% this year.

A news release from the Dallas-based Everest said the global BAO market is about $5 billion. Propelling market growth are factors such as increased administrative challenges due to imminent health care reforms, advancement of global sourcing that provides a more attractive cost-saving value, and quicker decisionmaking in a more stable, improved economic climate, Everest said.

More than 60% of BAO deals signed since 2006 include some type of offshoring component, and offshore delivery will increase. Defined Contribution is the most frequently outsourced area; however, Health & Welfare is growing at a much faster rate over the past few years.

Mid-market sized companies comprise almost 70% of BAO adopters, according to the news release.

The BAO supplier landscape remains dynamic with a wave of continuing consolidation in the market driven by the need to gain market share and enhance capabilities quickly. From a global basis, Hewitt Associates is the leading supplier followed by Fidelity that together account for 40% of the market in terms of number of participants managed and annual contract value. Other share leaders are ACS-Xerox, Towers Watson, Mercer, ING, ADP, and ExcellerateHRO, Everest said.

Hewitt was recently involved in two high-profile consolidation deals. Earlier this month, Aon Corporation and Hewitt announced that the boards of directors of both companies approved a definitive agreement under which Hewitt will merge with a subsidiary of Aon (see Hewitt Associates, Inc. to Merge with Aon Corporation). 

This week, Hewitt announced it had entered into a definitive agreement to acquire EnnisKnupp, a provider of investment advisory services to large institutional investors (see Hewitt Inks Deal to Acquire EnnisKnupp).  

U.S. Dominant in BAO 

In its news release, Everest also indicated that:

  • While North America continues to be the dominant market for BAO, adoption is increasing in Europe where the United Kingdom is the most dominant market.
  • Most buyers are signing deals for single-country operations only to achieve cost reductions more quickly.

“While cost reduction has always been an important driver for BAO, it gained further prominence with the pressures of the recent economic downturn and the need to address rising health care costs,” said Research Director Rajesh Ranjan, in the news release. “Buyers are also increasingly looking to BAO to better manage the complexities and burdens associated with compliance issues and provide improved employee engagement and communications platforms that help employees make better health care and retirement decisions.”

More information about Everest is at