To put that number in perspective, this represents ~40% of CVG’s consolidated revenues for the quarter and is nearly 5x the quarterly revenue of the HR Management business unit.  And as you can imagine, investors were thrilled (insert sarcasm here).  On a day when the market rose nearly 11%, CVG lost ~28% of it’s value and closed at an all-time low.  That’s right…the lowest price in it’s history at $7.16/share.

So what did CEO Dave Dougherty have to say?

“….In HR Management, we continue to make progress with our two large HR outsourcing implementations; however, our financial results are not satisfactory. As a result, we are taking a series of actions to reduce the implementation risk and improve the future earnings and cash flow in this business.”

The two deals are Johnson & Johnson (signed in May of ’07 as a 10-year, ~$1B HRO contract) and DuPont (announced in November of ’05 as a 13-year, $1.1B global HRO account).  Due to the complexity of the change management initiatives, scope and scale of implementation, and revenue recognition ties to go-live, BPO providers must float their cost basis on a forward-funded model.  This creates undue pressure on the P&L and results in the outcome we see today.

So the age-old question once again raises it’s head – is large market HRO sustainable?  Can it be deployed profitably?  Will clients embrace standardization and will providers effectively innovate and deliver?  Unfortunately, today’s results continue to reinforce an increasingly negative perception of holistic HRO’s value proposition.  Let’s keep the conversation going.