Administaff - Use Strategic Alliances To Improve And Expand Your Business

Journal Record - July 3, 2000

Use Strategic Alliances To Improve And Expand Your Business

By Allen Fishman

Have you ever considered forming strategic alliances to help grow your company, without giving up control of your company? Though some strategic alliances involve selling part ownership in your company, most such alliances do not involve ownership sale. It’s just two companies finding ways to use their synergies for mutual advantage.

Administaff, a leading professional employer organization (PEO), uses a strategic marketing alliance strategy that has helped them grow while helping their strategic partners as well. Administaff provides a variety of personnel management services to small and medium-sized businesses, and they currently have over 3000 small business clients. Most of their client companies have 20 to 100 employees.

One alliance, with American Express, included the sale of approximately five percent of Administaff common stock, together with warrants for an additional 14.9 percent at strike prices ranging from set prices per share. "By leveraging American Express’ marketing expertise, technology and small business consultants, we can expand our services and broaden our reach to prospective customers," said Paul J. Sarvadi, Administaff’s president and chief executive officer. According to Paul, "American Express is such a powerful marketing partner that it brought in 25% of 1999 new client business."

The new world of e-business and e-commerce provides tremendous opportunity for strategic alliances through web portals and shared opportunities and content online. Administaff has formed just such a portal. It is called bizzport, a multi-purpose eCommerce portal designed for exclusive use by Administaff’s clients and worksite employees. By leveraging the collective buying power of Administaff’s clients and worksite employees, the portal brings a broad range of value-added products and services from best-of-class providers to the premium small business community represented by Administaff’s client base. Along with the best-of-class provider network, bizzport offers a Best2BestTM forum that enables Administaff clients to market their products and services to other Administaff clients and worksite employees.

Through bizzport, more than 3,000 business clients and 50,000 worksite employees will have access to special offers on business-to-business and business-to-consumer products, services, and resources. Among the major categories on bizzport are technology solutions, financial solutions, business products and services, research and consulting, insurance services, and consumer services.

Administaff has established an e-business relationship with IBM to give small businesses access to the very latest e-business services and consulting via the Web. Administaff gets a commission on sales from their portal.

Major elements of the relationship include:

IBM Global Services collaborated in the construction and management of Administaff’s clients business-to-business e-commerce portal, a web site that delivers a broad range of product and service offerings from providers to the small business community represented by the Administaff client base. The portal brings Administaff’s client base buying advantages and information and gives providers a rifle to go directly to small businesses. The portal has providers for the businesses and also products and services for employees of the businesses. They will not sell advertising on their portal.
The companies will exchange content for use in various Internet channels. Administaff’s content will provide information about human resources best practices for small businesses, while IBM’s content will focus on information technology. Administaff’ alliance with IBM Global Services and the IBM Global Small Business Unit includes jointly marketing IBM’s e-business Accelerator and Small Business WebConnections to Administaff’s clients. IBM will in turn market Administaff’s personnel management services to IBM’s small and medium sized clients.

The port also capitalizes on a strategic alliance with Aon Enterprise Insurance Services, which Paul S. says "saves users as much as 15% in premiums." Aon Enterprise Insurance Services, Inc., is a provider of insurance services to small businesses. Under the strategic alliance, Aon will offer an array of property and casualty insurance products to Administaff clients through a co-branded web site and its new Client Service Center.

Through Aon Enterprise, Administaff clients have access to Aon’s expedited underwriting and economies not usually available to small business owners. Aon offers insurance products that include property and casualty, directors and officers, general liability, automobile, professional liability, and umbrella liability coverage to qualified Administaff clients. Administaff receives revenues stemming from the alliance through Administaff Enterprises, Inc., its licensed insurance agency.

Administaff has also formed a business alliance with Forrester Research to Offer Forrester’s electronic research products on Administaff’s e-commerce portal. Forrester Research, Inc. is one of the three most widely recognized sources of research and analysis on the global Internet economy. Gartner and Metta are the two other major research and analysis firms for technology solutions. Forrester will offer its line of research products on Administaff’s e-commerce portal to target small businesses.

All of these situations are advantageous to both sides, and help each company in the alliance by using the strengths of the other company to supplement what they already offer. This is a winning strategy on the web, and in brick & mortar businesses as well. Note, too that Administaff went right for some big names. The right strategic alliances can also add to your company’s image and prestige, so set your sights high!

Allen Fishman is founder and CEO of The Alternative Board TAB®, a national organization of advisory groups for business owners, CEOs, presidents and partners. Although he cannot answer individual questions, he will consider topics for future columns. Write to him at The Alternative Board TAB, 225 E. 16th Ave. Suite 580, Denver 80203-1622 or e-mail him at: Info@TABboards.com