RewardsPlus was launched in June 1996, 20 months after its conception. Today it brokers plans for 16 benefits providers and serves a total of 129,947 employees at 11 corporations. As of June it had pro-cessed close to $2 million worth of transactions over its extranet.
RewardsPlus's Web-based system has several things going for it. First, information moves over a private, secured section of the Internet leased from AT&T for $800 a month, instead of over a value-added network, which could cost twice as much. Second, corporate customers need only one connection to RewardsPlus, no matter how many benefits options they add to their rosters. HR departments zip information to RewardsPlus's server, where a proprietary system called Surededuct calculates deductions before sending the data back. Finally, customers' employees can access RewardsPlus's services through their companies' own intranets, allowing employees to visit Oz without realizing they've left Kansas. "We want all the good feelings about the service and the benefits to go to our corporate customers," says Longwell.
RewardsPlus's arrangement with Fujitsu America is typical of how the system works. RewardsPlus rounded up suppliers for the four benefits, including pet insurance (this is, after all, California), that Fujitsu wanted to offer employees; it then posted the suppliers' information on its own intranet. Now, when a Fujitsu sales director wants to insure his shih tzu, he simply hops on Fujitsu's intranet and clicks on an icon that says "ChoiceRewards." That bounces him to a page--still inside Fujitsu--displaying promotional material about some of the plans. From there he enters his user name and password and is connected to the RewardsPlus server in Baltimore, where he is greeted by a page with heavy Fujitsu branding. "That's great for us because it looks to our employees as if we are doing all the work to provide them with these benefits when, in fact, we are doing very little," says benefits administrator Huber.
Huber sounds happy now, but she admits she was skeptical when Farmer, vice-president of sales for RewardsPlus, approached the company in July 1997. The Fujitsu America job was just so big: 5,000 employees spread among 18 separate corporations, each with its own payroll application and schedule. "Companies typically think that they can connect to us and keep track of the payroll deduction, but we have a pretty complicated setup," says Huber, who had fielded kludgier proposals from other vendors.
But since this was to be a marriage rather than a date, RewardsPlus was willing to invest money to make that problem go away. Spriggs spent $25,000 on a data-conversion program that readily digests Fujitsu's--and other customers'--varied payroll formats. "If they couldn't have accommodated our different systems, we probably wouldn't have gone with them," says Huber.
Although the technical issues were the mountain, RewardsPlus and Fujitsu still had to negotiate some procedural molehills. For example, Huber balked at sending RewardsPlus the names and addresses of Fujitsu employees, which the outsourcer needed to process payroll deductions. "My head would explode if I ever heard that our employees were solicited for products outside of the agreed-upon benefits offering," she says. To allay her fears, Spriggs signed a contract restricting RewardsPlus's use of the information. Huber's anxiety didn't surprise Spriggs: privacy is a big issue in many extranet arrangements. "It's always a lengthy discussion," he says. "The customer has to trust us."
Huber also worried about security. How could she ensure the safety of employee information outside Fujitsu's walls? Not surprisingly, RewardsPlus had heard those concerns before as well, and Spriggs gave Fujitsu's technology team an exhaustive rundown of his company's elaborate system of firewalls, secure servers, and encryption technology.
Once its corporate customers are satisfied, RewardsPlus must thrash out a whole other set of issues with benefits providers. The most contentious is control of payroll deductions. Normally, providers handle those deductions for their own plans, but "we just ask them to turn their system off for our accounts," says Spriggs. In the few instances in which providers have refused, RewardsPlus has simply walked away from the deal. "We have to do business our way to gain the efficiency in cost, and we can't break from the model," says Barksdale.
Many benefits providers, however, are happy to play. New York City-based American International Group (AIG), for example, has been offering automobile and homeowner's insurance through RewardsPlus for five months. "We needed to try another distribution model for our group sales," says vice-president of sales Jim Shevlin. All it cost AIG, Shevlin points out, was the time it took to educate RewardsPlus about its products and to learn about RewardsPlus's services. Still, he's reserving judgment. "Sure, it looks good on paper not to have the marketing costs," says Shevlin. "But we have to see if they are as effective as we are at getting new customers. Then we'll know if the costs are really lower."
The extranet gives RewardsPlus a competitive advantage that could make it tough to catch up to. But it also means the company must make enormous investments--currently one-third of sales--in technology. With that rapid a burn rate, Barksdale doesn't project profitability until June 1999. "We know we have a long way to go," says Longwell. "But I've learned more in the past two years of developing this company than I did in my entire 26 years in the insurance industry."
