The Forecast for Recruitment Process Outsourcing (RPO): Peeping Above the Parapet?

Welcome to NelsonHall’s new HRO blog! Auspicious timing, as I spent several days last week at the 7th annual HRO World conference presenting on and speaking with a wide range of people about all things RPO.

So, given three (and now into the fourth) quarters of rip tide turbulence, will RPO stay afloat?

RPO’s Current State              

External hiring has been significantly reduced in the past three quarters due to budget cutbacks, in turn impacting provider revenues. But RPO providers have been weathering the storm in a number of ways including:

  • Increasing focus on internal hiring, despite lower revenue gains. According to the results of NelsonHall’s new RPO market analysis, to be published in mid-May, 92 percent of providers today are providing internal staffing (i.e., internal mobility) as compared to just 53 percent in 2007
  • Expanding contract scope to include new geographies, particularly in emerging economies in Asia Pacific
  • Developing and offering value-added services including talent planning, employment branding, employee engagement, employee retention and outplacement services. While clients still have a limited appetite for discretionary services in general, those such as employee engagement and outplacement are exhibiting significant demand

Low Single Digit Growth Expected in 2009

While these attempts at stemming the low tide are helping, our research predicts RPO revenue will grow at only low single digit rates in 2009. This is quite low growth in comparison to the 20 percent CAGR experienced in the RPO industry from 2006 to 2008. But most RPO providers will be satisfied with these low growth rates as the staffing industry (non-RPO) has seen significantly declining revenue in recent quarters, in some cases as low as negative 25 percent.

One of the keys to taking advantage of this delicate market is increased contractual flexibility. Clients are demanding scalability and a move from fixed to variable costs to guard against being sunk with fixed costs should the economy take a further turn for the worse, and vendors will need to address these concerns while the market retains its present nervousness.

All in all, RPO hasn’t seen the brightest weather in recent months, but expect the tide to turn in the second half of 2009 and smoother sailing in 2010 and beyond. Though the RPO market in Europe remains depressed, there are some early signs that the RPO market in North America has bottomed out and is now starting to stabilize. Overall, we expect to see significant market growth by the second quarter of 2010.

Gary Bragar, Lead HRO Analyst, NelsonHall

BTW – HRO Insights blog postings will rotate between me and my colleague Helen Neale, so keep an eye out for our evidence-based insights! Topics will include the benefits administration market, emerging economies HRO, changes in HRO contract scope and many more.

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2 Comments on “The Forecast for Recruitment Process Outsourcing (RPO): Peeping Above the Parapet?”

  1. Susan McGuire Says:

    Love it! Keep the HRBPO insight coming!

    Susan McGuire
    National Recruitment Leader
    Telus Sourcing Solutions Inc.

  2. gbragar Says:

    Thanks and glad your enjoying our blog. Look for future editions to include such RPO topics as employment branding, SLA’s and provide a preview to my recent RPO research to be published mid May. Ideas for future topics are welcome and we’ll try to accommodate if possible. Kind regards, Gary


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