Keeping in Tune with the HRO Beat

The general economic tone seems to be all over the musical map. Some are playing pop tunes, others dirges, and many are wobbling about tunelessly. So what is the tenor in HRO? The latest NelsonHall HR Outsourcing Confidence Index – being released this week to our clients and study participants – croons that in HRO we do seem to be on the same playlist, if not singing the same tune, and the general tone is upbeat. Eighty percent of participating HRO service providers reported a slightly to much more confident outlook for the next twelve months, the highest level in the last six quarters.

HRO optimism is bopping along on expectations of peppy pipelines and up-tempo revenues pretty much across the board of service lines, geographies and industries. Reports of pipeline growth continue to rise, with RPO leading the way followed by payroll, multi-process HRO and mobility services. Lagging a bit in pipeline growth are learning and benefits administration, which are expected to remain at current levels. Mobility, which includes relocation services, is still on the dance party sidelines, held back by continued slowness in corporate relocations and market evaluations and financing issues in the real estate market. 

Although declining, reports of frozen prospect and client decision making are still a dragging foot in the pace of signing new deals. While the new deal tempo is a bit of a slow waltz, expectations of growth in revenues are doing a nice quick step. Service providers have several ways to grow revenues, and there is greater new client contract activity – especially in RPO – along with some expansions in scope and services within existing contracts. Interestingly, although learning outsourcing has yet to see a solid pipeline boost, service providers expect their revenues to increase in the learning process. This reflects that, because HRO contracts are heavily priced on volumes, when client activity levels increase, so do revenues on existing business.

There is also some upturn in contract values, with 40 percent of service providers seeing increases in contract values. The level of multi-country contracts remains strong as companies continue to focus on standardizing payroll and other HR processes across geographies and business units, a likely factor helping to increase the average contract value.

We have a long way to return to volumes of old, so this feels more like preparations to return to growth rather than the sustainable breakthrough we all want. Service providers modify their general optimism by putting out one to several quarters before we see the full impact of the upturn.

That said…HRO buyers, feel the beat, start moving and loosen up that frozen decision making. It is time to get back into the dance. HRO service providers, fine tune your footwork, take your current clients and new prospects for a sweep around your fresh and expanded dance floor. They are playing your tune.

Linda Merritt, Research Director, HRO, NelsonHall

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Explore posts in the same categories: benefits administration, benefits administration outsourcing, hr outsourcing, hr outsourcing research, hro, HRO contracts, HRO providers, hro research, learning outsourcing, multi-process hro, nelsonhall, outsourced learning, payroll outsourcing, recruitment process outsourcing, relocation outsourcing, rpo, rpo contracts, RPO providers

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