HRO Gets Real in 2012

HRO is very much at the beneficence and the mercy of the economy. With slow expectations for recovery continuing into 2012, HRO vendors are moderating their expectations. As the threat of a double-dip recession slowly lessens in the U.S., concerns about the next presidential election increases and worries over the European economy remain high. With a mixed bag of economic indicators, the NelsonHall Confidence Index has lowered to 147 from a peak of 170 in Q1 2010, with unchanged expectations representing 100. Although the Confidence Index is slightly down, 147 is still positive for growth. It is the expectations for high growth over the next 12 months that have changed the most, dropping to 33% from 54% of surveyed vendors. Moderate growth expectations increased to 43%, up from 32% in the prior year quarter.

The anticipation of continued growth is based on the experience of 2011 contract growth and expansion in renewals and existing contracts, where service providers have seen the addition of geographies and new processes. At the same time, there has been no change in the perennial barriers of frozen decision making and unrealistic buyer expectations for pricing and savings.

A sign of the times is that payroll services (4.1 out of 5.0) replaced RPO as the strongest individual HR outsourcing service line in Q3 2011. Multi-process HR outsourcing (MPHRO) activity strengthened to 3.9.  This is great to see given that some organizations have been scared of adopting large-scale MPHRO services due to fears of the associated timescales and investments. Vendor MPHRO capability is once again maturing beyond employee administration and payroll services. Organizations are being asked to add in greater support for a wider range of HR functions; prompted by the strengthening need to achieve maximum cost savings in G&A functions as the economic situation threatens to worsen.

Expectations for RPO 2012 service line growth dropped to second place with a still very strong 4.0, with payroll remaining in the lead at 4.2. MPHRO comes at 4.0, showing continued strength for the latest generation of standardized processes starting out with initially smaller scale and scope. Look for buyer interest in multi-country and regional standardized and platform services to continue for payroll, RPO and MPHRO. North America and the U.K. will remain the target for modest growth in benefits administration at 3.5. Good news, despite a small drop in pipeline activity for learning (3.4), all service lines are healthy and are showing a reasonable amount of activity.

Will there be continued economic and political uncertainty? Sure. The good news is that HRO deals can and are being done when the basics of demonstrating both proven business value and cost justified efficiency are clear. So let’s get real and get on with the business of life and business – and have a Happy New Year!

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

Advertisements
Explore posts in the same categories: hr outsourcing, hr outsourcing research, hro, HRO Confidence Index, hro research, multi-process hro, nelsonhall, payroll outsourcing, recruitment process outsourcing

Tags: , , , , , , , , , , , ,

You can comment below, or link to this permanent URL from your own site.

One Comment on “HRO Gets Real in 2012”

  1. RPO UK Says:

    Thank you so much for all the green information and the info on the Employment Services. It is a lot to think about.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s