Highlights and Trends in the HRO Market for H1 2013: Part 2

Amy L. Gurchensky, HRO Research Analyst, NelsonHall

Last week, I zeroed in on specific market activity within the payroll, learning and RPO service lines. This week, I’ll take a closer look at H1 2013 activity within benefits administration and MPHRO as well as provide some insights on what to expect in H2 2013 based on NelsonHall’s recent HRO Confidence Index.

Benefits Administration

Contract signings aside, there has been a plethora of activity within benefits administration in H1 2013, including:

• New offerings:
  • Mercer launched a private benefits exchange, Mercer Marketplace
  • Buck Consultants launched an automatic enrollment offering in the U.K.
  • Secova launched a Coordination of Benefits (COB) audit offering to coordinate benefits with insurance carriers
• Acquisitions: Wageworks acquired Crosby Benefit Systems and Benefit Concepts to strengthen its H&W administration offering, including reimbursement account and COBRA administration
• Partnerships:
  • Fidelity partnered with Extend Health, a Towers Watson company, to provide retiree healthcare services
  • JLT Employee Benefits partnered with Vielife for health and wellbeing services in the U.K.
• New technologies:
  • Xerox launched an account-based benefits portal, BenefitWallet, to assist with managing multiple health accounts on one platform, including HSAs, HRAs, FSAs, HIAs (health/wellness incentive accounts) and other specialized services
  • Aon Hewitt launched an absence management tool, 360 Absence Solutions, to help clients manage absence-related costs, compliance risks, the administrative burden and lost productivity
• Educational resources:
  • Mercer and ADP both launched websites to provide information on healthcare reform
  • Ceridian launched an auto-enrollment knowledge center in the U.K.

MPHRO

In recent years, the MPHRO market has been relatively quiet in terms of contract announcements and H1 2013 was no exception. However, my last MPHRO research study, published in February 2013, revealed that the market is very much alive with new wins and contract renewals from all the major vendors, including IBM and Accenture. In fact, IBM recently won a new seven-year, multi-country MPHRO contract, which was bundled with F&A outsourcing services. Other wins include ADP and Marriott Vacations Worldwide for core HR, payroll, time & labor management and talent management covering ~9.2k employees.

Many vendors have been focused on their strategies for expansion, including Aon Hewitt with its acquisition of OmniPoint Workday Services. Although still early, NelsonHall expects ADP to make inroads in LATAM with its MPHRO services since it added RPO capabilities in this region from its acquisition of The RightThing and now expands its payroll footprint from the Payroll S.A. acquisition.

H2 2013

So what does the rest of the year have in store? NelsonHall’s recent HRO Confidence Index survey finds that overall expectations for HRO revenue growth remain at the same level as those reported for the last five quarters; with payroll leading followed by RPO. Top industry sectors for HRO services include healthcare, pharmaceuticals and high-tech. By geography, vendors have reported increased confidence for revenue growth in Central and Eastern Europe and Central and Latin America.

Needless to say, it will be interesting to see how the rest of the year unfolds for HRO.

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Accenture and Unilever Renew Major MPHRO Contract for Five More Years

Linda Merritt, HRO Research Analyst, NelsonHall

Let’s wrap-up 2012 on a high note for HR BPO with news of Accenture’s award of a 5-year multi-process HRO (MPHRO) contract renewal from Unilever. When orginally announced in 2006, the 7-year contract was the single largest HRO deal signed with an estimated value of $1bn.

First Generation HRO

The focus of the first generation Unilever contract was largely on cost reduction (20% – 30%) and creation of a unfied global HR operating environment of systems and services across 100 countries and 20 languages. Unilver had already begun the tranformation process by introducing shared service centers in key areas to capture some of the early gains on its own as part of its One Unilever program to reduce the cost of back-office services including HR, F&A, and IT. It then moved to HRO to make further progress in efficiency, cost, and to gain a single source of the truth in reporting and mearsurement capabilities.

Second Generation HRO

Accenture will continue to support ~130,000 Unilever employees operating in more than 100 countries through its global delivery network including multiple centers across the U.S., Europe, and Asia Pacific. MPHRO services include:

• Core HR administration
• Payroll administration
• Recruitment
• Learning services covering content sourcing and development, program planning and delivery, and learning system hosting
• Management and administrative services.

As is common with renewals, there are some expansions of scope and a greater focus on improvements, in addtion to a desire for further cost reducing efficencies.

Accenture will be introducing service improvements to drive greater efficiencies and improve the user experience and align the services it delivers with Unilever’s Talent Agenda. New elements include:

• Introducing a more proactive recruiting approach, including the expanded use of social media (Accenture itself has been using LinkedIn and Twitter to recruit staff for a few years now)
• Expanding the scope of the learning services delivered by Accenture to include professional skill-building modules in the curriculum to support Unilever’s focus on developing future leaders; learning programs will make greater use of virtual instructor-led training (VILT), which is in line with Unilever’s sustainability agenda
• Evolving in performance metrics to go beyond traditional operational SLAs to include metrics focused on the client’s desired business outcomes.

It is a good quarter when you can announce a major MPHRO deal, whether it’s new or a renewal. For FY Q1 2013, Accenture’s revenues were $7.2bn, up 5% in local currencies; EPS were up 10% to $1.06; and operating income was up 7% to $1.05bn. Outsourcing brought in $3.26bn in revenues, and $3.3bn in new bookings. A good quarter indeed!

Happy holidays from the NelsonHall HRO team: Gary Bragar, Amy Gurchensky, and Linda Merritt.

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