Archive for the ‘Business Process Outsourcing’ category

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

August 14, 2013
Amy L. Gurchensky, HRO Research Analyst, NelsonHall

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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Highlights and Trends in the HRO Market for H1 2013: Part 1

August 7, 2013
Amy L. Gurchensky, HRO Research Analyst, NelsonHall

Amy L. Gurchensky, HRO Research Analyst, NelsonHall

It’s hard to believe that H1 2013 is complete, which makes it an ideal time to recap highlights and trends from the HRO world this year.

Overall Activity

There was a healthy number of new contracts awarded across all HRO service lines in H1 2013. In addition, renewals and contract extensions signed were consistent with H1 2012. There was, however, an increase in activity with organizations changing their existing service provider, particularly within benefits administration and RPO.

For the last few years, attention has been on the mid-market (500-10k employees), among other things, as an area for growth within HRO. Quarter-over-quarter, mid-market activity has made strides relative to the large market. In fact, in H1 2013, the majority of activity reported was from the mid-market.

Beyond HRO, the number of HR software contracts signed globally was up substantially compared to H1 2012. For example, in the U.S., ADP was awarded a contract for its Vantage HCM platform, including HR, payroll, benefits and onboarding modules, by The Paradies Shops covering 4k employees. In the U.K., Ceridian gained traction with its automatic enrollment module with Asda for 175k employees and WH Smith for 16k employees.

Payroll

Despite being a mature service line, payroll outsourcing does not disappoint. The biggest news reported in H1 2013 would have to be ADP’s acquisition of Payroll S.A., which will expand its LATAM payroll capabilities to Chile, Argentina and Peru. ADP already had in-country services in Brazil, and had capabilities through GlobalView and Streamline to serve multinationals in other LATAM countries.

Other news within payroll includes Acrede opening an office in Singapore to expand its global payroll reach into Asia-Pacific. Growth opportunities in the region include Japan and South Asia-Pacific.

RPO

The RPO market continues to be a hot one to watch. Contracts were awarded in various countries, including the U.S., U.K. and China, and ~20% of contract activity in H1 2013 was from multi-country deals.

The level of M&A activity was consistent with H1 2012, but the level of RPO partnerships has dwindled. Nevertheless, RPO vendors were busy expanding service offerings and delivery capabilities, and launching new websites. Some examples include:

  • Randstad Sourceright launching an RPO integrated assessment program
  • Manpower U.S. launching a multi-channel delivery model
  • Ochre House launching a COE to drive innovation
  • Randstad Sourceright opening a shared services center in Budapest
  • Hays launching a new mobile website
  • AMN Healthcare launching a redesigned website.

Although technically within H2, it is timely to mention the Pinstripe and Ochre House merger.

Learning

After a rather long lull, the learning BPO market has shown many signs of improvement. New contracts include Raytheon and GM Korea for content development and training administration services, and delivery of sales and non-technical training.

GP continued its acquisition frenzy focused on strengthening and expanding its geographic footprint with Prospero Learning Solutions (Canada) and Lorien Engineering Solutions (U.K. and Poland). Not to mention Capita’s acquisition of KnowledgePool.

Stay tuned next week for more highlights and trends from H1 2013 that are specific to benefits administration and MPHRO. I’ll also share some insights on what to expect in H2 2013 based on NelsonHall’s recent HRO Confidence Index survey.

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NGA’s Broadening Offerings

July 24, 2013
Liz Rennie, HRO Research Analyst, NelsonHall

Liz Rennie, HRO Research Analyst, NelsonHall

Last week we attended the Advisor & Analyst Summit with NGA where CEO Adel Al-Saleh presented the highlights for FY2013 (up to 30 April 2013) and described the company as an “IP-led HR services company.” Focus was given to the company’s ability to support global payrolls, whatever the HRIS platform, as NGA supports multiple platforms such as Workday, SuccessFactors, PeopleSoft, Oracle and SAP. Further, NGA announced that BPO agreements are in place with all the above-mentioned technology companies.

NGA serves all size companies and is particularly focused on global enterprise clients. Multi-country BPO HR/payroll is where NGA sees growth. Over the last year NGA experienced flat revenues, the downturn in the consulting was cited as the main reason; however, EBITDA was up by 8.6% to $157m. Workforce administration and global payroll were cited as areas which were experiencing growth. A “sweet-spot” client would be a client who wants its IT to be managed and requires service components for HR administration and/or payroll.

New wins and renewals for FY 2013 were cited as Aer Lingus (Irish HRO client based on ResourceLink), Textron (PeopleSoft renewal), Pirelli (40 countries in scope), State of Texas, McGraw-Hill and Orica.

FY 2014 priorities

  • Evolve the client-centric coverage. This means to increase the reporting and visibility of customer satisfaction to drive this higher
  • Drive the maturity of global delivery capabilities
  • Evolve the transformation consulting services
  • Invest and launch key IP platforms, including:
    – Global payroll
    – Service center tools & utilities
    – euHReka – Preceda – ResourceLink – Moorepay
  • Increase traction of key partnerships:
    – Workday
    – SuccessFactors-SAP
    – Oracle.

NGA already has more than 8 clients utilizing the Workday platform.

NGA presented its Global Delivery Model, which demonstrates the maturity and scale of NGA’s global delivery, including approximately 1.2k employees in Manila, 1k in Kochi, 100 in Dalian, China, 150 in Katowice, Poland, 500 in Granada, Spain and 200 in Buenos Aires, Argentina. These centers have been undergoing a center standardization based on Six Sigma to improve alignment.

NGA’s depth of knowledge is evident in the 8 IP components presented, including its NGA Service Catalogue, Global Statutory Center, ePIM Implementation Methodology, SunEXo (to track payroll status), ScopeHR (to configure scope), Online Reference Guide (for processes and instructions), Global Standard Training and Global Process Framework.

Being an IP-led HR services company, NGA has to clearly articulate the value of the IP to the client and then ensure that the IP roadmap is closely following its client’s needs. Furthermore, increasing technology capability with a broader partner ecosystem could bring further challenges, such as:

  • Finding the right technical solution for a client without confusing them; especially where they are simply asking for a service
  • When the IP becomes less technology centric, NGA could lose some of the depth of knowledge that is already built into the IP.

NGA continues to be a company that is flexible to the needs of its clients. In this current climate companies need agility in HR solutions, services, prices and (now more than ever) technology. NGA offers a global delivery network that is experienced and always hungry for more business.

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Catching Up with ADP

June 20, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

The recent passing of long-term U.S. Senator Frank Lautenberg reminds us of his early role in the formation of what became ADP, a founding member of HR outsourcing. In the early 1950s he was engaged in selling insurance and sold a policy to two young New Jersey businessmen, Henry and Joseph Taub. The Taub’s were pioneering a then new concept; payroll outsourcing. The brothers knew payroll processing and Lautenberg knew sales and marketing. Lautenberg took a risk and joined the Taub brothers and together they created a new industry.

Establish Operating Principles

By the time the company incorporated in 1961 the three leaders established principles that still guide the company some 60 years later. Following are a few of the principles they put in place.

Focus on Business Markets that Offer Significant Growth Opportunities

ADP has always pursued growth through new market opportunities, both by expanding it service lines and by entering new geographies. Much of the early growth was through acquisitions, as well as organic growth. Lautenberg retired as CEO from ADP in 1982 having made over 100 acquisitions!

Over time, ADP became a global player. An early acquisition was GSI, a large payroll and HR services company in Europe. The latest 2013 acquisition is Payroll S.A. to expand LATAM payroll capabilities to Chile, Argentina, and Peru. In the last few years major acquisitions included Workscape (benefits), The RightThing (RPO) and SHPS (benefits).

Embrace Technological Change to Enhance Product and Service Offerings

By the early 1960s ADP had moved from manual operations to the pre-computer punch cards and on to leasing its first computer: an IBM 1401 mainframe. That willingness to continue to embrace the new is seen in ADP’s successful launch of a series of cloud-based SaaS HR technology and BPO service platforms, including Workforce Now (1k-20K employees), Vantage HCM (50-3k employees), and GlobalView for multi-nationals. Together, the three services support more than 40k clients.

The company has also launched extensive mobility options, including RUN powered by ADP for small business mobile payroll and ADP Mobile Solutions for access to a broad range of information and transactions spanning time and attendance to benefits and pay cards.

Attract and Retain Motivated and Talented People

ADP has grown into a $10bn global outsourcing business with one of only four remaining AAA credit ratings in the U.S. With ~570k clients across 125 countries, we know customers support its line-up of services and proprietary developed technologies. What about people? A few recent awards tell the story:

  • Ranked second on Fortune’s 2012 list of America’s Most Admired Companies in Financial Data Service
  • Ranked in the Top 50 on IDG’s Computerworld 2012 list of the 100 Best Places to Work in Information Technology (IT)
  • Named to the 2012 Working Mother 100 Best Companies, for the third time.

We therefore need to ask the question of prospective purchasers: does your prospective or current HRO service provider have long-term guiding principles and can you see evidence of them in action? Because ADP does.

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Targeting Payroll BPO, Part II

April 26, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

There is so much in my colleague Gary Bragar’s NelsonHall Targeting Payroll BPO market analysis that I will cover a few more items this week. The payroll market is divided into three parts: payroll software services; service bureau payroll (also called managed payroll, where the vendor manages payroll production and the client manages data input and employee help desk services); and payroll business process outsourcing (where the end-to-end payroll process is outsourced, including tier 1 and tier 2 employee help desk support).

Payroll BPO market share is growing

Payroll BPO is what NelsonHall follows most of all, and it is a growing part of the overall payroll market. Even as SaaS payroll products become more ubiquitous, many clients will still want support for the whole process. We can see some of the reasons why in the changing pattern of client requirements. As I covered in the first Targeting Payroll blog, cost remains the number one priority. However, other needs have increased in importance over time:

  • Standardization of centralization of processes and technology: Instead of defending customization, now buyers are demanding standardization to increase efficiency and reduce costs from maintaining disparate systems
  • Compliance/risk management: Compliance with ever-more complex and changing regulations and work rules needs the time and attention of fulltime experts. For example, in Europe the complexity of regulations combined with employee populations spread over multiple countries adds to the challenges of compliance
  • Better employee experience: Users want access that is easier and simpler, including 24×7 access to data, self-service, and mobile. Payroll self-service is widely available and has become table stakes. The vendors that deliver the most useful mobile applications, the fastest and with the greatest security, will create valuable market differentiation.
  • Payroll subject matter expertise: Clients expect improved quality of payroll with augmented accuracy, which can lower overpayment and off-cycle payroll runs.

Payroll Cost #1 with a new spin

While cost remains the number-one client requirement, there is a new aspect and it is the same one NelsonHall is seeing in other HRO areas; balancing cost with value. Value for price is especially understood by second- and third-generation buyers who indicate their willingness to change vendors to get it!

Payroll Analytics

It has been my view for some time that the focus on improved payroll processes and systems is driven by more than the need to pay employees timely and accurately. It is also driven by the need to manage the total cost of labor with real-time access to data and analytics for decision-making that leads to improved business performance. Payroll is increasingly being seen as a valuable management strategic tool, and clients will be looking to payroll BPO providers to help them access and develop workforce analytics expertise.

It great to see how dynamic the payroll outsourcing industry has become!

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Targeting Payroll BPO, Part I

April 18, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

The NelsonHall Targeting Payroll BPO report has recently been released by my colleague, Gary Bragar. Payroll is such a well-accepted mainstay of HR outsourcing that it’s nice to see it still showing steady growth year after year.

Gary regularly produces the payroll market analysis, and profiles leading vendors in this space. Over time you can see how what seems like a basic service has grown, evolved and increased in strategic importance. What has not changed is that buyers are looking for savings by outsourcing payroll. The good news is that payroll BPO delivers: first-time payroll outsourcing can save from 15% to +40% depending on the degree of complexity and variables (like the number of locations, with everything from a single location to more than 100 countries).

The full report includes more on what buyers want from payroll outsourcing and what’s key in vendor selection; including where data needs vary between the mid-market and large market. Here are a few highlights of the report:

Why Outsource Payroll?

Cost saving remains the number-one reason to outsource payroll, and several nuances have been added including:

  • Clients want a more variable cost structure and less fixed costs
  • Savings now often include not having to refresh client technology (cost avoidance)
  • Simplifying payroll after a series of M&As or restructurings reduces cost
  • Reduction in payroll losses from ineligible and overpayments.

Centralization and standardization of process and technology has increased in importance, similar to what has been seen in other HRO areas. Where clients used to want customization, many are now seeing the benefits of standardization to improve efficiency, reduce cost, and to increase timely access to accurate payroll data across the enterprise.

With constantly-changing regulations and taxation across multiple jurisdictions, accuracy, compliance and risk management remain core payroll benefits.

Multi-Country Payroll

For MNCs, multi-country payroll remains a sought-after capability. MNCs want one vendor, one contract, and one payroll platform. Also wanted is visibility to aggregated costs and data reporting, in addition to the flexibility and scalability to add or change geographies.

Payroll BPO vendors have responded to the blended needs of clients for cost savings and global coverage by:

  • Increasing nearshore and offshore service centers
  • Partnering for coverage in some countries
  • Offering multiple technology platforms from SaaS to ERPs.

Pricing Pressure

Given the focus on cost reduction, pricing pressure should be no surprise. This is a market with many mature and capable suppliers, which in itself adds competitive pricing pressure and the need for differentiation to focus on value as well as cost.

As an indicator of payroll service provider capabilities to compete, I earlier mentioned the steady year-over-year revenue growth. That growth has been achieved at the same time as the average price per-payslip has fallen significantly over the last three years!

There is so much more in the Targeting Payroll BPO market analysis, look for more highlights in a future blog.

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Onward and Upward for HRO in 2013

January 7, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Each year, the NelsonHall HRO team is asked by HRO Today to make predictions for the year ahead. Here is a summary of our featured article, Onward and Upward to kick off our 2013 blog series.

HRO is reaching maturity

There is a growing level of acceptance with less perceived risk in making the HRO decision; value is balancing the focus on cost, and pent-up technology needs will be opening the door to new service provider opportunities.

  • Value and cost are reaching parity for many buyers that want agile new HR capabilities that produce results, including the ability to measure and manage HR issues across the enterprise as well as improve the employee experience
  • The need for core HRMS upgrades and new technology should reach the point of increased budgeted spend; be ready to discuss whether upgraded and bolt-on additions versus a new core HRMS is the better path for increasing business impact and the total cost of ownership.

Breakthrough HR technology for 2013: cloud-based SaaS

Major technology costs will open the door wider for SaaS. As SaaS offerings move “up-stack,” the ecosystem for SaaS support will continue to develop in 2013 via consulting, implementations, integrations, BPO, etc.

  • SaaS HRMS adoption will continue to move fastest for mid-market organizations
  • Expect little large market HR ERP near-term erosion from SaaS HRMS; but cloud-based SaaS HR platforms are disruptive technologies that will quickly move up the value chain and be able to serve larger and more complex organizations
  • Total cost analysis, not just system costs, will be important in the adoption of SaaS HRMS in larger organizations; over time, the ERP per user pricing advantage will disappear, especially if evidence continues to mount of better performance and lower overall costs.

Emerging HR technologies: social media and HR analytics

There is increased interest in how to deploy the newer tools strategically. Look for adoption to slowly build as clients need a certain level of maturity in systems, services, and vision to create real value with the newer HR technologies.

The word for 2013: convergence

It may be a bit early to pick a HRO word of the year, but I think convergence will be a good candidate to cover changing client needs and new and emerging technologies.

Where, when, and how do we bring together the old and the new to create new synergistic capabilities? What can we do with a fully-integrated HRMS with HR analytics? How can we change the delivery of services with strategically deployed social media? Can we bring new magic to the employee experience with mobility and social tools?

As choices increase and grow more complex, confusion and inaction may result. With clear purpose, planning, and great advice and counsel the opportunity is before us all to create a real breakthrough year for HR and HRO in 2013.

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