Talent2’s Competitive Edge

Linda Merritt, HRO Research Analyst, NelsonHall

The NelsonHall HRO team recently spoke with Mary-Sue Rogers, Talent2’s global general manager for HR managed services, for an update on the major Asia-Pacific, pan-regional HRO service provider with ~2.6k clients across 30 countries. Its client base includes companies of all sizes in both the private and public sectors. The company had a busy fiscal Q4 2013 winning more than 60 contract awards across its service lines, including payroll, RPO, learning and HR advisory services.

The Asia-Pacific HRO Market is Competitive

Asia-Pacific is a huge and diverse region with many of the individual nations still considered “emerging markets,” with opportunities for long-term growth. Talent2’s in-region competitors are largely global HRO providers, some span all service lines and others go head-to-head-on a single service like RPO.

So how does a ten-year-young company compete with many of the biggest names in HRO? Its competitors also have in-region locations but find it hard to match Talent2’s 40+ HRO-dedicated locations supporting 31 languages in 16 Asia-Pacific countries, including parts of the Middle East. In May 2013, Talent2 further expanded its operations in support of the Asia-Pacific region by opening a service delivery center in the Philippines.

Succeed With a HRO Competitive Edge

It is a core part of providing multi-country services to offer local subject-matter expertise on employment rules, regulations, taxation and compliance reporting, and all of the competitors can provide such services directly or through vetted local partners.

Talent2 demonstrates deep knowledge of local regulations as well as cultural and business environments. It knows the nuances that others may miss, which can help develop a service offer that is right on the mark for design and cost. For example, in the first instance, Talent2 addresses the following questions:

• What style of payroll service center support is preferred by employees in different areas of its region?
• What are the differences in an MNC headquartered in the West versus one headquartered in the target region?

As a result, 50% of its clients use multi-country services led by payroll and followed by RPO. Some start with one targeted country and add more over time.

Quality services and competitive pricing, along with its deep knowledge, provides a winning combination for Talent2, achieving a NelsonHall estimated ~10% growth in FY 2013.

Then Change to Remain Competitive

Talent2, which became a private company in 2012, is working its way through its stated development roadmap. The multi-pronged plan is focused on upgrading and rationalizing its technology platform to meet current and future client needs and going environmentally green to control internal costs and lower the total cost of ownership for its clients.

HR services are changing rapidly all over the world, as are client needs and interests, and no service provider can long rest on its laurels. Therefore, the question arises: does your HRO service provider’s competitive edge match your needs today, and will it tomorrow?

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IBM & Air Canada: Proof that Traditional MPHRO Contracts Are Not Endangered

Before blogging about other current events such as ADP’s recent acquisition of The RightThing, one final announcement from HR Tech to address further is IBM’s contract win with Air Canada.

Air Canada was an early participant for outsourcing HR services as part of its business practice. In early 2004, it awarded a 7-year multi-process HR outsourcing (MPHRO) services contract to Exult, which was acquired by Hewitt a few months later. Hewitt, and then “Aon Hewitt” since its acquisition, provided Air Canada’s ~36k employees with workforce admin, payroll, benefits admin, recruiting, and learning admin services, a very “traditional” MPHRO contract at the time.

In addition, Air Canada awarded NorthgateArinso with a 5-year contract for managed payroll services in the U.K. in late 2010.  Then it decided to shake things up by opening up its MPHRO contract for competition. Key to winning the contract would be a provider that would continue to drive innovative transformation and ensure lower costs.

Last week, it became clear that IBM was the provider that Air Canada was looking for when it signed a ~8 year MPHRO contract for Air Canada’s North American employees and retirees.  Services include HR contact center, employee data management, employee travel support, payroll, benefits admin, leave management, recruiting services with support from Manpower, and software application support for the HR systems used to provide the services.  This recently announced contract is proof that traditional MPHRO contracts are not endangered.

Several weeks ago, I discussed the four market segments of MPHRO that exist in the market.  Among the emerging segments such as “multi-country standardization” was the “client-specific shared service / transformation” group, which represents many of the traditional, transformative deals that occurred in the early to mid 2000’s such as Hewitt’s contract with Air Canada.  Although growth for this segment isn’t expected to be quite as high as the other emerging segments, it is still expected to increase modestly through 2015 contrary to popular belief.

IBM and Aon Hewitt are both leaders within MPHRO.  Within the shared service transformation segment, Aon Hewitt is ranked first in terms of revenue with nearly ~19% market share; IBM is ranked second with ~14% market share.  Aon Hewitt is also doing its part to keep this segment alive; earlier this year it signed a MPHRO contract of significant size with an unnamed financial services organization.

While all the focus lately is on the newer species of MPHRO contracts, specifically the multi-country standardization contracts, the four existing segments can and will continue to co-exist in the larger ecosystem.

If you’re a MPHRO provider focused on the shared service transformation market segment be sure to tout your contract awards and renewals, so everyone knows that this segment is alive and well.  We love to share the good news!

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

 

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Let’s Not Forget About Learning

According to a survey by KnowledgePool, a U.K.-based managed learning services provider, 70% of internal client learning and development (L&D) organizations are too busy doing daily fire-fighting to focus on strategic talent and learning issues in their company. Out of 104 L&D managers, 69% say their training department does not have enough resources and 42% say that training receives inadequate support from senior managers. Yet 80% of L&D managers said they could improve their organization’s training ROI; 77% think new opportunities for improvement could be identified through rigorous analysis of their training spend and evaluation data; and 75% say improvements could be made by using more informal and on-the-job learning methods.

Sound like an opportunity for outsourcing? You bet!  The good news from NelsonHall’s most recent quarterly HR Outsourcing Confidence Index is that learning services, which has been the last of the HR outsourcing service lines to recover, is expected to continue to strengthen as the year progresses. Following several strong quarters of growth within RPO, the need is now shifting toward implementing and optimizing learning programs. Good news in learning since the beginning of Q2 includes:

• Genpact winning a content development contract by JobSkills in India
• Raytheon Professional Services winning a contract to develop an e-training program for NATO
• CIBER’s Federal division winning a 5-year training development contract with a potential value of $30.7m by the Center for Strategic Leadership, an institute of the U.S. Army War College
• Accenture winning an e-learning contract with a major bank that may later add classroom ILT
• General Physics winning $3m in 5 new contracts from energy companies across Africa, the Middle East, South America, and Asia
• Edvantage group winning a safety e-learning contract by Yara International, providing 7 interactive e-learning courses for 3,000 technicians, operators, engineers, and supervisors at 30 plants across 17 countries.

In NelsonHall’s last learning BPO report, top drivers of why companies are outsourcing learning, which support KnowledgePool’s findings, include:

1.        Lowering costs (average client savings of 26%)
2.        Increasing training effectiveness and ROI
3.        Improving the quality of learning for employees
4.        Accessing experts in the industry whose core competency is                       learning
5.        Flexible services, aligning learning with the customer’s                                 strategic objectives
6.        Focusing on strategic work, not transactional activities.

Look for increased learning outsourcing to continue the remainder of 2011, including by the likes of IBM who continue to see increased demand globally. In 2012, I think learning outsourcing will really soar. Although uncertainty in the economy continues to cause delayed decision-making, there is no doubt in my mind that we will see a boost in learning as companies unanimously agree talent management is more important than ever. To improve and engage talent, you have to invest in your people. There is only so long you can just say the words, eventually you have to walk the talk!

Gary Bragar,  HR Outsourcing Research Director, NelsonHall