Posted tagged ‘benefits administration’

HRO Inflection Points

June 28, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Everywhere around us inflection points are occurring. Inflection points are a sign that change is occurring that will create a new order of things. Whether we see them, understand their long-term implications, and leverage them to our advantage is another issue.

Social Inflection Points Impact HRO

Today the U.S. Supreme Court ruled on two issues impacting marriage law that will change who is entitled to marriage-related federal benefits.

Major social change invariably impacts HR and HRO services, and the marriage law rulings by the U.S. Supreme Court will have wide-ranging implications for workplace benefit plans in at least 12 states.

The long-term implications may take many years to become clear, but leveraging in the short term has already begun. ADP was the first HRO vendor I saw tweet about the court’s ruling by announcing an upcoming webinar on the changes to the Defense of Marriage Act (DOMA). Mercer quickly followed with a ‘benefits administration alert’ letter.

Technology Inflection Points Impact HRO

As a disruptive technology, SaaS has started a global “cloud war” that is only just beginning. HR and HRO are just a small piece of the IT landscape and we will see skirmishes as new entrants and long-term leaders battle for market share, industry leadership and shareholder value as they transform not only technology offerings, but revenue streams and business models.

Oracle’s Larry Ellison has been in the news for the last two weeks reporting on earnings that were already impacted by SaaS and the cloud war. Here was one of the industry’s titans comparing Oracle’s SaaS revenues (annualized at ~$1bn) to comparable revenues posted by perennial competitor SAP and upstart Workday!

Upgrade or rip-and-replace decisions are becoming imminent for HR clients and HRO services providers. Many vendors, including Ceridian, Mercer and Talent2, are already developing integrated service platforms and more cloud offerings for organizations of all sizes.

Client Inflection Points Impact HRO

To identify current trends in HRO customer requirements I reviewed current (2013) sources, including NelsonHall’s Targeting Payroll BPO market analysis and HR Outsourcing Confidence Index, and also HRO vendor discussions. Further, I reviewed a research survey by Mandy Sim, a University Teaching Fellow with the Business School at the University of Nottingham Malaysia Campus, entitled the HRO Adoption Survey Report 2012, which identified key Asia-Pacific HRO practices based on a survey conducted on delegates who attended the HRO Today Forum APAC 2012.

Following are my findings on what today’s HRO clients, across service lines and geographies, are wanting from prospective vendors:

  • Value for price, balancing cost with improved outcomes and business impact
  • Standardization of processes and technologies
  • Advanced subject-matter expertise and best practices
  • Scalability across services and geographies
  • Access to new tools, technologies and services.

Ready or not, change is coming to HRO. Are you ready for how will it impact you and your organization?

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HRO Déjà Vu

April 11, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Each quarter, we publish the NelsonHall HR Outsourcing Confidence Index (HROCI) for our clients and the participating service providers. I like to share some of the highlights in my blog, but it can be hard to make fresh insights during times when the results are stable from quarter to quarter. When the confidence ratings are generally strong, as they are, then stability is pretty good news for HRO service providers.

Overall Confidence Remains Stable

The most recent HROCI shows a vendor confidence level of 157 for Q1 2013, where 100 represents unchanged confidence and higher scores indicate increased confidence. That is in line with the 156 from Q4 2012 and a bit up from the 153 one year ago. Confidence dipped mid-2012 with Q2 at 138 and Q3 at 140, which was not too surprising given the political and economic uncertainty we saw last year:

  • While the overall confidence score at 157 remains stable, those suppliers reporting slightly more or much more confidence increased 13% quarter over quarter
  • Increased confidence is reflective of solid pipelines of potential new sales and expectations for growth.

Growth Expectations Vary

Service lines: HR business process outsourcing service lines do not grow at the same rate. Some services like RPO and payroll remain steady performers, followed closely by benefits administration. The pipeline for benefits administration is looking especially strong. Expectations for multi-process HRO and learning remain about the same, which indicates continued slow growth.

Geography: Location matters in HRO and the patterns of growth also vary by region. The economic recovery is uneven in pace, readiness for HRO is uneven, and multi-country deals are a smaller part of the mix than in the recent past.

Overall, vendor confidence by geography has weakened with many regions showing some decline in confidence. North America, Asia Pacific, and Latin America show the strongest numbers, but there can be significant variation country by country. As we have seen for some time, growth expectations for Europe and the Middle East remain dampened.

Industry: High-tech and retail look to be the optimistic growth industries with most sectors remaining within prior modest expectations for growth. Expectations remain low for federal government and defense.

Mostly Steady and Stable Ahead

It is good to see the balancing of demand for cost savings and process standardization continuing. Client pricing expectations may still be unrealistic as there are always those who want a quick 50% off along with some freebies thrown in at the same time.

One area to watch is the growing client interest in and adoption of platform-based services. Some buyers are specifying SaaS and cloud-based services in proposals. We need to help educate buyers on leaving some room for discovering the best solution fit for each client situation.

To end on a positive note, 79% of HRO suppliers believe that a net up-turn in decision-making is taking place. Let’s get out there and get those deals signed!

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Ceridian Has a Whole New Feeling

February 14, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Ceridian just held its annual sales kick-off meeting and according to Jayson Saba, vice president of marketing strategy and analyst relations, there was “a whole new feeling of excitement.”

Ceridian Made a Big Bet

Ceridian is a mature service provider having been in payroll and HR services since 1932. So, what is causing such excitement in 2013? The answer is Dayforce HCM.

Ceridian began partnering with Dayforce in 2010, which soon led to investing in the company, and then to purchasing the company in early 2012 and forming a new business unit, Dayforce, led by David Ossip, Dayforce’s CEO.

This was a major strategic bet on SaaS as the new direction for a large portion of an already successful company with an estimated $1.5bn in revenues. How big a bet? Well, in late 2012, Ceridian made the decision to realign its sales and marketing efforts behind Dayforce HCM in North America, the company’s largest customer and revenue base!

The company will continue to support clients on its current systems and will not force migration. In fact, it will continue to invest in adding more features and functionality in key areas. Its other service lines will also continue including international payroll, benefits administration, EAP, and stored value solutions (electronic cards with preset or refillable financial value).

Dayforce HCM is a Party of One

Dayforce is a cloud-based platform built as a single application with one record, one rules engine, and zero interfaces. Real SaaS can eliminate the need to enter data in multiple systems, manage complex interfaces, and confusion about who to call when multiple vendors are involved, and it provides easier implementations.

Dayforce HCM includes:

  • Payroll and tax: view, edit, fix, and preview payroll in real-time
  • Workforce management: plan, schedule, and forecast labor requirements, and time tracking and compliance
  • Benefits: manage enrollment, calculate eligibility, and support an unlimited number of benefit plan types
  • Human resources: forms and workflows for managers and employees to manage work and life events
  • Mobile: access, manage, and change schedules and other aspects of employee records including shift trading, availability, and time-off requests.

The system can scale for small, mid, and large market clients with a sweet spot in the 1,000 to 10,000 range. Ceridian already has several deployments of 15- to 30,000+ employees. Major retail clients include Aéropostale, Pier 1, and Crate & Barrel.

With a Clear Roadmap for the Future

The new system already has hundreds of clients and is available in the U.S. and Canada, and NelsonHall predicts that it will soon be expanded to the U.K. as well. We estimate Dayforce will become  the HR system of record for all of Ceridian’s HCM customers including managed and international payroll services and eventually become a global HRIS offering.

Ceridian is also working on new additions for talent management (performance management, compensation, and recruiting) and other social media features.

Nothing Succeeds Like Success

Imagine the excitement when your new system far exceeds expectations, wins awards, and delights customers. No wonder a good time was had at Ceridian’s annual sales conference!

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HRO Will Drive Ahead in 2013

January 25, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

With more organizations making the decision to use HR business process outsourcing services, even in the face of a still uncertain economic environment, the overall confidence of HR outsourcing suppliers in the market over the next 12-months is at its highest level in six quarters according to the latest NelsonHall HRO Confidence Index (HROCI).The HRO vendor confidence level is up 6% year-over-year reaching 155.5, where 100 represents unchanged confidence and higher scores indicate increased confidence.

Drivers Outweigh Inhibitors

The impact of the wider economy is strengthening the drivers for HR outsourcing which appear to be outweighing its impact on the associated inhibitors such as unrealistic pricing expectations and frozen decision-making. Currently, 89% of HR outsourcing suppliers believe that a net up-turn in HRO decision-making is taking place, with just 7% of suppliers perceiving that a net down-turn in HRO decision-making is taking place.

The top principal drivers for HR outsourcing include:

  • Increased cost reduction
  • Greater process consistency across business units and geographies
  • Organizations looking for an increased transformational emphasis.

New private sector HRO deals typically remain limited in initial size, and significant growth opportunities continue to come from existing clients in the form of added scale or scope. In line with the “increased focus on cost reduction driven by the worsening economic climate,” organizations are finally showing an increased interest in evaluating outsourcing opportunities previously rejected.

Transformation Beyond Cost Arbitrage

The HROCI supports our 2013 trends with “a clear ‘transformation’ agenda” and a focus on value. Clients are looking to vendors to help them:

  • Deliver a more empowered employee experience and access to learning using technology to administer, deliver, and share learning
  • Manage business outcomes by driving higher employee engagement including a better end-user experience and continual “future-thinking”
  • Achieve solid productivity and accelerate time to competency.

2013 Outlook

HRO vendor expectations for 2013 look best for payroll, then MPHRO which looks solid, followed by RPO, benefits administration, and then learning services. Multi-country deals for payroll and RPO will again be common with the average number of included countries around 20.  Of little surprise is that expectations for the government sector have slightly worsened, particularly for defense and state & local government.

Have You Listened

Another NelsonHall product of interest is the BPO Index which is supported by a quarterly conference call open to all who register.

According to the January Index, total BPO contract value was down significantly for 2012, especially in North America and Europe. The global economy and the U.S. fiscal cliff added to business growth uncertainty, which drove down industry-specific BPO the most.

At the same time, back-office BPO, which includes HRO, was up 25%, and HRO was up significantly year-over-year.

If you can lower total cost, improve performance, and increase business value, you can get an HRO deal!

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In Times of Crisis, HRO Has Your Back: Part 1

November 8, 2012

Linda Merritt, HRO Research Analyst, NelsonHall

Whether it is a hurricane, typhoon, blizzard, earthquake, or flood, the weather can create a crisis for businesses, customers, employees, public organizations, and service providers alike anywhere around the world.

The latest natural disaster in the U.S. is Superstorm Sandy and it has severely impacted millions of people across several states. Early estimates are upwards of $50bn in damages. The cost assessment does not begin to account for the loss of life, loss of a family’s home and personal belongings, or the impact on small and large businesses in the area. Our hearts and prayers go out to all of those impacted.

I reached out to several HRO vendors including Aon Hewitt, Mercer, NorthgateArinso, and Xerox on how they support clients in times of emergencies and how they ensure services are provided when they are also impacted.

Be Prepared and Proactive

Some disasters, like hurricanes, allow time for specific contingency planning in addition to the established business continuity protocols. One of those preparations is to consider the HR service cycle and what is occurring during the impending crisis.

For vendors providing benefits administration services, Sandy was heading into heavily populated business centers during annual benefits enrollment. Examples of actions taken included:

  • Contacting clients: Jocelyn Purtell, U.S. Operations Leader for Mercer, said they began pre-storm planning the Friday before hurricane Sandy made landfall. Mercer considered the impact on its clients and whether the storm would hit its client service center in the Boston area. They then reached out to the clients most likely to be impacted to let them know their plans and preparations.
  • Extending open enrollment periods: Aon Hewitt, Mercer, and Xerox all collaborated with clients on extending the annual enrollment period. One client wanted to quietly allow an extended “correction period,” others extended open enrollment and asked for assistance in communicating with employees to get the word out. Pat Quenan, Aon Hewitt Practice Leadership V.P., reported that 40% of its benefits administration clients extended open enrollment.
  • Amending policies or standard practice: Mercer has been able to make suggestions to clients on how to handle crisis exceptions (e.g., what to do if a short-term disability is in process or ready to expire; how to handle commuter benefits in urban areas affected like New York City; etc.).
  • Providing information: Aon Hewitt knows that retirees may be concerned about any delays to pension check delivery and provided information on its voice response system and website about possible delays in mail delivery by zip code. 

Asking about business continuity and disaster recovery is standard practice in an RFP, and it is important to know a HRO service provider’s capabilities. The reality is something more and is embedded in the strength of client-vendor relationships and culture that values dedicated customer service.

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HR Tech Another Success: Part 2

October 17, 2012

Gary Bragar, HRO Research Director, NelsonHall

In my blog earlier this week, I wrote about highlights from the new Outsourcing Track at HR Tech as well as the RPO meetings I attended. In related news, my fourth global RPO market analysis report was published on Monday.

In addition to walking through the exhibit hall and attending technology demonstrations, my additional meetings at HR Tech included:

  • Patersons: Its 2012 revenue growth is 70% YTD, driven by multi-country payroll. Safeguard World International has also reported similar success due to high growth for multi-country payroll services according to a business update two weeks ago.
  • IBM: The company is experiencing increased demand for its RPO and learning services and many of its key learning clients have renewed in 2012. New learning contracts include one in South Africa and pipeline activity includes a large global bank. The Kenexa acquisition will bring in new RPO and talent management opportunities that IBM will enhance with its social and analytics capabilities.
  • Hogan Assessments and SHL Assessments: Both companies provide personality assessments to predict work performance. SHL has also issued a talent management report with key findings showing that Eastern Europe ranks 1st in supplying IT and essential business skills; the U.S. ranks 23rd.
  • Secova: The benefits administration provider offers online enrollment, a 24/7 call center, eligibility verification, billing management, and leave management services that are delivered from their ISO/IEC 27001:2005 certified platforms. Services are provided from California, New Jersey, and Chennai.
  • Equifax Workforce Solutions: This was formerly operating as TALX, which rebranded as a result of its increased emphasis on the provision of workforce analytics and business intelligence to help clients improve their company’s performance.
  • HireVue: Offers a Digital Interview Platform that saves time, travel, and costs by allowing clients to create online interview guides with scientifically proven questions. Candidates then record answers via a webcam, which recruiting and hiring managers then view on demand, including from smart phones, to build digital talent pools.
  • JobVite: Provides a modular SaaS-based recruiting platform for applicant tracking, recruiter CRM, and sourcing talent.

Highlights from ADP include having ~30,000 clients for its cloud-based HCM platforms including:

  • ADP Workforce Now: Launched in October 2009, it supports clients with 50 – 1,000 employees. The majority of its 20k+ clients purchase the broader HCM suite.
  • ADP Vantage HCM:Piloted in October 2011 with general availability launched in June 2012, this platform, which targets employers with >1,000 employees, already has >30 clients. ADP has been adding ~5 – 6 new clients a month with a high percentage buying talent management, benefits (H&W), and time & attendance in addition to payroll. New wins include:
    • A national restaurant chain with ~24,000 employees
    • An employee healthcare staffing company with 15,000 employees
    • A retail chain with 4,500 employees.
  • ADP GlobalView: It now includes ADP Talent Management globally and has won several major clients including an electronics manufacturer with 85,000 employees in 29 countries including the Americas, EMEA, and APAC, which recently added the compensation module.
  • ADP Talent Management: It provides recruiting, performance, learning, compensation, and succession in 14 languages and 80 currencies for ~4,000 clients.
  • ADP Mobile Solutions: Deployed globally and offered in 12 languages, the app has ~30,000 clients and ~450,000 users.

See you all next year at HR Tech in Las Vegas October 7 – 9, 2013.

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A Closer Look at Benefits Administration in H1 2012: Part 2

August 23, 2012

Amy L. Gurchensky, HRO Research Analyst, NelsonHall

Part 1 of my mid-year benefits administration update covered several of the largest service providers, typically engaged in TBO services. Part 2 takes a closer look at TRO providers and updates from H&W vendors.

Fidelity Investments: Although it is a private corporation, from time to time Fidelity announces some of its success. H1 2012 was the company’s strongest half sales period in the last five years. It added 838 new DC administration clients, which will add ~522k participants to the ~15.7m it is currently serving. Fidelity has made substantial investments to strengthen its offering that will likely continue to fuel its success.

T. Rowe Price: While not as large as Fidelity, T. Rowe’s Administrative segment continues to report a steady growth rate of 3%. It prides itself on a long tenure rate with its clients and has plans to keep its offering competitive by introducing technological enhancements such as the T. Rowe Price Personal App for individuals and participants in employer-sponsored retirement plans.

JLT: Across the pond, JLT’s Employee Benefits segment, which includes revenues from consulting, outsourcing, and systems / technology, had a 5% growth rate in H1 2012. BenPal, its online integrated platform, is helping the company expand its benefits business internationally, which is likely to continue to have a positive effect on its bottom line.

Benefits providers in the U.K., the second largest benefits administration market behind the U.S. according to the 2012 Targeting Benefits Administration market analysis report, should also enjoy better than average growth due to new opportunities as a result of the automatic enrollment requirement of the Pensions Act of 2008 as well as opportunities in the public sector as budget concerns open doors to outsourcing assistance.

WageWorks: Newly public WageWorks provides a look into the high-technology SaaS H&W specialty services market of consumer-directed accounts including health (i.e., HRA, FSA, and HSA), commuter, and other employee spending accounts. Total revenues increased 29% y-o-y for Q2; its healthcare segment was up 21%. This year, it added US Airways as a client, expanded its contract with GE, and signed a channel partner agreement with Aflac that will add ~5k FSA clients and ~100k participants. It also entered into a reseller agreement with Aflac, which will continue to boost revenues beyond 2012.

Empyrean Benefit Solutions: Another private company touting its success in the H&W market is Empyrean, which has been offering services since 2007. It has set a record with year-to-date new client wins in H1 2012, adding 10 large market clients. The company is expecting 2012 revenues to increase 40% y-o-y.

Service providers who are slightly behind growth targets for 2012 or those who just want to perform better are prepping to make sure 2013 is a success. For some, this means focusing on health insurance exchanges or launching health and wellness offerings, and for others, it’s about enhancing existing offering with technology improvements and educational initiatives.

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