Posted tagged ‘Capita’

Success Factors for the Market Segments of MPHRO

August 9, 2011

Last week, I discussed the four market segments of multi-process HR outsourcing (MPHRO) as defined in my 2011 NelsonHall MPHRO report: multi-country standardization, client-specific shared service transformation, core business focus, and technology-led HR service enhancement.  This week, I’ll examine success factors for service providers within each segment.

In the “multi-country standardization segment,” which is the segment with the highest growth rate for the next five years, it is critical for vendors to be able to support a client’s operations across a wide range of countries including emerging markets. Providers must also be able to rollout standardized HR administration and payroll to create a global system of record. Examples of service providers operating in this segment include ADP, HP, and NorthgateArinso.

To be successful in the “client-specific shared service transformation segment,” the largest of the four, vendors must provide HRO support directly or through a partner for all HR service lines (i.e., payroll, benefits, learning, RPO, and workforce development services) and have a high degree of multi-shore delivery capabilities to support clients in various locations.  Equally important is a service provider’s ability to be able to work with the client’s existing HR technology.  One of the biggest challenges faced by vendors in this group is getting clients to transition more than just back-office functions to its offshore service centers to reduce operating costs.  Service providers operating in this segment include those that have been long-term players in the MPHRO market such as Accenture; IBM; Aon Hewitt; ACS, a Xerox Company; and U.K.-based Capita.

Within the “core business focus” market segment, success is contingent on a provider’s ability to quickly deploy HR services and be accessible when expertise is required.  In terms of HRO offerings, standardized HR administration and payroll are a must and providing support for talent management services is very appealing.  The biggest challenge for vendors operating here is all the competition that exists from some of the following vendors: Genpact, TCS, Talent2, Infosys, HCL, Wipro, and Caliber Point.

Success in the final segment, “technology-led HR service enhancement,” requires vendors to provide their own standard technology for HR administration and payroll that includes talent management functions.  Also, it’s important that this technology be rolled-out relatively quickly.  Providers that fall within this segment mirror the multi-country standardization segment, but also include vendors such as Ceridian.

There’s lots of room in the MPHRO market for all types of buyers, so it’s critical for service providers to decide which segments are of strategic value and to define their sweet spots in their MPHRO portfolios and fill in capability gaps where contracts can be lost to competitors.

Amy Gurchensky, Research Analyst, HRO, NelsonHall

A Steady State in HRO for 2Q 2011

July 7, 2011

After several quarters of new HRO activity, the pace settled down a bit in the second quarter, but was still plenty interesting. Here are several samples from 2Q 2011.

Capita stands out for its volume and breadth of HRO activities. It is the largest MPHRO provider in the U.K. according to the NelsonHall MPHRO 2011 market report. Capita was awarded preferred supplier status by NHS in North Mersey, providing a potential of up to £27m by offering a mix of HR, payroll, and RPO services to 12 Mersey NHS trusts. There were also two awards for occupational health services, which it is expanding into the more holistic well-being services. An acquisition was also in the mix. Team24 was brought in to enhance medical RPO capabilities, further strengthening a market segment in which Capita is rated third in the U.K.

I like to look at the mix of new partnerships, offerings, and mergers and acquisitions to see where vendors are placing their bets on expansion and growth. Global remains hot and deal activity is there to keep hopefuls in the game of capturing new markets.

A leading example is ManpowerGroup’s strategic moves in China. It purchased REACH HR in south China, added Xi’ an Fesco with its 10k associates, and partnered with the city of Kaifeng in the Henan Province to add coverage in the west and north central area of China. To top off this spree, ManpowerGroup aligned itself with China’s Ministry of Industry & Information Technology (MIIT) for a five year plan.  It will develop a talent exchange center, enabling ManpowerGroup’s local partners to provide workforce solutions focused on manufacturing.

Remember that China is not a market you can just jump into and Manpower has been on the ground in mainland China for 17 years. It has the needed relationships and is well-positioned to benefit from the development expansions now moving into inland China.

Other APAC activity included Australia. Mercer was awarded a superannuation pensions administration contract by RBK. Also, Towers Watson is partnering with Link Group to enter the superannuation market in Australia which is not big in numbers, but each group plan can have a large number of members. Finally, Futurestep opened global service management centers in Australia and New Zealand.

Elsewhere in APAC, Genpact was selected for a five year learning content development contract by JobSkills in India; Merce r launched a flex benefits offering in Hong Kong, and is partnering with PayrollServe to offer its HR services in APAC; and ManpowerGroup acquired Web Development Company in India to strengthen IT recruiting.

With plenty of recent HRO deals in implementation and early stabilization, along with perkier volumes and special projects in existing contracts, service providers need to focus on balancing delivery performance with new acquisitions. Compared to some of the things we have experienced in HRO, a steady state is not such a bad thing!

Linda Merritt, Research Analyst, HRO, NelsonHall

Learning Services Acquisition Frenzy

March 17, 2011

Last year, we wrote quite a bit about all of the M&A activity in benefits administration including:

  • Towers Perrin and Watson Wyatt completing its merger to become Towers Watson
  • ACS, a Xerox Company acquiring ExcellerateHRO
  • ADP acquiring Workscape
  • Aon acquiring Hewitt to become Aon Hewitt
  • Other acquisitions made by vendors including Mercer, Xafinity, and Capita.

Will learning be the next HR service area abundant in acquisitions?  Although we have seen learning services acquisitions in the past, including ACS acquiring Intellinex in 2006, and will likely continue to see more in the future, I don’t believe we will see any in learning that are equivalent in scale to the large benefits acquisitions.  However, if there was an award for the number of acquisitions in a short period of time, it would have to go to General Physics Corporation (GP). On March 10th, GP acquired RWD Technologies for $28m, its 8th acquisition in the past 18 months.  RWD is based in the U.S. near GP in Baltimore and has three additional U.S. locations as well as offices in the U.K. and Colombia.

GP got RWD at a bargain since RWD’s consulting revenues were $65m in 2010.  RWD was hit hard by the recession and GP came along at the right time with cash on hand.  As a result of the acquisition, GP inherits RWD’s IT learning expertise, where it had little prior experience.  The acquisition also strengthens GP in the petroleum, manufacturing, and automotive sectors.

Last month, GP acquired Communication Consulting to expand delivery of its training services in China.  GP’s other acquisitions were made in the U.S. and U.K. between September 2009 and December 2010.

GP’s 2010 revenues were $259.9m, an increase of 18.6% compared to 2009.  Growth was attributed to increased volumes from existing clients, new contract awards, and its acquisitions, which had the greatest impact.

Moving forward, what will happen?  Well for one thing, don’t count GP out from making future acquisitions.  GP still has ~$35m in revolving credit after the RWD deal and has stated that they will continue to seek acquisitions to grow globally.  However, with so many acquisitions, GP now faces the challenge of creating an integrated client experience and cross-selling into the strengths of these acquired companies to continue its rapid pace of growth.

It will be interesting to watch as things unfold this year.  In the meantime, we can finally put to rest the question “what’s happening with RWD”.

Gary Bragar, Lead HRO Analyst, NelsonHall

Where the Action is At in HRO

March 8, 2011

As a follow-up to my colleague Linda Merritt’s blog last week titled “HRO is Settling in for a Good 2011,” I thought I’d write about where the most action is at thus far. If you were thinking recruitment, good guess, but it is actually benefits administration leading the way in the number of announced contracts in 2011.

In addition to Mercer being awarded a pensions administration contract by Loomis UK Ltd., which Linda also wrote about Mercer in her February 23rd blog, a number of providers have announced important contract awards, including:

Fidelity Investments, after two big five-year contract awards in Q4 2010 by AT&T and Office Depot, in January Fidelity was awarded a five-year contract renewal for total retirement outsourcing (TRO) services by BP America, Inc., a subsidiary of BP. Fidelity will continue to provide administration and recordkeeping for BP America’s 95,000 DB and 48,000 DC and nonqualified deferred compensation plans for U.S. employees. Later in the same month, Fidelity was awarded another five-year contract renewal for TRO services by HP in North America. Under this deal, Fidelity will service all of HP’s retirement plan participants, adding 162,500 participants from EDS who were previously serviced by other providers. In total, Fidelity will serve more than 135,000 DC participants and more than 192,000 DB participants for HP.

Aon Hewitt, in February announced it had gone live with eight new benefits administration clients since the beginning of the year. Across these clients, Aon Hewitt has implemented 12 services including DB, DC, and H&W and has added more than 325,000 participants and retirees to its base of 22 million participants.

Capita, in February was appointed as a preferred supplier for the administration of the Teachers’ Pension Scheme (TPS) by the U.K. Department of Education. This is a seven-year, £80m contract renewal that starts in October 2011 and includes an additional three-year option. A week later, on a smaller scale, Capita won a three-year occupational health services contract by Technip. Capita will provide its Wellness Assessment Surveillance Portal, which gives centralized visibility of health surveillance records to Technip’s 3,000 personnel in Aberdeen and offshore locations.

So will benefits administration continue to be hot this year? I believe it will, though it might be hard-pressed to exceed RPO for the full year in terms of number of contract awards.  As evidenced in the examples above, there are huge volumes of benefit plan participants that are serviced and in today’s economy, clients cannot afford internal resources to manage these programs, nor do they have the expertise and most up-to-date technology. Handling benefits administration is vitally important to employees and retirees, whether it’s the ease of an annual online enrollment or the knowledge of a service center professional in answering DB and DC questions. And it’s not just large companies that need this expertise.  As I wrote in my February 25th blog, mid-market HRO is rapidly growing as well.

A final thought about what will continue to drive contract awards in benefits administration is that buyers are increasingly looking to consolidate their outsourcing services under one provider, as evidenced by Fidelity’s contract with Office Depot. This is a trend I believe will continue and from an employee and retiree perspective is a good thing. I was fortunate enough to leave my long-term employer four years ago with H&W benefits, DB & DC plans, and voluntary benefits, of which all four were provided by four different vendors. Sounds like I should play the number four!

Gary Bragar, Lead HRO Analyst, NelsonHall

HRO Can Help Stem Absence Management Cost Hits – But There’s More

October 21, 2010

A recent CyberShift survey found that one third of the 1,088 respondents cited absence management as a continuing top priority. Yet 53 percent of the survey participants stated they did not have an automated system in place for absence, leave, vacation and FMLA tracking. This is a pretty scary statistic, especially when, per CyberShift, unscheduled absenteeism can cost businesses more than $760,000 per year in direct payroll costs alone.

At the same time, forward-thinking buy-side companies over the past couple of years have awarded absence management contracts to HRO providers, and the vendors are beefing up their absence management offerings. Let’s take a look.

Absence Management Contracts

  • MidlandHR was awarded 10 contracts in the last two years for its iTrent HR and payroll software, including its absence management modules, by the University of Exeter, Capel Manor College, Oxford City Council, NetworkersMSB, Pentagon Investments, Preston College, Which? (yes, this is an actual company name), Manchester Fire and Rescue, Kent County Council and Farnborough College
  • Wipro implemented Oracle’s PeopleSoft Enterprise HCM 9.0 for Jammu & Kashmir Bank in India. Modules implemented include absence management and approval workflow
  • NorthgateArinso won a five-year contract with Hastings College for its ResourceLink HR platform, which supports absence management
  • Convergys entered into a five-year contract renewal for multi-process HRO services with a leading business services company; components of the contract include absence management and leave administration
  • Hewitt was awarded several unnamed contracts that include absence management
  • Raet won a 10-year contract with OSG for its online HR portal, which includes absence management

Providers’ Enhanced Absence Management Offerings

Just a couple of weeks ago, Capita acquired FirstAssist Services Holdings Ltd. to strengthen its capabilities in health and workforce management, including absence management. In January, Hewitt added participant advocacy services to its absence management offering. In August, Ceridian added Presagia’s employee leave management software to support its leave management services. And Xchanging announced an alliance with absence management specialist FirstCare through which the two parties will jointly go to market with FirstCare’s absence management and occupational health pre-employment screening services and Xchanging’s portfolio of HRO services.  

Here’s my take. Leveraging software and services for absence management tracking is a great step in the right direction when it comes to stemming costs. But equally, if not more, important is drilling down into the why’s of non-authorized and non-sick absences. This maps to blogs I’ve written over the past year that focus on rampant employee dissatisfaction. Unhappy employees are more inclined to call in sick simply because they don’t want to go to their jobs. Get to the heart of employee dissatisfaction, fix what is truly broken across the enterprise, and absenteeism will decrease. Strong leadership and performance management training is invaluable in helping determine the root of employee discontent. Corporations lacking internal training programs of this type can leverage offerings from both full-scope and pure-play learning services HRO providers.

Gary Bragar, Lead HRO Analyst, NelsonHall

HRO is Never Static or Still

October 12, 2010

During every stage of the economic lifecycle, HRO service providers are doing something to either anticipate or react to changes in the marketplace and client needs while simultaneously striving to achieve strategic goals. This week I wrap-up NelsonHall’s review of 3Q 2010 HRO activity with a look at what’s new in offerings, partnerships and acquisitions.

One way to quickly expand a service line or fill-in gaps is to partner with a provider that is already offering the service or operating in the target geography. Last quarter was most active for RPO. Those announcing new RPO-related partnerships included Alexander Mann Solutions (AMS), Kelly Services, Kenexa, Pinstripe and The RightThing. Notably, two of the partnerships were to continue to expand RPO services internationally in the Asia Pacific region, with AMS adding reach into India and Kelly in Vietnam.

A more committed path to rounding out or adding new services is to buy it. Making small to large acquisitions is another constant in the world of HRO as players define and redefine their portfolios. In addition to the close of the three game changing major acquisitions in the benefits community (ADP/Workscape, ACS/ExcellerateHRO, and Aon/Hewitt), other folks were also making deals. For example, Mercer acquired IPA and ORC, and Xafinity bought PwC’s pension consulting and administration business in the U.K. Further, Randstad continued its acquisitive ways, this time outside of Europe, with its planned acquisition of FujiStaff in Japan.

Health and welfare (H&W) outsourcing used to be limited to the U.S., and that will remain the major market. But no matter how health insurance and care is funded, H&W concerns are growing globally. In the U.S., Fidelity is partnering with RedBrick Health to offer its clients wellness services, and in the U.K., Capita is acquiring FirstAssist Services to add to its health service offerings.

Finally, if you cannot find what you want in the marketplace, you can build or expand it yourself. Ceridian wants to truly offer a new line of BPO services and has announced it is ready to consult, build and manage the health insurance exchanges that some states will need in a couple of years as part of the U.S. health care reform program. 

Most announcements of “new offerings” are incremental additions. For example, Hewitt is adding Micromedex medical reference information to its advocacy service offering. You can also simply package what you have and call it new. Aditro has done that with a standardized set of payroll services that include preset services levels and implementation process to make a lower cost bundled option.

Yet another variation blends supply chain partnerships with building it yourself to make a new service offering. Take a SaaS HR service from Oracle or Sap and wrap in value added enhancements and services additions and, voila, you have a new HRO service platform. Mercer introduced its Human Capital Direct that uses PeopleClick Authoria’s talent management suite as the core, surrounded by Mercer’s consulting, tools and methodologies such as decision support, competency models and analytics.

In HRO, somebody is always doing something. What have you done lately?

Linda Merritt, Research Director, HRO, NelsonHall

HRO Total Contract Value Jumps 38 Percent in 1H10 – Where are the Gains Coming From?

July 15, 2010

During our Quarterly BPO Index webinar last week, NelsonHall CEO John Willmott reported that HRO total contract value (TCV) revenue increased 38 percent in 1H10 in a year-over-year comparison to 1H09. While HRO’s gains weren’t as great billions of dollars-wise as other BPO segments such as multi-process or industry-specific BPO, it is good to see the start of an upturn.

So where are these gains coming from? Forty-five percent of the contracts were signed with North American organizations, 43 percent were awarded to European enterprises (of which two-thirds were based in U.K.), and organizations in Asia Pacific accounted for the remaining 10 percent. And by service type:

• Recruiting – 32 percent of deals – including contract wins by Hays, Manpower, Kenexa, OchreHouse, Pinstripe, CPH Consulting, Alexander Mann Solutions, The RightThing, KellyOCG and PeopleScout

• Payroll – 22 percent of deals – including contract wins by Capita, MidlandHR, Raet, NorthgateArinso, ADP, TDS and Ceridian

• Benefits Administration – 20 percent of deals – including contract wins by Workscape, Aon, Secova, Mercer, Convergys and Xafinity

• Multi-process HRO (MPHRO) – 14 percent of deals – including contract wins by Accenture, Ceridian, ADP, Xchanging and Hewitt

• Learning – Eight percent of deals – including contract wins by Edvantage Group and General Physics

• Other HR – Four percent of deals – including talent management-related contract wins by Kenexa

Overall, I was not surpised with the above breakdowns as they were very consistent with the predictions in our June 2010 quarterly HRO Confidence Index.

Digressing a bit here to add to the buzz about Aon’s acquisition of Hewitt…while much written and water-cooler discussed has been about benefits administration, a sizeable amount of Hewitt’s revenue comes from MPHRO. A good example of this is Hewitt’s five-year contract renewal with International Paper, announced in April 2010.The renewal will support 40,000 International Paper employees with payroll, workforce administration, health and welfare administration, recruiting support, SAP application support and help desk, call center and HR manager support, learning administration and flex staffing management services. Given the amount of revenue coming from Hewitt’s MPHRO client base, I believe Aon will not only happily want to continue to support these existing clients, but also want to continue to grow the MPHRO business.

Although most new MPHRO contacts will likely not be the mega deals of yesteryear, reducing the number of suppliers in the outsourcing portfolio continues to grow in appeal among buyers. If buyers are satisfied with their MPHRO deals, they will continue, albeit in smaller fashion, to benefit both buyers and providers.

Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall