HR Tech: Another Winner!

Kudos to Bill Kutik and everyone involved in planning and organizing the 14^th Annual HR Tech Conference that took place October 3 -5. Surveys are still being collected, but I’d rate it as a success! As an analyst, I did attend a couple presentations and briefly visited the showroom floor but, the majority of my time was spent in small meetings learning about new outsourcing contract activity and technology offerings, which included demos.  Highlights from some meetings included:

• IBM, already a major global MPHRO and LBPO provider, winning three significant contracts in the past month with clients headquartered in three different continents including a MPHRO contract with Air Canada (press release issued this morning). More to follow on the Air Canada win as well as the other MPHRO and LBPO contract awards as those press releases are issued.
• ManpowerGroup Solutions’ RPO business continuing to grow at > 50% thus far in 2011 with dozens of new clients added YTD in countries that include: U.S., Mexico, Costa Rica, Nicaragua, Australia, China, Hong Kong, Malaysia, Taiwan, India, Vietnam, Japan, U.K., Israel, Belgium, Finland, Poland, Netherlands, Sweden, and France.
• ADP’s demo of Vantage HCM, which is initially targeted in the U.S. for organizations with 1,000 – 20,000 employees.  I was impressed with the performance management capabilities and the overall ease of use, which included setting goals, identifying competencies, weighing performance to goals, linking performance to compensation, succession planning, etc. I could easily see how this platform can make an organization’s talent more effective, especially when combined with project management and implementation consultation.
• Kenexa’s recent announcements that include: launching Social Solutions for Recruiting and its new performance management suite, 2x Perform, which integrates performance management, succession planning, and compensation; a partnership with Skillsoft to integrate its e-learning content and SkillPort platform with Kenexa’s talent management platform and 2x Perform; a partnership with The Brooklyn Group to increase RPO presence in Australia; and a partnership with HR GlobBlog for global talent advice.
• SourceRight Solutions, whose revenue has been growing from both new contract wins as well as existing clients increasing hiring volumes, with the biggest news that Randstad completed its acquisition of the SFN Group for ~$771m last month. SourceRight will be the RPO arm for Randstad and with combined company revenue of ~$22 bn, of which ~80% are in Europe, expect great opportunities abroad as well as continued success in North America.
• Mercer’s Human Capital Connect, which combines talent management technology for performance management, succession planning, and compensation. It uses the PeopleFluent platform and a client success team that does a readiness assessment and stays with the client for life. Since its launch in mid-2010, a few major clients have been won, but names cannot be disclosed.

I attended twelve other meetings, demos, and presentations I’ll write more about in a future blog, but for now common themes are that HRO is thriving and that vendors are introducing new offerings for clients to improve talent management. Yes, technology combined with consultation is important and is most effective by organizations trained in how to do performance management.

Gary Bragar, HR Outsourcing Research Director, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

NorthgateArinso Getting SaaS-y Starting with e-Learning Content

NorthgateArinso (NGA) has just announced its euHReka Inclusion Framework to provide transparent access to third party providers, HR professionals, and associated resources.  The euHReka platform includes payroll and talent management SaaS for learning, recruitment, performance management, compensation management, and succession planning.  It serves 80 clients and 800,000 employees, and is available in 100 countries and 32 languages.

Although NGA has been providing learning BPO (LBPO) since its acquisition of Convergys’ HR Management business in March 2010, and since learning is already a part of its euHReka platform, the company is aware of the heightened demand for e-learning content in the market.  Consequently, NGA’s first partnership on the new framework is with SkillSoft to add e-learning content to euHReka.  Subsequent content and applications will include:

• Compensation data
• Benefits programs
• Job boards
• Professional social networking sites.

NGA is wise to begin with e-learning.  In NelsonHall’s LBPO market analysis, published Q4 2010, traditional instructor-led classroom training (ILT) is expected to be reduced from ~50% of the market in terms of revenue to 40% by 2012 due to the explosion of e-learning.  As a result, content development is also rapidly growing.  NelsonHall’s LBPO report ranks content development second behind learning administration in terms of LBPO revenue and ahead of delivery, technology, and consulting. 

Some examples of e-learning contracts this year include:

• Accenture with HSBC
• Genpact with JobSkills in India for a 5-year content development contract (note: approximately 85% of Genpact’s courses are provided via e-learning)
• Edvantage Group with Yara International for safety e-learning (note: Edvantage Group’s H1 2011 financial results showed a 31% increase in sales and double-digit revenue growth y-o-y with EBITA increasing 168% to 5.9m NOK, compared to 2.2m NOK in H1 2010).

I believe we will continue to see significant increased demand for e-learning content for years to come, which will be further magnified by mobile learning (i.e., m-learning), especially for accessing content for self-paced e-learning when out of the office.  However, e-learning will not replace the uptick expected for virtual instructor-led training (VLT) because of the need to actively participate and focus on the learning task at hand in VLT.  I’ll write more about contracts for VLT and web 2.0 learning portals at a later date.  In the meantime, further analysis on the useage of e-learning by region and other associated information is available from NelsonHall.

Gary Bragar, HR Outsourcing Research Director, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.comwith “HRO Insight” as the subject.

HRO Staffing – A Balancing Act

Fast and flexible scaling is one of the major benefits of HRO. Scaling up is a lot more fun than scaling down, but both are important, take time, and consume resources. One of the toughest challenges in HRO is maintaining staffing and margins at the same time through the ups and downs of client demand and the overall economy.

Recent times required painful and expensive downscaling as HRO client demand and employment levels dropped, reducing volumes and overall spend. Significant expenses were allocated for staff severance and consolidation of real estate. Even in periods of growth, merger and acquisition “savings” targets are based largely on staff downsizing to reduce overlap, followed by real estate consolidation. Whether a service provider is growing organically or via acquisition, or responding to reduced demand, maintaining appropriate staffing capability, capacity, and expense is critical.

HRO is slowly recovering with RPO leading the way while some areas are still waiting for their upturn including learning and MPHRO. New deals are occurring, renewals are going well, and existing clients are once again increasing scale and scope, at least at a modest level. All good and welcome news!

HRO service providers are confident enough to prepare for a return to growth and make select expansions. At the same time, they know they need to add client load with a minimum of new hiring as pricing pressure is still intense. And this is not even mentioning the need for maintaining an experienced and qualified staff to satisfy client employees and other end-users in the ever changing world of HR.

On the upside, clients are growing in sophistication and understanding of HR outsourcing options. While onshore delivery still leads, especially for voice, acceptance of offshoring has reached the expectation that HRO vendors should offer multi-shore delivery options. Nearshore options and the use of non-voice channels like chat allow leveraging more work to selected centers, increasing the need for and the value of a truly global service delivery network.

Recent HRO service provider expansions include:

• TriNet – Added three new U.S. offices
• CPH – Opened a new office in Sydney
• Futurestep – Added a global recruitment operations center in Houston
• NorthgateArinso – Invested in a new global HR delivery center in Hyderabad, India; opened offices in Russia, the Czech Republic, and Istanbul; partnering with ICAP Group in Greece
• Edvantage Group – New e-learning production center in Denmark.

Expanding the coverage of service locations helps avoid the war for talent and damaging attrition rates in the hottest spots as well as providing increased options for clients.

Buyers, do more than look for an SLA on turnover. Ask about the vendor’s current and future plans for managing staffing and service flexible coverage. Does your service provider show that they are at least as, or more, sophisticated as you are in workforce planning and management? They should be.

Linda Merritt, Research Director, HRO, NelsonHall

Learning BPO Market Morphing by M&As, Partnerships and Organics to Meet Evolving Client Needs

Per the findings from NelsonHall’s recently published “Targeting Learning BPO” report, we saw only a modest growth rate of 2.5 percent in this HRO segment in 2009 – 2010, but predict a global compound average annual growth rate of 8.4 percent through our 2014 forecast period. So what’s driving this growth from the buy-side, and how are providers responding?

Buyers’ top driver for learning BPO (LBPO) remains reducing the cost of the learning function, followed by increasing the effectiveness and improving the quality of learning for employees. Other drivers include gaining a better return on the learning investment, right-time/right-level access to specialist trainers, obtaining a well-defined process from a provider with the ability to deliver higher quality, aligning learning with strategic objectives, contract flexibility and utilizing cutting-edge technologies for learning services delivery.

To meet these buyer needs, providers must step up their game in a range of areas including the ability to manage a global network of delivery suppliers, and providing access to the technologies required to effectively deliver and manage all aspects of the learning function via learning management systems, Web 2.0., virtual instructor-led training, e-learning, m-learning, virtual world technologies, gaming and learning analytics. Providers also need to have global learning capabilities across all four learning towers: Learning Administration, Content Development, Learning Delivery and Technology.

LBPO providers are taking a variety of paths to address these evolving, and in cases daunting, buyer requirements. Some, including Raytheon Professional Services, Expertus, Edvantage Group and RWD, are growing organically, with new service offerings including new technology, content and geographic delivery capabilities. Acquisitions and partnerships are also occurring.

2010 acquisitions in the LBPO space include:

• Kenexa’s acquisition of The Centre for High Performance Development to strengthen leadership develop and management training
• Talent2’s purchase of Origin HR and Sugar International to expand vocational training capabilities
• General Physics’ acquisition of Marton House to strengthen e-learning content development in the U.K., and its purchase of PerformTech to strengthen learning services for the U.S. government

 And 2010 LBPO partnerships include:

• NIIT and SENA to provide learning services in Colombia
• Edvantage Group and Mediapharm to offer a pharma online portal

Bottom line is, for the LBPO market to grow and prosper, it is all about meeting client’s learning needs: delivering what they need, where they need it, when they need it and how they need it. Organic is great, but not always feasible, and not necessarily always the best option for the involved parties. Thus, I beleive we will continue to see more acquisitions, and even more partnerships, in the LBPO space in the next 12 months.

Gary Bragar, Lead HRO Analyst, NelsonHall

Learning 2.0 Portals – From Buzz to Abundant Value to Increasing Innovation

In blogs earlier this year, I wrote about “The Buzz About Learning 2.0 Portals” and “The Abundant Value of Learning 2.0 Portals.” We’re now seeing providers building increasingly innovative components and capabilities into their learning portals, which can exponentially increase their value and usage.

For example, just yesterday Expertus announced it was recently awarded a virtual instructor-led training (ILT) contract by a large global software provider. Expertus will develop a virtual ILT program to train the client’s sales force on new products, and to educate technical sales architects. Delivered over the ExpertusOne social learning platform, components of the program include hosted live events around the world, live chat with international subject matter experts, hands-on labs, virtual classrooms, online proctors and technical support. And the client’s anticipated cost savings – through elimination of worldwide travel and events expenses – is up to $5 million. While these types of portals of course require a financial investment, such potential hefty cost savings provide justification.

Other examples:

• OCLC, a nonprofit, membership-based computer library service and research organization needed to bring together library staff and organizations around the world, and provide a venue that would allow them to engage in discussions, participate in groups, share content and engage in collaborative learning development. The solution it selected was Plateau’s Talent Gateway platform, which integrates social tools, content management, Plateau learning management, customer management and virtual meeting spaces. It’s enabling OCLC members to connect with colleagues across the library community using social tools, create custom content, join in conversations, create ad-hoc communities and learn relevant skills.

• Liberty Mutual is using Cornerstone OnDemand’s Cornerstone Connect to facilitate informal learning as part of the company’s front line management training program. Participants take part in an in-person, weeklong program, supported by supplemental online courses via Cornerstone’s learning management system. Using Cornerstone Connect, Liberty Mutual’s team has created a management community to maximize and extend the benefits of the training program. Components of the Cornerstone Connect platform include rich user profiles, status updates, live feed views, communities of practice, discussion boards, blogs, wikis, podcasts, rating and sharing of content, knowledge management, tag clouds and RSS feeds.

One of the common, and critical, capabilities across all these platforms – as well as those already offered or under development by other providers – is engagement. In an isolated e-learning environment, it’s all too easy for the mind to wander (“Did I remember to send that memo?” “Hum, I wonder if there’s any cake in the break room?”) and equally challenging to feel a sense of connection (“Is anyone else unclear about that point the instructor just made?” “Who can I ask, other than my boss?”) Social media capabilities such as discussion boards and live chats with peers and subject matter experts can significantly enhance engagement in, and the resulting value of, e-learning.

Expect to see an increase in uptake of Learning 2.0 portals that enable engagement via social media capabilities. The rapid deployment, learning enhancement and cost savings value prop is über compelling.

Gary Bragar, Lead HRO Analyst, NelsonHall