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

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.

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

H1 2012 HRO: Who Did What in the Large Market?

Linda Merritt, HRO Research Analyst, NelsonHall

There was a good amount of announced HRO contract awards of many sizes and services in the first half of 2012, especially in the large market. A nice volume of new work coming online will provide future revenue support for HRO service providers, where earnings have recently been lower than in 2011.

Learning: finally announced some major deals including:

• Capita Workplace Services: awarded a competitive win for a £250m contract by the Cabinet Office to manage civil service training services in the U.K.
• Serco: won awards with the Army in both the U.K. and the U.S.; it won a scope extension valued at $38m by the U.S. Army and a £55m training contract by the British Army
• Genpact: won  a learning services contract by Johnson Controls, extending its record of recent learning wins; last year, it won a 7 year MPHRO contract with Nissan that included learning and it also won a 5 year content development contract by JobSkills in India.

MPHRO: activity was spread around nicely with ADP, Aon Hewitt, NorthgateArinso, and Logica all bringing in MPHRO contracts. One notable deal was IBM’s multi-tower BPO and IT deal with Cemex valued at $1bn; it includes finance and accounting BPO, HR BPO, IT infrastructure management, application development, and maintenance.

RPO:  continued to see a high volume of new contracts spread across many vendors. There were also two of the largest awards ever in RPO:

• ManpowerGroup: awarded a $400m five year contract extension with the Australian Defense Force, continuing a relationship that started in 2003
• Capita: won a £440m 10 year recruiting partnership contract by the British Army; it will also deliver supporting technology for the Royal Navy and the Royal Air Force, partnering with advertising agency JWT for recruitment marketing and with Kenexa for assessment and recruitment technology.

Benefits administration: contract awards were announced by Aon Hewitt, Empyrean, HP, and Xafinity Paymaster. Fidelity Investments reported the highest volume with DC contracts adding 522k new participants to its base of over 15m participants served. It also made major renewals and brought in new competitive wins. This is Fidelity’s strongest first half sales period in the last five years.

Payroll: deals in the U.K. led the way with awards going to Ceridian, Equiniti ICS, Liberata, and Mouchel. ADP won a multi-country contract from HP and will implement its GlobalView for payroll and Enterprise eTIME system for time and labor management for ~130,000 employees across 40 countries in Asia Pacific (excluding India), Europe, and the Americas (excluding U.S.) over the next five years.

With pipelines still healthy, the second half of 2012 should bring in a year of solid HRO growth and results. Congratulations to all!

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

ADP: Analyst Day Priorities

Last week, ADP held its annual industry analyst day in NYC. Its priorities for the event included communicating its identity and progress as a global HCM company, its innovations in talent management, and its benefit services. Of course no ADP analyst day would be complete without product demos.

To begin the day, Carlos Rodriguez, CEO, spoke about the company’s vision to become the global HCM market leader. With workforces expanding globally, talent shortages, and the need to be more strategic, the international HCM opportunity is huge and ADP is determined to be at the center of it all. Given its large client footprint for its payroll and time and attendance solutions, integrating talent management functions including learning, compensation, and performance will be paramount for global domination in the HCM market.

Well-timed with the analyst event was ADP’s announcement that it launched an integrated end-to-end platform for talent management. In addition to talent acquisition, compensation and performance management, and succession, the talent management suite now leverages advanced learning management tools, learning content from Bersin and Associates, and an enterprise competency framework, and will be available for both its GlobalView and Vantage platforms.

ADP’s HCM toolbox is loaded and ready to be used. The GlobalView platform is available in 81 countries; the general availability date for Vantage has moved up to June; and WorkforceNow, which includes integrated HR, payroll, time and labor management, benefits, and talent management will soon support Canada. On the back-end, it would be great to see some HR BPO opportunities beyond payroll arise, and the company has been busy making enhancements to this portfolio as well.

In addition to its acquisition of the The RightThing, which brought in RPO capabilities, ADP has been quite busy building up its benefits business. There is great potential for benefits outsourcing due to changing regulations and complexities, not to mention the fact that an HCM market leader would not be complete without a strong benefits offering. Investments began with the Workscape acquisition, and continued with Asparity (for decision-support tools, analytics, and reporting) and SHPS (for reimbursement account administration and absence management). Finally, it added a Strategic Advisory Services offering to provide value-added analytics and advice to clients.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

ADP’s Meeting of the Minds, not just an Ordinary Event

I attended ADP’s Meeting of the Minds (ADP MOTM) that happened last week March 11 to 14 in Dallas. This was my first time attending, and I didn’t quite know what to expect until I arrived—well, how about ~900 enthusiastic ADP clients. This is an annual event of which ~30% of attendees were first timers.

Sure, there were a few ADP presentations and demonstrations on ADP’s latest products and services, but many of the sessions were not conducted by ADP and were instead facilitated by HR practitioners and clients. Professional development would be a good way to summarize it. As they say, everything is bigger in Texas—how about ~170 sessions that you could attend to learn about everything from Healthcare Reform to Payroll taxes, to RPO, to best practices across a number of services, and functions including shared services, recruiting, change management, etc. There were also hands-on training sessions, of which I attended Learning, part of ADP’s Talent Management.

I could write my entire blog talking about the keynote speaker, Emmitt Smith, and the fun social events, but I’ll shift gears to talk about HRO to keep with our blog focus.

To begin, it’s important to share ADP’s three priorities, as stated by CEO Carlos Rodriguez, that are important to advance ADP as a:

• Technical leader
• Service leader
• Global leader.

Regina Lee, president of ADP’s national and major accounts, GlobalView, and ADP Canada, spoke about four key areas of investments that were made by ADP:

• Integrated Human Capital Management: including Vantage HCM and Workforce Now
• Talent Management: including the integration of performance management, succession planning, and learning. ADP’s talent management platform has over 100 clients
• Benefits Administration and Healthcare Management: having acquired Workscape in 2010 to strengthen ADP’s benefits administration capability, in addition to Workscape’s talent management and compensation capability. On March 8, ADP announced it has entered into an agreement to acquire SHPS Human Resource Solutions (rationale is below)
• HR BPO, including the acquitisition of The RightThing in October 2011 (further details below).

I’ll finish my blog focusing on Benefits Administration and RPO.

The Workscape acquisition has proven to be a success, with ADP adding ~100 additional benefits clients annually. SHPS will further strengthen ADP’s benefits administration offering with capabilities including:

• Eligibility and enrollment
• Spending accounts administration
• COBRA administration
• Absence management
• Benefits advocacy.

SHPS will strengthen ADP’s leave administration and reimbursement account administration capabilities, including HSAs and HRAs, which have become increasingly important as more employers offer high deductible benefits plans to their employees. You can read about this in my recent blog.

The RightThing – coming off its best year in 2011 – was ranked by NelsonHall in its 2011 RPO report as the top U.S. RPO provider in terms of North American revenue, bringing in ~80 clients. Prior to the acquisition, ADP provided recruitment administration and technology, but it is now a full end-to-end RPO services provider. Expect an RPO contract announcement soon and much more to come as RPO will continue to be provided as a standalone service and now also in combination with ADP’s multi-process HRO services.

Gary Bragar, HRO 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.