Posted tagged ‘HR BPO’

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

August 15, 2012

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!

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Kenexa and Aon Hewitt New Product Offerings Help Clients Hire, Engage, and Retain Talent

June 18, 2012

By Gary Bragar, HRO Research Director, NelsonHall

Kenexa’s RPO business has been growing, including globally as evidenced by its five year RPO contract with Eli Lilly to provide services in Asia Pacific, Europe, and the Americas.

Kenexa has been expanding its business with new service offerings including those focused on talent management. Two new product offerings that help clients hire, engage, and retain talent include:

  • Fit Compass
  • Career Bull’s Eye.

Kenexa calls these offerings Performance Accelerators.

Fit Compass: helps clients determine the quality of the hire by providing managers with an interview guide to help probe for candidate strengths, work styles, and challenges of how they would fit into the culture of the organization. Fit Compass can also be used for employee development and career planning, team building, and team effectiveness.

Career Bull’s Eye: determines an employee’s level of engagement by assessing their purpose, passion and pay. It then helps business leaders identify where in the organization they need to focus by finding out causes of disengagement so it can make improvements and reduce turnover. It can also be used when onboarding new hires to ensure that they are engaged to avoid turnover. Results are shared during quarterly business reviews with the client. Both products are available as standalone services or can be bundled with other RPO service offerings.

Aon Hewitt provides RPO as both a part of its HR BPO offering and as a standalone service. Aon Hewitt’s RPO business has been growing globally as well. Examples include its HR BPO contract with BP where it provides RPO in North America and EMEA, and its recent contract award with a professional services company to provide RPO as a standalone service in EMEA and North America. Aon Hewitt has two new products that help organizations transform their hiring process:

  • SourceSprint
  • Digital interviewing capabilities.

SourceSprint: keeps applicants in a talent community for possible placement with other opportunities. Often when an organization fills a job requisition, other applicants are lost after the new hire comes on board. While the applicants may not have gotten the job they applied for, they may be good candidates for other opportunities. But, finding them again is problematic. SourceSprint changes that by using social media, optimization of search engines, and mobile communications to keep these prospects in a talent community. It remembers how applicants were originally found and their preferred communication.

Digital interviewing capabilities: improves the efficiency and experience of the hiring process for both candidates and hiring managers. Through its partnership with HireVue, Aon Hewitt clients can use the HireVue Digital Interview Platform to ask candidates scientifically validated questions that will ensure consistency and objectivity across interviews. Candidates then use a webcam to record their answers. Since it is not a live interview, candidates can respond from anywhere at their convenience, and hiring managers can watch and share the recorded interviews with colleagues anywhere.

Given these types of continuous innovative offerings, it’s no surprise to me that RPO has been rapidly growing as clients seek to attract, engage, and retain talent, while improving the efficiency of the recruitment process at the same time!

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HRO Reduces TCO!

April 5, 2012

Buyers, how much will you save by implementing HRO services? Will it be 8% or over 50%?

ADP recently published the results of its latest total cost of ownership (TCO) study, The Hidden Benefits of Human Resources Business Process Outsourcing. The company has sponsored several PwC TCO studies since 2003 comparing the TCO of companies maintaining HR services in-house to those using ADP HR BPO. The 2012 study was completed by Sourcing Analytics and digs even deeper into the patterns established in the earlier PwC studies.

I touched on this topic last year, but it is well worth a second look because the research supports common HRO advice and counsel.

The good news remains: HRO of services including payroll, time and attendance, workforce administration, and health & welfare reduce TCO over in-house services.

The bad news is that HRO is not a quick financial fix and first year savings are usually modest. It takes time and hard work to transform HR operations and service delivery, but there are companies that have reduced TCO by 50% with 20-30% being possible for most over time.

Often, one or more HR services are outsourced with the focus mostly on the technology and transactions and may include more than one service provider. While there should be many benefits in new service features and functions and improved processing, the TCO impact is likely to be low, perhaps only 8%. To get both full value and full savings, more is needed.

Here are some of the building blocks that can be used to further increase your HRO TCO:

Technology and process

  • Use one vendor for integrated payroll and time and attendance to bump up savings a bit
  • Move to SaaS-based technology platforms to reduce technology costs the most
  • Make it real BPO, include contact center services
  • Multi-process HRO (MPHRO) saves more than best-of-breed services managed in-house, can significantly ramp up savings.

Process and people

  • Support initial transition, adoption, and utilization
  • Adopt standardized and centralized best practice processes across the entire enterprise
  • Follow through and reduce or re-deploy the retained organization
  • Keep working on it together; it may take up to five years to achieve maximum TCO savings as maturity is attained and more and more of the building blocks are added.

How much a particular client will save depends on a number of choices and options that are largely within the control of the client. In addition to great HRO performance, top-notch providers will be able to support each client in their journey to attain the most savings possible.

Next week, we will take a look at some of the factors and actions that shape the HRO journey.

Linda Merritt, Research Analyst, HRO, NelsonHall

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Fast or Slow for HRO?

August 5, 2011

The economic signals for the second half of 2011 remain mixed. Looking at the macro markets combined with global debt situations and unemployment rates, it looks like we are on the edge again. The long struggle to reaching agreement on raising the U.S. debt ceiling rattled nerves around the world.

Alternately, if we look at the NelsonHall HRO Confidence Index for Q2 2011, we see that service provider’s confidence level is 168, near the all time high of 170. Supplier expectations for 2011 for most industry sectors have improved with banking remaining the strongest followed by high-tech and telecoms, with the state and local government sector also up. Expectations are a bit lower for automotive, professional services, and transportation. Geographic growth expectations continue to be positive in emerging markets and have strengthened in the mature markets like the U.S. and some areas of Europe.

HRO vendors see what is happening in the larger economy, they know there is a chance of a double-dip recession or at least several more sideways quarters. At the same time, strength in new sales and expanded scope with existing clients along with still strong pipelines provides them with a more optimistic view. Let’s hope they are right!

ADP echoed this divergent view on its FY 2011 earnings call. It is well aware of the current economic conditions, including a still possible downgrade in the U.S. credit rating. ADP’s FY2012 forecast calls for continued growth based on its strong performance in FY2011, with Employer Services (ES) up 8% to $6.9bn, and a better-than-ever pipeline. It is also benefiting from recent acquisitions and new service innovations that have broadened and refreshed its service lines, especially adding more beyond payroll options in Europe. While payroll continues to be the largest service line for ADP at 66% of ES revenues, 33% is now from beyond payroll services including full HR BPO. In the pipeline, it is now an almost even split: 52% payroll, 48% beyond payroll.

As seen during the recession, HRO can be hit hard and fast in a full-fledged downturn. So, how can a HRO provider like ADP defy the larger economic outlook now? ADP was willing to take a small hit to operating margins to hire and train several hundred sales and service people ahead of the upturn. It was able to affordably acquire added capabilities to round out service lines and invest in new services that have been successful right out of the box, including Workforce Now and Run, which currently has over 120k clients in the small market on its cloud platform using self-service and Smartphone access. At the same time, ADP retains focus on client satisfaction and retention to stabilize recurring revenues.

In a recovery, even a weak one like we are experiencing, a well-prepared HRO vendor can beat the odds. Is your HRO provider one that is beating the odds?

Linda Merritt, Research Analyst, HRO, NelsonHall

Aon Hewitt 2011 Analyst and Consultant Briefing

June 30, 2011

At Aon Hewitt’s first analyst and consultant conference, Aon CEO Greg Case set the tone of the day with his enthusiastic overview about the company’s twofold focus on risk and people.  As of 2010, the risk segment makes up 60% of the business, while HR solutions is the remainder with an objective of a 50/50 split.

To achieve the 50/50 split, Bal Dail and Kristi Savacool, co-CEO’s of Aon Hewitt, shared their vision.  That is, for Aon Hewitt to be the most trusted partner for clients seeking HR solutions across its consulting, benefits administration, and HR BPO sectors.

Overall, the sectors are quite healthy with consulting leading the way.  Of particular interest to me is the HR BPO business since I recently completed the 2011 NelsonHall multi-process HRO (MPHRO) report.  HR BPO accounts for 13% of Aon Hewitt’s revenues and positions it as the global leader in the MPHRO space with a little more than 12% of market share.

It has 27 MPHRO clients, most recently adding Bank of America who was previously serviced by Fidelity.  The Bank of America contract is for five and a half years, for 290,000 employees, and covers the following services:

  • HR administration
  • Performance management
  • Payroll
  • Time keeping
  • H&W administration
  • Learning
  • Recruiting technology.

Most importantly, Aon Hewitt hasn’t lost any HRBPO clients to its competitors.  It lost Mervyns and Circuit City in 2009 due to liquidations and it has another client that has downsized to where there is no business case for MPHRO services.  Aon Hewitt, however, will still perform benefits administration services for this client.  The most immediate challenge in this space is renewing Air Canada and Prudential.

In terms of its standalone offerings, Aon Hewitt is strongly focused on RPO, which is provided as a standalone service as well as part of its HR BPO offering.  The company has 500 recruitment professionals, assesses 10m candidates annually, and fills 65,000 positions a year.  Current RPO clients include Bank of Montreal, Marriott, and the TSA.

Absence management is another standalone offering that Aon Hewitt is planning to make significant investments in.  It currently has 400 employees, 4 global service centers, and 55 clients.  Absence management is also offered within the company’s HR BPO portfolio.

One thing was very clear throughout the day, Aon Hewitt is excited and enthusiastic about the current direction it has positioned itself in.  But make no mistake, the company won’t sit idle with this strategy even if it is one of the largest HRO and consulting players in the world.  It will continue to evolve so it stays on top.

Amy Gurchensky, Research Analyst, HRO, NelsonHall

Mercer 2011 Analyst Forum – Style and Substance

May 13, 2011

I enjoy HRO analyst forums, particularly the in-person presentations and the chance for casual conversation with service provider executives and fellow analysts. Live events showcase the personality of the host company. Personality comes through in who is invited, what is said, what is not said, and the venue itself. All have a tone that subtly provides context for content. Some are very nice and some are almost austere. None are luxurious parties.  Apparently HR BPO analysts do not rate that high!

Mercer’s session was on the high-end of venues; the meeting was seemingly casual and relaxed while still guiding attention where desired. The analyst meeting and accompanying client conference was well-prepared and well-presented, providing a consistent profile of Mercer, its style, and confidence. Even the smallest touches reinforced the company’s image of management competency, teamwork, and expertise in HR benefits.

Mercer is a $3.5bn benefits service provider with 27k clients and 20k employees with offices in over 40 countries, serving large market clients primarily based in the U.S. and mid-market clients worldwide. Consulting services bring in the greatest revenue at 2.4bn, followed by outsourcing at $700m, and investment services at a rapidly rising $400m. The largest outsourcing client segment is DC, followed by DB, and H&W. The company has seen significantly more interest in the last 18 months in its newest segment, absence management, with a small but growing base of clients. Mercer Q1 2011 revenues were $922m, up 9% year-over-year, 5% in constant currency compared to Q1 2010, outsourcing was flat in constant currency.

Strategically, Mercer is focusing on increasing revenues and building scale by leveraging existing client relationships to cross-sell, expand into select adjacent market opportunities, and build bundled solutions. These are not uncommon HRO strategies, but it is ability to execute that sets apart the leaders.

Reliance on its ability to work collaboratively across its business segments will be a critical success factor, a style that was amply present throughout the Mercer sessions and is also seen in its several new product offerings.  One is a new solution called Human Capital Connect, which is bringing together consulting and research expertise, software and web technology, and various forms of education to address metrics and analytics in a way that will help HR teams establish the needed foundation of HR information, data and report access, and understand and provide a roadmap to more advanced levels.

According to the soon to be published Mercer 2011 “What’s Working” report, employees are putting more importance on the value of benefits in the mix of total compensation. And we know that employers continue to be very cost conscious even as they return focus to talent management.

With a crowded field of top-tier benefits providers, including Mercer, which one will be able to best capitalize on the opportunities?

Linda Merritt, Research Director, HRO, NelsonHall