Don’t ask for HRO to be done your way.
Using your existing technology, processes, people and vendors – called “lift and shift” – was common in the early years of multi-process HRO. It did lift. It did shift. And it did trap many a buyer and provider.
Providers could not leverage investments across clients when each buyer had its own customizations, sets of licenses, technology cocktails and networks of pre-existing vendors. They also couldn’t protect their own margins and profitability.
Bubble buyers found there was little on-going innovation and improvement other than what they could directly fund. Lift and shift limited overall total cost of ownership management. Whatever initial savings obtained were in many cases eaten away by change orders needed to continually address changes in the customized services platform.
Large enterprise customers do have legitimately complex needs, which may make them think they need significant customization. But even at this level, providers are offering viable ERP wrap-around technology, multi-tenant support services, tools, accelerators and partner vendors that will add value and lower costs for both parties.
Don’t tell providers how to meet your needs by limiting and pre-defining the solutions.
Avoid requesting costly customization that is ultimately unnecessary. For example, large multi-national companies thought they needed one instance of global payroll. It can be done, with enough capital. But even if you can afford it, is that the best use of your limited investment dollars?
Today, multi-national payroll accuracy, compliance and business intelligence can be delivered through business process outsourcing (BPO) that supplies the required coverage, quality and reporting at less initial cost and with a more flexible total cost of ownership compared to a custom solution built for one.
There is increased buyer acceptance of true multi-tenancy, intelligent shoring, and common provider tools, services and partners. SaaS, SOA and provider proprietary investments in technology, workflow management and service center optimization can provide an integrated front-end with the quality, speed, cost points and analytics needed to satisfy a wide variety of needs. There will be room for unique needs. Vendors that offer standard solutions are set-up to offer 10-20 percent in planned customization.
Does this sound like an unnecessary warning? “We are beyond this”, you say? Take a look at the results of a LinkedIn poll by Vivek Khanna who asked; as head of HR, would you prefer a packaged offering or a customized solution from your service providers?
- 68 percent: “customized to my needs”
- 25 percent: “pre-packaged”
- 8 percent: “I don’t care, I need it cheaper”
While the number of poll respondents was small (25), the pattern of results is interesting. Who wouldn’t prefer customized, all things being equal? But all things are not equal. Customization sounds wonderful, but it is costly on Day One and every day thereafter when you pay the price to maintain, update and upgrade.
There always exceptions and niche players leveraging labor arbitrage, so you can still get it your way, if you really want it. But fewer major providers will take HRO bubble business, and if they do they now know to pass the full costs on to you. So, be careful what you ask for – you just might get it!
As provider capability and configurability is rapidly improving, my advice is to push the envelope internally and with vendors to limit customization to what is absolutely required and worth the price. Do not be a bubble buyer using customization to gain short-term comfort at the cost of long-term value.
Linda Merritt, Research Director, HRO, NelsonHall
HRO Insights 
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