Talent2’s Competitive Edge

Linda Merritt, HRO Research Analyst, NelsonHall

The NelsonHall HRO team recently spoke with Mary-Sue Rogers, Talent2’s global general manager for HR managed services, for an update on the major Asia-Pacific, pan-regional HRO service provider with ~2.6k clients across 30 countries. Its client base includes companies of all sizes in both the private and public sectors. The company had a busy fiscal Q4 2013 winning more than 60 contract awards across its service lines, including payroll, RPO, learning and HR advisory services.

The Asia-Pacific HRO Market is Competitive

Asia-Pacific is a huge and diverse region with many of the individual nations still considered “emerging markets,” with opportunities for long-term growth. Talent2’s in-region competitors are largely global HRO providers, some span all service lines and others go head-to-head-on a single service like RPO.

So how does a ten-year-young company compete with many of the biggest names in HRO? Its competitors also have in-region locations but find it hard to match Talent2’s 40+ HRO-dedicated locations supporting 31 languages in 16 Asia-Pacific countries, including parts of the Middle East. In May 2013, Talent2 further expanded its operations in support of the Asia-Pacific region by opening a service delivery center in the Philippines.

Succeed With a HRO Competitive Edge

It is a core part of providing multi-country services to offer local subject-matter expertise on employment rules, regulations, taxation and compliance reporting, and all of the competitors can provide such services directly or through vetted local partners.

Talent2 demonstrates deep knowledge of local regulations as well as cultural and business environments. It knows the nuances that others may miss, which can help develop a service offer that is right on the mark for design and cost. For example, in the first instance, Talent2 addresses the following questions:

• What style of payroll service center support is preferred by employees in different areas of its region?
• What are the differences in an MNC headquartered in the West versus one headquartered in the target region?

As a result, 50% of its clients use multi-country services led by payroll and followed by RPO. Some start with one targeted country and add more over time.

Quality services and competitive pricing, along with its deep knowledge, provides a winning combination for Talent2, achieving a NelsonHall estimated ~10% growth in FY 2013.

Then Change to Remain Competitive

Talent2, which became a private company in 2012, is working its way through its stated development roadmap. The multi-pronged plan is focused on upgrading and rationalizing its technology platform to meet current and future client needs and going environmentally green to control internal costs and lower the total cost of ownership for its clients.

HR services are changing rapidly all over the world, as are client needs and interests, and no service provider can long rest on its laurels. Therefore, the question arises: does your HRO service provider’s competitive edge match your needs today, and will it tomorrow?

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Catching Up with ADP

Linda Merritt, HRO Research Analyst, NelsonHall

The recent passing of long-term U.S. Senator Frank Lautenberg reminds us of his early role in the formation of what became ADP, a founding member of HR outsourcing. In the early 1950s he was engaged in selling insurance and sold a policy to two young New Jersey businessmen, Henry and Joseph Taub. The Taub’s were pioneering a then new concept; payroll outsourcing. The brothers knew payroll processing and Lautenberg knew sales and marketing. Lautenberg took a risk and joined the Taub brothers and together they created a new industry.

Establish Operating Principles

By the time the company incorporated in 1961 the three leaders established principles that still guide the company some 60 years later. Following are a few of the principles they put in place.

Focus on Business Markets that Offer Significant Growth Opportunities

ADP has always pursued growth through new market opportunities, both by expanding it service lines and by entering new geographies. Much of the early growth was through acquisitions, as well as organic growth. Lautenberg retired as CEO from ADP in 1982 having made over 100 acquisitions!

Over time, ADP became a global player. An early acquisition was GSI, a large payroll and HR services company in Europe. The latest 2013 acquisition is Payroll S.A. to expand LATAM payroll capabilities to Chile, Argentina, and Peru. In the last few years major acquisitions included Workscape (benefits), The RightThing (RPO) and SHPS (benefits).

Embrace Technological Change to Enhance Product and Service Offerings

By the early 1960s ADP had moved from manual operations to the pre-computer punch cards and on to leasing its first computer: an IBM 1401 mainframe. That willingness to continue to embrace the new is seen in ADP’s successful launch of a series of cloud-based SaaS HR technology and BPO service platforms, including Workforce Now (1k-20K employees), Vantage HCM (50-3k employees), and GlobalView for multi-nationals. Together, the three services support more than 40k clients.

The company has also launched extensive mobility options, including RUN powered by ADP for small business mobile payroll and ADP Mobile Solutions for access to a broad range of information and transactions spanning time and attendance to benefits and pay cards.

Attract and Retain Motivated and Talented People

ADP has grown into a $10bn global outsourcing business with one of only four remaining AAA credit ratings in the U.S. With ~570k clients across 125 countries, we know customers support its line-up of services and proprietary developed technologies. What about people? A few recent awards tell the story:

• Ranked second on Fortune’s 2012 list of America’s Most Admired Companies in Financial Data Service
• Ranked in the Top 50 on IDG’s Computerworld 2012 list of the 100 Best Places to Work in Information Technology (IT)
• Named to the 2012 Working Mother 100 Best Companies, for the third time.

We therefore need to ask the question of prospective purchasers: does your prospective or current HRO service provider have long-term guiding principles and can you see evidence of them in action? Because ADP does.

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Ceridian Has a Whole New Feeling

Linda Merritt, HRO Research Analyst, NelsonHall

Ceridian just held its annual sales kick-off meeting and according to Jayson Saba, vice president of marketing strategy and analyst relations, there was “a whole new feeling of excitement.”

Ceridian Made a Big Bet

Ceridian is a mature service provider having been in payroll and HR services since 1932. So, what is causing such excitement in 2013? The answer is Dayforce HCM.

Ceridian began partnering with Dayforce in 2010, which soon led to investing in the company, and then to purchasing the company in early 2012 and forming a new business unit, Dayforce, led by David Ossip, Dayforce’s CEO.

This was a major strategic bet on SaaS as the new direction for a large portion of an already successful company with an estimated $1.5bn in revenues. How big a bet? Well, in late 2012, Ceridian made the decision to realign its sales and marketing efforts behind Dayforce HCM in North America, the company’s largest customer and revenue base!

The company will continue to support clients on its current systems and will not force migration. In fact, it will continue to invest in adding more features and functionality in key areas. Its other service lines will also continue including international payroll, benefits administration, EAP, and stored value solutions (electronic cards with preset or refillable financial value).

Dayforce HCM is a Party of One

Dayforce is a cloud-based platform built as a single application with one record, one rules engine, and zero interfaces. Real SaaS can eliminate the need to enter data in multiple systems, manage complex interfaces, and confusion about who to call when multiple vendors are involved, and it provides easier implementations.

Dayforce HCM includes:

• Payroll and tax: view, edit, fix, and preview payroll in real-time
• Workforce management: plan, schedule, and forecast labor requirements, and time tracking and compliance
• Benefits: manage enrollment, calculate eligibility, and support an unlimited number of benefit plan types
• Human resources: forms and workflows for managers and employees to manage work and life events
• Mobile: access, manage, and change schedules and other aspects of employee records including shift trading, availability, and time-off requests.

The system can scale for small, mid, and large market clients with a sweet spot in the 1,000 to 10,000 range. Ceridian already has several deployments of 15- to 30,000+ employees. Major retail clients include Aéropostale, Pier 1, and Crate & Barrel.

With a Clear Roadmap for the Future

The new system already has hundreds of clients and is available in the U.S. and Canada, and NelsonHall predicts that it will soon be expanded to the U.K. as well. We estimate Dayforce will become  the HR system of record for all of Ceridian’s HCM customers including managed and international payroll services and eventually become a global HRIS offering.

Ceridian is also working on new additions for talent management (performance management, compensation, and recruiting) and other social media features.

Nothing Succeeds Like Success

Imagine the excitement when your new system far exceeds expectations, wins awards, and delights customers. No wonder a good time was had at Ceridian’s annual sales conference!

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Have You Tripled Your HRO Business?

Linda Merritt, HRO Research Analyst, NelsonHall

TriNet has tripled its PEO and HR services business in five years with major acquisitions and organic growth under CEO Burton Goldfield.Most PEO’s are small businesses serving the local small business market. TriNet started out that way as well in 1988 in San Leandro, CA. Over time, it acquired other PEO’s and began expanding services to new localities. The first big acquisition was Gevity in 2009, helping the regional company to become a national player.

Acquiring Growth

In 2012, TriNet went on a buying spree with three acquisitions fueled by low interest rates, easy access to capital, and its own cash:

• Accord HR, a small PEO for additional geographic coverage
• ExpenseCloud, which added expense reporting as a service line
• Strategic Sourcing, Inc. (SOI), a larger PEO for additional scale and expertise.

ExpenseCloud and SOI will each maintain their name, brand, products, and services and operate as TriNet business units.

With the addition of SOI, the company almost doubled in size from 750 employees to 1,400, and it has gone from one office as a start-up to thirty-five in many areas of the country.

Growing Organically

Before and during growth by acquisition, the company was growing organically. It has been recognized by Inc. and included in the Inc. Hall of Fame for five years of rapid growth.  With the combination of both strategies, the company is now the largest privately held PEO in the U.S. and revenues have nearly tripled in the last five years.

Cloud-based, On Demand, and Mobile

Just this week, TriNet released it latest HRP Mobile app for Android and iOS:

• My Paycheck: access to payroll data and compare payroll statements
• My Time: information about planned time-off, accruals and balances, and submit and manage time-off requests
• My Benefits: view of key health benefits details
• About Me: update employee information
• Company Directory: find and call work contacts; also includes an organization chart search option
• Contact TriNet: contact employee solution center via email or phone.

PEOs like TriNet and its customers are benefiting from the evolution of affordable SaaS and cloud-based platform services and advances in mobile any-device access. Now even small local start-ups and mid-sized regional businesses have access to full HR suites and services.

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IBM & Air Canada: Proof that Traditional MPHRO Contracts Are Not Endangered

Before blogging about other current events such as ADP’s recent acquisition of The RightThing, one final announcement from HR Tech to address further is IBM’s contract win with Air Canada.

Air Canada was an early participant for outsourcing HR services as part of its business practice. In early 2004, it awarded a 7-year multi-process HR outsourcing (MPHRO) services contract to Exult, which was acquired by Hewitt a few months later. Hewitt, and then “Aon Hewitt” since its acquisition, provided Air Canada’s ~36k employees with workforce admin, payroll, benefits admin, recruiting, and learning admin services, a very “traditional” MPHRO contract at the time.

In addition, Air Canada awarded NorthgateArinso with a 5-year contract for managed payroll services in the U.K. in late 2010.  Then it decided to shake things up by opening up its MPHRO contract for competition. Key to winning the contract would be a provider that would continue to drive innovative transformation and ensure lower costs.

Last week, it became clear that IBM was the provider that Air Canada was looking for when it signed a ~8 year MPHRO contract for Air Canada’s North American employees and retirees.  Services include HR contact center, employee data management, employee travel support, payroll, benefits admin, leave management, recruiting services with support from Manpower, and software application support for the HR systems used to provide the services.  This recently announced contract is proof that traditional MPHRO contracts are not endangered.

Several weeks ago, I discussed the four market segments of MPHRO that exist in the market.  Among the emerging segments such as “multi-country standardization” was the “client-specific shared service / transformation” group, which represents many of the traditional, transformative deals that occurred in the early to mid 2000’s such as Hewitt’s contract with Air Canada.  Although growth for this segment isn’t expected to be quite as high as the other emerging segments, it is still expected to increase modestly through 2015 contrary to popular belief.

IBM and Aon Hewitt are both leaders within MPHRO.  Within the shared service transformation segment, Aon Hewitt is ranked first in terms of revenue with nearly ~19% market share; IBM is ranked second with ~14% market share.  Aon Hewitt is also doing its part to keep this segment alive; earlier this year it signed a MPHRO contract of significant size with an unnamed financial services organization.

While all the focus lately is on the newer species of MPHRO contracts, specifically the multi-country standardization contracts, the four existing segments can and will continue to co-exist in the larger ecosystem.

If you’re a MPHRO provider focused on the shared service transformation market segment be sure to tout your contract awards and renewals, so everyone knows that this segment is alive and well.  We love to share the good news!

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

 

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First Year+ Strong for ACS, a Xerox Company

With a year and a half passing since Xerox acquired ACS, Xerox has appropriately defined its new tagline: “Services-Led, Technology-Driven” with revenues roughly split equally between its Services segment and its Technology segment. Of Xerox Services, BPO is leading, accounting for 55% of revenues. The remainder of its Services revenue is ITO (12%) and DO (32%).

Within BPO, its four segments are HR, F&A, customer care, and transaction processing. Focusing on HR specifically, ACS is doing well according to information shared at yesterday’s Industry Analyst Meeting in NYC.  In total, the company has secured 44 HR services deals in the past 18 months.  Its first HRO deal since the acquisition was closed was a 5 year H&W services contract with P&G in March 2010.  

Some recent HRO highlights include signing a long-term TBO contract with a wireless telecommunications company, winning its largest ever learning services contract with a pharmaceutical company, and leveraging the ACS and Xerox relationship to win a multi-process HR outsourcing (MPHRO) contract from a competitor. 

Serving more than 11m employees and retirees worldwide, the company is focused on “consumer-driven solutions” or viewing the client employee as the end-consumer.  Part of this initiative includes its client collaboration group, FutureThink, which began piloting last year and has recently expanded. 

Its plans for geographic expansion are ripening.  The company has made great progress with its first target, Europe, with revenues increasing 10% and pipeline growth up more than 100%.  Approximately 90% of this pipeline improvement is the result of Xerox synergy.  Another positive is a recent MPHRO win from this region. 

Aside from Europe, ACS is targeting Latin America, specifically Brazil and Mexico, and Asia.  In Latin America, the company has a good market presence due to its acquisition of ExcellerateHRO last year. 

Additional acquisitions and partnerships can’t be ruled out either, especially for building out service capabilities.  Finally, to support all this growth, ACS has made investments in CRM, expanding its India and Malaysia centers.

Eighteen months since the acquisition has closed, Xerox has demonstrated a successful integration of ACS and signs are pointing to a positive future for HR services.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

The Forgotten HRO Capabilities

It is no longer enough to just talk about HRO lowering administrative costs and burdens.  The lead focus is now on how HRO and a particular vendor’s services will help make the buyer’s business better and HR more effective.

As soon as a business grows in size, it grows in complexity. And HR services are, in and of themselves, unexpectedly complex and dynamic – a lesson learned the hard and costly way by many a client and HRO provider. Thus, in addition to defining the service solutions and holding the pricing discussions, it is important to bring to light both the provider’s and the buyer’s capabilities to manage complexity. These deeper capabilities can make or break long-term results achievements, and make the partnership a binding one or a bonding one.

Most HR organizations are networks of services, some that cross internal support services organizational lines and others that involve multiple suppliers and start and end in the business units. Even with a new multi-process HR outsourcing (MPHRO) engagement, it is unlikely that all existing suppliers and technologies will be displaced. And a best-of-breed approach can actually enlarge the network, requiring the client to manage the services integration and vendors, or separately pay one provider for the integration and vendor management.

Complexity management capabilities such as governance, program management, project management, change management and supply chain management become critical enablers. No matter how latest and greatest the technology, or how compelling the pricing, it must all work in the ever changing world of HR and for businesses still facing uncertainty.

Let’s focus on one of the sometimes forgotten HRP capabilities – supply chain management. Vendor management is often listed somewhere in the benefits statements or addressed briefly in the RFP. The level of integration and coordination needed across a complex network of internal and external suppliers is major and can be a real bottleneck. Every interface is a service break point; every vendor requires communications, coordination and contracts. Just ask Boeing, which for years has been struggling with delays and burdened by hundreds of millions of dollars in cost overruns due to a complex and uncontrolled supply chain for its largest new planes.

What happens when changes, expected or unexpected, that cross boundaries of the HR network occur? For example, a change to the benefits plans requires changes to multiple systems including payroll, IT, the network of benefits providers, knowledge databases, etc. Who will handle what? What tools and governance systems will be used? Does the provider’s approach sound reactive, or proactive?

When I was with AT&T as contract manager for a large MPHRO deal, I remember the unexpected benefit of our vendor actually managing other vendors and suppliers, and coordinating with our internal IT, treasury and security departments. AT&T HR and my group were deeply involved as well, and together we were able to successfully implement more projects and changes on time and within our budget than ever before.

Buyers, really dig for complexity management proof points. Providers, showcase your competitive advantages!

Linda Merritt, Research Director, HRO, NelsonHall

Building a Sustainable Base of HRO Clients

Last week’s Infosys BPO analyst day, which I blogged about the day after I attended, got me thinking about what it takes to build a sustainable base of long-term client relationships. This is important for HRO vendors and clients where contracts are multi-year, and services can be complex, difficult and expensive to transition. Fifty percent or more of an HRO vendor’s organic growth can be from long-term customers.

During analyst day, ADP brought in several clients for us to meet with, and Infosys BPO brought in five customers for group and one-on-one meetings. Sure, clients are carefully selected for such opportunities, but it’s still a nice show of vendor confidence. So let’s use this to cover two elements in building a strong foundation for profitable client relationships.

Provide a consistently high level of services across all customer segments.
Many early HRO clients felt the quality of their service experience relied too much on a particular account manager, service team or location, whether they were a big dog client or not, as well as their own ability to actively “manage” the service provider.

The Infosys customers represented different service lines, including HRO, sizes from small/mid to large market, with both U.S. and global coverage, and ranged from a brand new client still in transition to a client that pre-dated the formation of Infosys BPO in 2002. Think about that for a minute. It is possible to build and sustain a consistently high level of HRO services, service centers and personnel across all services, segments and regions, even given the higher rates of turnover common in many offshore locations. Not easy, but possible.

Be a strategic partner and grow your business without “selling.”
Another common HRO complaint is the lack of innovation once the services are up and running. Regularly bringing the client relevant and knowledgeable suggestions and best practices on how to improve processes and practices keeps the conversation on scale and scope open and ongoing. Even if clients choose not to act on the suggestions, they appreciate the thought. But note I underlined relevant and knowledgeable for emphasis. Every client wants to know you understand and care about its unique business needs, and that you have the domain experience and expertise to be a strategic partner. In a strategic partnership, the client feels it can do more with you than on its own.

HRO buyers, when assessing vendors, consider talking not only to clients most like your company, but also to clients of different services, sizes and geographies. Ask service providers about price, performance, customer satisfaction and what percent of organic growth comes from current clients.

HRO vendors, how consistent is your service experience? How well do you continually build and reinforce your brand as you grow and globalize? Think you’re a strategic partner? Is the evidence present in growth of mature accounts, sole source opportunities and inclusion in business planning? Do your clients bring new projects and service opportunities to you? They will if you are a consistent and trusted strategic partner.

Linda Merritt, Research Director, HRO, NelsonHall

Welcome to 2010 and the Rise of the HRO Services Portfolio Manager

As we were moving quickly toward 2010, most leading firms in the services delivery industry were asked to make predictions for the year ahead, what trends will continue and in what new directions will we go tomorrow. NelsonHall’s (per Gary Bragar and me) HRO predictions will be published in the next issue of HRO Today magazine, and mine is already available in the Shared Services & Outsourcing Network’s article, The Year Ahead: 2010 in Shared Services & Outsourcing.

I firmly believe achieving HR services excellence today does not begin with the question of outsourcing or shared services. Rather, the question is what is the optimum mix of outsourced, shared services-based and locally delivered HR services given the current and going forward needs of the business? As a result, I see the possible, and needed, rise of a new type of HR executive…the HR services portfolio manager.

The HR services portfolio manager is a business and HR leader who blends a review of business plans and HR initiatives with internal capabilities and costs to develop a strategic plan to manage the total cost of ownership for the entire portfolio of HR services, while maximizing HR’s efficiency and effectiveness and its impact on the business. The HR services portfolio manager partners with the HR executive to gain funding and the buy-in of stakeholders.  

Another role of the HR services portfolio manager is that of HR services delivery architect. Here the responsibility lies in building out in phases the “Lego” mix and match service delivery model to ensure it is all seamlessly integrated and managed, and providing the required service quality, cost and performance. The requisite skills and competencies for this role are that of a technology leader, a vendor manager and an HR-savvy operations manager. 

While this new role represents a new possible direction rather than a solid current trend, I saw signs of it as early as 2007, and have continued to seek and see peeks and parts since then. For example, I met a European executive who was managing a large scale multi-function outsourcing portfolio, and a U.S. executive who was brought in to manage a large and challenging scale HRO engagement and help revise the retained HR services. Both were non-HR business executives.

A more rare peeks and parts sighting is the metamorphosis of existing shared services leaders into portfolio and delivery architects. The financial pressures of the recession have helped with the growth under fire of some of the skills and competencies needed for the full emergence of the HR services portfolio manager.  

Whether this describes one HR superstar, or team capabilities, we are not talking about quiet “factory” managers toiling out of the way in the back-office, taking out a few more pennies here and there. We are talking dynamic executive talent that impacts the lion’s share of the HR spend, and accelerates HR’s delivery of business results.

Happy New Year!

Linda Merritt, Research Director, HRO, NelsonHall