Fast, Flexible and Free HRO – What Customers Want Now

The newest NelsonHall HR Outsourcing Confidence Index indicates that although supplier confidence in the demand for HRO services rose significantly in the second quarter of 2009, they still face largely frozen decision makers.

The signs of hope seem to be more in growing pipelines than in deals done. When a few presenters at this year’s HRO World conference in New York said pipelines were increasingly active and growing, the buzz quickly spread. Rumors, or even rumors of rumors, about the dawn of an upturn in the economy and dreams of unleashing pent-up demand were enough to feed the HRO World attendees’ hunger for good news.

What will help unfreeze the freeze? What are HRO customers most looking for now? Well, they want deals that are fast, flexible and free.

Fast – First Year Savings

The focus is on the short-term. Customers are not interested in long-term returns on investment that may or may not materialize, they want savings now. Our research over the past year shows the nature of deals has changed with organizations typically looking for certainty of cost reduction within the first year of the contract.

Flexible – No Minimums

Scalable services and variable pricing has long been part of the HRO value proposition. Minimum volume guarantees are a part of many contracts as a way to embed suppliers’ recovery of transition and investment costs. Today buyers are looking for infinite variability to be able to quickly add or shed expense directly in line with volumes to the maximum degree possible.

Free – No Upfront Investments

If buyers are shying away from fixed fees, they are even more averse to upfront implementation fees and technology investments.

This risk-averse environment favors smaller scope and scale deals, as opposed to large transformative deals where major technology investments are needed. Right now, buyers are not willing to make major long-term investments and service providers, mindful of their own profitability, are much more cautious about taking on more financial risk.

With HRO pipelines heating up it will be interesting to see what type of deals result. How close will they be to fast, flexible and free?

Linda Merritt, Research Director, HRO, NelsonHall