Posted tagged ‘HRO in United States’

Europe Overtakes U.S. in New HRO Deals

September 17, 2009

While the United States continues to dominate the global HRO market with over 50 percent of revenue share, 60 percent of the announced HRO contracts in the first half of September 2009 were with European buyer organizations, and only 20 percent were inked with U.S. companies. Granted a two-week period is just a short snapshot in time. But there is data to support a trend of geographic shift in where new HRO deals are being established. For example, the number of HRO contracts signed in the U.S. dropped from 50 percent in 2008 to 45 percent in 2009 to date, while U.K.-based deals jumped from approximately 30 percent in 2008 to approximately 40 percent in 2009 to date.

Why this traction shift? As organizations in the European buyer community become more accepting of HRO as a delivery model, they are increasingly seeking the cost savings, standardization of processes and technology, improved data quality, talent acquisition and improved data quality benefits associated with outsourcing payroll, benefits administration, RPO and other HR processes.

In addition to these traditional HRO drivers, European companies face significant HR complexities beyond those experienced by U.S. companies. Think compliance to local labor laws and legislation in different countries, different length work weeks and holiday time across countries, currency differences, disparate overtime rates and changing tax laws. HRO providers have the up-to-date knowledge and staff levels to effectively and efficiently manage these complex issues for their client companies.

The U.S. remains the largest market for HRO, and NelsonHall’s 2Q09 HRO Confidence Index indicates the U.S. to be among the top countries and regions in expected revenue growth by geography in 2009. However, I expect that in 4Q09 and 2010 we will see closer to 40 percent of contracts coming from the U.S., which is down slightly from 1Q to 3Q09. I further expect to see a continuing increase in the number of European – and Asia Pacific – HRO contracts. And wherever the engagements are located, an increase in HRO activity bodes well for the global HRO industry.

What do you think?

Gary Bragar, Lead HRO Analyst, NelsonHall