The Places We Will Go to Grow HRO

The players in the multi-process HRO field have been changing. As we ready for economic recovery, will there be new entrants? Who is leaving? Who is for sale? And who is on the hunt for an acquisition?

As we have at least a few minutes before the recovery takes off, let’s have a little fun speculating.

Tidbits

I recently interviewed several of the new India-based HRO provider entrants. Each said that while they were not explicitly looking for acquisitions they would consider the “right opportunities.”

The United States remains the largest market for HRO, and there is more than one non-U.S. based player looking to grow business in the U.S.

The Economic Times reported this week that Infosys BPO CEO Amitabh Chaudhry talked to reporters on the sidelines of the World Economic Forum in New Delhi, India. While Infosys already has eight delivery centers around the globe, including in Mexico, it does not have one in the U.S. According to the press coverage, Infosys BPO is reportedly planning to set up a new delivery center in the U. S. before the end of this financial year. In addition, “Infosys also said it is eyeing acquisitions worth USD 50-200 million in areas where the company has a small presence. ‘The acquisitions will be funded through cash in areas we have a small presence,’ Chaudhry said.”

While the above reported comments are about Infosys’ broader BPO, it is a safe leap to assume the interest is there to further expand its HR business as well.

Is NorthgateArinso also looking to expand its share of business in the U.S.?  If the two most recent new experienced executive hires are any indication, the answer is yes.  In September, Trey Campbell was brought aboard as President of the Americas. And in October, Troy Workman joined as VP of Service Delivery in the Americas.  

Trends

We have been seeing acquisitions and partnerships to fill out service and coverage footprints to provide expanded services to multi-national companies, and that activity will continue.

Growth into emerging markets is regularly predicted and will happen in due time.

Given the anticipation of a slower recovery in Europe, combined with its less mature HRO market, it is not likely to lead the way in growth.

So the U.S. will remain a growth target magnet for HRO, in everything from applications to discrete processes to multi-process HRO.

Are you a small-to medium-size niche HRO provider with state-of-the-art technology, specialty services with deep subject matter expertise or coverage in a desirable geography? Be ready to answer the knock of opportunity.

And buyers, good news. There are providers who want to be where you are and where you are going, whether it is in North America or around the world.

Linda Merritt, Research Director, HRO, NelsonHall

Managing Your Footprint – Welcome to the New Summer Time HRO Dance

Many HR outsourcing providers today are looking for ways to carefully manage their service footprint.  Under economic pressure, and with limited tolerance for capital investments, they are seeking cost-effective and risk-managed ways to leverage their service strengths and geographic coverage. As a result, we are seeing a new round of provider dance partners making selective divestitures, partnerships and acquisitions.

The Back Step: In a few cases, providers are back-stepping from some services and countries to focus on core strengths and growth geographies.

•  For example, in Europe, Randstad continues to sell parts of its salary administration and payroll services in the Netherlands while planning to carry on delivering these services in other countries where it has better growth prospects.

Two to Tango: In more cases we are seeing partnerships and alliances to leverage complementary service delivery strengths with an overall expanded geographic footprint.

•  In May, General Physics and Baker Communications entered into an agreement to increase their partnering in offering global corporate training and learning services.

•  Alexander Mann Solutions (AMS) has been leading the alliance dance this summer. It and Xchanging just announced their strategic alliance to deliver end-to-end HR services. And just two week ago, AMS and The RightThing announced their partnership to cover and expand multinational RPO services.

Take the Lead: Swinging across the dance floor from alliances and strategic partnerships and moving on to joint ventures can culminate in acquisitions.

•  Hewitt Associates has acquired the remaining interest in BodeHewitt AG & Co KG – a German pensions and benefits specialist – from its joint venture partner Bayerische Hypo- und Vereinsbank AG (HVB), with the business becoming Hewitt’s German Retirement and Financial Management (RFM) consulting practice.

•  Trinet just completed its acquisition of Gevity, further expanding its PEO geographic footprint and ability cover both the small business and midmarket.

Thank Your Partner: A good turn around the dance floor can lead to more business opportunity.

•  Adding to its dance card, Alexander Mann Solutions has signed a five year agreement to use new HRO partner Xchanging’s procurement outsourcing services.

The HR service provider partnering activity we are seeing looks like positive strategic moves for providers and buyers alike. But actually making partnerships of any nature work requires a lot of nurturing over a long period of time. We’ll see which of the summer time dance partnerships lead to long-term relationships.

Linda Merritt, Research Director, HRO, NelsonHall