The Logic in Logica’s Focus on MPHRO

Linda Merritt, HRO Research Analyst, NelsonHall

Logica has long been an HRO service provider in the U.K. and Europe. With much of its HRO revenues from payroll, it has been a bit quiet on the multi-process HRO (MPHRO) front. So I wasn’t sure that I saw the logic in Logica’s increased investment in MPHRO capabilities, especially when there are other major MPHRO players already in the economy-constrained market.

The HRO group at Logica recognized the developing opportunity for MPHRO as some buyers, especially second generation HRO users and multi-country businesses, began to want more than just transactional low-cost contracts. This created space for an HRO partner to help clients transform HR to increase business and workforce agility in responding to rapidly changing market conditions.

Logica is emphasizing its transformational HRO capabilities by:

• Assisting organizations to align their HR objectives and services with those of the wider organization and manage HR against business goals such as increased employee engagement
• Change management and ensuring that change management is both carried out up-front and carried through to a detailed sub-process level using service simulations to promote operational change as necessary
• Composing a common HR process taxonomy to be used as a common language across both outsourced processes and the retained HR processes
• Program management and its real-time PMO tools.

In terms of process design, the company is looking to use a set of standard Logica HR processes for Logica-delivered processes; for client-retained HR processes, it will provide workflow tools. Logica is also looking to encourage innovation beyond minor process improvements by establishing jointly managed innovation funds and innovation groups with its clients.

In technology terms, Logica currently supplements Oracle’s PeopleSoft HCM 9.1 and Oracle’s E-Business Suite with specialist HR applications where necessary. It may also consider SAP-based HRMS implementations downstream.

To date, the investments are starting to pay off. BPO, including HRO, was the fastest growing segment for Logica in FY 2011, up 23.8%. In the last 12 months, Logica has also been awarded several major MPHRO contracts including:

• BAE Systems:  a six year contract supporting 33,000 participants in the U.K. with a new single-tenant, hosted Oracle HR platform; payroll services; absence and attendance; employee care; and administration services in support of talent management functions including recruiting and learning
• Ahold, a Dutch headquartered supermarket retailer: a nine year contract supporting ~100,000 participants in the Netherlands, Slovakia, and the Czech Republic with a new Oracle PeopleSoft 9.1 platform; HR administration services; HR service desk; and payroll services, which will be subcontracted to ADP.

Other MPHRO contracts were awarded by a British telecom and a Swedish financial services firm, both for five years.

Logica is well underway working its five year roadmap for services development, which includes strategic new services, increasing its partnership ecosystem, and practical elements like adding more mobile apps. Logica is also a relationship-focused partner, and that trust factor, along with results realization from the new wins, will help it continue to grow in MPHRO. Logical indeed!

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Asia Pacific, Talent2, and HRO

Asia Pacific is the emerging market of the most interest to HRO service providers, especially RPO vendors. Most of the big names in HRO/RPO are building or expanding scale there to take advantage of the higher than average growth rates. ADP and NorthgateArinso are well-established in the region, and Futurestep, GP, Kenexa, ManpowerGroup, Mercer, and Towers Watson have all made recent acquisitions in China, Hong Kong, India, and Australia as the fastest way to get more feet on the ground in this expanding market.

Still considered an emerging market, some Asia Pacific countries are already mature including Australia and Japan, while others are truly experiencing the first rush of growth. Each country has different needs and challenges and HRO service providers need to bring a lot of service line experience and local knowledge to the table. While one industry needs a high volume of entry-level employees to meet demand, another, a bit further on the maturity scale, needs management-level employees with the experience to manage and continue growth of a more complex enterprise.

Newer entrants should not forget that there are regional providers already on the ground; one of the largest is Talent2, which covers the entire area and a bit beyond. Talent2 has continued its solid pace of contract wins across the Asia Pacific region. An example from the public sector is contractor procurement and management for 13 agencies of the Queensland government. In the private sector, contract wins included payroll, RPO, and learning, and cover Australia, China, Hong Kong, Japan, Malaysia, and even the Middle East.

With ~1,700 employees, Talent2 supports 30 countries in 30 languages from its 46 offices and service centers located across 19 countries. With its scale and services it should be no surprise to find that Talent2 is, according to NelsonHall, the HRO leader in Asia Pacific.

Perhaps it is reasonable then that Talent2 has attracted interest from investors wanting to take it private. Morgan & Banks Investments (MBI) and Allegis Group have entered into an agreement to acquire the company, which will remain operationally as Talent2 if the deal is successful. MBI represents current major stakeholders and Allegis is already a Talent2 RPO partner. It will be interesting to see if privatization allows Talent2 to fuel even more growth in and outside of the Asia Pacific region.

Linda Merritt, HRO Research Analyst, NelsonHall

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