HRO Continues Growing and Going

As we near the halfway point, 2012 is going well for HRO. As support, here are choice tidbits from our HRO news coverage and analysis.

First quarter revenues were solid for most vendors. RPO and PEO led the way with continued strong growth in the mid-to-high teens even as new job growth has stalled. Clients are increasingly using HRO services to help manage and balance workforce talent needs. Lower but steady mid-single digit growth is rolling along for benefits and payroll in the traditional HRO service areas.

There was plenty of new business to go around by service line, vendor, geography, and in both the private and public sectors. There was even a very nice smattering of large deals with TCVs in the hundreds of millions!

Logica was awarded a 6-year multi-process HRO contract by BAE Systems to support its 33,000 U.K. employees. Included is implementation and management of a single-tenant, hosted Oracle HR platform, along with payroll, and adminsitrative services in support of talent management functions including recruiting and learning. This is Logica’s second significant sized multi-process HRO win in six months. This is a good indicator of its success as a major preferred partner of Oracle for HRO in Europe.

Speaking of Europe, HP has been awarded a major 15-year multi-process HRO contract by Italian financial services firm UniCredit Business Integrated Solutions SCpA. A major driver for this deal was the need for a platform to support globally standardized HR and payroll processes across the countries in scope (Italy, Austria, plus a third country), serving ~98,000 employees. The HRO services in scope include payroll, time and attendance, workforce administration, learning and development administration, mobility, and ex-pat services.

The U.K. was the hottest area for the public sector. These deals are long wave sales with lots of competition, and there were even incumbent upsets. The services are naturally very important, but the promised cost advantages must be delivered. Lots of hard work and strong partnerships will be needed by the client organizations and the vendors to ensure success.

• Capita was awarded a £250m contract by the Cabinet Office to exclusively manage the Civil Service’s training services. It will both directly deliver training and manage a competitive network of other training suppliers.
• Capita was awarded a £440m contract by the British Army for recruiting services. The Recruitment Partnering Project contract is for 10 years and Capita will also deliver supporting technology for the Royal Navy and the Royal Air Force. It will partner with Kenexa for assessment and recruiting technology.
• Almost at the finish line is CSC as it has been selected as preferred bidder for a £400m, 7-year contract by the MoD to provide pay and pensions administration services to the Service Personnel and Veterans Agency (SPVA) for the U.K. Armed Forces.

Let’s all hope the rest of the year keeps HRO growing and rolling along!

Linda Merritt, HRO Research Analyst, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.

Does HRO Help or Hurt in Achieving Human Capital Leadership?

Can employers be recognized as leadership development advocates and a great place to work and still take advantage of HRO services? Yes—and recent “best companies” announcements provide plenty of examples.

Fortune’s annual 100 Best Companies to Work For list includes a number of companies known to use HRO services. RPO examples include: American Express (Hays RPO), Edward Jones and Intuit (Manpower Group), Microsoft and Novartis (Alexander Mann Solutions), and SAS and Telefonica (Ochre House). Accenture, which provides HRO services, is on the list as an employer.

HRO clients are also among the recognized companies in the 2011 Top Companies for Leaders, another recent Fortune study in association with Aon Hewitt. PepsiCo (Aon Hewitt) and Unilever (Accenture, IBM) are among the multinationals taking the lead in developing leaders. Again we see RPO as a common talent management service selection; Eli Lily and Novartis AG (The Right Thing, An ADP Company), GE and Siemens AG (KellyOCG), and Whirlpool (Kenexa). IBM, another major HRO player, is recognized, as is Wipro. Accenture is noted on the U.S. list and Infosys is on the Asia Pacific list. ADP is included in the 2012 list of 10 Best  Companies for Leaders rankings by the Chief Executive.

Business Today has just released its 11th annual “Best Companies to Work for” in India and top companies include HRO providers such as Accenture, IBM, Infosys, Wipro, and TCS. Honeywell International (SourceRight Solutions) also made the list and is on the U.S. list for Leaders as well.

The lists go on and on and you will find companies that use HRO as well as HRO providers among the best of the best. You can be a pioneer in leadership development and use HRO in critical talent management areas. You can achieve greatness in any region of the world. You can even look to some of the HRO providers to share their own expertise as a “best company” in the human capital leadership arena.

Will HRO automatically make you the best company? No. However, HRO will not slow you down and may even provide a committed partner in accelerating your success.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

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