Posted tagged ‘HRO vendors’

HRO Déjà Vu

April 11, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Each quarter, we publish the NelsonHall HR Outsourcing Confidence Index (HROCI) for our clients and the participating service providers. I like to share some of the highlights in my blog, but it can be hard to make fresh insights during times when the results are stable from quarter to quarter. When the confidence ratings are generally strong, as they are, then stability is pretty good news for HRO service providers.

Overall Confidence Remains Stable

The most recent HROCI shows a vendor confidence level of 157 for Q1 2013, where 100 represents unchanged confidence and higher scores indicate increased confidence. That is in line with the 156 from Q4 2012 and a bit up from the 153 one year ago. Confidence dipped mid-2012 with Q2 at 138 and Q3 at 140, which was not too surprising given the political and economic uncertainty we saw last year:

  • While the overall confidence score at 157 remains stable, those suppliers reporting slightly more or much more confidence increased 13% quarter over quarter
  • Increased confidence is reflective of solid pipelines of potential new sales and expectations for growth.

Growth Expectations Vary

Service lines: HR business process outsourcing service lines do not grow at the same rate. Some services like RPO and payroll remain steady performers, followed closely by benefits administration. The pipeline for benefits administration is looking especially strong. Expectations for multi-process HRO and learning remain about the same, which indicates continued slow growth.

Geography: Location matters in HRO and the patterns of growth also vary by region. The economic recovery is uneven in pace, readiness for HRO is uneven, and multi-country deals are a smaller part of the mix than in the recent past.

Overall, vendor confidence by geography has weakened with many regions showing some decline in confidence. North America, Asia Pacific, and Latin America show the strongest numbers, but there can be significant variation country by country. As we have seen for some time, growth expectations for Europe and the Middle East remain dampened.

Industry: High-tech and retail look to be the optimistic growth industries with most sectors remaining within prior modest expectations for growth. Expectations remain low for federal government and defense.

Mostly Steady and Stable Ahead

It is good to see the balancing of demand for cost savings and process standardization continuing. Client pricing expectations may still be unrealistic as there are always those who want a quick 50% off along with some freebies thrown in at the same time.

One area to watch is the growing client interest in and adoption of platform-based services. Some buyers are specifying SaaS and cloud-based services in proposals. We need to help educate buyers on leaving some room for discovering the best solution fit for each client situation.

To end on a positive note, 79% of HRO suppliers believe that a net up-turn in decision-making is taking place. Let’s get out there and get those deals signed!

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Moorepay’s Roadmap to Success is in the Cloud

October 4, 2012

Linda Merritt, HRO Research Analyst, NelsonHall

Moorepay is a payroll and employment service provider in the U.K. with over 10,000 clients and it is a part of NorthgateArinso (NGA). Earlier this year I blogged about the launch of its new HR and payroll platform service for the small employer market in the U.K. This week, I spoke with Ann Fitzpatrick, Moorepay managing director, for an update.

In a brief recap, MoorepayHR is a cloud-based SaaS and BPO service built on NGA’s Preceda SaaS platform that is customized for the U.K. market and combined with Moorepay’s payroll and HR services such as employment law and health and safety advisory.

Cloud Opens the Small Employer Market

Most major HRO vendors do not attempt to reach the small employer market, which is just what Moorepay serves. Certainly small employers want professional and modern services, but until the rise of streamlined HRO platforms in the cloud, the costs were unaffordable for both clients and vendors. In the U.S., ADP has had such great success with Workforce Now, it launched a larger version called Vantage HCM. Now, employers in the U.K. can have the same level of service as larger companies at very affordable price points.

The Roadmap to Success

There are three levels of service, each with its own pricing openly displayed right on the company’s website. Payroll is available as an option with each of the service levels.  Approximately 40% of clients are currently adding payroll. In a bit of a nice surprise, ~80% of customers are choosing the highest level that comes with client services, making it a real BPO offering.

A 1Q 2013 launch is planned for the highest level of service, HR Advanced, which will add modules for talent management, recruiting, and remuneration. That will make the service more valuable for employers in the 100-400 range with more complex HR needs.

With its large base of payroll clients, Moorepay will later market the new system and services to its existing clients to allow conversion to the new system and added services.

Finally, Moorepay is receiving good support from the NGA Preceda team and they will work together to ensure the technology development roadmap is completed in the near future, including mobile and tablet access.

The Proof is in the Pudding

The new system has just reached its three-hundredth customer and all of these customers are new to Moorepay. The company now has a solid base of wins and users to move forward with its multi-stage approach to growth.

The small employer market is clearly hungry for such a service. Even before launch, there were hundreds of inquiries, and the number of inbound leads has rapidly increased. You know something is going well when customers are lining up at your door!

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Fast or Slow for HRO?

August 5, 2011

The economic signals for the second half of 2011 remain mixed. Looking at the macro markets combined with global debt situations and unemployment rates, it looks like we are on the edge again. The long struggle to reaching agreement on raising the U.S. debt ceiling rattled nerves around the world.

Alternately, if we look at the NelsonHall HRO Confidence Index for Q2 2011, we see that service provider’s confidence level is 168, near the all time high of 170. Supplier expectations for 2011 for most industry sectors have improved with banking remaining the strongest followed by high-tech and telecoms, with the state and local government sector also up. Expectations are a bit lower for automotive, professional services, and transportation. Geographic growth expectations continue to be positive in emerging markets and have strengthened in the mature markets like the U.S. and some areas of Europe.

HRO vendors see what is happening in the larger economy, they know there is a chance of a double-dip recession or at least several more sideways quarters. At the same time, strength in new sales and expanded scope with existing clients along with still strong pipelines provides them with a more optimistic view. Let’s hope they are right!

ADP echoed this divergent view on its FY 2011 earnings call. It is well aware of the current economic conditions, including a still possible downgrade in the U.S. credit rating. ADP’s FY2012 forecast calls for continued growth based on its strong performance in FY2011, with Employer Services (ES) up 8% to $6.9bn, and a better-than-ever pipeline. It is also benefiting from recent acquisitions and new service innovations that have broadened and refreshed its service lines, especially adding more beyond payroll options in Europe. While payroll continues to be the largest service line for ADP at 66% of ES revenues, 33% is now from beyond payroll services including full HR BPO. In the pipeline, it is now an almost even split: 52% payroll, 48% beyond payroll.

As seen during the recession, HRO can be hit hard and fast in a full-fledged downturn. So, how can a HRO provider like ADP defy the larger economic outlook now? ADP was willing to take a small hit to operating margins to hire and train several hundred sales and service people ahead of the upturn. It was able to affordably acquire added capabilities to round out service lines and invest in new services that have been successful right out of the box, including Workforce Now and Run, which currently has over 120k clients in the small market on its cloud platform using self-service and Smartphone access. At the same time, ADP retains focus on client satisfaction and retention to stabilize recurring revenues.

In a recovery, even a weak one like we are experiencing, a well-prepared HRO vendor can beat the odds. Is your HRO provider one that is beating the odds?

Linda Merritt, Research Analyst, HRO, NelsonHall

HRO, Shared Services Centers and the HR COO

June 17, 2011

Oh the things you can find when you wander the Web. One link leads to another and you can find shiny new ideas that catch your eye. Wandering may be a sign of a short attention span, I prefer to considerate it part of having an open mind searching for relevance. My latest Web find is Deloitte’s Human Capital Trends 2011 study.

HR is challenged to meet a myriad of needs and provide ever more value within constrained resources. Cost remains a top priority and business leaders also want HR to be less tactical and more strategic. The HR tactical work must get done to keep the organization running and HR regulatory compliance issues grow ever more complex, necessitating even more tactical tracking and reporting requirements.

In response, HR shared service centers (HRSSC) have emerged in larger organizations, especially multinationals, driven by the need for cost reduction and the efficiency and compliance benefits of better integrated systems and consistent processes.  Outsourcing some of the shared service processes and/or technology support is also a typical part of HRSSCs.

The HRO community touts the benefits of cost optimization, improved processes, improved compliance and reporting, meeting SLAs, and high user satisfaction. By role and nature, vendors focus on the performance of the areas of their own accountability. Therefore, if only a portion of the HRSSC’s processes are outsourced and multiple vendors are involved, it is a challenge to ensure that overall HR delivery services are effective, efficient, and cost-controlled.

One “revolutionary” trend for HR from the Deloitte study is the need for a HR Chief Operating Officer (COO) to focus on the design, development, implementation, and delivery of HR services. This leader needs to be a great organizational, process, and systems designer and manager. I would also add the HR COO needs to be able to determine from a capability and cost perspective where outsourcing is the most viable option and how to integrate HRO into the overall operation.

It is important to not get lost in the tactical aspects of shared services. The HR COO should be a strategic leader, well-versed in both HR and the business. Adding in the art of building and selling business cases, including capabilities in communications, networking, and even marketing would add value.

Tracking cost and process efficiency are necessary parts of managing an HRSSC. So is collaborating with HR generalists and business leaders to create results and provide data-based information for workforce decision making. Promoting HR and the value of the HRSSC is also important – deliver, create awareness, and buy-in for the next cycle of improvement!

Buyers – the HRSSC leader can be a key partner in both operations and strategic HR transformation, invest and select wisely.

HRO vendors – the state of HRSSC leadership, capabilities, vision, and current operation is a component of the HRO Maturity Continuum.

Linda Merritt, Research Director, HRO, NelsonHall

Building a Sustainable Base of HRO Clients

August 24, 2010

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

Cautious HRO Optimism from HR Week in New York City

April 14, 2010

Contrary to my headline, I should say cautious optimism from the New York Hilton as I did not actually attend the conference yesterday. This the first year there was no HRO World component to the event. But the HR Executive Forum agenda included some top HR leaders and senior HRO vendor executives, and the HR Expo for exhibitors was there so it was still a pretty good place to meet with others in the HRO community. My colleague Gary Bragar and I were all over the Hilton for planned meetings, and it was fun waving at others we knew on our way to meetings in the lobby bar, the side bar, the café, the Starbucks, and in conference rooms and suites.

Signs of the still-not-quite-here recovery were pretty abundant. One vendor did have a hotel room in which to meet, and another big name vendor did have an actual conference room and refreshments; coffee, tea and cookies. That was as lavish as it got.

On the more positive side, we had a number of meetings with RPO vendors, and they are experiencing something of an upturn. A few companies are establishing contractual relationships with RPOs to be ready for greater hiring volumes without rebuilding internal recruiting staffs. And it isn’t just the U.S. getting ready to return to hiring. One RPO vendor showed us a list of new first quarter 2010 clients in China, India, France and Mexico. Congratulations.

One of the running themes was choices for clients. There are more entry points into HRO than ever. Want support for your on premises ERP? You got it. Want to move to a hosted or SaaS ERP? It’s there. Plan to blend the two options? Go right ahead. Want full BPO for a set of core services and basic system functionality for your HR staff to use in other areas? No problem. Have a couple of long standing vendors you want to incorporate? It’s done. Onshore, nearshore, offshore or multishore, you can get it your way.

However, all this choice comes with a price for buyers, literally and figuratively.  It is easier to navigate choice when you are working within a long-term plan for your HR service delivery needs. So be sure the choices you make today will not limit your options for tomorrow.

Are today’s HRO vendors really excited about signing limited deals that only cover a portion of your entire service delivery system? Well, pretty much yes. In this not-quite-yet-a-recovery period, business is business.  But over time, your HRO vendor partners will each be hoping you will expand the relationship and win more of your business.  Make sure your selected providers – especially the primary HRO vendor for your HRIS system, and data and foundational employee and manager services – have the current and future planned capabilities and capacities to be your partner in what will ultimately be HR transformation.

But, a word of caution. I did hear there are some buyers still shopping for rock bottom prices. A smaller competitively priced deal? Yes, those are out there. Buying for price only, and assuming a vendor will take a loss to win your business, is a lose-lose proposition. From what I heard yesterday, the major players have learned that lesson.

Overall, the general mood was one of cautious optimism. A couple of vendors said they have signed some nice sized deals, and announcements should be released soon. Good news is always welcome, and we look forward to covering the news in our NelsonHall Tracking Service!

Linda Merritt, Research Director, HRO, NelsonHall