Posted tagged ‘MPHRO’

HRO and Innovation – Getting Practical

May 31, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Innovation in multi-process HRO (MPHRO) has been a topic of discussion, and some contention, since the early mega-deals that created the modern MPHRO market more than ten years ago.

Even in the early days there was a desire for innovation, but there was also a lack of common definitions and mutual understanding, along with difficulty in articulating innovation in contract language.

There was an even greater barrier – systems spaghetti. Early MPHRO clients had highly-customized ERP infrastructure, aging legacy systems, and third-party applications, much of which may have been non-centralized and non-integrated. Each major customer was in their own bubble of services and systems. It quickly became apparent that it would be hard to add new and different innovations within the constraints of the contracts and the technologies.

Platforms for Innovation

Major MPHRO service providers now have global multi-client service delivery and data centers with sophisticated workflow processes. Early clients have been moved bit-by-bit into the common support infrastructure, even if they remain on their own, licensed ERP systems.

Many HRO clients are ready for increased standardization and multi-client platforms to reduce cost and to improve performance. Innovative cloud-based SaaS and services platforms are opening up new services to the mid-market and parts of the large client market:

  • Clients on a shared service platform benefit from ongoing incremental improvements
  • Clients benefit from access to new products and services without paying a significant portion of the R&D needed for a one-off innovation.

Some tension between continuous improvement and innovation is natural, as the line between an “included enhancement” and what is “new and different to be added as an extra charge” looks very different depending on whether you are a buyer or a supplier.

Collaborative Innovation

Client user groups support both HRO improvement and innovation. Vendors were originally reluctant to let clients communicate with each other (partially because the clients might “gang-up” on the vendor – and sometimes they did!).

Companies like IBM and Xerox were leaders in developing client advisory boards. These interactive groups provide feedback on the services, give input into common needs, and even offer guidance on parts of the vendor’s development roadmap. They are not just “the voice of the customer”; they are also a built-in base of beta testers. Willingness to put some skin into the game is also a great way to test market viability and further strengthen relationships.

Infrastructure of Innovation

Buyers can develop their processes for HRO innovation in the following ways:

  • Assess vendors for innovation capabilities as part of the selection process
  • Develop the language and mutual expectations for measurable innovation upfront and include in the terms of contract. Include who pays, and when, determine if there will be vendor incentives, and clarify the client’s role
  • Use the governance process to jointly monitor, manage, and measure improvements and innovations over the course of the relationship.

The good news is that we are beginning to build the HRO infrastructure for future innovation; common language, standardized multi-client platforms, and client user groups.

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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!

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

RPO Generation 2.0 is Ready to Go

March 28, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Recruitment Process Outsourcing (RPO) is one of the younger HRO service lines and it is both growing and maturing quickly. The March issue of HRO Today recognizes the emergence of RPO 2.0.  NelsonHall’s RPO specialist, Gary Bragar, would certainly agree. Gary’s October 2012 Targeting Recruitment Process Outsourcing market analysis highlighted many of the same developments in this rapidly growing HRO segment.

What is New in RPO 2.0?

The rapid growth and incorporation of social media for recruiting is a big part RPO 2.0, one that keeps pushing RPO to the leading edge of innovation in the HRO space.

RPO services are rapidly moving up the value chain, and changing client expectations is the key. While reducing the cost of service provision is always on the table, it is no longer the number one issue. Flexibility and scalability will always remain important as well, given how quickly hiring needs can change.

Today’s RPO 2.0 clients are looking for more value:

  • Improved quality of hires
  • The latest tools and technologies for social and mobile
  • Expertise in accessing talent pools and passive hires
  • Greater focus on candidate experience
  • Analytics and insights, in addition to metrics and reports
  • Improved retention
  • Access to advanced services including employment branding, talent management, talent engagement, and integration with workforce planning.

Clients Simply No Longer Want To Do It

In the last few years, many buyers reduced internal recruiting staff in line with the reduced volume of hires, and they do not want to rebuild and reinvest in the rapidly evolving technologies and advanced skill sets it takes to succeed in today’s competitive, social, mobile, and global recruitment process market.

Buyer Choice is Broad

For every large staffing company that does RPO including Adecco, Kelly, Manpower, and Randstad, there are smaller vendors that specialize in RPO such as Ochre House and Pinstripe.   Most leading RPO vendors of all sizes can offer services in most of the regions of the world as they have partnered and made acquisitions to make their footprints global.

Not long ago, major multi-process HRO (MPHRO) providers either did not provide end-to-end RPO or saw it taken out of contracts. Now, more MPHRO providers have full RPO services strong enough to be offered as standalone services including ADP, Aon Hewitt, Infosys, and IBM.

With RPO 2.0 You Can Have It All

While having it all may still be a bit aspirational for most of us, we are finding evidence that successful client / provider RPO partnerships can improve process efficiencies (e.g., reduce time to hire 20% to 50%), reduce the total cost of hire (often 20% to 30% or more), along with increasing hiring manager and candidate satisfaction.

Imagine what we can achieve with RPO 2.0!

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HRO Will Drive Ahead in 2013

January 25, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

With more organizations making the decision to use HR business process outsourcing services, even in the face of a still uncertain economic environment, the overall confidence of HR outsourcing suppliers in the market over the next 12-months is at its highest level in six quarters according to the latest NelsonHall HRO Confidence Index (HROCI).The HRO vendor confidence level is up 6% year-over-year reaching 155.5, where 100 represents unchanged confidence and higher scores indicate increased confidence.

Drivers Outweigh Inhibitors

The impact of the wider economy is strengthening the drivers for HR outsourcing which appear to be outweighing its impact on the associated inhibitors such as unrealistic pricing expectations and frozen decision-making. Currently, 89% of HR outsourcing suppliers believe that a net up-turn in HRO decision-making is taking place, with just 7% of suppliers perceiving that a net down-turn in HRO decision-making is taking place.

The top principal drivers for HR outsourcing include:

  • Increased cost reduction
  • Greater process consistency across business units and geographies
  • Organizations looking for an increased transformational emphasis.

New private sector HRO deals typically remain limited in initial size, and significant growth opportunities continue to come from existing clients in the form of added scale or scope. In line with the “increased focus on cost reduction driven by the worsening economic climate,” organizations are finally showing an increased interest in evaluating outsourcing opportunities previously rejected.

Transformation Beyond Cost Arbitrage

The HROCI supports our 2013 trends with “a clear ‘transformation’ agenda” and a focus on value. Clients are looking to vendors to help them:

  • Deliver a more empowered employee experience and access to learning using technology to administer, deliver, and share learning
  • Manage business outcomes by driving higher employee engagement including a better end-user experience and continual “future-thinking”
  • Achieve solid productivity and accelerate time to competency.

2013 Outlook

HRO vendor expectations for 2013 look best for payroll, then MPHRO which looks solid, followed by RPO, benefits administration, and then learning services. Multi-country deals for payroll and RPO will again be common with the average number of included countries around 20.  Of little surprise is that expectations for the government sector have slightly worsened, particularly for defense and state & local government.

Have You Listened

Another NelsonHall product of interest is the BPO Index which is supported by a quarterly conference call open to all who register.

According to the January Index, total BPO contract value was down significantly for 2012, especially in North America and Europe. The global economy and the U.S. fiscal cliff added to business growth uncertainty, which drove down industry-specific BPO the most.

At the same time, back-office BPO, which includes HRO, was up 25%, and HRO was up significantly year-over-year.

If you can lower total cost, improve performance, and increase business value, you can get an HRO deal!

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The Importance of Defining MPHRO by Market Segments

January 22, 2013
Amy L. Gurchensky, HRO Research Analyst, NelsonHall

Amy L. Gurchensky, HRO Research Analyst, NelsonHall

In NelsonHall’s last “Targeting Multi-Process HR Outsourcing” (MPHRO) market analysis report, I identified four unique market segments that MPHRO buyers fall within and their characteristics.  Namely:

  • Multi-Country Standardization
  • Shared Service Transformation
  • Core Business Focus
  • Technology-Led HR Service Enhancement.

In the latest report that is due to be published this month, I cover how these segments have evolved and take a closer look at contract activity in the last two years among each segment.

Some highlights include:

  • The average number of countries for all contracts in the “Multi-Country Standardization” and “Shared Service Transformation” segments versus the average number of countries for contracts within these segments signed since January 2011
  • Average employee headcount for each segment overall and for contracts signed after January 2011
  • Client drivers, benefits, and inhibitors by segment
  • Average contract length by market segment and the trend for contract durations by segment since January 2011
  • Pricing model trends within each segment
  • Market size and growth rates by market segment
  • Vendor revenues by segment.

To really understand the MPHRO market, distinctions by market segment need to be made since trends in one segment can incorrectly skew data.  For example, the average MPHRO contract length for all market segments combined is approximately six years.  However, durations by segment reveal that the Shared Service Transformation contracts average 8.1 years, while the other segments average somewhere between 4.8 and 5.5 years.

Stay tuned for more insights on the current shape of the MPHRO market.

Accenture and Unilever Renew Major MPHRO Contract for Five More Years

December 20, 2012
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Let’s wrap-up 2012 on a high note for HR BPO with news of Accenture’s award of a 5-year multi-process HRO (MPHRO) contract renewal from Unilever. When orginally announced in 2006, the 7-year contract was the single largest HRO deal signed with an estimated value of $1bn.

First Generation HRO

The focus of the first generation Unilever contract was largely on cost reduction (20% – 30%) and creation of a unfied global HR operating environment of systems and services across 100 countries and 20 languages. Unilver had already begun the tranformation process by introducing shared service centers in key areas to capture some of the early gains on its own as part of its One Unilever program to reduce the cost of back-office services including HR, F&A, and IT. It then moved to HRO to make further progress in efficiency, cost, and to gain a single source of the truth in reporting and mearsurement capabilities.

Second Generation HRO

Accenture will continue to support ~130,000 Unilever employees operating in more than 100 countries through its global delivery network including multiple centers across the U.S., Europe, and Asia Pacific. MPHRO services include:

  • Core HR administration
  • Payroll administration
  • Recruitment
  • Learning services covering content sourcing and development, program planning and delivery, and learning system hosting
  • Management and administrative services.

As is common with renewals, there are some expansions of scope and a greater focus on improvements, in addtion to a desire for further cost reducing efficencies.

Accenture will be introducing service improvements to drive greater efficiencies and improve the user experience and align the services it delivers with Unilever’s Talent Agenda. New elements include:

  • Introducing a more proactive recruiting approach, including the expanded use of social media (Accenture itself has been using LinkedIn and Twitter to recruit staff for a few years now)
  • Expanding the scope of the learning services delivered by Accenture to include professional skill-building modules in the curriculum to support Unilever’s focus on developing future leaders; learning programs will make greater use of virtual instructor-led training (VILT), which is in line with Unilever’s sustainability agenda
  • Evolving in performance metrics to go beyond traditional operational SLAs to include metrics focused on the client’s desired business outcomes.

It is a good quarter when you can announce a major MPHRO deal, whether it’s new or a renewal. For FY Q1 2013, Accenture’s revenues were $7.2bn, up 5% in local currencies; EPS were up 10% to $1.06; and operating income was up 7% to $1.05bn. Outsourcing brought in $3.26bn in revenues, and $3.3bn in new bookings. A good quarter indeed!

Happy holidays from the NelsonHall HRO team: Gary Bragar, Amy Gurchensky, and Linda Merritt.

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HRO Yesterday and Today

October 29, 2012

Linda Merritt, HRO Research Analyst, NelsonHall

NelsonHall was pleased to contribute to the HRO Today article Out of the Ashes for the 10th anniversary issue. 

Looking back ten years shows a picture of HR saddled with expensive and paper-heavy manual processes, even after the introduction of the big HR ERPs from PeopleSoft, SAP, and Lawson, providing impetus for an emerging HRO industry.

A New HRO Emerges…

The new HRO industry was full of great ideas and big plans and ready to grow well beyond payroll and benefits administration services. Unfortunately, intentions were a bit ahead of capabilities including the buyers, providers, and technology. Luckily for the industry, most clients and service providers fought through the issues, the losses, the changes in scope, and even changes in providers, to stay with HRO.

One of the biggest changes we have seen is the maturation of the HRO experience and enabling technologies. As the HRO experience has been developed, subject matter expertise has grown, global service delivery networks have been built, processes have become structured and standardized, and technology has advanced with more configuration and less customization.

…Goes Global…

HRO is now global in every sense of the word. Clients are based in every region of the world as are sales and service delivery. The highest revenues are still generated from the established markets like North America and Western Europe; the growth markets in Asia Pacific and Latin America are developing beyond service delivery (supply) for multinationals into internal markets for growing regional businesses (demand). For example, IBM is headquartered in the U.S. and Tata Consulting Services (TCS) is headquartered in India, both have major multi-county multi-process HRO clients in Latin America as well as a growing set of in-region service delivery centers.

… and Gets High Tech

Technology advancement is the great enabler of HRO services. The BPO industry as we know it would not be viable without global low-cost communications and the internet that allows work to be done anywhere at any time. Software advances bring not only better tools to clients, but improved workflow processing to HRO service providers, allowing work distribution to where it can be done most efficiently and effectively. Now an employee in the U.S. may call a service center on or nearshore with a complex issue that creates a tier 2 referral to a center of excellence in a third country using data and analysis derived from the data center in a fourth country.

Web-based services, mobile device access, and social media are all transforming the user experience and bringing more value at affordable prices to HRO. The creation of Software-as-a-Service (SaaS) services, HRO platform services that add BPO to SaaS, and the Cloud are bringing more options and affordability to all clients, especially to the mid-market.  

The HRO industry has grown in maturity, capability, and has an even greater future ahead. 

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