Posted tagged ‘NorthgateArinso’

Asia Pacific, Talent2, and HRO

June 15, 2012

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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HRO Confidence Remains Steady for 2012

May 10, 2012

Every quarter, my colleague Amy Gurchensky surveys HRO vendors for the NelsonHall HR Outsourcing Confidence Index (HROCI), which is then available for our clients and the participating service providers. In normal times, the HROCI does not change drastically from quarter to quarter; it more shows changes in trends over time. In uncertain times, however, it is a timely way to see changes in market perceptions even before disruptions occur in contract values, volumes, and revenues.

It is of some comfort that the HROCI is in a steady state of small changes from quarter to quarter. That is not a sign of upcoming exuberant growth, but it is a predictor that we will continue to see solid continuous HRO growth throughout 2012.

The most recent HROCI shows a vendor confidence level of 153, where 100 represents unchanged confidence and higher scores indicate increased confidence. While 153 is down a bit from 164 in 1Q 2011, it is in line with 3Q and 4Q 2011 at 151 and 147 respectively. Vendor confidence is often based on how current business is going, along with the pipeline. In HRO, growth from existing clients is just as important as new business. Ever since deals got smaller in scale and scope, there has been increased focus on retaining and growing existing accounts, and we see positive vendor confidence here as well.

Looking at some of the HR lines of service, payroll is once again in the leading position for growth, followed by RPO, multi-process HRO (MPHRO), benefit administration, and learning. MPHRO is expected to perform well in 2012, primarily driven by the need of organizations to standardize HR services across regions and geographies. Vendors such as ADP and NorthgateArinso that previously offered primarily payroll and employee administration services have been very active in acquiring or partnering to extend capabilities to a wider range of platform-based MPHRO functions. In addition, Logica is becoming increasingly successful in this space in Europe.

There is a slight tempering of growth expectations that can be seen in the data, although pipelines still seem solid. I think this is the same kind of hedge-your-bets thinking that is in the larger economy and what we are seeing from HRO buyers. Everyone still has a healthy sense of caution in case things suddenly go sideways.

Luckily, more and more HRO buyers and clients are willing to move ahead and get on with doing business, even if a bit cautiously. Other buyers still suffer from frozen decision-making and unwillingness to make long-term investments. Buyers with clear direction for what they want to achieve through HRO are the most likely to be deal ready – as along as prices are right and there is not too much upfront investment. The earlier service providers can assess readiness, the faster they will be able to fill pipelines with well-qualified prospects.

Linda Merritt, HRO Research Analyst, 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.

HRO Today Forum In Vogue

May 8, 2012

I found my attendance at last week’s HRO Today Forum to be very worthwhile. I presented my newly published research on the “State of the Learning BPO Marketplace,” including the emergence of social learning. While there, I took full advantage of attending many of the other sessions and meeting with several companies including: The Good Jobs, KellyOCG, Pinstripe, Randstad Sourceright, Kenexa, Aon Hewitt, Raytheon Professional Services, NorthgateArinso, Seven Step Recruitment, and Hays. Here are some of the highlights from the forum.

The Good Jobs: The Good Jobs is an online service that allows job seekers and employers an innovative way to find each other. Employers not only advertise job opportunities, but also their employment brand, culture, and corporate values to candidates. Job seekers can identify their life and work style priorities, and target those employers who meet their needs. Matching talent desired to employer desired will lead to employee engagement and retention in addition to business results, including increased productivity and lower cost by reduced attrition. No surprise The Good Jobs won the iTalent competition.

Where do Jobs Come From Panel: This panel was led by Prudential HR SVP Sharon Taylor and included Brink Lindsey from the Kauffman Foundation; Scott Case, CEO of Startup America; and John Haltiwanger from the University of Maryland. A few interesting data points from this session included the following:

  • 90% of companies are small, but 65% of employees work for large companies
  • 2003 – 2007 saw high job growth averaging 200,000 hires per month but it was not as strong as the 1990s
  • From ~1977 – 2003, there were only 5 years that job growth exceeded layoffs for non-start-up companies, i.e. a net creation in jobs
  • I missed the time period, but the point was that more jobs have been created in startups (3.5m) vs. established private sector companies (2.5m)
  • The fastest growing businesses are also the most profitable.

Is Outsourcing Good for America Debate: Interesting points from the pro side included:

  • 90% of outsourcing serves companies outside of the U.S.
  • 95% of world consumers are outside of the U.S.
  • 90% of what is made abroad gets sold abroad
  • Foreign companies invest more in the U.S. (e.g. Honda, Nissan, BMW) than the U.S. invests abroad (it’s a 2 way street)
  • The U.S. tax rate is one of the highest in the world adding to why some companies shift a portion of their business and jobs offshore.

Congratulations to all Bakers Dozen MSP winners led by Randstad Sourceright, Staff Management, Allegis Group Services, Adecco Solutions Group, The Bartech Group, Guidant Group, Advantage xPO, KellyOCG, Hyphen, Agile 1, Yoh, Hays Plc, and WorkforceLogic.

Congratulations to HRO Award recipients including providers NorthgateArinso, Pinstripe, Aon Hewitt, KellyOCG, and Evolv, Inc.; provider executives Cynthia Crose of IBM and Mike Ettling of NorthgateArinso; and buyer executive Chris Payton of Bank of America.

Gary Bragar, HRO Research Director, 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.

NorthgateArinso Sets a Cadence for Growth

April 25, 2012

NorthgateArinso (NGA) recently held its annual analyst day in Boston. Chief Executive Mike Ettling reported that NGA’s revenues have increased 6-7% every quarter for the last six quarters and it had brought in over £500m in revenues for 2011. With very good growth under its belt and its built-out set of services, updated core technologies, and global delivery network, NGA is setting new goals to reach its target of $1bn in revenues by 2014.

The company is defining itself as “an HR BPaaS business enabled by technology, process, and domain expertise.” Business-platform-as-a-service is what many are calling business platforms, and since we are talking about HRO, I call it HRO platforms. From that perspective, NGA is already in the BPaaS business of providing bundled business process services and technology solutions.

NGA has ~8,500 personnel in 35 countries with HR technology, outsourcing, and consulting services in over 100 countries. That will not change. It will continue to offer unbundled technology and software services for payroll and HR. It will also continue to offer consulting services for HR systems and implementation of sand integrations, as both are good revenue streams. What is new is that the company is staking out its direction for future growth as an HRO services company, not a technology company.

How does an already good, solid HRO performer accelerate to outpace its competitors? For NGA, the answer is in structure and cadence.

Structure

Management structure is seen in the cascading goals, upcoming changes in organizational structure and alignment of compensation, the use of metrics, and the top-down involvement in selecting and managing key initiatives, investments, and projects. NGA is continuing to standardize its services into a catalog of selections, standardize implementation, and even standardize the offer to delivery process. It is developing an internal system called ScopeHR, which will standardize and automate the production of all key BPO/BPaaS information and documents to make solution selection, selling, pricing, and contracting easier, faster, and more efficient for both the client and NGA.

Cadence

Timing and pacing are also NGA keys in achieving profitable long-term growth. This includes an understanding of how to migrate and grow client scale and scope over time, to step-by-step refine its robust system for services delivery that includes moving to “mega centers of scale” and plans for workforce development to avoid capability gaps. Components of the service delivery value chain are addressed, cross-checked, and backed up. Continuous improvement is also seen in the use of Lean Six Sigma teams, CCMI standards, and an operational excellence framework to increase capability maturity while growing the business and retaining satisfied customers.

There is still a lot of uncertainty in the economy, which may impact NGA’s plans and timing. Given NorthgateArinso’s track record so far, clear goals, and achievement plans, if it adds in a bit of flexibility, the odds are good that it will hit its target.

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.

Moorepay and NGA get even more SaaSy in the U.K.

March 14, 2012

The one question that I always have after acquisitions is, “How does it work out over time?” Some M&As put emphasis on “synergy” (i.e., consolidation and cost recovery). Others focus on skills and footprint in new geographies. NorthgateArinso (NGA) is one of the HRO service providers that use acquisitions in new markets as one type of growth strategies. Moorepay is a payroll and employment service provider in the U.K. with over 10,000 clients and it is one of those NGA acquisitions.

Growth through accretion of revenues and clients in new geographies – along with the access to in-country knowledge to service MNC clients – is a good rationale for M&A. But does the overall vendor system become stronger? Are new capabilities leveraged across opportunity areas? I have lived the life of trying to create change, fighting against the not-invented-here syndrome in the corporate world. This is one of the more subtle reasons for using HRO—to circumvent this internal tug of war.

Now back to Moorepay and NGA. Moorepay just released its newest service on March 12th, a SaaS HR and payroll platform that it will use for the small-employer market. I asked if the underlying technology was based on SAP or Oracle. The answer is “neither”; it is based on Preceda, a proprietary NGA system stemming from the 2010 acquisition of Neller in Australia. Preceda is already in use for ~4,000 clients and 500,000 participants in Australia, Philippines, and New Zealand, and now it is expanding to the U.K. Yeah, synergy, re-use, and leverage to improve capabilities and services for the underserved small-business market halfway around the world!

HRO SaaS is a proven cost-effective alternative to fully customized systems. Its very nature lends itself to offering needed benefits to the small and midsized employers (SME). SaaS brings the illusion of customization through configuration at an affordable cost. These are important attributes, especially important for the employer with less than 500 employees.

Moorepay is fully using the benefit of configuration to launch the new service with four pricing levels from the most basic HR and payroll that gives the option to easily turn on additional services like time and attendance, recruiting, and learning modules.

HR and payroll platforms also bring self-service for employees and streamlined HR processing for managers. According to Ann Fitzpatrick, Moorepay managing director, existing and prospective SME clients are asking for the same level of services that have been in the market for years for the large-employer market.

If the launch goes well, and Moorepay turns the rising demand and its first-mover advantage in the U.K. SME market into new and profitable growth, expect to see new NGA Preceda-based SaaS HRO offerings pop up elsewhere around the world.

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.

U.S. Jobs Grow – How Will It Impact HRO

February 7, 2012

By now, most have heard last Friday’s favorable jobs news.

In the U.S., 243,000 jobs were added in January, bringing the unemployment rate down to 8.3%, and as noted on one of the staffing provider’s earnings calls last week, down to 4.2% for college graduates. Government jobs have contracted as expected, while the private sector had the gains in the services industry, specifically in leisure, hospitality, education, healthcare, and retail, and in manufacturing, including construction.

Also last February 3, Randstad reported a five-point rise in its U.S. Employee Confidence Index.  The index measures the workers’ confidence in their personal employment situation and optimism in the economic environment. This is the biggest increase since the survey started seven years ago.

With good reason to be optimistic, many RPO providers are realizing the gains with increased hiring volumes by existing clients. Even before this welcome employment news, 2011 had been a good year for HRO. In RPO, many vendors achieved significant growth, including Kelly OCG, whose RPO revenue was up 40% year-over-year from 2010; Pinstripe was up 58% y-o-y with 21 new contracts and extensions; and for Q4, Kenexa reported an RPO growth of 54% y-o-y.

But the benefits go far beyond RPO. Increased hiring bodes well for providers of payroll, benefits, and learning as the number of employees they serve increases. For example, ADP, who already pays 1 of 6 U.S. employees, announced the number of employees on its U.S. client payroll increased by 2.8% in fiscal Q2 2012, for the period ending December 31, 2011. Benefits administration providers including Aon Hewitt, Fidelity, and Mercer reported numerous contract awards in 2011. In MPHRO, in North America, ADP won several new contracts, while IBM was awarded a large MPHRO contract with Air Canada and NorthgateArinso awarded a seven-year MPHRO renewal by Fifth Third Bank. In learning, vendors including Raytheon, Xerox, and Accenture won several contracts. There are more updates to follow on learning as NelsonHall is currently conducting a global learning BPO market analysis.

However, a few words of caution by ManpowerGroup were given last February 3 that demand is expected to continue to fluctuate and it would be prudent for employers to adopt flexible workforce models that include: full-time, contingent, and virtual-skilled workers to ensure productivity.

There are a few key implications here:

  • Providers who haven’t yet provided recruitment services that include RPO, MSP, and Contingent Workforce services would be prudent to evaluate doing so and/or consider partnering with a vendor that does
  • Given the ManpowerGroup statistic that 52% of U.S. companies are struggling to fill key jobs, focus on the development and retention of talent is more paramount than ever. Buy-side organizations should be continuously monitoring employee satisfaction, reviewing attrition rates, conducting exit interviews to find out why people leave, and developing action plans to improve organizational effectiveness. If buyers do not have this capability, they may want to consider a talent management vendor who can help them, which has become a key HRO vendor focus and for good reason!

Gary Bragar, HRO Research Director, 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.

Insourcing American Jobs – The Risk and Opportunity for HRO

January 19, 2012

Offshoring is once again under the harsh glare of the polarized political spotlight in a presidential election year. As my NelsonHall HRO colleague Gary Bragar commented in his blog, President Obama is increasing focus on job creation including encouraging employers to insource jobs back to the U.S. This may cast a shadow of negative publicity on outsourcing that includes offshoring, but I predict the issue poses only minimal direct threat to HRO. In fact, I see increased opportunity for savvy HRO service leaders.

In listening to the President’s remarks and reading the insourcing and investment fact sheet issued by the White House, it is clear that manufacturing jobs are the primary target.

The U.S. lost millions of manufacturing jobs and in some cases almost entire industries, as companies pursued ways to remain competitive with lower-priced global competitors. Lower wages and benefits were a key part of the equation, but there were other factors including regulations, taxation policies, and the low cost of transportation in what was still a bountiful world of low-cost oil.

Offshoring dynamics are changing, especially for manufacturing. The time delay inherent in moving products around the world now creates challenges in meeting the rapidly changing market preferences and shortened product lifecycles of a connected world. With increased competition for limited energy supplies from the emerging economies, the cost of transportation has become a significant factor. Add in moderately decreasing wage gaps and we can see why companies will be able to insource some jobs. Others will be able to create more jobs in the U.S., much like Honda, Toyota, and Mercedes Benz have been doing for years.

HRO as an industry is already a blend of onshore, nearshore, and offshore technologies and workforces. A mix of right-shoring talent and technology helps vendors meet client needs for cost, service, and value. With time and transportation being minor factors in HRO or other BPO, talent remains a primary driver.

Access to pools of affordable skilled talent is an increasingly important element in the growth of all businesses, whether small or large, local or multinational. Who has access to comprehensive data on workforces around the world including costs, turnover, and availability? Who can see trends emerging on skilled labor capabilities and capacity shortages? Who has direct experience in building and maintaining global workforces both for clients and for themselves? HRO service providers!

Think about it, in our HRO community are the likes of Accenture and IBM, growing globalists like ADP and NorthgateArinso, modern tech heavyweights like Infosys and TCS, global research and analysis specialists like Aon Hewitt and Mercer, and RPO leaders such as Alexander Mann, Hays, and Manpower, we even have learning leaders that can handle rocket science like Raytheon RPS.

We need to have a large enough vision for what we can become as an HRO community. There is so much already that we can leverage. Be confident in our value and let our light shine bright!

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.