SaaS versus BPO

Linda Merritt, HRO Research Analyst, NelsonHall

The HR Outsourcing Association (HROA) just completed a series of webinars on SaaS and HR BPO. There was a wide range of HROA industry experts bringing their real world experience on each panel including Accenture, ADP, Aon Hewitt, Futurestep, IBM, ISG, NorthgateArinso, Oracle/Taleo, and more.

SaaS or BPO is Not the Question

The conversation was largely about the difference between SaaS and the ERP systems included in most current BPO deals. It was not about using only SaaS or only BPO. SaaS can and does fit into BPO. I expect to see lots of growth in SaaS and BPO combinations in the next few years as SaaS platforms scale and grow in handling complexity.

SaaS is a Success Story of Innovation

The rise of SaaS was also fueled by the recessionary pressure to lower HR costs. Pre-downturn, HR leaders strongly preferred the customization power of ERPs to conform to a client’s policies and processes. Now the acceptance of the speed and economic advantage of configuration and standardized processes makes SaaS a viable option for an increasing array of HR services and even HR management system infrastructure (HRMS).

BPO service providers are also prime sources of many SaaS applications:

• SAP and Oracle offer cloud HRMS used as the core for most HRO platforms such as: Genpact Hosted HRMS Platform, Infosys TalentEdge, CGI Oracle HCM, Caliber Point Republic, TCS HR platform
• Proprietary systems include: ADP Vantage HCM and Workforce Now, NorthgateArinso ResourceLink Aurora, Preceda, and MoorepayHR, Ceridian DayForce and HRevolution
• Talent management applications including RPO services have been so popular that Oracle snapped up Taleo, IBM acquired Kenexa, and SAP bought SuccessFactors.

Selection and Implementation Commonalities

The buyer experience has common elements whether selecting SaaS or BPO.

• The upfront client planning process is the same: identify goals and objectives aligned with business and HR strategies; gather cost, process, and performance data to build a business case; consider enterprise risk; etc.
• Vendor selection: do not just select the service; ensure there is a proven record of vendor performance and solid evidence of collaborative client relationships.

SaaS is not Self-Installing

While the total time and effort may be less, all the traditional elements remain. Webinar panelists warned that even if the decision has been made to use SaaS, do not underestimate the time and effort to make a vendor selection, manage change, gain buy-in, and project management implementation.

Even though one of the advantages of SaaS solutions is faster and “easier” implementations, it will still take buyers time and effort to standardize processes and data and to determine the configurations. Make sure that as a buyer, you know and plan for the skill and effort needed. Like BPO, experience says to consider a phased in rollout starting with one service / process and bring the learning forward to the rest of the implementation.

Next time, we will explore to SaaS or not to SaaS.

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The Trajectory of Change for HR and HRO

Linda Merritt, HRO Research Analyst, NelsonHall

The 15^th Annual PwC Global CEO Survey of 1,258 CEOs in 60 countries shows what CEOs want now from HR that transcends country and industry. PwC summed it up as:

1. Protect the home market from uncertainty
2. Attack new and emerging markets for growth.

Hockey legend Wayne Gretsky said that he skated to where the puck would be, not to where it was, anticipating the trajectory of change. This is hard for HR, which often takes years to complete a major change and looks to HRO with a focus on price and improving operational efficiency. Skating to where we needed to be yesterday is hard enough; how do we skate to where we need to be tomorrow?

CEOs Top Concern: Talent

For the last two years, the number one concern of CEOs in the PwC survey is talent. CEOs are personally concerned with developing leaders and the talent pipeline. Why? Because CEOs see that talent constraints and mismatches are already limiting opportunities. CEO talent concerns include:

1. Talent-related expenses rising more than expected
2. Not being able to innovate effectively
3. Not being able to pursue a market opportunity
4. Cancelling or delaying key strategic initiatives
5. Not achieving growth forecasts in overseas markets.

Talent Gaps

Availability of key skills is a concern in every market outside of North America, especially for the Middle East, Africa, and Latin America. This matches well with the drive to increase the global coverage of RPO.

Talent gaps are greater in some areas. In addition to global talent concerns, it is harder for some industries such as technology and pharmaceuticals / life sciences to find needed skilled talent. Of heightened concern is middle management talent. Will RPO best fit at the level of volume and skilled talent hires? Or will RPO further encroach into middle management recruiting?

The future is also about talent management and proof of HR’s business impact. This supports the movement we are seeing to strengthen talent management (TM) capabilities through M&A. Examples include:

• SAP and SuccessFactors
• Oracle and Taleo
• IBM and Kenexa.

CEOs Want Proof

Proof of business impact is part of HR metrics and advanced analytics. Even what should be the basics in workforce information is not considered comprehensive enough by most CEOs; they would like more data including the return on human capital investments, the cost of turnover, and staff productivity. HRO is ready with HR analytics as one of the newest components of HRO offerings.

Today, most HRO remains pressured on price rather than on value delivered. In hockey, someone must put the puck into play. In HR and HRO, someone must pay to develop the capabilities CEOs say they want. In the meantime, HRO is doing a good job of getting ready to skate to where business needs are going.

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The Parable of IBM and Kenexa: Part I

Linda Merritt, HRO Research Analyst, NelsonHall

I have not seen such a range of varied opinions from members of the HRO and HR tech communities as those about IBM’s acquisition of Kenexa. The commentary showed that many were taken a bit by surprise and weren’t sure how to analyze the news that IBM was acquiring Kenexa for $1.3bn.

IBM Bought Kenexa?

The surprise was not the purchase of Kenexa, which was foreshadowed by the acquisition of Taleo by Oracle and SuccessFactors by SAP. It was more about the fact that IBM was doing the purchasing.

A few  thought that ADP might make such an acquisition since it had already expanded its benefits capabilities with Workscape and SHPS and its RPO capabilities with The RightThing, so wouldn’t talent management make sense? Speculation continued, perhaps Mercer, Ceridian, or even ADP would be the target of an acquisition or merger.

IBM itself was considered likely to continue its acquisitive ways with something more in the talent management / HCM space. Likely targets mentioned included Cornerstone OnDemand, SilkRoad, SumTotal, Saba, with a few suggesting Halogen, Peoplefluent, and others. In short, someone is going to buy something else.

The Meaning of the Deal?

What does this mean we all asked, much like the tale of the Blind Men and the Elephant as was suggested by the leading light Naomi Bloom. Early viewpoints on the acquisition included:

• Continuing IBM’s move into social media and analytics
• Continuing IBM’s move into professional services including strengthening RPO
• Disrupting the HCM market and becoming a talent management player
• Delivering value to the HR executive
• Delivering value to the C-suite and bypassing HR
• Primarily being a HRO deal with some software attached
• Primarily being a software deal with some HRO attached
• Upping competition with SAP, Oracle, Salesforce.com, and even Workday
• Selling into Kenexa’s IBM-like customer base of Fortune 500 clients.

IBM’s news crossed many markets including HRO, HCM, HR tech (software, platform, cloud, etc.), BPO, social media, talent management, and financial and market analysts. Each commenter viewed the same information through the lens of their personal perspective and professional interest, much like the blind men touching different parts of the elephant.

With so many options before it, including IBM’s own announced intentions for the addition of Kenexa, the opportunities are new and exciting. Given the inherent complexities, IBM will face many risks as well. Look for more on The Parable of IBM and Kenexa coming in Part II.

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TCS HRO Delivers Certainty

Linda Merritt, HRO Research Analyst, NelsonHall

 NelsonHall’s HRO team really enjoys service provider briefings and we recently had one with Tata Consulting Services (TCS).  It was great to have a conversation with the TCS HRO team about their plans and activities. There was a lot to catch up on as they have been very active growing, adding clients, and expanding their global footprint for HRO services and delivery.

TSC offers the following HRO services:

• Workforce administration
• Payroll
• Talent management
• Resourcing
• Benefits
• Employee service center services.

The company is growing its set of global service centers which includes India, China, U.S., U.K., Hungry, Brazil, and Uruguay, its newest center. Supporting a total of ~500,000 employees in 27 languages, it offers options for onshore, nearshore, and offshore service delivery.

TSC HRO clients are spread globally with its largest client base in the U.S., followed by Asia Pacific, EMEA, and Latin America. Currently, the majority of its clients are large market with embedded ERPs to support, and like most MPHRO service providers, TSC supports multiple client ERPs including SAP and PeopleSoft/Oracle. It also supports regional ERPs like Adam and Revolution in Latin America and Chris 21 in Australia. TCS has added its own SAP-based global HR platform for SaaS and SaaS with BPO services.  The SaaS HCM option will support its fastest growing middle market segment, as well as be an option for larger clients ready to consolidate and change outdated systems “lock, stock, and barrel.” For example, for a market research company, TCS consolidated 50+ various HR systems onto its global HR platform across 48 countries in less than a year.  

I frequently comment on the need for buyers to align HRO use with a strategic HR plan that outlines what is needed for what you are doing today, as well what is needed to achieve your long-term objectives. TCS has a client maturity model for its services; it works with potential new clients to assess their current state and helps clients find the “fit and affordability” roadmap that is right for them. The process has been so successful that TCS is retrofitting the tool and assessment for existing clients as well.

A briefing is about the numbers, and it is also an opportunity to learn more about what makes a vendor distinctive and what its approach is to the HRO marketplace. For TCS, a global IT company based in India, one would expect to see an emphasis on technology solutions, IT-support, quality, process standardization, etc. and all that is there. In addition, however, TCS HRO has a focus on “delivering certainty,” not just correct transactions, but improved performance that builds long-term client relationships with the flexibility to meet changing business needs. Having established a solid base of services and customers from which to grow, we look forward to covering the next chapter in TCS’ success.

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IBM Accentuates its RPO and Talent Management Offering by Acquiring Kenexa

Gary Bragar, HRO Research Director, NelsonHall

Although a bit smaller than the $1.9bn Oracle paid for Taleo (coincidentally at $46 per share as well) and the $3.4bn SAP paid for SuccessFactors, I believe that IBM’s acquisition of Kenexa, a cash transaction at $46 per share or ~$1.3bn and closing in Q4 2012, will have a much more immediate and larger impact than the aforementioned acquisitions.

Both Taleo and SuccessFactors were specifically acquired for their talent management (TM) technology. Beyond the strength of Kenexa’s technology, however, is the provision of TM services including:

• Consulting
• RPO
• Employee engagement
• Leadership development.

According to an IBM study conducted earlier this year, 71% of respondents cited “human capital” as the leading source of sustained economic value, above products and services innovation and significantly higher than technology. Kenexa, as a HCM and TM provider, will compliment IBM’s TM offering, which focuses on the full TM life cycle of attracting, developing, rewarding, and retaining talent. Specifically, IBM’s TM offering includes:

• Recruiting
• Learning
• Performance management
• Compensation
• Succession management.

In addition to its multi-process HRO (MPHRO) offering, which includes TM, IBM also specializes in providing workforce strategy transformation, social technology, and analytics to predict and measure performance.

While RPO is part of IBM’s MPHRO offering, it also provides RPO on a standalone basis to GM. Kenexa’s RPO capabilities, however, will accelerate IBM’s RPO market share, making it one of the largest RPO providers globally with clients headquartered in North America, Europe, and Asia Pacific. Kenexa also delivers RPO services in Latin America including South America in ~25% of its contracts.

Kenexa’s BrassRing technology is one of the two most widely used applicant tracking systems in RPO contracts. Kenexa also brings its Kenexa 2x Recruit platform, which in addition to recruiting and learning contains the following performance management modules:

• Goal setting
• Competencies
• Performance appraisals
• Compensation
• Career development and pathing
• Succession planning.

NelsonHall estimates that Kenexa has more than tripled the size of its RPO business since 2006 with brand name clients including Ford and multi-regional contracts with Baker Hughes and Eli Lilly.

IBM’s price of $46 per share is a 42% premium over Kenexa’s August 24^th close, but it will be well worth it. IBM is getting much more than software technology; it is getting assets, including human talent that can make a HCM difference. IBM’s plan is to combine its approach to social business, analytics, and TM to transform business processes to create smarter workforces with measureable business results. Given Kenexa’s record of growth and IBM’s experience with integrating acquisitions, this sounds like a good plan and a great business opportunity for both companies.

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Bridging Talent Management and Workforce Management with HRO

Linda Merritt, HRO Research Analyst, NelsonHall

One of the hottest topics in HR and HRO has been talent management (TM), including everything from recruiting and RPO to performance management and employee engagement. Major ERP vendors have snapped up TM software leaders to strengthen HR product lines, e.g., SAP and SuccessFactors; Oracle and Taleo. Very good moves and very on trend, but let’s not forget about the less flashy powerhouse: workforce management (WM).

TM and WM are both critical components of human capital management (HCM) and depending on definitions and models, there can be a lot of overlap. For my purpose here, TM is about the individual and the capabilities for a specific job position and WM is about groups of workers and managing multiple positions.

TM involves attracting, retaining, and developing people with the required capabilities according to requested volumes and performance management. WM involves workforce planning and forecasting the capabilities and volumes needed and day-to-day scheduling and time and attendance. It takes both processes to have the right number of people, with the right skills, in the right places, at the right time.

Let’s consider two more elements, HR analytics and ROI, that will also benefit from seamless HR systems and processes, which our dear HRO community can enable and deliver. Timely and accurate workforce data is a foundation block upon which HR is built. At least part of the drive for multi-country payroll has been to get better employee data, and there is an important feeder into payroll: time reporting. Today’s leading time and attendance systems offer great flexibility in capturing the detailed data needed for payroll plus analyses of productivity, labor costing, pricing, project billing, workforce planning, etc.

Everybody wants to tie HR and HRO to ROI. Lowering the cost of HR operations alone is not enough. We must show real impact in measurable business results. Simplifying a bit, TM supports improved business results through customer satisfaction and revenues generated; WM supports improved business results through optimizing SG&A via operations and reducing losses.

Many HRO offerings come in basic and advanced levels. HRO providers– ensure you offer both levels of time and attendance, scheduling, and attendance management services. Buyers – take the time to determine whether advanced workforce management services will not only provide better data, but will pay for itself through reductions in overtime and the impact of absences. Also, for many positions and industries, ensuring all customer-facing seats are filled at the right capacity, capability, and time has a direct link to productivity and revenues. Finally, don’t forget about compliance with wage, hour, and labor regulations where accurate records and proactive scheduling are a great defense against fines and losses.

HR and HRO in partnership can be the bridge to strengthen TM and WM across the entire human capital value chain.

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Oracle Buying Taleo: Is It a Good Deal?

As Howie Mandel always says to his guests after they’ve pressed the button and say “Deal!” on the TV show Deal or No Deal—”but was it a good deal?” Time will of course tell, but I do believe Oracle has made a very good deal. As the acquisition was announced just last February 9, I’ll briefly recap what had happened.

Oracle announced an agreement to buy Taleo for $46 per share, an 18% premium over Taleo’s stock price the day before the announcement, equating to $1.9 billion. As Taleo’s board has approved the acquisition, it is now subject to normal regulatory approval and is expected to close by summer. This follows SAP’s announcement on December 3, 2011 to acquire SuccessFactors for $3.4 billion. I had blogged about my take on the acquisition last December 13, 2011, stating that SuccessFactors is a provider of talent management software, but software alone does not get at the core of what makes for effective talent management. First, let me state that I also feel that SAP buying SuccessFactors was a good deal, albeit a steep price, as cloud-based software, including talent management is clearly on the rise and expected to continue to grow. NelsonHall has seen a large increase in the number of cloud SaaS HR services contracts and nearly 15% of HRO contracts in 2011 also included talent management software, often performance management, mostly in the mid-market.

Getting back to Oracle, Taleo provides cloud-based talent management software as well, so this is also a good deal, but how does that make this different? Because Taleo adds recruitment capability that Oracle did not have before. And although SuccessFactors provides recruitment software as does Taleo, Taleo also has an applicant tracking system that according to NelsonHall’s 2011 RPO report is the most widely used recruitment technology and applicant tracking system, utilized by approximately 80% of all RPO vendors for their clients, Oracle’s PeopleSoft had been in sixth place. The RPO report also noted that approximately 45% of all recruitment technology was platform-based. Taleo also has a business edition, popular in the mid-market for clients seeking a more standardized solution, used by vendors including Alexander Mann Solutions and Pinstripe. According to NelsonHall’s HRO forecast, RPO will have the highest growth of all HR services through the forecast period of 2015.

In summary, I think both acquisitions by SAP and Oracle are good; especially as clients continue to focus on talent management and recognize the need to have integrated technology and processes, most importantly supported by leadership that understand this. I’m in the final stages of my learning BPO research interviews and I‘m seeing a clear trend that learning vendors are now also providing talent management software and associated consulting services to their clients along with their learning services. I look forward to aggregating this data that I’ll present at the HRO Today Forum in Washington, DC on May 1st, titled State of the Learning BPO Marketplace, including the Emergence of Social Learning.

Gary Bragar, HRO Research Director, NelsonHall

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HRO and a Culture of Analytics

Recently, Bersin & Associates held a webinar on HR measurement and the need to create a culture of analytics to get to data-driven decision making. Bersin refers to four levels with HR metrics and workforce metrics as the basics. Integrated talent management metrics and business impact predictive metrics are the advanced levels.  Getting to the advanced levels is not easy to achieve and it will likely take several years for those with the vision and fortitude to make the journey.

Many HR vendors offer HR analytics tools including IBM. I spoke with several IBM’ers to learn more, including Steve Johnson in product management.  IBM’s Workforce Performance application is based on its Cognos platform. It is prebuilt with highly configurable HR analytic content from hire to retire with pre-packaged standard reports. It is available as a licensed product (on-premises or hosted) that has prebuilt connectors for SAP, PeopleSoft, and Oracle’s e-business suite. To ensure the application functions well at every level from basic to advanced, IBM has added SPSS predictive analytic software.

Designed to map to HR data from many sources, it brings in data internal to the client and from other applications from third party vendors — key in getting consolidated cross functional workforce information for HR’s many processes and subject matter areas.

IBM understands that HR analytics is a journey and measurement is in its own DNA. The application can be used from basic to advanced levels and extended from HR specialists -only to business unit HR partners and on to line managers as readiness matures. Reports vary by user type from pre-set dashboards and scorecards, to detailed operational reporting, and to ad hoc research by power users.

IBM starts from the viewpoint of business workforce questions HR needs to answer and advise such as: do we have the right mix of people to meet business objectives optimally, or what will our workforce age distribution in key jobs look like in 3 years, in 5 years?  After assessing client needs and interest, a discussion of the actual metrics follows and a starting point can be identified.

The Workforce Performance application is available directly from IBM. It is also available to IBM’s HRO clients and to other service providers who want to integrate advanced HR analytics capabilities into its service offerings. A typical client is in the 5K to 10k plus employee range and there is particular interest from high tech and global employers.

IBM has a user forum for its Cognos products and with the HR analytics users interested in learning more from IBM and each other, there may soon be a user group just for them.

Even the best tools and most capable service provider cannot make the whole journey, especially the cultural part, for a client. Do you have the strategy and roadmap for your HR analytics journey and do you have a HRO partner that will help you create a culture of analytics?

Linda Merritt, Research Analyst, HRO, NelsonHall

Mobile Apps are Ringing up HRO

Smart phones, mobile devices and “apps” are more and more ubiquitous and indispensible in our personal and business lives. But while the HR phone is ringing in invitation, is HR, and are HRO providers, ready to answer?

Workforce.com’s article, “Avoid These Hurdles to Adopting HR Mobile Apps,” covers a number of the issues HR faces with mobile apps, perhaps the most critical of which is employee and corporate data security. What data is accessible, and how can you safeguard secure data if the device is lost or stolen? Will only organization-provided devices be allowed mobile access to corporate data? To address this piece of the apps pie, IBM Global Process Services is currently developing HR mobile apps  with authentication and encryption capabilities to address its HRO clients’ data security issues, needs and concerns. It will move to client use and testing pilots in 2011.

In-house HR departments and internal IT groups can wrestle with issues across a variety of technology systems, vendors and applications. Those with a multi-process HRO provider,  or at least an HR technology and administration vendor, will have a partner that can lead in the development of security, integration and even the design of applications that work with the major HR ERP systems and integrate standalone applications, like talent management, thereby reducing the burden on in-house IT.

For buyers using the new SaaS HRO platforms, providers will be developing mobile apps that meet the needs of multiple clients, as well as rolling out applications as they become available by the provider of the underlying HR system (usually Oracle or SAP.)

What HR mobile use offerings make sense? Thoughtful design is required to develop a cost effective strategy for the client and the HRO provider, one based on user needs and usability in a mobile setting. Anything that smacks of bells and whistles and looks pretty but is too complex, or does not add to user productivity, will not add value. User research and testing must be utilized to identify and prioritize which features and functions will make sense from a cost, integration and security perspective.

One of the early entrants is RUN Powered by ADP® mobile payroll, now available on the App Store for its small business RUN payroll clients, and is available for iPhone, iPad and iPod touch. In early 2011, ADP will extend the app to other smart phone platforms like Blackberry, Windows Mobile and Droid.

My colleague Gary Bragar commented on mobile HR apps in his blog, HRO Themes at the HR Tech Conference: Portals, Platforms and Self-Service. He noted that not the just concept, but examples of specific uses, such ability to access your insurance medical provider data while traveling, would be valuable.

This is all now emerging technology for HR and HRO, but users are way ahead, with many adopting the “mobile lifestyle” for work and play on the go, anytime, anywhere. Will HRO be there?

Linda Merritt, Research Director, HRO, NelsonHall

HRO is Never Static or Still

During every stage of the economic lifecycle, HRO service providers are doing something to either anticipate or react to changes in the marketplace and client needs while simultaneously striving to achieve strategic goals. This week I wrap-up NelsonHall’s review of 3Q 2010 HRO activity with a look at what’s new in offerings, partnerships and acquisitions.

One way to quickly expand a service line or fill-in gaps is to partner with a provider that is already offering the service or operating in the target geography. Last quarter was most active for RPO. Those announcing new RPO-related partnerships included Alexander Mann Solutions (AMS), Kelly Services, Kenexa, Pinstripe and The RightThing. Notably, two of the partnerships were to continue to expand RPO services internationally in the Asia Pacific region, with AMS adding reach into India and Kelly in Vietnam.

A more committed path to rounding out or adding new services is to buy it. Making small to large acquisitions is another constant in the world of HRO as players define and redefine their portfolios. In addition to the close of the three game changing major acquisitions in the benefits community (ADP/Workscape, ACS/ExcellerateHRO, and Aon/Hewitt), other folks were also making deals. For example, Mercer acquired IPA and ORC, and Xafinity bought PwC’s pension consulting and administration business in the U.K. Further, Randstad continued its acquisitive ways, this time outside of Europe, with its planned acquisition of FujiStaff in Japan.

Health and welfare (H&W) outsourcing used to be limited to the U.S., and that will remain the major market. But no matter how health insurance and care is funded, H&W concerns are growing globally. In the U.S., Fidelity is partnering with RedBrick Health to offer its clients wellness services, and in the U.K., Capita is acquiring FirstAssist Services to add to its health service offerings.

Finally, if you cannot find what you want in the marketplace, you can build or expand it yourself. Ceridian wants to truly offer a new line of BPO services and has announced it is ready to consult, build and manage the health insurance exchanges that some states will need in a couple of years as part of the U.S. health care reform program. 

Most announcements of “new offerings” are incremental additions. For example, Hewitt is adding Micromedex medical reference information to its advocacy service offering. You can also simply package what you have and call it new. Aditro has done that with a standardized set of payroll services that include preset services levels and implementation process to make a lower cost bundled option.

Yet another variation blends supply chain partnerships with building it yourself to make a new service offering. Take a SaaS HR service from Oracle or Sap and wrap in value added enhancements and services additions and, voila, you have a new HRO service platform. Mercer introduced its Human Capital Direct that uses PeopleClick Authoria’s talent management suite as the core, surrounded by Mercer’s consulting, tools and methodologies such as decision support, competency models and analytics.

In HRO, somebody is always doing something. What have you done lately?

Linda Merritt, Research Director, HRO, NelsonHall