Posted tagged ‘payroll outsourcing’

NorthgateArinso Getting SaaS-y Starting with e-Learning Content

September 28, 2011

NorthgateArinso (NGA) has just announced its euHReka Inclusion Framework to provide transparent access to third party providers, HR professionals, and associated resources.  The euHReka platform includes payroll and talent management SaaS for learning, recruitment, performance management, compensation management, and succession planning.  It serves 80 clients and 800,000 employees, and is available in 100 countries and 32 languages.

Although NGA has been providing learning BPO (LBPO) since its acquisition of Convergys’ HR Management business in March 2010, and since learning is already a part of its euHReka platform, the company is aware of the heightened demand for e-learning content in the market.  Consequently, NGA’s first partnership on the new framework is with SkillSoft to add e-learning content to euHReka.  Subsequent content and applications will include:

  • Compensation data
  • Benefits programs
  • Job boards
  • Professional social networking sites.

NGA is wise to begin with e-learning.  In NelsonHall’s LBPO market analysis, published Q4 2010, traditional instructor-led classroom training (ILT) is expected to be reduced from ~50% of the market in terms of revenue to 40% by 2012 due to the explosion of e-learning.  As a result, content development is also rapidly growing.  NelsonHall’s LBPO report ranks content development second behind learning administration in terms of LBPO revenue and ahead of delivery, technology, and consulting. 

Some examples of e-learning contracts this year include:

  • Accenture with HSBC
  • Genpact with JobSkills in India for a 5-year content development contract (note: approximately 85% of Genpact’s courses are provided via e-learning)
  • Edvantage Group with Yara International for safety e-learning (note: Edvantage Group’s H1 2011 financial results showed a 31% increase in sales and double-digit revenue growth y-o-y with EBITA increasing 168% to 5.9m NOK, compared to 2.2m NOK in H1 2010).

I believe we will continue to see significant increased demand for e-learning content for years to come, which will be further magnified by mobile learning (i.e., m-learning), especially for accessing content for self-paced e-learning when out of the office.  However, e-learning will not replace the uptick expected for virtual instructor-led training (VLT) because of the need to actively participate and focus on the learning task at hand in VLT.  I’ll write more about contracts for VLT and web 2.0 learning portals at a later date.  In the meantime, further analysis on the useage of e-learning by region and other associated information is available from NelsonHall.

Gary Bragar, HR Outsourcing Research Director, NelsonHall

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

NorthgateArinso Proving Success with Legacy Convergys Clients

June 23, 2011

When NorthgateArinso acquired Convergys’ HR management business in March 2010, my first reaction was that this was a really good deal for NorthgateArinso because it would be gaining some big brand name clients in the U.S.  Some wondered whether NorthgateArinso would be successful in retaining these legacy clients, but I was optimistic for two reasons.

First, it is mainly the same legacy Convergys employees supporting these clients, most transferred to NorthgateArinso with the acquisition.  It is well-known that the most successful ingredient in an outsourcing relationship is how well the client and service provider can work together and have an effective relationship / partnership.

Back in October 2008, I attended the Convergys Industry Analyst Day in Cincinnati where Thomas Neltner, VP of HR at Fifth Third Bank, was a guest speaker.  Thomas spoke about why Fifth Third chose Convergys, its services outsourced, and benefits obtained, including 99% utilization of employee self-service and 40,000 transactions turned paperless.  So it is no surprise to me that this week Fifth Third agreed to extend its contract with NorthgateArinso for an additional seven years.

The original contract with Fifth Third was signed in October 2003 for five years.  Services provided to the bank’s 20,000 employees included:

  • Payroll administration and processing
  • Compensation administration
  • Performance management support
  • Benefits administration
  • Time and attendance management
  • Implementation of recruitment technology and a self-service web portal.

In May 2007, the contract was extended for an additional five years for 21,000 employees and services were added including recruiting and specialized staffing and employee and manager self-service.  Now, the seven year extension through 2019 also includes upgrading the banks current SAP HCM platform to NorthgateArinso’s euHReka technology platform.

euHReka is also based on SAP but is a preconfigured multi-tenant platform that is fully integrated in providing HR and payroll services. In addition, it is used as a multi-country payroll solution, although that won’t be needed with Fifth Third, but you never know what the future may bring, which brings me to the second reason why I was optimistic about NorthgateArinso’s ability to renew legacy Convergys clients.  That is, similar to how customer service is a core competency of legacy Convergys, the same is true for technology and systems integration at NorthgateArinso.  This is a strong combination that NorthgateArinso can capitalize on when other contracts with marquee clients such as DuPont and Johnson & Johnson come up for renewal in the years ahead.  It will also help with winning new business!

Gary Bragar, Lead HRO Analyst, NelsonHall

HRO and the Total Cost of Ownership

June 22, 2011

A top question for buyers new to outsourcing is how much will we save?  A legitimate question and one that can be hard to answer. Many studies have been done over the years tracking the subject, often asking respondents to estimate the percent of savings. In other words, asking for their opinion. Not exactly what senior business leaders are looking for!

ADP sponsors PwC’s Total Cost of Ownership (TCO) Study and the 2011 results are in. The research covers the costs of payroll, workforce administration (HRIS), time and attendance, and health and welfare services and compares the cost of in-house managed services to clients that outsource to ADP. The 279 participants compiled a more complete picture of the following costs: systems (e.g., install, upgrade, and maintenance), direct and indirect labor, and direct non-labor (e.g., vendor fees, facilities, and other overheads), the cost of outsourcing was included for those using ADP.   

TCO for organizations managing the four services in-house, with no outsourcing, were $1,403 for larger employers (1k+ employees) and $1,953 for those with 100 to 1,000 employees.

Guess what? Outsourcing saves money. Average savings of outsourcing over in-house is 18%. Employers with more than 1,000 employees save more due to good old-fashioned economies of scale, up to 27%.

Outsourcing clients sometimes feel they do not reduce costs as much as pitched by the vendor or planned in the business case. The ADP-sponsored study also identifies success factors that help maximize TCO savings.

The findings put real data behind what we intuitively know:

  • Adding self-service is basic to reducing cost for HR and time for employee users.
  • Comprehensive process transformation is needed to realize full savings. It takes more than new technology; process redesign, governance, and standardization are also needed.

Another finding confirms what I have long suspected: using one vendor and one service platform (outsourced or even in-house) saves more than using multiple vendors and platforms. There is added cost to using multiple, even “best-of-breed” point solutions for payroll, workforce administration, and time and attendance.

  • Average cost of outsourcing the three services to one vendor on a common platform was $910 per employee per year, compared to $1,020 (+18%) for managing in-house on a common platform and $1,202 (+32%) for managing in-house using multiple vendors and platforms.

To understand total costs look at the “seams,” places where interdependent processes and systems must be integrated, interfaced, up-dated, and even manually coordinated when using multiple platforms and vendors. The cost can be as high as $200 per employee per year.

HRO works and significantly reduces TCO, but it takes time and effort of both the vendor and the client to achieve maximum benefits. I’ll cover more on that topic next time.

Also, I have some good NelsonHall news. The 2011 Targeting MPHRO study has just been released by our HRO colleague Amy Gurchensky, see more information at www.nelson-hall.com.

Linda Merritt, Research Analyst, HRO, NelsonHall

Playing the Hidden Object Game with HRO News

June 9, 2011

As one of NelsonHall’s research analysts, I follow what is happening in the various HRO markets. The simplest method is reading press releases, to which we add our commentary in our tracking service.  As a reader, you see a portion of this analysis in our HRO Insight Blog and HRO Insight Newsletter.

On my own time, I like to play basic computer and online games. One of my favorite types is hidden object games where you follow clues to solve puzzles. Occasionally, tracking press releases is a bit like a virtual scavenger hunt for the larger objective.

Let’s take a look at an example with Ceridian’s recent announcement of its acquisition of Versult Group, Inc. Versult Group is a workforce management consulting firm acquired to enhance Ceridian’s implementation, training, and support services for its InView Workforce Management (WFM) solution.  It is a straightforward article, easy to cover as is, and then I followed one clue to another and ended up with a richer story. HRO analyst fun!

Back in February 2011, Ceridian announced its partnership with Dayforce to launch InView.  The two partners began working together a year earlier to integrate Dayforce’s WFM software suite into Ceridian’s payroll and HR administration services and ready both teams for launch. Ceridian also made an equity investment in Dayforce, which had already raised $20m, including $10m from Bridgescale Partners in July 2010.

Versult was one of seven Dayforce implementation partners and Versult had already performed implementations with Ceridian. As a bonus to Versult’s experience with WFM system implementation, it brings its own mobile access application, Versobile, to Ceridian.

Ceridian intends to further develop this platform for its clients seeking SaaS-based HR services by integrating beyond the current HR administration and payroll services to create an end-to-end offering including: H&W, tax, pay cards, COBRA, recruiting, EAP, tuition reimbursement, performance management, and training.

The payoff so far is that Ceridian’s investments are seeing rapid initial client acceptance. The platform has already grown to 90 Ceridian customers, rapidly escalating from 20 in February 2011.

This is a good, well-thought-out strategic move for Ceridian. It gets to cost effectively expand its SaaS service portfolio, leverage the strengths of its current offerings, increase scope with its client base, and add an experienced implementation team. It also has an equity stake in WFM, an increasingly important service line given employer concerns with cost control and the capability for rapid and effective workforce scaling.

Let’s leave this chapter of the story with a puzzle. How long will Ceridian be satisfied with a partnership with Dayforce, the WFM software source, when it felt the need to acquire Versult, the implementer?

Now for HRO vendors large and small, how are you solving your piece of the HRO SaaS puzzle?

Linda Merritt, Research Director, HRO, NelsonHall

HRO – How the Garden Grows

April 29, 2011

Everything seems pretty moderate and modest in the garden of HRO so far this year. After the abundance in 2010, perhaps that is not so bad. Reasonably steady business gives service providers a breather and a chance to attend to growth opportunities by leveraging current capacities while cultivating new capabilities selectively.

In benefits outsourcing, the contract levels were good with some key wins and renewals. Fidelity continues its blossoming growth with major 5 year renewals for total retirement outsourcing contracts with HP and BP, and a new defined contributions contract with the University of Oklahoma. In the U.K., Mercer was awarded a 7 year defined benefits renewal by Saint-Gobain and it won a new pensions administration client, Loomis UK.

RPO saw a smaller crop of new awards, but is still growing, especially in North America and the U.K.  My colleague, Gary Bragar, will be heading off soon to the RPO Summit as a presenter and I look forward to hearing the latest views.

Smaller M&A and partnership activity remains perennial, continuing the pattern of growing footprints in terms of geography and specialized services. GP was the most active with the acquisitions of Ultra Training in the U.K.; RWD Technologies with offices in the U.S., U.K., and Colombia; and Communications Consulting in China. Manpower Group acquired Web Development Company in India to add to its IT recruiting in Asia Pacific. Finally, Raytheon Professional Services partnered with Baptist Health to increase training in healthcare systems.

With the blooming of HRO platform managed services, we have two trends. First is the belief that the time for HRO mid-market is finally here. Vendors are confident enough to invest in and launch new platform service offerings specifically for the mid-market. The second is growth into new fields beyond the base of payroll and HR administration systems. Examples of both trends:

  • Payroll – NorthgateArinso launched agoHRa for companies with up to 500 ee’s per country
  • Learning – IBM launched the mid-market Smart Business Learning Services and has launched Smart Business Learning Content Services
  • RPO – Mid-market grew from c. 20% of total revenue in 2008 to c. 33% in 2010
  • RPO – SourceRight Solutions launched RPO One for organizations with 100 – 5,000 employees, providing a dedicated service team, pre-configured ATS, and reporting and analytics.

Contract activity adds evidence that customers agree these services are desirable options. NorthgateArinso was awarded a 5 year managed payroll services and HR software contract by Historic Scotland utilizing ResourceLink Aurora. Historic Scotland is responsible for data entry, while NorthgateArinso will handle processing, pay runs, and produce electronic payslips. Edvantage Group won a 3 year managed learning services contract with Rieber & Son in Norway, which included Learning Gateway, Edvantage Group’s SaaS LMS, and e-learning courses. Edvantage Group also recently announced two contacts for its SaaS LMS. 

Learning has been slower to recover. Hopefully, 2011 will be the year for its bountiful harvest.

Linda Merritt, Research Director, HRO, NelsonHall

Is HRO at the Table – the Investment Table?

February 10, 2011

IT spend on consulting and infrastructure increased in the fourth quarter of 2010, especially in North America and Asia Pacific.  There were even bright spots in Europe like France and Italy.  Accenture saw its strongest quarter in consulting in 2 ½ years and IBM had its strongest quarter of the last decade.  Increases in outsourcing tend to follow.  For example, at Xerox, now including ACS, BPO was up 11.1%.

The bad news is that major HRO investments often trail at the end of the outsourcing pack.  The good news is that HR and its HRO vendors can see trends coming and prepare to present the strongest business case possible for investment.

ADP was up 7% to $1,663m for Employer Services.  Its bright spot was beyond payroll services, which were up 16% and include benefits administration, MPHRO, and various point solutions.  One-time activities, or smaller add-on services, helped hold up results throughout the recession for many HRO vendors as they were smaller, less risky, and easier to fund investments, but it is hard to have significant growth through small increases in incremental spend.

Aon Hewitt’s Q4 2010 numbers were way up with revenues of $1,151m, an increase of 229%.  Stripping away the impact of the merger, organically HRO was $580m, down 2%.  The same was true at Towers Watson.  For FY Q2 2011, it came in at $791m, but in a pro forma comparison it was down 5%.  Towers Watson completed a lot of integration work in the past year and managed operating margins well at 18.7% for the quarter, but underperformed organic growth expectations.  All of the HRO service providers caught up in last years acquisition frenzy need to ensure they do not miss the current and coming window of opportunity for major HRO decisions and investments.

The business development profile for every HRO client, or hot prospect that wants to do business with you should include the timing and approval process for business case decisions.  Also know what can be done through operating expenses and local discretion.  Even the most solid HRO solution will run into trouble if the funding window is missed and all that is left are the scraps on the table.

Even with investment dollars starting to fly, pie-in-the-sky projects will still be grounded.  I really liked a term I heard in relation to an increase in consumer spend, frugal splurges.  Pragmatic investments that are well supported with facts and figures and direct ties to key business initiatives and business results will have the edge.  Don’t forget to add just a little bite of pizzazz!  Add-on modules, basic features and functions, workflow and service center capabilities are important, but a bit boring.  How will new major HRO investments be riding the tech wave of virtualization, cloud, and mobility – adding to the capabilities of an adaptable workforce of the future, ready to compete, and win today?

Linda Merritt, Research Director, HRO, NelsonHall

HRO Confidence Jumps 13 Percentage Points, Per NelsonHall’s 4Q10 Index

December 14, 2010

What a difference a quarter, or two, or three, can make! NelsonHall’s just-released 4Q10 HR Outsourcing Confidence Index found that 54 percent of respondents are much more confident about the health and growth of the HR outsourcing industry over the next 12 months as compared to the previous 12 months. And this number is up from 41 percent in 3Q10, 33 percent in the second quarter of 2010, and 27 percent in 1Q10. 

The primary drivers for this boosted confidence are increases in both new contract awards and in providers’ pipelines. The strongest pipeline is in RPO, followed by outsourced payroll (especially in the SMB market, as providers are offering better technology and services targeted specifically to this segment) and then outsourced learning services.

In terms of revenue growth, based on financial results for the period ending 3Q10, RPO led the pack, followed by payroll, learning, benefits administration and multi-process HRO (MPHRO) taking the next four rankings. It should come as no surprise that RPO took the top spot as contracts continue to be awarded weekly. As I’ve written about before and consistently hear during discussions with RPO providers, growth in this space is about scalability to meet demand while lowering fixed costs of dedicated internal resources when volumes are low, while, of course, simultaneously improving quality of hire.

At the opposite end of the spectrum, MPHRO is facing significant challenges due to a range of factors – especially risk aversion, which in turn is driving more point solution deals – but it is by no means dead. If I were an MPHRO provider, I would continue to hold steady as MPHRO contracts are being awarded, albeit smaller in scope than in the boom years of mega deals.

As for expected HRO growth by geography in 2011, on our 1 to 5 scale, with 1 being lowest and 5 being highest, we see:

  • U.S.: 4.6
  • Asia Pacific (overall): 4.3
  • U.K.: 4.1
  • Europe: (overall) 4.0
  • Central and Latin America (overall): 3.9

I believe all these indicators point to a move out of the mucky waters HRO has been slogging through for the past eight quarters. Further, I believe the U.S. and other regions will continue their outsourcing trend as companies try and continue to grow their strategic businesses, while offsetting costs associated with non-core areas (and companies’ views of what IS core are changing quite substantially.) Finally, I believe we will continue to see more multi-country and multi-continent point solution HRO deals as companies look to standardize those processes and implement best practices provided by a single, best-of-breed vendor.

Gary Bragar, Lead HRO Analyst, NelsonHall