Highlights and Trends in the HRO Market for H1 2013: Part 2

Amy L. Gurchensky, HRO Research Analyst, NelsonHall

Last week, I zeroed in on specific market activity within the payroll, learning and RPO service lines. This week, I’ll take a closer look at H1 2013 activity within benefits administration and MPHRO as well as provide some insights on what to expect in H2 2013 based on NelsonHall’s recent HRO Confidence Index.

Benefits Administration

Contract signings aside, there has been a plethora of activity within benefits administration in H1 2013, including:

• New offerings:
  • Mercer launched a private benefits exchange, Mercer Marketplace
  • Buck Consultants launched an automatic enrollment offering in the U.K.
  • Secova launched a Coordination of Benefits (COB) audit offering to coordinate benefits with insurance carriers
• Acquisitions: Wageworks acquired Crosby Benefit Systems and Benefit Concepts to strengthen its H&W administration offering, including reimbursement account and COBRA administration
• Partnerships:
  • Fidelity partnered with Extend Health, a Towers Watson company, to provide retiree healthcare services
  • JLT Employee Benefits partnered with Vielife for health and wellbeing services in the U.K.
• New technologies:
  • Xerox launched an account-based benefits portal, BenefitWallet, to assist with managing multiple health accounts on one platform, including HSAs, HRAs, FSAs, HIAs (health/wellness incentive accounts) and other specialized services
  • Aon Hewitt launched an absence management tool, 360 Absence Solutions, to help clients manage absence-related costs, compliance risks, the administrative burden and lost productivity
• Educational resources:
  • Mercer and ADP both launched websites to provide information on healthcare reform
  • Ceridian launched an auto-enrollment knowledge center in the U.K.

MPHRO

In recent years, the MPHRO market has been relatively quiet in terms of contract announcements and H1 2013 was no exception. However, my last MPHRO research study, published in February 2013, revealed that the market is very much alive with new wins and contract renewals from all the major vendors, including IBM and Accenture. In fact, IBM recently won a new seven-year, multi-country MPHRO contract, which was bundled with F&A outsourcing services. Other wins include ADP and Marriott Vacations Worldwide for core HR, payroll, time & labor management and talent management covering ~9.2k employees.

Many vendors have been focused on their strategies for expansion, including Aon Hewitt with its acquisition of OmniPoint Workday Services. Although still early, NelsonHall expects ADP to make inroads in LATAM with its MPHRO services since it added RPO capabilities in this region from its acquisition of The RightThing and now expands its payroll footprint from the Payroll S.A. acquisition.

H2 2013

So what does the rest of the year have in store? NelsonHall’s recent HRO Confidence Index survey finds that overall expectations for HRO revenue growth remain at the same level as those reported for the last five quarters; with payroll leading followed by RPO. Top industry sectors for HRO services include healthcare, pharmaceuticals and high-tech. By geography, vendors have reported increased confidence for revenue growth in Central and Eastern Europe and Central and Latin America.

Needless to say, it will be interesting to see how the rest of the year unfolds for HRO.

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

Benefits Outsourcing is Blooming

Linda Merritt, HRO Research Analyst, NelsonHall

Benefits administration is producing a bountiful crop of new and expanding services. Recent contract award announcements included ADP, Aon Hewitt, Ceridian, Equiniti, Fidelity, Mass Mutual and Merrill Lynch. A wide range of industry segments were represented: banking; food; education; non-profits; hi-tech; pharmaceuticals; and travel. This week, I have taken a look at some of the newer benefit outsourcing “crops” that are starting to grow nicely.

Managed Retirement Accounts

Fidelity’s relatively new managed retirement account offering – Fidelity Portfolio Advisory Service at Work – was designed to address the low rate of adequate preparation for retirement by many employees by combining Fidelity Investments plan sponsor customized portfolio active management services with auto enrollment and available advisory services to help bridge the gap in achieving retirement goals from a defined contribution plan. The service grew in both participants and assets by 50% in 2012. Already in 2013, another 135 new clients have been added, bringing the total to more than 1,800 plan sponsors.

• Fidelity awarded a contract for Portfolio Advisory Service at Work by ADM.

Health and Wellness

ADP’s Vitality wellness solution supports employers with between 50 and 1,000 employees manage rising healthcare costs and also reduce employee absenteeism. Vitality’s incentive-based program includes an interactive wellness portal, health risk assessments, biometric screenings and personalized wellness plans with recommended goals and activities. It integrates with social networking sites, mobile applications and fitness technologies; and when employees achieve planned goals, they earn points towards lowering their health plan contributions. The service is also integrated with ADP’s payroll services.

• ADP awarded a contract by Jackson Companies for ADP Vitality services.

Benefits Bouquet Bundles

HRO buyers want multiple related services from one vendor under one contract; and health and wellness lends itself to packaging separate services into bundles. Ceridian’s LifeWorks.com combines EAP, work-life, and wellness services into one program with its own portal and mobile access. Also available is Health Coaching – a program for high-risk employees that provides access to comprehensive health assessments and personalized guidance programs – and Client Value Dashboard – included for employers to monitor reports usage data and ROI information.

• Ball State University chooses Ceridian’s LifeWorks.com

Private Employer Exchanges

Mercer’s Marketplace allows employers to improve management of their benefits spending and administrative responsibilities for active employees. Employers determine how much to contribute toward the cost of their benefits program and can select from a range of insured and self-funded products and providers. The platform includes full benefits outsourcing and provides employees with call center and online decision support.

• Mercer recently announced names of 10 of its 20 national, regional and state carriers that have joined Mercer Marketplace for providing core medical and voluntary benefits.

A good garden has a variety of plants. Some base crops are evergreen like benefits enrollment and management services, while others are changed out to meet growing market demand. Benefits HRO: how does your garden grow? Very well thank you.

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

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.

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