HRO – How the Garden Grows

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

Plan Ahead to Attend the HRO and RPO Summits

As a reader of our blog, you know that we don’t normally advertise events.  Rather, we provide our own commentary on the HRO market.  However, since this is the first time the HRO Summit and RPO Summit is being combined, plus MSP and the HR Demo, I thought I’d pass along the details: HRO Today Forum.

The RPO Summit 2011 is all about managing global talent and improving the business value of recruiting and staffing. The Summit aims to put the right people together to discuss how recruitment can lead the corporate agenda, including expert speakers, targeted presentations, in-depth case studies, and hands-on workshops focused on the solutions and technologies that will unleash the true potential of the HR-Powered Enterprise.

You can register now for the RPO Summit at http://bit.ly/fhSKDS and save 30% using promo code SPSAV30.

I’ll be at the RPO Summit in Las Vegas on May 24^th presenting my latest RPO research with an emphasis on benefits to buyers and critical success factors to make RPO a success.

In the meantime, I can’t resist sharing some news on the RPO front. This week, Futurestep won a 5-year RPO and consulting contract in New Zealand and Australia with Fonterra, a large dairy exporter, performing ~2,000 permanent and fixed-term hires per year, demonstrating that all industries globally are engaging in RPO.  Hope to see you in Vegas!

Gary Bragar, Lead HRO Analyst, NelsonHall