Posted tagged ‘rpo’

Highlights and Trends in the HRO Market for H1 2013: Part 1

August 7, 2013
Amy L. Gurchensky, HRO Research Analyst, NelsonHall

Amy L. Gurchensky, HRO Research Analyst, NelsonHall

It’s hard to believe that H1 2013 is complete, which makes it an ideal time to recap highlights and trends from the HRO world this year.

Overall Activity

There was a healthy number of new contracts awarded across all HRO service lines in H1 2013. In addition, renewals and contract extensions signed were consistent with H1 2012. There was, however, an increase in activity with organizations changing their existing service provider, particularly within benefits administration and RPO.

For the last few years, attention has been on the mid-market (500-10k employees), among other things, as an area for growth within HRO. Quarter-over-quarter, mid-market activity has made strides relative to the large market. In fact, in H1 2013, the majority of activity reported was from the mid-market.

Beyond HRO, the number of HR software contracts signed globally was up substantially compared to H1 2012. For example, in the U.S., ADP was awarded a contract for its Vantage HCM platform, including HR, payroll, benefits and onboarding modules, by The Paradies Shops covering 4k employees. In the U.K., Ceridian gained traction with its automatic enrollment module with Asda for 175k employees and WH Smith for 16k employees.

Payroll

Despite being a mature service line, payroll outsourcing does not disappoint. The biggest news reported in H1 2013 would have to be ADP’s acquisition of Payroll S.A., which will expand its LATAM payroll capabilities to Chile, Argentina and Peru. ADP already had in-country services in Brazil, and had capabilities through GlobalView and Streamline to serve multinationals in other LATAM countries.

Other news within payroll includes Acrede opening an office in Singapore to expand its global payroll reach into Asia-Pacific. Growth opportunities in the region include Japan and South Asia-Pacific.

RPO

The RPO market continues to be a hot one to watch. Contracts were awarded in various countries, including the U.S., U.K. and China, and ~20% of contract activity in H1 2013 was from multi-country deals.

The level of M&A activity was consistent with H1 2012, but the level of RPO partnerships has dwindled. Nevertheless, RPO vendors were busy expanding service offerings and delivery capabilities, and launching new websites. Some examples include:

  • Randstad Sourceright launching an RPO integrated assessment program
  • Manpower U.S. launching a multi-channel delivery model
  • Ochre House launching a COE to drive innovation
  • Randstad Sourceright opening a shared services center in Budapest
  • Hays launching a new mobile website
  • AMN Healthcare launching a redesigned website.

Although technically within H2, it is timely to mention the Pinstripe and Ochre House merger.

Learning

After a rather long lull, the learning BPO market has shown many signs of improvement. New contracts include Raytheon and GM Korea for content development and training administration services, and delivery of sales and non-technical training.

GP continued its acquisition frenzy focused on strengthening and expanding its geographic footprint with Prospero Learning Solutions (Canada) and Lorien Engineering Solutions (U.K. and Poland). Not to mention Capita’s acquisition of KnowledgePool.

Stay tuned next week for more highlights and trends from H1 2013 that are specific to benefits administration and MPHRO. I’ll also share some insights on what to expect in H2 2013 based on NelsonHall’s recent HRO Confidence Index survey.

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Catching Up with ADP

June 20, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

The recent passing of long-term U.S. Senator Frank Lautenberg reminds us of his early role in the formation of what became ADP, a founding member of HR outsourcing. In the early 1950s he was engaged in selling insurance and sold a policy to two young New Jersey businessmen, Henry and Joseph Taub. The Taub’s were pioneering a then new concept; payroll outsourcing. The brothers knew payroll processing and Lautenberg knew sales and marketing. Lautenberg took a risk and joined the Taub brothers and together they created a new industry.

Establish Operating Principles

By the time the company incorporated in 1961 the three leaders established principles that still guide the company some 60 years later. Following are a few of the principles they put in place.

Focus on Business Markets that Offer Significant Growth Opportunities

ADP has always pursued growth through new market opportunities, both by expanding it service lines and by entering new geographies. Much of the early growth was through acquisitions, as well as organic growth. Lautenberg retired as CEO from ADP in 1982 having made over 100 acquisitions!

Over time, ADP became a global player. An early acquisition was GSI, a large payroll and HR services company in Europe. The latest 2013 acquisition is Payroll S.A. to expand LATAM payroll capabilities to Chile, Argentina, and Peru. In the last few years major acquisitions included Workscape (benefits), The RightThing (RPO) and SHPS (benefits).

Embrace Technological Change to Enhance Product and Service Offerings

By the early 1960s ADP had moved from manual operations to the pre-computer punch cards and on to leasing its first computer: an IBM 1401 mainframe. That willingness to continue to embrace the new is seen in ADP’s successful launch of a series of cloud-based SaaS HR technology and BPO service platforms, including Workforce Now (1k-20K employees), Vantage HCM (50-3k employees), and GlobalView for multi-nationals. Together, the three services support more than 40k clients.

The company has also launched extensive mobility options, including RUN powered by ADP for small business mobile payroll and ADP Mobile Solutions for access to a broad range of information and transactions spanning time and attendance to benefits and pay cards.

Attract and Retain Motivated and Talented People

ADP has grown into a $10bn global outsourcing business with one of only four remaining AAA credit ratings in the U.S. With ~570k clients across 125 countries, we know customers support its line-up of services and proprietary developed technologies. What about people? A few recent awards tell the story:

  • Ranked second on Fortune’s 2012 list of America’s Most Admired Companies in Financial Data Service
  • Ranked in the Top 50 on IDG’s Computerworld 2012 list of the 100 Best Places to Work in Information Technology (IT)
  • Named to the 2012 Working Mother 100 Best Companies, for the third time.

We therefore need to ask the question of prospective purchasers: does your prospective or current HRO service provider have long-term guiding principles and can you see evidence of them in action? Because ADP does.

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HRO Déjà Vu

April 11, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Each quarter, we publish the NelsonHall HR Outsourcing Confidence Index (HROCI) for our clients and the participating service providers. I like to share some of the highlights in my blog, but it can be hard to make fresh insights during times when the results are stable from quarter to quarter. When the confidence ratings are generally strong, as they are, then stability is pretty good news for HRO service providers.

Overall Confidence Remains Stable

The most recent HROCI shows a vendor confidence level of 157 for Q1 2013, where 100 represents unchanged confidence and higher scores indicate increased confidence. That is in line with the 156 from Q4 2012 and a bit up from the 153 one year ago. Confidence dipped mid-2012 with Q2 at 138 and Q3 at 140, which was not too surprising given the political and economic uncertainty we saw last year:

  • While the overall confidence score at 157 remains stable, those suppliers reporting slightly more or much more confidence increased 13% quarter over quarter
  • Increased confidence is reflective of solid pipelines of potential new sales and expectations for growth.

Growth Expectations Vary

Service lines: HR business process outsourcing service lines do not grow at the same rate. Some services like RPO and payroll remain steady performers, followed closely by benefits administration. The pipeline for benefits administration is looking especially strong. Expectations for multi-process HRO and learning remain about the same, which indicates continued slow growth.

Geography: Location matters in HRO and the patterns of growth also vary by region. The economic recovery is uneven in pace, readiness for HRO is uneven, and multi-country deals are a smaller part of the mix than in the recent past.

Overall, vendor confidence by geography has weakened with many regions showing some decline in confidence. North America, Asia Pacific, and Latin America show the strongest numbers, but there can be significant variation country by country. As we have seen for some time, growth expectations for Europe and the Middle East remain dampened.

Industry: High-tech and retail look to be the optimistic growth industries with most sectors remaining within prior modest expectations for growth. Expectations remain low for federal government and defense.

Mostly Steady and Stable Ahead

It is good to see the balancing of demand for cost savings and process standardization continuing. Client pricing expectations may still be unrealistic as there are always those who want a quick 50% off along with some freebies thrown in at the same time.

One area to watch is the growing client interest in and adoption of platform-based services. Some buyers are specifying SaaS and cloud-based services in proposals. We need to help educate buyers on leaving some room for discovering the best solution fit for each client situation.

To end on a positive note, 79% of HRO suppliers believe that a net up-turn in decision-making is taking place. Let’s get out there and get those deals signed!

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RPO Generation 2.0 is Ready to Go

March 28, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

Linda Merritt, HRO Research Analyst, NelsonHall

Recruitment Process Outsourcing (RPO) is one of the younger HRO service lines and it is both growing and maturing quickly. The March issue of HRO Today recognizes the emergence of RPO 2.0.  NelsonHall’s RPO specialist, Gary Bragar, would certainly agree. Gary’s October 2012 Targeting Recruitment Process Outsourcing market analysis highlighted many of the same developments in this rapidly growing HRO segment.

What is New in RPO 2.0?

The rapid growth and incorporation of social media for recruiting is a big part RPO 2.0, one that keeps pushing RPO to the leading edge of innovation in the HRO space.

RPO services are rapidly moving up the value chain, and changing client expectations is the key. While reducing the cost of service provision is always on the table, it is no longer the number one issue. Flexibility and scalability will always remain important as well, given how quickly hiring needs can change.

Today’s RPO 2.0 clients are looking for more value:

  • Improved quality of hires
  • The latest tools and technologies for social and mobile
  • Expertise in accessing talent pools and passive hires
  • Greater focus on candidate experience
  • Analytics and insights, in addition to metrics and reports
  • Improved retention
  • Access to advanced services including employment branding, talent management, talent engagement, and integration with workforce planning.

Clients Simply No Longer Want To Do It

In the last few years, many buyers reduced internal recruiting staff in line with the reduced volume of hires, and they do not want to rebuild and reinvest in the rapidly evolving technologies and advanced skill sets it takes to succeed in today’s competitive, social, mobile, and global recruitment process market.

Buyer Choice is Broad

For every large staffing company that does RPO including Adecco, Kelly, Manpower, and Randstad, there are smaller vendors that specialize in RPO such as Ochre House and Pinstripe.   Most leading RPO vendors of all sizes can offer services in most of the regions of the world as they have partnered and made acquisitions to make their footprints global.

Not long ago, major multi-process HRO (MPHRO) providers either did not provide end-to-end RPO or saw it taken out of contracts. Now, more MPHRO providers have full RPO services strong enough to be offered as standalone services including ADP, Aon Hewitt, Infosys, and IBM.

With RPO 2.0 You Can Have It All

While having it all may still be a bit aspirational for most of us, we are finding evidence that successful client / provider RPO partnerships can improve process efficiencies (e.g., reduce time to hire 20% to 50%), reduce the total cost of hire (often 20% to 30% or more), along with increasing hiring manager and candidate satisfaction.

Imagine what we can achieve with RPO 2.0!

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ADP Meeting of the Minds 2013 – Another Success

March 22, 2013
Gary Bragar, HRO Research Director, NelsonHall

Gary Bragar, HRO Research Director, NelsonHall

My second ADP Meeting of the Minds (MOTM) client event once again exceeded expectations. There were 170 sessions with tracks including HR BPO, talent management, benefits, payroll, time & labor management, and personal & professional development. The following highlights the opening session and one of the general sessions I attended.

Opening Keynote by Steve Wynn

It’s no surprise that Steve Wynn’s hotel has won awards as the best place to work. At Wynn, a great customer experience is achieved by interaction with your people (i.e., employees) as only they can make others happy. To achieve human aspiration and to best serve customers, self-esteem is most important. If you can enhance self-esteem, then a single employee interaction with one guest can change the history of the enterprise. Steve views the most important person in an organization as the next person you (i.e., a guest) encounters.

According to Steve, to achieve self-esteem you need to be recognized by your boss. One form of recognition is pre-shift meetings where the supervisor asks if there are any good stories of guest interactions. That employee then gets his / her picture taken, which gets hung on the walls including in the employee cafeteria, which then motivates other employees to provide an exceptional customer experience!  Several examples of how employees have gone above and beyond the call of duty to exceed guest expectations were also provided.

RPO

Terry Terhark, president of The RightThing and Neil Efron, account manager, presented with client Tom Osmond, managing director of talent at Goldman Sachs; Neil sits onsite with Goldman in NY. Terry began with an overview of what RPO is and then Tom spoke of their journey together. Goldman has $34.2bn in revenues with 34,200 employees. At the end of 2011, Goldman signed a contract with The RightThing that commenced in March 2012. In 2012, Goldman did 7,200 hires (2,500 experienced hires, 2,000 college hires, remainder were interns).

Key drivers that led to outsourcing included:

  • Leverage a scalable infrastructure to better support highly variable recruiting volumes
  • Engage with a single provider for global delivery
  • Reduce costs associated with onsite staff
  • Partner with an experienced provider knowledgeable of best practices
  • Incorporate advanced recruiting and sourcing technology, e.g. in 2010 job boards and mobile recruiting were not used.

The contract began with support for North America experienced hires via the NY office. Support is provided both onsite in NY and centralized from The RightThing service center in Findlay, Ohio. Today, The RightThing also provides support to the London office including scheduling of interviews.

Initial services included interview scheduling, coordination of travel, and job offer management. ADP resources are also leveraged for Green Card processing. In October 2012, a sourcing solution was designed for recruitment of niche specialist positions, e.g. how to hire investment bankers, which was expanded in 2013.

From the client perspective, ADP has enabled a more flexible and efficient recruiting model with lower cost including reduced administration and time dealing with issues.

Emerging is the ability to expand globally including sourcing for EMEA and then into APAC. Further recruiting cost reduction is to be obtained by moving from ~50% offsite/onsite to 60% offsite resources in Findlay.

Summary

If you are an ADP client and have the opportunity to attend MOTM, I highly recommend it for your personal and professional development and you will have fun!

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Global Clients Join Analysts at Futurestep Showcase

March 15, 2013
Gary Bragar, HRO Research Director, NelsonHall

Gary Bragar, HRO Research Director, NelsonHall

Congratulations to Futurestep on a job well done! The company brought several clients to the entire analyst event as well as Futurestep leaders from EMEA, APAC, including China and New Zealand, North America, LATAM, and all functional leaders.

Korn/Ferry

Parent company Korn/Ferry CEO Gary Burnison shared his perspectives on leadership including how employees want to be part of something where they can grow and be stimulated and what Korn/Ferry can do to better work with clients and help them make their business successful; it all boils down to its people! Korn/Ferry understands that companies focused on people outperform the market in terms of growth by linking its business strategy to its talent strategy.

Futurestep Offerings / Capability

Continuing its people focus, Futurestep CEO Byrne Mulrooney talked about a new career development tool called Forte. Career development is a top reason why employees stay with a company. Forte will be deployed throughout Futurestep starting with the top 100 people. Futurestep has also begun to market Forte globally to complement (but not replace) talent management platforms.

Regional and practice RPO leaders talked about how Futurestep makes a difference including its focus on:

  • Understanding customer needs: per a recent OI RPO client satisfaction survey, Futurestep achieved top ranking in understanding client needs; I believe a leading factor is that a high percentage of Futurestep employees sit on site with clients
  • Sourcing, assessments, talent communications/employer branding, contract management, technology, the recruitment process, vendor management, and metrics
  • Its ~800 professionals in 20 countries organized by industry sectors with specialists including:
    • Life sciences
    • Financial services
    • Consumer/retail
    • Technology
    • Industrial
    • Government/public sector
  • Building talent communities in all RPO contracts at no extra charge
  • Using analytics with a dashboard to look across all RPO clients for benchmarking purposes.

Futurestep’s analytics, included for all new clients and to be added for existing clients by Q3, allow users to:

  • View detailed data and trends including productivity, job placements by job type and gender, the top seven markets for the top seven functions, etc.
  • Perform predictive analysis, e.g., top sources of hires.

Futurestep Clients

Of all analyst events I’ve been to this had the highest number of client attendees and case studies combined with presentations and dialogue around the table. Clients talked about why they outsourced, why Futurestep was chosen, benefits received to date, and what they would like to receive in the future. For example:

  • An APAC client is going to use Futurestep for internal candidate hiring next
  • Another client is looking to enhance its employment branding
  • A North America client plans to expand globally with Futurestep including in EMEA
  • A MNC client changed providers because it found Futurestep to be more of a consultant and partner.

Case studies provided examples of documented benefits obtained by clients including:

  • Reduced agency hiring
  • Cost savings
  • Reduced time to hire, including time to deliver a short list of candidates
  • Hiring manager satisfaction, etc.

Summary

I was impressed by the ability to speak directly with clients and Futurestep leaders across all regions and to learn about Futurestep’s capabilities.

SaaS versus BPO

March 14, 2013
Linda Merritt, HRO Research Analyst, NelsonHall

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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