Learning BPO Market Morphing by M&As, Partnerships and Organics to Meet Evolving Client Needs

Per the findings from NelsonHall’s recently published “Targeting Learning BPO” report, we saw only a modest growth rate of 2.5 percent in this HRO segment in 2009 – 2010, but predict a global compound average annual growth rate of 8.4 percent through our 2014 forecast period. So what’s driving this growth from the buy-side, and how are providers responding?

Buyers’ top driver for learning BPO (LBPO) remains reducing the cost of the learning function, followed by increasing the effectiveness and improving the quality of learning for employees. Other drivers include gaining a better return on the learning investment, right-time/right-level access to specialist trainers, obtaining a well-defined process from a provider with the ability to deliver higher quality, aligning learning with strategic objectives, contract flexibility and utilizing cutting-edge technologies for learning services delivery.

To meet these buyer needs, providers must step up their game in a range of areas including the ability to manage a global network of delivery suppliers, and providing access to the technologies required to effectively deliver and manage all aspects of the learning function via learning management systems, Web 2.0., virtual instructor-led training, e-learning, m-learning, virtual world technologies, gaming and learning analytics. Providers also need to have global learning capabilities across all four learning towers: Learning Administration, Content Development, Learning Delivery and Technology.

LBPO providers are taking a variety of paths to address these evolving, and in cases daunting, buyer requirements. Some, including Raytheon Professional Services, Expertus, Edvantage Group and RWD, are growing organically, with new service offerings including new technology, content and geographic delivery capabilities. Acquisitions and partnerships are also occurring.

2010 acquisitions in the LBPO space include:

• Kenexa’s acquisition of The Centre for High Performance Development to strengthen leadership develop and management training
• Talent2’s purchase of Origin HR and Sugar International to expand vocational training capabilities
• General Physics’ acquisition of Marton House to strengthen e-learning content development in the U.K., and its purchase of PerformTech to strengthen learning services for the U.S. government

 And 2010 LBPO partnerships include:

• NIIT and SENA to provide learning services in Colombia
• Edvantage Group and Mediapharm to offer a pharma online portal

Bottom line is, for the LBPO market to grow and prosper, it is all about meeting client’s learning needs: delivering what they need, where they need it, when they need it and how they need it. Organic is great, but not always feasible, and not necessarily always the best option for the involved parties. Thus, I beleive we will continue to see more acquisitions, and even more partnerships, in the LBPO space in the next 12 months.

Gary Bragar, Lead HRO Analyst, NelsonHall

Expect Payroll Outsourcing to Proliferate in Financial Services and other Struggling Sectors

Our March 2009 “User Requirements from Payroll Services” research study found that today’s most critical payroll management necessities include:

•  Consistent, standardized payroll processes across the enterprise, particularly when the organization operates in multiple countries or is poised to enter into other geographies

•  Common-view access to complete payroll data across the enterprise to enable HR to make better strategic decisions

•  Cost reduction resulting from increased efficiency, self-service capabilities and Web 2.0 technologies

Thus, two very recent payroll outsourcing deals come as no surprise. On May 19, 2009, ADP announced it had entered into a payroll outsourcing engagement with Swiss Re, a leading and highly diversified global reinsurer. During the five year contract, ADP will service the payroll needs of up to 10,000 employees and 2,500 pensioners across Switzerland, Germany, the U.K. and the U.S., and smaller populations across more than 20 other countries. And on June 9, 2009, NorthgateArinso announced it had entered into a payroll outsourcing deal with One Housing Group, a non-asset holding parent that brings together three housing associations serving London and adjacent countries under a group structure.

It also comes as no surprise that both of these contracts are in industries struggling in today’s current economic climate, as cost reduction in many areas including services delivery is key to their survival. We anticipate seeing an increase in signed contracts for managed payroll services globally – particularly within the financial services, manufacturing and professional services industries – especially those which enable client organizations to leverage the provider’s technology solutions and self-service/Web 2.0 implementations to reduce overall HR costs and improve global data management and integration without heavy capital outlay requirements.

Until next time, happy sourcing!

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall

Web 2.0 and HRO: A Marriage of Necessity

Google the phrase “define Web 2.0” and you’ll come up with nearly as many hits as Scottish singing sensation Susan Boyle’s YouTube views (okay, a little bit of an exaggeration, but you get the point.)

One very recent Webopedia definition I think nicely nails it: “Web 2.0 is the term given to describe a second generation of the World Wide Web that is focused on the ability for people to collaborate and share information online… includes open communication with an emphasis on Web-based communities and users, and more open sharing of information. Over time, Web 2.0 has been used more as a marketing term than a computer-science-based term. Blogs, wikis, and Web services are all seen as components of Web 2.0.”

So why am I talking about Web 2.0 in an HRO blog? Millennials in the workforce openly and adamantly “expect” Web 2.0-type capabilities in their working environment, as do their Gen X counterparts to a large extent. It’s simply an integral part of their lives. Further, it allows for enhanced connectivity and communication as workforces become increasingly global. And finally, employees and retirees alike desire more, better and easier access to information which directly impacts them and their decisions today and in the future.

The implications of Web 2.0 on HRO providers is clear…they must innovate to offer their clients’ employees Web 2.0-type services to enable the engagement and satisfy the information access requirements of today’s employers and workers. And there are a wide range of opportunities for doing so. For example:

•  Social networking sites can be incorporated into learning BPO (LBPO) arrangements to encourage collaboration and sharing of tacit knowledge across particular spheres of expertise, as can wikis for specific training needs

•  More interactive, information-rich and modeling technology-based HR portals can address the need for real-time, life event-based employee engagement in benefits administration decisions

•  Payroll processes can be “jazzed” up to enable employees to utilize mobile technology to view their payslips as soon as they are available

And let’s not forget the importance of Web 2.0-type services for HRO clients themselves. For example, executive sponsors expect better and easier access to information on their engagements’ SLAs and KPIs, increasingly via a dashboard environment; benefits administration plan sponsors are looking for enhanced, streamlined access to individual case tracking through plan sponsor-specific web portals; and wikis can potentially be utilized to develop understanding around specific issues within outsourcing contracts, leading to better client service.

We strongly believe Web 2.0 will continue to encourage – and increasingly demand – HRO suppliers to innovate around the technology offerings they provide to drive greater efficiency, effectiveness, satisfaction, information access, SLA/KPI analytics and, ultimately, cost savings into their delivered processes. Further, we believe the availability of robust Web 2.0-type services will lead to more HRO arrangements in which technology is a key driving factor not only in the initial outsourcing decision but also in the selection of the third-party provider.

Until next time, happy sourcing!                     

Helen Neale, Research Director, Human Resources Outsourcing, NelsonHall