NelsonHall’s HRO Insights blog has changed locations. New entries are being added to the HR Outsourcing blog page on the NelsonHall website.
If you would like to be notified via email when new blog entries are posted, please click here to sign-up.
Thank you for your continued readership.
Very truly yours,
The NelsonHall HRO Team
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:
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.
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:
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.
Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.
Gary Bragar, HRO Research Director, NelsonHall
This year’s HR Technology Conference, less than 10 weeks away, will be back in Las Vegas October 7-9 (please note onsite rooms are going fast, I had to stay at alternate hotels the past two years!).
With 6,000 people from 28 countries attending last year, I continue to find it an invaluable investment of my time to:
Presentations: Session topics include:
Be sure to check out the agenda at: http://www.hrtechconference.com/agenda.html
Highlights of just a few of the many presentations include:
Whether your company has outsourced or continues to do everything internally, there are bound to be several sessions where you can learn how to improve HR in your organization and be a better business partner. When I was on the buy-side prior to joining NelsonHall, I would attend such HR conferences to:
Technology Exhibits: Since technology is changing so rapidly, it is often difficult to keep up with new applications that are available. The conference is a great way to get exposed to a broad-range of recent innovations. You can stop by any booth and see a demo. There is no pressure and vendors are excited about their new products and services and are happy to show you more.
So here is your chance to make a difference at your organization; you might stumble onto a better, more user-friendly technology for example. Even if you are not the decision-maker, you can always tell your organization about it when you return and request a customized demo. Alternatively, if you are already outsourcing, you might see something that you don’t have and can bring it to your provider’s attention.
Network: The conference provides an opportunity to expand your network with others, including HR practitioners, buyers, providers and analysts, etc. In addition to the daytime events, there are evening socials too. HR deserves to have fun!
As a reader of my blog you are entitled to a discount. Just use the Promo Code HRO13 (all caps) when you register online at: http://www.HRTechConference.com/register.html to get $500 off the rack rate of $1,895. The discount does not expire until the conference ends on October 9, 2013.
Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.
Liz Rennie, HRO Research Analyst, NelsonHall
Last week we attended the Advisor & Analyst Summit with NGA where CEO Adel Al-Saleh presented the highlights for FY2013 (up to 30 April 2013) and described the company as an “IP-led HR services company.” Focus was given to the company’s ability to support global payrolls, whatever the HRIS platform, as NGA supports multiple platforms such as Workday, SuccessFactors, PeopleSoft, Oracle and SAP. Further, NGA announced that BPO agreements are in place with all the above-mentioned technology companies.
NGA serves all size companies and is particularly focused on global enterprise clients. Multi-country BPO HR/payroll is where NGA sees growth. Over the last year NGA experienced flat revenues, the downturn in the consulting was cited as the main reason; however, EBITDA was up by 8.6% to $157m. Workforce administration and global payroll were cited as areas which were experiencing growth. A “sweet-spot” client would be a client who wants its IT to be managed and requires service components for HR administration and/or payroll.
New wins and renewals for FY 2013 were cited as Aer Lingus (Irish HRO client based on ResourceLink), Textron (PeopleSoft renewal), Pirelli (40 countries in scope), State of Texas, McGraw-Hill and Orica.
FY 2014 priorities
NGA already has more than 8 clients utilizing the Workday platform.
NGA presented its Global Delivery Model, which demonstrates the maturity and scale of NGA’s global delivery, including approximately 1.2k employees in Manila, 1k in Kochi, 100 in Dalian, China, 150 in Katowice, Poland, 500 in Granada, Spain and 200 in Buenos Aires, Argentina. These centers have been undergoing a center standardization based on Six Sigma to improve alignment.
NGA’s depth of knowledge is evident in the 8 IP components presented, including its NGA Service Catalogue, Global Statutory Center, ePIM Implementation Methodology, SunEXo (to track payroll status), ScopeHR (to configure scope), Online Reference Guide (for processes and instructions), Global Standard Training and Global Process Framework.
Being an IP-led HR services company, NGA has to clearly articulate the value of the IP to the client and then ensure that the IP roadmap is closely following its client’s needs. Furthermore, increasing technology capability with a broader partner ecosystem could bring further challenges, such as:
NGA continues to be a company that is flexible to the needs of its clients. In this current climate companies need agility in HR solutions, services, prices and (now more than ever) technology. NGA offers a global delivery network that is experienced and always hungry for more business.
Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here
Linda Merritt, HRO Research Analyst, NelsonHall
The NelsonHall HRO team recently spoke with Mary-Sue Rogers, Talent2’s global general manager for HR managed services, for an update on the major Asia-Pacific, pan-regional HRO service provider with ~2.6k clients across 30 countries. Its client base includes companies of all sizes in both the private and public sectors. The company had a busy fiscal Q4 2013 winning more than 60 contract awards across its service lines, including payroll, RPO, learning and HR advisory services.
The Asia-Pacific HRO Market is Competitive
Asia-Pacific is a huge and diverse region with many of the individual nations still considered “emerging markets,” with opportunities for long-term growth. Talent2’s in-region competitors are largely global HRO providers, some span all service lines and others go head-to-head-on a single service like RPO.
So how does a ten-year-young company compete with many of the biggest names in HRO? Its competitors also have in-region locations but find it hard to match Talent2’s 40+ HRO-dedicated locations supporting 31 languages in 16 Asia-Pacific countries, including parts of the Middle East. In May 2013, Talent2 further expanded its operations in support of the Asia-Pacific region by opening a service delivery center in the Philippines.
Succeed With a HRO Competitive Edge
It is a core part of providing multi-country services to offer local subject-matter expertise on employment rules, regulations, taxation and compliance reporting, and all of the competitors can provide such services directly or through vetted local partners.
Talent2 demonstrates deep knowledge of local regulations as well as cultural and business environments. It knows the nuances that others may miss, which can help develop a service offer that is right on the mark for design and cost. For example, in the first instance, Talent2 addresses the following questions:
As a result, 50% of its clients use multi-country services led by payroll and followed by RPO. Some start with one targeted country and add more over time.
Quality services and competitive pricing, along with its deep knowledge, provides a winning combination for Talent2, achieving a NelsonHall estimated ~10% growth in FY 2013.
Then Change to Remain Competitive
Talent2, which became a private company in 2012, is working its way through its stated development roadmap. The multi-pronged plan is focused on upgrading and rationalizing its technology platform to meet current and future client needs and going environmentally green to control internal costs and lower the total cost of ownership for its clients.
HR services are changing rapidly all over the world, as are client needs and interests, and no service provider can long rest on its laurels. Therefore, the question arises: does your HRO service provider’s competitive edge match your needs today, and will it tomorrow?
Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.
Linda Merritt, HRO Research Analyst, NelsonHall
Everywhere around us inflection points are occurring. Inflection points are a sign that change is occurring that will create a new order of things. Whether we see them, understand their long-term implications, and leverage them to our advantage is another issue.
Social Inflection Points Impact HRO
Today the U.S. Supreme Court ruled on two issues impacting marriage law that will change who is entitled to marriage-related federal benefits.
Major social change invariably impacts HR and HRO services, and the marriage law rulings by the U.S. Supreme Court will have wide-ranging implications for workplace benefit plans in at least 12 states.
The long-term implications may take many years to become clear, but leveraging in the short term has already begun. ADP was the first HRO vendor I saw tweet about the court’s ruling by announcing an upcoming webinar on the changes to the Defense of Marriage Act (DOMA). Mercer quickly followed with a ‘benefits administration alert’ letter.
Technology Inflection Points Impact HRO
As a disruptive technology, SaaS has started a global “cloud war” that is only just beginning. HR and HRO are just a small piece of the IT landscape and we will see skirmishes as new entrants and long-term leaders battle for market share, industry leadership and shareholder value as they transform not only technology offerings, but revenue streams and business models.
Oracle’s Larry Ellison has been in the news for the last two weeks reporting on earnings that were already impacted by SaaS and the cloud war. Here was one of the industry’s titans comparing Oracle’s SaaS revenues (annualized at ~$1bn) to comparable revenues posted by perennial competitor SAP and upstart Workday!
Upgrade or rip-and-replace decisions are becoming imminent for HR clients and HRO services providers. Many vendors, including Ceridian, Mercer and Talent2, are already developing integrated service platforms and more cloud offerings for organizations of all sizes.
Client Inflection Points Impact HRO
To identify current trends in HRO customer requirements I reviewed current (2013) sources, including NelsonHall’s Targeting Payroll BPO market analysis and HR Outsourcing Confidence Index, and also HRO vendor discussions. Further, I reviewed a research survey by Mandy Sim, a University Teaching Fellow with the Business School at the University of Nottingham Malaysia Campus, entitled the HRO Adoption Survey Report 2012, which identified key Asia-Pacific HRO practices based on a survey conducted on delegates who attended the HRO Today Forum APAC 2012.
Following are my findings on what today’s HRO clients, across service lines and geographies, are wanting from prospective vendors:
Ready or not, change is coming to HRO. Are you ready for how will it impact you and your organization?
Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.
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:
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.
Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.
Linda Merritt, HRO Research Analyst, NelsonHall
This week I attended Mercer’s always well managed and informative analyst forum in Boston, MA. The meeting was focused on the talent consulting line of business.
Talent Management on the Rise
Mercer research indicates that human capital issues are a top CEO concern and managing talent is becoming a board of directors’ issue, moving beyond the traditional CEO succession planning and compensation to overall talent and workforce planning. The new Mercer Talent Barometer Survey, which was introduced at the 2013 World Economic Forum, reports that 60% of the 1,200 global companies surveyed are investing more in talent, but only 30% feel that their workforce plans are highly effective.
The business of talent has become both exciting and disruptive, with possible new entrants, globalization, media, innovations, and opportunities. (Talk about new entrants, eHarmony is considering getting into the talent matching game!)
With a possibility of double-digit growth, the talent group looked at how to grow across the talent value chain by expanding its services, tools and technology offerings for talent, rewards, and communications to increase growth and leverage Mercer’s depth of experience and capabilities.
The answer will become apparent over the next few months as more packaged solutions are launched that combine consulting, information, and technology to meet the needs of clients that want a less-customized consulting approach with “off-the-shelf” packaged and reusable services and tools.
Workforce Planning Versus HR Analytics
Some elements that will be leveraged are already mature and solid revenue producers. Surveys, benchmarks, and analytics for compensation/total rewards and job structures are a more than $200m line of business. Globalization of the revenues is already well on its way, with about equal distribution from North America, Europe, and emerging markets across 57 countries.
Instead of focusing on HR analytics, Mercer is emphasizing data acquisition and integration, data modeling, as well as data visualization as it applies to a wide range of workforce and data that drives business results. This may mean a consulting and outsourcing services engagement, it may mean workshops and training, or self-service use of integrated SaaS technology platforms with one or more Mercer products.
Think Big, Start Small, Move Fast
There are a lot of moving parts in Mercer’s strategy to create an integrated talent solutions portfolio.
It is brought together under the go-to-market Talent Impact label that includes new and existing products and services to forecast, engage, mobilize, reward and assess talent. Behind the scenes Mercer will be streamlining its own architecture into fewer and more integrated technology platforms to support the new offerings.
There is a lot to be done in a short time, but that is in alignment with the “think big, start small, and move fast” philosophy of Orlando Ashford, senior partner and president of Mercer’s talent business. Mercer is on the move!
Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.
Linda Merritt, HRO Research Analyst, NelsonHall
Innovation in multi-process HRO (MPHRO) has been a topic of discussion, and some contention, since the early mega-deals that created the modern MPHRO market more than ten years ago.
Even in the early days there was a desire for innovation, but there was also a lack of common definitions and mutual understanding, along with difficulty in articulating innovation in contract language.
There was an even greater barrier – systems spaghetti. Early MPHRO clients had highly-customized ERP infrastructure, aging legacy systems, and third-party applications, much of which may have been non-centralized and non-integrated. Each major customer was in their own bubble of services and systems. It quickly became apparent that it would be hard to add new and different innovations within the constraints of the contracts and the technologies.
Platforms for Innovation
Major MPHRO service providers now have global multi-client service delivery and data centers with sophisticated workflow processes. Early clients have been moved bit-by-bit into the common support infrastructure, even if they remain on their own, licensed ERP systems.
Many HRO clients are ready for increased standardization and multi-client platforms to reduce cost and to improve performance. Innovative cloud-based SaaS and services platforms are opening up new services to the mid-market and parts of the large client market:
Some tension between continuous improvement and innovation is natural, as the line between an “included enhancement” and what is “new and different to be added as an extra charge” looks very different depending on whether you are a buyer or a supplier.
Collaborative Innovation
Client user groups support both HRO improvement and innovation. Vendors were originally reluctant to let clients communicate with each other (partially because the clients might “gang-up” on the vendor – and sometimes they did!).
Companies like IBM and Xerox were leaders in developing client advisory boards. These interactive groups provide feedback on the services, give input into common needs, and even offer guidance on parts of the vendor’s development roadmap. They are not just “the voice of the customer”; they are also a built-in base of beta testers. Willingness to put some skin into the game is also a great way to test market viability and further strengthen relationships.
Infrastructure of Innovation
Buyers can develop their processes for HRO innovation in the following ways:
The good news is that we are beginning to build the HRO infrastructure for future innovation; common language, standardized multi-client platforms, and client user groups.
Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by clicking here.
HRO Insights 
Recent Comments