We've had many animated discussions in the past regarding the trials and tribulations of the HRO market. To cut to the chase, HRO has struggled to live up to expectations as clients struggled with poorly integrated service delivery, overly complex operational issues, the lack of common HR standards and common HR technology platforms. This often resulted in negligible cost savings and fractured service provider relationships. Not to mention some significant write-downs by some of the providers who took on overly complex engagements.
However, new research I've been carrying out in recent weeks
Reasons for this renewed growth?
Recent HRO engagements are largely much less complex than the earlier generation of contracts, primarily centered on payroll, contact ctr, workforce admin services
The HRO mid-market has not only arrived, it is now driving the market, spearheaded by a very strong performance by ADP
More efficient deployment of HR technology platforms bundled with HR processes (a dire industry need Naomi Bloom discusses here). 84% of current HRO engagements involved a new system being implemented either concurrently with or just prior to the HRO engagement. In a similar vein, 92% of the current HRO engagements involve the HRO service provider maintaining and supporting the HRO systems
The increased maturity of global outsourcing providers and the rapid deployment of offshore/nearshore HR delivery models
The leading HR services specialists sticking to their knitting
A significant move has come from the India-headquartered global services providers, with Wipro now commanding a 6% market share of the enterprise market with some significant new client engagements, and Infosys and TCS also gaining footholds in the market. IBM has also made some significant traction in the enteprise space.
The industry has gone back-to-basics to provide HRO services that are centered primarily on payroll and workforce admin solutions that are tried and tested, and less complex. The key has been for the service providers to deliver HR services that are based on common standards, common technology platforms, using lower-cost offshore and nearshore resources. Moreover, the entry of aggressive lower-cost competition from the global outsourcing providers has served to create a much more enticing value proposition for today’s buyer.
With a challenging 2009 ahead for enterprises, the availability of maturing HRO models are surely going to be enticing offerings for firms seeing to reduce overhead and move onto a global operating HR services model.