HRO Market On a Steady Incline

The Human Resources Outsourcing market has gone to $2 Billion in what seems like a split-second. The US $2 Billion industry has seen an annual growth spurt of 28 percent, showing a growth of nearly four times that of the general HR services market itself. During 2005 the HRO market saw nearly 40 deals signed which caused that year to become the turning point for the market in general.
The concept of Human Resources has been a major factor in outsourcing decisions with regards to staffing transfers and downsizing. HR functions, typically led by benefits administration, payroll administration and HR information and technology, are primarily the target for outsourcing and are beginning to see a major increase in offshore movements. While these movements are becoming the norm within HR functions, they are currently used in a little less than half the major outsourcing transactions that we see in force presently. This will of course increase as more and more companies begin to realize the substantial savings of this option. However with the skepticism that many buyers have of offshore skills, the HR industry is still a bit behind many other areas that are currently being outsourced. Major suppliers are currently focused on elevating offshore HR skills so it may not take long for the HR industry itself to make its mark with others such as IT and customer service that are currently being adopted as offshore options.
There is currently more complex work being outsourced to India by those thought of as giants among international corporations. Intel is expected to invest more than $1 Billion and JP Morgan Chase is planning to add another 4000 or more employees. India has increasingly seen a steady rise in outsourcing work. In the past year they have seen a major increase by Wall Street firms and larger globally based banks.
At the beginning of 2008, Ceridian saw a major growth in Human Resources Outsourcing, including eight new employers in the United States alone to add to the eight existing HRO clients that the company maintains who extended their contracts with Ceridian HRO. The company’s portfolio now consists of 29 US clients who are currently engaged in offshore outsourcing.
You will remember that a few months ago EquaTerra and IDC presented a flash report that predicted the growth and changes that would take place in 2007. Mark Hodges, EquaTerra founder and Lisa Rowan, IDC Program Manager, both presented interesting details into current and future HRO trends, forecasts for the market and lessons that were learned in the past few years that will help to ensure the future expansion of the industry.
As a standalone HR outsourcing has continued to increase at an annual growth rate of 8.3 percent. Comprehensive BPO when combined with multiple HR functions is also growing rapidly at an increase of 14 percent. Although HR outsourcing pricing was recently seeing a steady decline, it is now on the rise again and provider profitability is increasing at a steady rate overall.
What this means for the HR manager is that the multiple process Human Resources Outsourcing market has been constantly maturing over the past three years. With prices continuing to fall, outsourcing is becoming a much more attractive option than if was just a short time ago. Also, while standards have not yet been set, they have evolved steadily and are allowing suppliers to leverage scale across their customer bases. Offshore HRO services has become a reality and is now commonplace in many new deals, where just a few years ago this was simply a foreseeable option, although not really a strong reality. With stronger capabilities for suppliers and a constantly increasing competition in the market, pricing has gone down considerably from 30 to 50 percent in some segments. Those who have an existing outsourcing contract have a very attractive negotiation opportunity and new buyers are seeing much better pricing structures than before.
The bottom line is that Human Resources Outsourcing is a growing industry that is not simply for the large players any longer. More mid-sized buyers are beginning to come around to the effectiveness and cost-efficiency of offshore outsourcing. The number of providers is steadily growing, giving more options to all market sizes. Many of the larger powerhouses are offering or have already consolidated offering comprehensive services that include a large number of functions instead of simply one major service. Competition is a good thing. It can help to drive down costs while also offering choices for businesses that will enable all segments of the market to select providers that will best meet their individual company needs.

Another Acquisition for IBM

BI and Performance Management Software industry has experienced a major consolidation wave in acquisitions space. The first to happen was the acquisition of Hyperion by Oracle, followed by the acquisition of Pilot Software by SAP. The third acquisition to happen now is the acquisition of Cognos by IBM. IBM and Cognos have been partnering for nearly 15 years with extensive technical integrations and eight pre-integrated joint solutions already supporting many joint customers such as the NY City police department, Blue Cross/Blue Shield of Tennessee, Canadian Tire, MetLife and Bayer UK. This acquisition will be the 23rd acquisition for IBM with other major acquisitions up till now being with Princeton Softech, FileNet, Ascential Software, DataMirror, SRD, Trigo, DWL and Alphablox.
Please review this for a complete Press Release from IBM on the Cognos acquisition :
IBM to Acquire Cognos .

Hiring in India HRO

When I met the Senior VP of Human Resources in one of the top notch MNC a couple of months ago on a promotion drive for HRO Manager, one of his comments took me by surprise. When I told him about how key decision makers on HRO look at informative websites for making their business decisions whether it be for vendor selection or product selection, he stated that he believes many business leaders have neither the time nor the interest to look at website for information that could influence their business decisions.
This may be true to some extent when it comes to taking complex business decisions such as whether or not to outsource their HR and so forth, but how far does this hold true for HR Managers holding key responsibilities who can not allocate time to updating themselves on the latest happing in HR around the world?
When I met another senior HR manager in a call center based in Chennai, India, I asked him if he looks at any HR informative channels such as websites or blogs in specific and his answer was a resounding NO. The reason given was that the bulk of his time is spent hiring talent. This made me think for a while. If this a trend visible in India alone or does is stretch around the world? When I look at my Google Analytics Statistics for HRO Manager, 75% of hits come from the United States, 20% come from Europe and only 5% come from India. This might be a realistic figure given that my site contains more articles pertaining to the United States. However, a mere 5% figure coming from India really concerns me. From my experience and what I have personally observed during my interactions with various senior HR managers in India, it is clear that Indian HR is mostly concerned with hiring and not in a position to go that extra mile in terms of a whole transformation into a strategic HR center competing with global HR standards.
Viewing HR as a strategic business center is still fiction in India and is not currently being viewed as a reality. The everyday job in a typical Indian HR department begins with viewing job requisitions from line managers, job postings, interacting with consultants, conducting entry and exit interviews, documenting for new joiners and exits and so forth. We have yet to see HR leaders playing a vital role in key executive meetings and most of the key HR decisions are still being taken by CEO or COO and the HR heads have simply to implement these decisions. There is a huge cry from among the community to bring a new role to the HR controller or chief Human Resources Officer in Global HR. however; India HR is still far from accepting this. It may be past time for Indian HR to transform into strategic HR centers.

Philips BPO Unit

Unconfirmed reports are playing rounds in the market that Electronics Major, Philips is all set to sell its BPO operations to Infosys, India’s largest software leader. The deal is pegged at US $200 Million. Philips currently employs roughly 1500 people in its BPO units operating in Chennai, Bangkok and Warsaw. The acquisition should be a positive event for both companies. Critics have their say that Philips BPO unit experiences higher attrition and other issues which add to higher operating costs that impact the company’s balance sheet. Philips BPO unit in Chennai currently supports F&A processes for its parent company and deploys SAP, according to informed sources. Infosys BPO unit enjoys a strong hold on F&A process outsourcing, so the acquisition should prove positive for the latter if the reports emerge true. This is just another example of major consolidation drives experienced by the Indian BPO sector after reports that CitiGroup plans to sell its BPO.
Disclaimer - HRO Manager does not verify or hold responsibility for the authenticity or validity of the views expressed herein by the Contributor and the views purely belong to the Contributor.

Indian HR Outsourcing Prices

HR Outsourcing companies with operating centers in India need to reevaluate their pricing structure for current and future contracts, in view of the appreciating Indian Rupee versus the American Dollar. The current exchange rate for $1 anywhere is fluctuating between 40 to 41 Indian Rupees which is almost a 10% drop in the American Dollar against the Rupee when compared to the past 6 months of data. This is already showing a little impact on the earnings of Indian outsourcing companies in general, who entered into contracts at the higher rates. The impact is not merely limited to HRO companies, but to almost every company dependant on US contracts. The current average pricing cost per employee annually is $677 for an HRO contract per EquaTerra Research. Indian HRO companies need to look at this pricing structure and compare their current and future pricings before negotiating with buyers.
On the other hand, Indian HRO companies are also experiencing talent shortage and higher wage costs which are again contributing factors for a reevaluation of their pricing structures.

ARINSO International

Rev-Trac changed management solutions for its SAP-based business information infrastructure. ARINSO employs over 2,500 staff in 27 countries on five continents and provides HR solutions to one in five of the world’s largest companies. Through the HR management systems that it currently has installed, ARINSO serves over 6 million employees. In addition, its HR Outsourcing solutions now serve 600,000 employees worldwide. ARINSO is part of UK-based Northgate Information Solutions.
Globally, Rev-Trac provides enhanced change control capabilities to many major organizations with SAO-based IT systems. At ARINSO, Rev-Trac brings the ability to manage customers by rapidly changing HR needs efficiently, effectively, in an auditable manner and at the lowest cost. It will help ARINSO to ensure its outsourced services remain cost competitive, even in highly regulated environments. ARINSO selected Rev-Trac because it can enforce change control processes, provide automated workflow and automated transport migrations and has built-in sequencing error prevention. Together these capabilities were considered a compelling argument for partnering with RSC in change management technology, according to a report from PRNewswire.
The decision of ARINSO to partner with Revelation Software to enhance its existing HRMS platform SAP suggests ARINSO is likely to continue with SAO solutions and its migration to Northgate’s HR solutions is still uncertain. Many know that when Northgate announced its acquisition of ARINSO, analysts wanted to wait and see whether ARINSO would continue with its present technology SAO or migrate slowly to Northgate HR solutions. However, the current partnership with Revelation Software offers us the fact that ARINSO might still want to continue with SAO, at least in the near long term. This is an interesting development that was discussed during the recent web cast hosted jointly by EquaTerra and IDC on Changes in HR Outsourcing. During the presentation a participant raised the question on how the Northgate acquisition of ARINSO can be viewed and one of the panelists answered that this is an interesting development and rather a very bold move on the part of Northgate. She also shared that it will be interesting to see how ARINSO will make the decision on its technology, whether it will choose to go with SAO or Northgate proprietary software.

No Overtime For Indian BPOs

While it may be the show piece of India’s entrepreneurial talent and technological prowess, when it comes to compensating employees for overtime work, India’s fabled BPO sector does a bad job even when compared to the infamous sweatshops of urban India. This comes in a report from Economic Times.
A Noida-based BPO pays its employees Rs 12.50, which equals approximately 33 cents, and Rs 50 which is equal to approximately 1 US Dollar, for 4 hours of OT, which is often mandatory. It says these low overtime rates are despite the fact that the hourly billing rates are fairly good. However, this trend is particularly visible in small BPOs. Large BPOs fare much better paying Rs 100 which is equal to $2 US, per 1 hour of overtime. For each national holiday worked, these players pay a 2 days salary with a compensatory day off. Sometimes they pay an Rs 250 or US $5 per extra Saturday worked over and above the day’s salary.
From our own HR research in many other BPOs, the OT figures continue to be dismal. A low OT will have an impending effect on the quality of work done by the employees, which will ultimately seriously affect the service deliverables. We often advise our clients to be more flexible in terms of paying reasonable OT and other perks to help encourage them to be engaged toward the company. There are many BPOs who are still shying away from even paying a small amount of OT. They are simply adjusting themselves by giving a $1 worth Sodexho pass voucher, which is a meal voucher in India, for the entire day of extra work. Let’s just hope this article will wake those BPOs up.

Kronos Expected Acquisition

Kronos, a leading HR software developer and Staffing services company publicly traded on Nasdaq, has announced its agreement to be acquired by Hellman & Friedman Capital Partners under a deal worth $1.8 billion. Under the terms of the buyout agreement, Kronos shareholders will receive $55 per share. The deal is in line with ACS which announced recently that it received a buy out proposal from its chairman, Darwin Deason, in association with Cerberus Capital Management.

Oracle Acquisition of Hyperion

Oracle today announced that it has agreed to buy Hyperion for $3.3 billion, in a report from Business Intelligence.
This acquisition is expected to make Oracle the category leader in high growth enterprise performance management market, said its CEO Larry Ellison. This acquisition is also expected to expand Oracle’s offerings to SAP customers, said its President Charles Philips.
“Given the critical need for managers across the enterprise to align operational decisions with strategy, it is the right time for Hyperion to combine with a strategic partner like Oracle to deliver the first, integrated Enterprise performance management system“, said Hyperion CEO Godfrey Sullivan.
Hyperion’s EPM software coupled with Oracle’s Business Intelligence (BI) tools and analytic applications form an end-to-end performance management system that includes planning, budgeting, consolidation, operational analytics and compliance reporting.

CareerBuilder.com Acquisitions

In a Press Release yesterday, CareerBuilder.com announced that it has acquired two leading online recruitment sites in Northern Europe. The two sites are Sweden’s Jobbguiden.se and the Netherlands’s JobbingMall.nl. This move is the company’s latest step in its international expansion. These acquisitions are supposed to add more than 1 million new job seekers to CareerBuilder’s international network. According to the terms of the agreement, the two portals will retain their existing brand names, but will be powered by CareerBuilder’s technology.
According to the company’s viewpoint, the European online recruitment market is expected to generate $1Billion in spending in 2007.
CareerBuilder.com began its international expansion in the Spring of 2006, building its presence through a combination of organic development, partnerships and acquisitions as market conditions warranted. CareerBuilder.com launched organic sites in Canada and the United Kingdom. In addition, the company forged strong partnerships in China with 51Job and in South Korea with Incruit. In India, CareerBuilder.com launched a site while maintaining a close partnership with Naukri.

Lawson Software To Partner With Enwinsen

Lawson software is partnering with Enwinsen to integrate On Demand Workforce Communications with its proprietary ERP Lawson HCM suite, reports Businesswire. The integration is expected to provide the users of Lawson HCM suite with an enhanced experience through integration of HR transactions and in-context communications and decision support. This new partnership is also expected to improve the effectiveness of workforce applications an effectively manage compliance and company procedures.

Widespread HRO Acquisitions

In the Year 2006, we have experienced nearly 60 odd acquisitions in the HRO industry. In an otherwise slower than expected HRO growth experienced in 2006, we begin to wonder, why has Top HRO providers started looking for more acquisitions?
The HRO industry as such has very limited players who offer end-to-end outsourcing. Each provider specializes in specific processes which makes it vulnerable on the part of HRO buyers to opt for several providers instead of one single provider. This results in HRO buyers scouting for providers who can provide them with an end-to-end outsourcing solutions, not just restricted to a select service choice. This is a prudent choice because one can make a good bargain for a whole lot rather than a small bunch of service. Realizing this shift, many HRO providers started looking for ways to consolidate themselves in end-to-end HRO services. This trend shift finally resulted in choosing acquisition path by HRO providers. This consolidation is already started and has been underway since 2006. One such example is the ADP acquisition of VirtualEdge, a recruiting and talent management firm, and Employease, a web-based HR provider.

Gevity Acquisition of HRAmerica

Gevity HR, a premier HRO provider acquired HRAmerica Inc for $10million, an all-cash deal that includes a payment of $0.5million for a small number of co-employed HRAmerica clients, which is subject to state regulatory approval. This acquisition should provide Gevity with scalable technology to enhance its non co-employment model, Gevity Edge Select.
Interestingly, in January HRAmerica Inc and Caliber Point, a subsidiary of Hexaware Technologies, announced a strategic partnership with respect to HRO services. It is unknown how this acquisition of HRAmerica by Gevity HR will impact the partnership with Indian partner, Caliber Point.
Related Post on HRO MANAGER:

Equifax Acquiring TALX Corporation

Atlanta based Equifax is acquiring TALX corporation for $1.4 billion, reports HRO Today. This acquisition once completed, would be the single larget acquisition happening in HRO space.
For a complete news you can view the article in its entirety at HRO Today.

ACS signs HR BPO Contract

Affiliated Computer Services(ACS), a premier business process outsourcing company and information technology solutions company, announced today it has been awarded a $171 million contract with Glaxo SmithKline (GSK) to provide HR BPO services. The contract term is 10 years.
Under the contract, ACS would consolidate various processes of GSK outsourced to a variety of providers or within GSK.

Uniform Metrics Buzz in HRO Industry

In a recent article posted on Workforce Management, it was that that a working group set up by four HRO companies has created a way to standardize a SOW (Statement of Work) - the outline that is the basis of an outsourcing agreement. Buyers would be able to see the pricing and performance indicators for each of those prospective providers on a single sheet of paper.
The background for this decision is that different HRO providers have different ways of defining the HRO terms. There are various buyers who would need an extensive education to understand them. It takes months in some cases to actually make the buyers understand. To overcome this challenge four companies, Accenture HR Services, EquaTerra, SAP and Arinso have agreed to bring uniform metrics on a single sheet so that a buyer can actually compare the pricing structures simply by looking at the paper, without any extensive understanding of HRO in general. These providers say that they gain on reduction in sales time by implementing this strategy.
It is not yet clear however, how this actually meets the intended objectives. This strategy, if found successful, may be implemented by many other companies in the future.

Alternative Form Of Outsourcing

Dallas based GDES has announced an alternative form of outsourcing. Global Workforce solutions will serve American companies, reports YAHOO. The difference between the traditional outsourcing models versus the global workforce solutions model is that the latter allows the US companies to use the office space available in Chennai, India through remote connections. The India staff would be directly reporting on-site in the US. GDES makes available office space and other infrastructure set up. One could ask where the difference lies. The difference is unlike outsourcing in its traditional form. It deploys human resources through a third party which ultimately connects to US offices through remote connection, In the new model, the US office staff would be connecting to India and its staff directly. The traditional form of outsourcing requires outsourcing to a third party whereas this model does not require a third party outsource. Under this model, companies are provided with direct access to a low cost, highly educated workforce in India providing up to 60% savings in operational cost. The office set up in GDES is based on a satellite office model.

Hewitt Announces Q1 Results

Hewitt Associates, a global human resources company, announced their Q1 results for 2007.
Results Highlights
*Outsourcing segment revenues increased by 2%
*$22 million decline in third party supplier revenues
*Outsourcing revenues increased by 5%
*Outsourcing segment margin was 11.1% against 8.6% in 2006 Q1
*Consulting segment revenues increased by 10%
*Consulting segment income decreased by 15%
Comments on Results from the company chairman and CEO

“Overall, we are pleased with the results of the first quarter, which excluding some special items, reflect strong underlying earnings growth driven by the solid performance of both Outsourcing and Consulting”, said Russ Fradin, chairman and chief executive officer of Hewitt Associates.
“Just as importantly, we made meaningful progress on a number of key initiatives in the quarter .we are in the process of renegotiating our most troublesome HR BPO contracts, we have made significant progress in redefining our HR BPO strategy, and we have restructured our approach to variable compensation to build a stronger linkage between rewards and performance. Each of these is a critical step in the right direction.”

Strategic HR - An Evolving Concept

There was an article published in SHRM recently on a survey and its findings on Strategic HR. Strategic HR is an evolving concept which requires the corporate HR executives to go an extra mile to innovate and implement new HR strategies rather than to restrict themselves to a routine form of jobs which are mostly administrative in nature. Strategic HR also requires the HR executives to understand the overall business goals and match the HR objectives and practices in line with these business goals. It is a welcome shift happening in the corporate atmosphere, recognizing the vital role played by HR in achieving business goals. All the HR executives, whether in a HRO or corporate, need to accomplish this skill set to give the HR a new shape for the new future.

Blogs: The New Marketing Tool for HRO

According to a report, HR Buyers’ Behavior, by marketing services firm HRMarketer, HRO buyers are increasingly relying on the Internet for their purchase decisions and vendor selections. Blogs are considered to receive the most attention from these buyers currently and are expected to receive the bulk of attention in the upcoming future. Most companies in the HR sphere have just begun to use external blogs although blogs themselves have existed since the 1990s. In a survey finding, it was reported that 49% of all professionals read blogs. Blogs will, no doubt, provide much more needed information than any other web tool. It is an information exchange built on various intellectuals’ views and opinions. The chances are good that HRO buyers will be looking to blogs in help with making informed decisions.

How Dexterous Are Offshore Companies?

The term dexterous can be otherwise stated as how competent the offshore companies are in handling HRO. We hear companies boasting about their competencies in implementation of various outsourcing processes and HRO is no exception to this boasting exercise by HRO provider companies. Mostly we hear companies telling us stories they do have enough talent (skilled employees) rich in process competencies, but in realty, they don’t. After all, one has to understand that HRO is an emerging story which is still restricted to few large size and mid-size companies. We have yet to see a stabilization or consolidation in this industry. With this being the case could we agree to a new entry HRO provider company if it says it competent? The answer is strictly no. These companies ultimately rely on the HRO adopter company to train their staff on the processes which ultimately is an indirect transfer of knowledge. It’s a matter of fact that it takes a while before these employees come in handy to the process. In other words, it is time for bound processes for these employees to become practice oriented from a training oriented phase. Companies often ignore this time factor. We see both adopters and providers hurrying to carry on the HRO transition without even analyzing the staff compatibility on the longer term. HRO as such is a complex process which demands high competencies, enough practice. Ultimately what we see due to this negligence on the part of companies to ignore the time factor is the desired or expected service levels drafted as per SLA’s go for a task which is dangerous to both parties. In this context, it is a known fact that the outsourcing industry as a whole irrespective of the process doesn’t have specific performance benchmarking methods set in place (This is in progress in India). However, should adopters not outsource due to these constraints? No. They just need to overcome these constraints by measuring internally the productivity and efficiency of the provider companies through careful scrutiny. So when you think of HRO to a provider, scrutinize the dexterity of the provider before signing the contract.