[HUMAN RESOURCES] Small, Shorter Term Deals Setting New Trends in HROSmita Vasudevan
HRO providers are not seeing too many opportunities for multi process deals, but there lies a clear opportunity in transforming small, short-term deals into longer strategic outsourcing relationships.
The Everest Report had classified ADP, Aon Hewitt, Northgate Arinso (Convergys), IBM and Accenture as the leaders, while Genpact, Xchanging and Neeyamo are categorized as the emerging players.
Service provider strategies are also changing in line with the changing demands of the industry. Many providers are trying to strengthen their offshore presence and add single process offerings to their line of services. Growth is most likely to be achieved by way of inorganic routes like mergers and acquisitions. The recent spate of M&A deals amongst HRO service providers clearly highlights this. Northgate Arinso is of the opinion that need for higher employee engagement, continuing globalization, openness to process standardization, automation of transactions, and focus on core strategy as the most important elements of a successful HRO strategy.
Typically, the pricing models are based on headcount utilization by enterprises. This is usually the same for both single-process and multi-process HRO. But as cloud-based and SaaS offerings are becoming more popular, utility based pricing models are likely to be seen more. Mid-market enterprises will be more open to such kind of a model as it offers them access to technology applications without having to pay a high initial cost for deployment.
The Power of the Mid Market
The Power of the Mid Market
“Cost reduction remains a top driver of MPHRO. Other important drivers include managing compliance risk, greater alignment between HR and business strategy and access to better technology,” says Ranjan. Enterprises are depending a lot on service providers in areas other than cost saving and are looking for partnerships that bring a little extra in the form of innovation and guidance. Experts believe that providers have a big opportunity here. They may not be seeing too many opportunities for multi process deals but there lies a clear opportunity in transforming small, short-term deals into longer strategic outsourcing relationships. Enterprises are targeting improvements in different areas, and providers that are able to offer this will have a visible advantage in the end.
The mid market segment is expanding the growth opportunities for global HRO service providers. Today a large chunk of the business is coming from these enterprises and providers are developing specialized strategies to tap this exploding potential. A research paper by Katrina Menzigian, VP, Research Relations, Everest Institute 'How Mid-market HRO is Emerging as a True Growth Platform, 2011' states that the mid-market companies have increased their adoption of integrated MPHRO and this segment is becoming the growth platform for many of the leading HRO service providers. Of all the MPHRO deals signed in 2010, 61 per cent came from the mid market. Cost saving objectives, access to advanced HR technology and improvements in overall business efficiency are the major factors driving these companies towards outsourcinGoing Strong
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[HUMAN RESOURCES] Small, Shorter Term Deals Setting New Trends in HRO
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