by Marc Pramuk

The market is becoming more interrelated. here are several categories from which to consider leading hro service providers.

Human Resources BPO pure plays are emphasizing depth of expertise. Several companies have gained strong attention as "pure play" HR BPO providers, most notably Exult. These pure-play firms emphasize their depth of HR process expertise, strong HR systems to enable employee self-service, and in-house HR consulting capabilities. Most target a specific market segment, either by company size, service industry, or geography. Other firms in this category include ARINSO, Empagio, Onvoi, and Synhrgy.

• Traditional HR Outsourcing service providers are shifting from discrete HRO to HR BPO. Many providers of traditionally discrete HRO services, such as ADP and Ceridian in payroll processing and Hewitt Associates in benefits administration, are shifting their marketing and sales efforts to emphasize their breadth of services across the spectrum of HR needs. These traditional HR outsourcers leverage their strengths in HR process expertise and in process management quality to offer new, related services to their current customers. Other firms in this category include Paychex and ProBusiness Services.
• HR management and IT consulting firms are expanding into HR BPO. A number of consulting firms are expanding beyond their core project-based work and seeking to leverage their business process and technology expertise to deliver HR BPO services. Accenture acquired Accenture HR Services (formerly e-peopleserve) from its joint-venture partner to incorporate HR BPO with its human performance consulting practice. Towers Perrin took an equity stake in Authoria to expand into Web-based HR administration services; Towers Perrin also formed an exclusive partnership with BrassRing, a leading provider of talent management systems, and acquired Working Concepts, an HR technology implementation firm. Aon won a seven-year outsourcing agreement with AT&T to manage all administrative and transactional HR and payroll functions, moving 400 of AT&T's HR professionals to Aon's HR Outsourcing practice.
• IT outsourcing firms are expanding into BPO. Most IT outsourcing firms are evolving from IT outsourcing to BPO. Traditional IT outsourcing firms expect year-over-year growth to slow to single digits, largely because of the impact of the computing utility model eroding demand for broad, long-term engagements. As a result, IT outsourcers are shifting from these commodity-like services to more value-based BPO services. BPOs can leverage their strengths in IT infrastructure and process services, as well as their existing consulting and management expertise. For example, EDS has benefit claims processing and payroll capabilities in its BPM practice and management and business process expertise with A.T. Kearney, leading to a large BPO contract with CIBC. Convergy has processing services and call center capabilities that lead it to form an Employee Care practice. Other large players include ACS, CSC, and Unisys.
• Financial service providers are returning to HR Outsourcing. Financial service providers are increasing their involvement in HRO services. HR BPO services can complement the strengths of financial firms, including financial and tax expertise, infrastructure to process financial transactions, favorable reputations, and strong client bases. Fidelity Employer Services Company (FESCo) won a large HR BPO contract with IBM, in which FESCo acquired IBM's shared service center and the two formed an alliance to market and deliver HR BPO and IT outsourcing services. Fleet Financial recently acquired InterPay, a payroll service bureau. H&R Block acquired MyBenefitSource, an outsourced benefits administration portal, and Mellon Financial acquired Unifi Network, PwC Consulting's HR outsourcing and consulting practice, to add to its current HR consulting firm, Buck Consultants.
• PEOs are revising their target market and expanding their capabilities. Professional employer organizations (PEOs) have provided outsourced HR departments to small companies long before the term BPO was coined. PEOs deliver coemployment services and administer payroll and benefits for clients. These firms are shifting their target markets from blue-collar markets, such as construction, to white-collar services markets. They also are expanding the scope of their services, making greater use of technology. Administaff and Gevity HR, among others, are offering HR portals that enable self-service for timekeeping, payroll, and benefits. Strengths of these firms include strong client bases, HR expertise, and infrastructure to deliver payroll and benefits administration management services (see diagram on previous page).

Who is best positioned to realize the leadership position? At this early stage, the market leadership is still relatively wide open. Each category of competitors brings important strengths and competencies, yet each also still lacks important pieces to providing the complete package to customers-in particular, firms are weak in the area of performance management and measurement. However, important strides are being made in educating the market and in capturing and communicating the measurable business impact of HR Outsourcing services. All of this helps position HR Outsourcing for significant growth going forward.