Riding the Next Wave

Hold on tight HR: Big things are to come in 2017.

By Amy L. Gurchensky

2016 had its share of trending topics in HR: cloud-based technology, open ecosystems, marketplaces, and robotics process automation. These issues, as well as a few others, will play a key role in shaping the future of the landscape over the next several years.

Developments in 2016 are bound to drive change in 2017. Here are some predictions by HR service line for the next year.

Payroll

In 2017, NelsonHall estimates that the global payroll market will grow nearly 5.8 percent to nearly $18 billion, driven by the wider HR agenda for change. HR and payroll transformation and the move to cloud-based solutions will position this area for growth.

While the majority of payroll service providers utilize proprietary payroll software, most of which is already available in a cloud environment, the focus over the last year has been on integration capabilities. Nearly 65 percent of vendors are developing or investing in integrations and interfaces with some of the most prevalent human capital management software. The emphasis on integration capabilities and middleware products will continue in 2017, especially as demand for multi-country payroll continues to increase. In anticipation of growth for multi-country payroll services, vendors have also been keen to fill geographic capability gaps. Examples include:

• ADP expanding its payroll services to an additional seven countries, including Angota, Azerbaijan, Guam, Mozambique, Puerto Rico, Tanzania, and Zambia.

• NGA HR launching a managed payroll offering in Latin America, extending to nearly 33 countries including the Caribbean.

•SD Worx acquiring Ceridian UK and Ireland and fidelis HR in Germany

The multi-country payroll market is estimated to growth at four times the rate of single-country services through 2020 and will account for close to one quarter of the market. Growth in the multi-country space will be fueled by the use of cloud technology and will also begin to move down-market.

Benefits Administration

In 2016, the benefits administration market was all about enhancing the participant experience, with a focus on personalization based on broad life categories. This will continue through enhancements, such as suggestions for individuals based on their circumstances. Another key area of development in 2017 will be benefits that integrate health and wealth to enhance participant decision-making. Organizations can also expect voluntary benefits to be more prominent on private health exchanges and within health and wellness administration offerings.

With respect to global benefits, organizations are likely to continue to move HR and payroll to cloud-based platforms. Over the last year, many benefits administration service providers, such as Mercer, Xerox, ADP, and Willis Towers Watson, have launched and developed a global benefits offering. The majority are leveraging Thomsons Online Benefits’ cloud-based Darwin platform.

Over the next year, NelsonHall expects early adopters to focus on rolling out a global benefits platform, and subsequently, to add administration services in select countries, particularly in the United States. and the U.K. Strong momentum for global benefits will likely pick-up over the next three to five years.

RPO

RPO has and will continue to have the highest growth rate within the HR services portfolio, with a compound annual growth rate (CAGR) of nearly 16.6 percent through 2020. The U.S. and the U.K. will dominate in terms of activity, but emerging markets in Asia Pacific and Latin America have high growth expectations over the next several years.

In terms of services, emphasis will be on consulting, analytics, and creating labor market data to provide greater insights to hiring managers in particular industries and geographies. Industry sectors heavily relying on RPO services will include financial services, healthcare and pharmaceuticals, manufacturing, and technology.

The top drivers for buyers of RPO services include scalability and agility, as well as improving performance results. The ability for organizations to meet hiring demands and support business growth is a widespread problem, especially when it comes to specialized roles. With respect to performance results, RPO is important to increasing the quality of hire and satisfaction for both the hiring manager and the candidate. Internal talent acquisition teams simply lack the resources that RPO specialists have to leverage people, processes, and technology, which is why demand for RPO will remain so strong.

Learning BPO (LBPO)

Over the last year, there has been a shift occurring in the market with respect to how organizations purchase LBPO services. Historically, the emphasis was on selecting from a catalog of services; now LBPO discussions are driven by larger business objectives, such as transformation or increased revenues.

Over the last year, there has been a shift occurring in the market with respect to how organizations purchase LBPO services. Historically, the emphasis was on selecting from a catalog of services; now LBPO discussions are driven by larger business objectives, such as transformation or increased revenues.

The new approach calls for consulting services. This will only increase over the next few years, especially as organizations focus on optimizing learning and trying to determine the appropriate mix of delivery models to accommodate diverse workforces.

Digital learning is exploding, especially bite-sized video training. But traditional classroom training is—and will continue to be—relevant in the LBPO space, providing networking and collaboration opportunities to learners.

Service providers will be tasked with improving performance and engagement, so future innovations will include open learning platforms and guided, personalized learner experiences, with analytics at the core of innovation.

Cloud-based HR Services

Over the last year, market interest has heavily shifted away from traditional multi-process HR outsourcing (MPHRO) services and toward cloud-based HR services. The cloud-based HR services market includes the provision of the following:

• HR cloud consulting services
• HR SaaS implementation services
• Cloud AMS support services
• HR BPaaS

Given market penetration for cloud-based platforms, including Workday and SAP SuccessFactors as well as proprietary platforms such as ADP Vantage HCM and Ceridian Dayforce, it should not come as a surprise that this is a nearly $16 billion market, with cloud implementations accounting for nearly 44 percent.

Within HR SaaS implementation services, guided implementation tools and rapid deployment time are two key areas. For example, Ceridian recently launched Dayforce Activate, which shortens the implementation lifecycle to provide clients with a faster return on investment, and Neeyamo’s Rapid Deployment offering for SAP SuccessFactors allows go-live to be achieved in 21 days. Demand for cloud implementation services will remain high for the next several years, and vendors will continue to invest here to drive efficiency.

HR BPaaS is another large piece of the cloud-based HR services market. This year, many vendors were focused on building out their capabilities, which will continue to be a key theme over the next year. Some examples include:

• NGA HR’s new fully integrated HRaaS solution, cleaHRsky, which includes support for core HR and payroll on SAP SuccessFactors or NGA HR proprietary platforms.

• OneSource Virtual’s (OSV) partnership with CloudPay to offer a global workforce administration service.

Organizations utilizing HR cloud consulting services tend to be legacy MPHRO buyers. To date, nearly 40 percent of legacy MPHRO users have already transitioned to a cloud HR system, which will rise to nearly 45 percent by the end of 2017.

To facilitate growth, vendors will also expand delivery support similar to Norwegian-based Zalaris, which opened a SuccessFactors center of excellence, or OSV, which opened a center in Ireland to provide support around Workday.

It’s clear that the next wave of HRO will be the most revolutionary to date.

Amy L. Gurchensky is senior HR research analyst for NelsonHall.

Posted December 15, 2016 in Enabling Technology

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