Industry professionals express their frank assessments of suppliers, sourcing consultants, and other constituents participating in the $59 billion HRO market.
Imagine if you could know what others are saying about you. For suppliers in the HRO industry, they no longer have to imagine. The Delve Group has just released its latest Delve Brand Index for Human Resources Outsourcing, which reveals how leading HRO providers are perceived in the marketplace today by the various market constituents: buyers, suppliers, influencers, sourcing advisors, journalists, and analysts. To gather its data, The Delve Group conducted anonymous telephone and face-to-face interviews with more than 100 market constituents.
“Perception is reality, especially within HRO, so learning how you are perceived throughout the marketplace is incredibly valuable information,” said Richard Crespin, CEO of the The Delve Group.
The chart below shows how top suppliers within HRO were rated and ranked by market constituents. In addition to in-depth profiles of each major supplier, the Delve Brand Index for Human Resources Outsourcing also draws some overarching conclusions about the present state of the HRO industry. Here are a few of them.
A Few Suppliers Dominate the Landscape
A limited number of suppliers dominate mindshare, but none has achieved hegemony. The same names keep coming up: Accenture, ACS, Fidelity, Hewitt, and IBM. Different buyers rank them differently, and there is a general consensus that these are the leaders, but there is no consensus around who is the leader. Statistically speaking, Hewitt has racked up the best numbers. Hewitt clearly dominates in market share and recent wins, and it consistently makes almost everyone’s top three list.
More specifically, the reasons one company ranks over another are as varied as the buyers’ needs. Clients seeking operational HR expertise and depth as their key criteria are likely to look to suppliers such as Hewitt. Buyers seeking fast and cost-effective results in times of financial pain are likely to look to ACS. Buyers who want to transform their HR systems and processes over time might consider Accenture. Other factors like geography also come into play—for example, Fidelity is an obvious player in the U.S. market but not in Europe. Again, ratings and rank depend on which criteria matter most.
The Relative Importance of Price
Buyers indicate that price matters but isn’t everything. The majority of buyers questioned ranked price a “distant” third, placing values and culture far above price. This ranking has remained consistent since 2004. It should be noted, however, that cost savings—which are different than price—remain a high priority. The reality, as many will attest, is that price always matters. That is, buyers want the same or better service for the same or better price.
However, the survey suggests that buyers are willing to make trade-offs on price for other things that matter to them—e.g., while some buyers will sacrifice depth of solution (process, IT) for lower cost and quicker returns, the reverse is also true for others. Also, some suppliers seem to understand their cost base and pricing approach very well to their (and the client’s) benefit—e.g., ACS—while other suppliers may be reputed for their quality and the price premium that goes with it—e.g., Accenture and Hewitt.
The Need for Global Delivery
The word “global” is on a lot of lips these days and has been since late 2004. Suppliers throw it around. Buyers claim they need it. Anyone sitting in on a sales presentation is familiar with “dot envy,” the colored markers that show where a supplier operates. Buyers should be careful, however, to distinguish sales locations from delivery locations. But few really seem to know exactly what “global delivery” means. In the words and positioning among suppliers, there are varied definitions and interpretations of global. For example, many vendors have excellent in-country HRO solutions across multiple markets (Accenture in Europe comes to mind) but without having a cross-country (e.g., pan-European) capability. Based on its research and analysis, Delve has developed its own definition of global capability in HRO.
A truly global provider must be able to provide:
- Multi-currency (at least 30) payroll, benefits, and reimbursement;
- Multi-lingual (at least 15), follow-the-sun service;
- Multi-jurisdiction resident expertise; and
- On-the-ground presence in all of their localities (not just a sales presence).
Shortage of HRO Professionals
While many generalist BPO-heritage companies such as Accenture, ACS, ExcellerateHRO, and IBM can bring considerable resources to bear, there is a market shortage of HR expertise in the sale and delivery of HRO. For example, ACS gets kudos from clients for operational excellence but is also noted for a lack of HRO-specific delivery skills, as it pulls resources to backfill from other parts of the business. Similarly, at IBM, it is important for prospective buyers to determine if they are getting the “HR guys” (usually ex-PricewaterhouseCoopers) versus old guard IBM employees, who have more experience in IT than in HR.
Suppliers are trying (and have tried) various approaches to HR IT platforms, from Fidelity’s development of a proprietary killer platform to ACS’ offering of stable middleware to make the most of existing in-house applications. SAP and PeopleSoft are still the dominant platforms for HR management, and no HRO supplier has established the “killer platform.”
Most HRO suppliers tout their ability to help their clients re-engineer their HRO processes to be best in class. In reality, however, some suppliers sell on rapid return and price: They can help companies get quick wins with HRO and sustain those benefits (ACS comes to mind). Other suppliers take a much more deliberate, involved, and deeper approach to HR and HRO (e.g., Accenture), which can yield correspondingly deeper benefits; however, they often do so at a premium in time and cost. Prospective clients should decide what type of HRO buyers they are—transformational or transactional—and select a provider accordingly.
The Showcase Account Crucible
As various HRO suppliers evolve, from developing a solution to getting the first big account, they must inevitably undergo a trial-by-fire period in which they experience and master the complexities of providing comprehensive HRO solutions on a large scale. All of the leaders have been through this process (Fidelity is still in this stage with Bank of America), and this phenomenon will continue this year. ACS is in the middle of its crucible with the likes of Motorola and Delta; Convergys is likely to take this step in 2006 as well as it books a showcase account. Other emerging players such as ARINSO or Aon have yet to book these types of HRO deals. Market watchers should be careful to distinguish between a company’s relative interest in and suitability for HRO versus the “python swallowing the pig.” For example, all future success stories experience market indigestion, which may look like they are falling down when, in fact, they are learning on the job and positioning for future growth.
Focus on Appropriate Outcomes
Opinions on buyer satisfaction with HRO (and outsourcing in general) vary based on clarity of purpose. Delve’s interview-based research in 2005, as well as multiple other recent studies, reflects varying opinions on how satisfied buyers are with their HRO results. What is clear, though, is that there is a direct correlation between how clear a buyer is about its desired outcomes and how satisfied it is with the result. When a buyer clearly prioritizes cost savings to an overwhelming degree, more often than not the buyer will save money. If the buyer prioritizes improving employee service, most often it will get improved employee service. Buyers with fuzzy objectives, though, get what they design: fuzzy results and fuzzy satisfaction. Like many other value equations, buyers generally do not get everything that they want and so must prioritize.
The Delve Brand Index for Human Resources Outsourcing also contains information on the ever-important sourcing advisors as well as articles written by insiders at important HRO players such as Accenture, Hewitt, ExcellerateHRO, EquaTerra, and Alsbridge. Because this report is built on getting key market constituents to frankly discuss the industry, the report is likely to raise more than a few eyebrows.
More information of the Delve Brand Index for Human Resources Outsourcing can be found at http://www.dbihro.com/.