A look back at deals and trends since the last European conclave.
By Simon Constance
This year’s annual HRO Summit Europe was the perfect time to look back over the year. We could see how the industry developed, enriching our discussions in Barcelona. Last year’s summit in Amsterdam was an event full of lively debate. Since then, it has been a real pleasure to stay in touch with so many buyers and providers of HRO services through our analyst research and client work.
With an agenda this year focused on innovation, we had a chance to see where the industry made advances. Outlined below are some examples of this. Admittedly we cannot cover everything in the space we have, but here is a snapshot of innovative practices that have caught our eye over the course of the year.
There are no two ways about it: The multi-process, offshore-delivered deal is still with us. The market has not retrenched (as some had forecast) to payroll and limited employee administration only. However, the market is being driven by the service innovation that suppliers can provide in this space. A few of these deals across the globe—and the projects that the major providers are running behind the scenes—stand out as interesting to look at in more detail.
We heard from Ahold (a major European retail group) at last year’s conference on their work to find a supplier in Europe. There were a number of nervous HRO sales executives in the room! Well, not too long after the conference, the news broke that Logica had secured a nine-year deal. The engagement covers more than 95,000 employees for resourcing, health and safety, learning, payroll (delivered via ADP), and core employee administration. Ahold talked last year about the challenges of managing a huge number of part-time and young staff. Self-service to engage this group, and automation would be a real advantage for them. Logica had the innovative answers here, and we will hear more as they roll the service out.
Air Canada recently signed a multi-process HRO and RPO deal with IBM, supported by Manpower. It covers everything from payroll, through HRIS systems support to learning and resourcing. At $80 million over eight years, it reflects the kind of deal that we are seeing the market settle at—not overly ambitious in scale, but broad in scope—from an organization that is a mature confident buyer of outsourcing services.
In the context of our theme of innovation, of real interest is IBM’s investment in a new program called “Beyond Customer Satisfaction.” This is a joint initiative with their clients to really drill into service areas to engage deeply with service users. This goes beyond traditional satisfaction surveys to identify joint improvement opportunities in efficiency and service quality. Staying focused on the customer, rather than the SLA, seems a great move.
ACS Xerox will be pleased with the renewal of their deal with GM Europe, with an extension to another 31 countries (38 in all), totaling 80,000 employees in scope. However it is easy to suspect that management will be even more pleased with a new win serving a European headquartered IT services company. As we go to press, they have not been able to publicly release the name, however the deal scope is for broad HR and payroll to 31,000 employees in 27 countries, with a big focus on local language services. The source of management’s delight will be the role that the translation and knowledge management capabilities of Xerox will have played in winning this. A lot has been made of the role Xerox can play in driving innovation in ACS’s business as a rationale for the takeover. Maybe this is a sign of that coming through.
After their merger, Aon Hewitt remains by a number of measures one of the leading players globally in HRO.
The HR Outsourcing Association has awarded them a number of accolades, including “customer relationship of the year.” They are a good indication that large-scale contracts, supported by innovative investment in operational infrastructure, can still be made to work with significant offshore service provision. Earlier in 2011 the first phase of the Bank of America global deal went live for over 290,000 employees. Service is being delivered from their main HRO centers in Poland, southern India, and the United States. Along with their global 10-country deal with one of the major Canadian banks, their position is pretty solid as a leading player.
Other Vendors, Other Offers
Not all the action and innovation has come from the major HRO providers and the core HRO services. We have seen some new offerings from the single process vendors, and specialist providers in areas like learning and development that increase their ability to dominate their respective niches.
Adviser Plus from the United Kingdom are a good example of innovation from a niche provider, concentrating on doing their “thing” really well. Their deal this year with Network Rail (the provider of rail track infrastructure in the U.K.) to provide employee relations advice to more than 6,000 managers really seems to cement their position in this market. The U.K. rail industry contains all the industrial relations challenges you could wish for, and if the service can be introduced there, it has to be robust and proven to integrate with the customer’s business. Their service uses a highly active technology-backed approach to supporting managers in employment issues such as discipline and absence. That is led by really deep expertise from case advisers. We will be interested to see how their bid goes to get up the value chain, by offering legal advice on employment matters.
The area of learning also has some great examples of innovation. The work of ACS and IBM with their clients in use of mobile and virtual learning games are good examples. It seems the iPad has “landed” and brought learning into the working patterns of employees, rather than dragging them away to the classroom.
Resourcing also offers a chance to access new services from suppliers. Capita has been investing in its managed services provision (MSP) offering to improve contractor performance assessment. Deeper data here is driving up the quality of contractors, and also they are enabling buyers to get contractors to put some fees at risk against performance. Also Alexander Mann Solutions has launched its source cloud solution. Here, buyers can access AMS’s offshore candidate research capabilities to create and actively manage pools of passive and active candidates without buying the wider RPO service. As firms need to trade more on employment brand to get deeper into the passive candidate market, this could be a service that finds plenty of buyers.
Finally, a good deal of innovation is going on in service access that is providing buyers with access to investments that they would struggle to make on their own. We have been impressed with the work on mobile access platforms we have seen from Capita on their own platform. This is particularly applicable to the way this integrates into the working lives of all staff and managers. There is plenty more innovation to come from all the major providers with everyone we have spoken to investing and piloting services in this area.
Overall, it’s been a good year for the industry in terms of innovation. In our own work, we see that as the feature that will keep the industry alive and attractive to buyers. On that basis, we can look forward to a year of opportunity for buyers and vendors alike.