BenefitsEngaged Workforce

Gauging the Hype in the Hiring & Recruiting Outsourcing Market

Sure RPO is on the lips of buyers and providers everywhere, but the truth is market penetration remains low. Look for the segment to mature and become productive in the near future.

by Robert H. Brown

Much has been made of the ascent of RPO in the HRO industry in the past several years. But how much of the market is hype versus true delivery of hiring and recruiting excellence?

At Gartner, we annually produce our hype cycles on all manner of technology and services markets; our 2007 Hype Cycle for Business Process Outsourcing services has just been updated and published. One of the findings of this year’s iteration is that hiring and recruiting outsourcing services are at the “peak of inflated expectations” for buyers and the market at large—that is, during this phase of over-enthusiasm and unrealistic projections, a flurry of well-publicized activity by service providers will result in some successes. But on the whole, hiring and recruiting outsourcing services will be pushed to their limits, and many buyers’ expectations will go unmet. Often in the peak of inflated expectations scenario, the only enterprises making real money are conference organizers and magazine publishers.

In the lead-up to the current period, hiring and recruiting outsourcing involved very niche services, as opposed to holistic outsourcing of the entire recruiting function. Indeed, many companies associated with recruiting services were not engaged by their clients on a multi-year contractual basis, but instead delivered staffing services for piecemeal, per-employee placement fees. Much of what is outsourced in the hiring and recruiting function today is still partial in nature.

Because many HR departments have identified attracting and retaining talent as their primary competency, they are reluctant to outsource too much.

At the same time, vendors of hiring and recruiting outsourcing have been touting the marketing term of RPO to buyers for about three years. Specialist providers such as Adecco, Aon, Hudson, Kenexa, Pinstripe, Spherion, StraightSource, The RightThing, Veritude, and Yoh Group have been active in the market. However, at present, we estimate the market to have only attained one to five percent of its target audience, with an estimated market size of only $1.3 billion—a fraction of the overall HR BPO opportunity.

There is currently much vendor-driven hype in the market, but the actual market adoption of hiring and recruiting outsourcing has been minimal, compared with other types of HR BPO such as payroll and benefits administration. Today, most of the hype in hiring and recruiting outsourcing has focused on the concept of outsourcing for talent management—a nebulous term that encompasses aspects of human capital management consulting, recruiting services, and traditional outsourcing services. Expect more buyers to embrace hiring and recruiting services over the long term to grapple with the challenges of workforce globalization and the impact of the Baby Boom retirement wave.

Buyers should consider hiring and recruiting outsourcing based on its capability to reduce costs in the hiring process, to enhance quality of new employees, and to hasten the overall speed of the process. Understand your organization’s current approach to the hiring and recruiting function and whether you seek increased efficiency of the function (cost reduction) versus a transformational use of new recruiting technologies, channel diversification, and access to global talent pools. Remember, partial outsourcing of components of the hiring and recruiting function is always an option versus more holistic forms of RPO.

Despite the present hype and market realities around RPO, during the next five years, it will start to mature toward a plateau of productivity. Its benefits will be accepted and methodologies will stabilize as contracts enter their second and third generations. The war for talent will become a very critical concern and driver in the HR BPO market during the next three to five years.

Hiring and recruiting specialists are in a unique position relative to outsourcing and talent management. They are about “getting the right people in the door.”

To optimize the workforce, hiring and recruiting outsourcing will require a blend of the vision of human capital management consultants and traditional recruitment specialists. Industry knowledge will become critical as will specific personnel administration capabilities to monitor analytics-driven HR competencies such as employee productivity, absence management, and knowledge management.

Tags: Benefits, Engaged Workforce

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