BenefitsEngaged Workforce

What’s Hot in HRO Trends Today

Scope creep an inevtiable result of end-to-end HRO. Buyers voice demand for more services.

by Scott Gildner

HRO is a term that is used ubiquitously in our industry. Generally, it refers to the establishment of a broad-based, multi-process outsourcing relationship between an organization and a service provider. However, when you break down this umbrella term into its individual components, a dynamic marketplace emerges—one that warrants a closer look and better understanding.

There are a number of large and distinct market segments under the broad term HRO, including:

• Actuarial and consulting services;
• Payroll administration;
• Benefits administration;
• Recruitment process outsourcing;
• Learning administration;
• Domestic and international relocation; and
• Multi-process outsourcing.

These markets—each at various stages of maturity, have one thing in common: they are all bubbling with innovation and opportunity for today’s employers. The following are some examples.

Let’s start with actuarial and consulting services. We are on the verge of seeing price (yes price) emerge as a competitive factor among the HR consulting firms. Many of the larger firms are making their first forays into globalization, seeking to establish offshore locations to support their domestic services. We also see tremendous innovation in the integration of the global capabilities of these firms.

In payroll administration the biggest innovations are occurring in the area of global payroll. ARINSO is rapidly emerging as an attractive solution to pan-European payroll for companies looking for an integrated solution. Meanwhile, ADP is expanding all over the globe via internal expansion, acquisition, and alliances to provide one-stop-shopping.

Benefits administration is not standing still. While most large employers already outsource these services, that doesn’t mean competition isn’t alive and well. Traditional market leaders have had some challenges of late, while others formerly considered “second-tier” are emerging as legitimate alternatives. We continue to see prices fall across the board, and lately companies with 3,000 to 8,000 participants are finding the providers more interested in supporting their needs.

A more strategic sub-market is developing around recruitment process oΩutsourcing (RPO). Where historically many RPO deals were really just mass purchases of external recruiting services, we are now seeing the segmentation of recruiting needs and the allocation of recruitment responsibilities externally and internally to maximize the effectiveness of the function. The emergence of broader RPO contracts and services—including process engineering—in combination with recruiting at all levels and improved technology and vendor management capabilities has had a huge impact in efficiencies and cost reduction as well as helping companies improve the quality of talent acquired.

In learning administration, two different solutions sets are emerging. We are seeing integrated learning solutions as part of multi-process outsourcing arrangements, as well as stand-alone learning solutions which include technological and service center support for a variety of e-learning and traditional learning programs.

The global mobility marketplace has been a hotbed of alliances and mergers for the past several years. It is now possible to outsource a meaningfully integrated set of services to support the transfer of employees, either within the U.S. or around the world. Many of these new integrated solutions also have integrated solutions for expatriate administration.

And finally, the world of multi-process outsourcing, usually including some combination of workforce administration along with the other functions described above, continues to pick up momentum globally. There are now nearly 100 organizations around the world that outsource core employee records management, HR systems infrastructure, and the bulk of contacts with employees and managers around HR transactions and simple inquiries. This growth has resulted in some signs of stress, with service providers exhibiting a growing impatience in achieving profitability. Buyers should be prepared for rising prices, less flexible contractual terms, and a reluctance to make new investments as the providers try to leverage the investments they have already made.

All in all, HRO represents a diverse, vibrant marketplace, providing a plethora of options to solve the needs of any employer. And we expect a continuation of this innovation trend as the competition among providers heats up.

Tags: Benefits, Engaged Workforce

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