Find out whatâs trending in six sectors of the HR services market basedÂ on annual research.
By Gary Bragar
The HR outsourcing market is changing and the topÂ trend that has emerged this year across all HR serviceÂ lines is a focus on improving the user experience forÂ both job candidates and current employees. There isÂ a renewed commitment to making things as easy asÂ possible through the use of technology, whether it beÂ by adopting one integrated system for all HR needs,Â improving ease of system use, or leveraging bots toÂ provide quick answers to inquiries, improving customerÂ service.
For example, one payroll provider has introducedÂ chatbots into its platform to enhance the employeeÂ experience.
- In a chat box, an employee can ask any HR questionÂ and get a response from a bot.
- If unable to answer the question, the employee canÂ opt to go to live chat.
- If still unable to get to a solution, the employee isÂ sent a link with the phone number to reach a serviceÂ representative.
And this evolution is only expected to continue in theÂ coming years. NelsonHallâs global business processÂ services (BPS) market forecast for 2018 to 2022 revealsÂ the overall HR services market will grow at 6 percentÂ in 2019, reaching approximately $104 billion. A majorÂ driving force of this growth is the shift toward digitalÂ transformation, wherein more partners leverageÂ technology to redesign processes and improve the userÂ interface. Though outsourcing remains strong, moreÂ buyers can afford technology-only solutions.
Below is a look at the trends by HR service line,Â including some predictions within each for 2020.
Cloud-Based, Multi-Process HR Services (MPHRS)
MPHRS contracts were the only HR service line to see aÂ slight decline in growth in 2019 due to the consolidationÂ of outsourced services and the rise of technology-ledÂ contracts. About half of MPHRS contracts were deliveredÂ on a cloud platform in 2019, up from about 40 percentÂ in 2018, leaving a significant growth opportunity forÂ HR partners to support buyers seeking a shift to theÂ cloud. Currently, the top cloud-based human capitalÂ management (HCM) platforms hosting MPHRS includeÂ Workday with 27 percent of the market, SuccessFactorsÂ with 25 percent, and Oracle Cloud HCM with 19 percent.
HCM Platform Technology
Companies of all sizes continue to adopt cloud-basedÂ platform technologies to enable digital HRÂ transformation. North America remains the largestÂ adopter of cloud-based HCM platforms, with demandÂ steadily increasing in EMEA and APAC.
The middle market remains the highest adopter of cloud-basedÂ HCM platforms, with smaller buyers on the riseÂ who seek to leverage modern HR technologies in lineÂ with their larger peers. NelsonHall estimates thatÂ between 55 and 60 percent of organizations haveÂ transitioned to the cloud for core HR processes, withÂ many large enterprise buyers operating with legacy onÂ premise platforms that will lose support in the next sixÂ to seven years.
While core HR, payroll, and time management modulesÂ remain the highest adopted, adoption for talentÂ modules is steadily increasing as organizations focus onÂ acquiring and developing top talent.
Access to on-demand, analytic reporting that enablesÂ HR to make informed decisions through predictiveÂ insights into the total global workforce has become aÂ critical tool for HR. Artificial intelligence (AI), machineÂ learning (ML), and natural language processingÂ (NLP) capabilities are becoming increasingly commonÂ in both consumer and workplace technologies andÂ are augmenting HCM users to deliver personalizedÂ experiences and enhanced outcomes.
Considering the maturity of the market, payroll remainsÂ quite strong, growing at over 4 percent annually.Â While middle market buyers remain the largest usersÂ of managed payroll services, adoption is increasing inÂ both the small and large market segments, driven byÂ the demand for modern cloud platforms and globallyÂ consolidated solutions. Payroll transformation hasÂ become a critical priority and many buyers are seeking toÂ future-proof payroll operations by consolidating payrollÂ to a single platform, user experience, and delivery modelÂ globally.
Multi-country payroll services are rapidly increasing inÂ demand and continue to grow at more than twice theÂ overall market rate, as businesses of all sizes are expandingÂ operations to new international locations and increasinglyÂ require payroll solutions that can support growth andÂ scale in emerging geographies. Growth is being driven byÂ the demand for consolidation of payroll suppliers, greaterÂ visibility of the global workforce and associated analytics,Â increased control over risk and compliance matters, and aÂ demand for a more modern, future-proof cloud platformÂ that can seamlessly integrate with the HCM landscape.
Benefits Administration Services
Companies are seeking best-in-breed benefits suppliers,Â often for a single benefit administration service line.Â Retirement plan contracts continue to dominate mostÂ contract announcements; however, health and welfareÂ remains the largest revenue percentage of benefitsÂ administration (59 percent in North America).
Top drivers of benefits administration outsourcing includeÂ modernizing technology platforms and improving theÂ participant experience. Most technology developmentsÂ around the participant experience are centered on helpingÂ employees become more effective consumers, withÂ the emergence of personalization based on life events.Â Partners are also beginning to integrate health, wealth,Â and welfare within a single consumer interface.
RPA, AI, and ML technologies are also emerging, withÂ chatbots and automated virtual assistants mobilized toÂ answer basic questions. Advanced analytics are beginningÂ to be applied to identify the most cost-effective treatmentsÂ and healthcare providers.
More organizations are embracing an integrated learningÂ BPS model that is characterized by a collaborativeÂ partnership and focused on performance, with trainingÂ objectives aligned with wider business objectives.
Organizations are buying learning services in moreÂ piecemeal ways, starting with a single service and thenÂ adding other learning services over time. The top driversÂ for engaging in a learning BPS relationship are:
- cost savings;
- the benefits of long-term partnership;
- access to expertise around learning trends and the latestÂ platforms;
- higher learner engagement through better content andÂ delivery; and
- a standardized approach to learning.
Recruitment Process Outsourcing (RPO) Services
Recruitment priorities for organizations focus on addressingÂ talent shortages, embracing technology and tools, andÂ becoming more agile. The pace of change is acceleratingÂ and more organizations are seeking external expertise fromÂ RPO partners to help them navigate these challenges.Â RPO partners have adapted to the changing market byÂ offering more choices in RPO models and programs, andÂ have begun bundling their expertise into consultancyÂ services that are sold as either standalone advisory servicesÂ or as part of an RPO program.
Organizations that have partnered with RPO partners forÂ at least one contract cycle are focusing on how continuousÂ improvement in services and technology, including betterÂ market insights and improved candidate experience,Â can minimize the impact of talent shortages on theirÂ businesses.
Gary Bragar is HR services research director of NelsonHall.