The discussion is just beginning to define standards for the industry and achieve consensus on where and how to implement them.
There is a frisson of excitement in the HRO industry these days regarding standards, which are predicted to do everything from shortening sales cycles to easing implementations to saving the HRO industry itself. “We must have standards” (or some variation) is becoming the fashionable mantra in the HRO market.
At this writing, there are at least three separate initiatives considering and promoting HRO standards; the effort that is furthest along is OpenDoor (www.opendoorhro.com ), the collaboration among ARINSO, EquaTerra, and SAP.
But what are standards? And how can we be sure that everyone in the industry—suppliers, buyers, advisors, analysts, etc.—agrees not only on what a “standard” is, but also on what can and should be standardized? In speaking with a random sample of people in each of the aforementioned roles and asking them what they thought was meant by standards, I gathered the following definitions (among others):
• A standard contracting process across all suppliers;
• A standard delivery model (also across all suppliers);
• A standard statement of work that all advisors and buyers would use;
• Standardized HR processes (to some that meant across HRO suppliers; to others, it’s a standard solution—i.e., a one-to-many model from one supplier);
• Standard definitions of terms and processes, so we all mean the same thing by, for example, “process data transactions” or “produce paychecks.”
Standards are a good thing in many cases. I’m glad that I don’t have to think about how to tap into electricity in the U.S. Anywhere I go, regardless of the
supplier, I know that the many power cords in my computer bag will fit into any outlet.
In the HRO market, however, there seems to be little or no agreement on what standards are (evidenced by my admittedly unscientific research) or what needs to be standardized. And having three separate initiatives currently under way concerning standards feels downright, well, unstandardized. In fact, there may not even be agreement on what business problem would be solved by the introduction and creation of standards.
Clearly the HRO industry is at a crossroad. The HRO market today is still shaped by the delivery models used in first-generation deals, which in many (if not most) cases were “lift-and-shift” deals—limiting deal profitability and the suppliers’ ability to realize scaled growth. While suppliers are slowly moving to a one-to-many model, the resources that are required to do so divert time and money from creating value-added differentiation and innovation. Sales cycles are long and complicated; implementations are even longer and more complex.
So where might standards help? Certainly using statement-of-work templates that ideally capture 80
percent of a buyer’s requirements will be faster than starting with a blank sheet of paper. And suppliers with so-called standard solutions that ideally meet 80 percent or so of a buyer’s requirements and can be configured to meet the rest are going to be faster and less costly to implement and more efficient to run than highlycustomized, one-to-one solutions. Neither of these examples is truly a standard, however, and they will not radiate across all buyers and suppliers.
But standards do make sense in some areas; for example, standard terms and definitions make sense so we are all speaking the same language and avoid awkward conversations. But the only way that standards will be accepted and used is if all the major players in the HRO industry—that also means you and your competitors—lock themselves in a room and agree on what can be standardized, what should be standardized, and what those standards look like.
A good example of this type of collaboration comes from the HR-XML Consortium (www.hr-xml.org), which develops and promotes standard XML specifications to simplify HR data transactions. It was painful at the beginning, and it is taking a while, but it’s working. (And much credit and thanks go to Naomi Bloom for getting the software vendors in a meeting room, getting them to play nicely together, and incubating the fledgling initiative.)
So, what do you think? Do we need standards? What should be standardized? And will standards really save the HRO industry? Let me know your thoughts.