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IN FOCUS: Our Crystal Ball Reveals Four Big Predictions for the Year Ahead

Hey, we’ve learned our lesson. No longer is any year the year of just one thing. And 2007 will be HRO’s year of many things, including finally hitting the $100 billion mark. But wait ’til you read the list of things.

by Harry Feinberg, Jay Whitehead

There are few gifts that keep on giving us quite as much grief as being reminded about off-the-mark predictions from years ago. Fortunately, none of our crystal ball work showed the NASDAQ at 100,000 by January 2006. But we are often reminded (mostly by readers like you) that a few of our prognostications were, well, premature.

Take for example the December 2004 prediction that 2005 was the year of the mid-market in HRO. As it turned out, 2005 was a fair year for new mid-market accounts. But it was nowhere close to the breakout year we predicted. In fact, it was the year of technology fix-ups rather than go-to-market time. We weren’t wrong. We were just early.

We have also been wrong on the downside. For example, take our October 2002 prediction that global HRO would hit $50 billion by 2007. That guess was wrong by half on the low side. IDC recently predicted that the 2007 global volume for HRO will hit $100 billion.

Then there are the developments we did not foresee that we should have, such as the staggering growth of recruitment process outsourcing (RPO). In 2002, our first Resource Guide listed only five vendors who claimed to have RPO services—technology-enabled recruitment done on an industrial scale. We should have seen this one coming because as the founders of the HR Outsourcing Association (HROA), we were present in 2004 when Hyrian’s Jason Berkowitz and others founded the RPO Alliance—a loose confederation of a couple dozen vendors who came together within the HROA to decide on some standards. Heck, when there is enough business around for a couple dozen competitive vendors to come together to agree on anything, that’s a sign of a market trend.

In 2004, we also predicted that FAO would be as big as HRO by 2006. We were not wrong about the FAO market’s trend, which is big growth both driven by offshore labor cost savings and transaction processing innovations. But we were wrong about equating HRO’s customer uptake with that of FAO. And as it turns out, we missed the boat on understanding that the market growth differences have to do with the contrast between HR leaders and finance leaders. Finance leaders are both change-averse and borderline sociopaths. I don’t mean “sociopath” in the bad, serial-killer sense. I mean it in the sense that “I really don’t care to have to leave my desk to meet anyone and have them explain it to me, especially at a conference where I actually might have to engage a stranger in conversation, especially a stranger who doesn’t fear me because of my power over the checkbook.” HR leaders, for all their flaws, at least play well with others.

But in 2007, we’re going to get our predictions right.

First, private equity will be behind at least one large and three mid-sized mergers. We know of three big potential deals under discussion with big funds right now, so we’re almost sure to hit this forecast out of the park.

Second, 2007 will be Fidelity Employer Service’s breakout year. Its HRO unit has wisely recruited some of HRO’s perennial superstars, including former Ceridian and Advantec honcho Pat Goepel. They have spent nine figures upgrading their technology platform. And Fidelity is all the buzz among the 200 or so HR leaders we talk with regularly.

Third, expect Accenture to have another strong year. The firm’s outsourcing leader Kevin Campbell’s hand-picked management team is about to bear more fruit, on the heels of its big Unilever win in 2006.

Fourth, 2007 really is going to be the year of the mid-market. Every time we’ve predicted this, we’ve been right, but just a little early. This time, we’re bound to be right. You can trust us. We’re the media.

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