Recovery is under way. But are recruiting providers positioned to prosper?
By Rajesh Ranjan
As the economy comes out of recession, the RPO market is looking more dynamic than ever, and so is the supplier landscape. Everest Research Institute’s recent research titled RPO Supplier Landscape and Capability Assessment shows an increased number of choices for buyers today—both because new suppliers continue to enter the market, and existing suppliers are expanding their capabilities through mergers, acquisitions, and partnerships. While this is a good sign in general, it is becoming increasingly important for RPO suppliers to create differentiation within the growing and probably overcrowded marketplace. Buyers, on the other hand, need to identify the real difference among seemingly similar suppliers to understand who can best meet their unique needs in terms of value desired, geographic coverage, process scope, types of hire, technology requirements, etc. So, what are the levers of differentiation for suppliers?
Levers of differentiation
Value creation. Within RPO, value can be created at three levels:
1. Direct-cost impact that focuses on process efficiency;
2. Business impact that focuses on process effectiveness; and
3. Strategic impact that focuses on aligning business needs to overall talent acquisition.
While cost reduction and improving process efficiency metrics such as time-to-hire are important, they are increasingly becoming the table stakes. As the economic climate improves, the ability of suppliers to create business impact by improving the quality of hire, reducing new hire attrition, and improving the hiring manager/candidate satisfaction are increasingly becoming the differentiating factors. On a more strategic level, the ability of suppliers to advise and support their clients in their workforce planning process is the next level of value creation that they can create. That means helping clients identify the right mix of hires and the most effective way to attract, hire, and retain them.
Global solution. A large number of RPO suppliers have been able to successfully create and provide local RPO solutions, and there are examples of successful regional RPO engagements as well. However, a truly global RPO solution is still largely unrealized. Suppliers also realize this —a significant (and growing) number of partnerships in recent times is a step in that direction. However, most of these partnerships appear to be loosely coupled, from both a process and technology perspective. It means that while the buyers might work with a single supplier (the lead supplier in the partnership) from a governance perspective, they won’t be able to really get the standardized processes and the integrated view of their global talent acquisition data and information—among the key drivers behind a global RPO solution.
It is therefore becoming imperative for suppliers to invest, either on their own or with their partner(s), to create a solution that combines the globally standardized backbone with local customization.
Global sourcing. Effective usage of global sourcing (a combination of nearshore and offshore delivery) has become a key requirement across several Business Process Outsourcing (BPO) areas. However, within RPO, very few suppliers currently have the global sourcing delivery capability. Everest Research’s analysis of 16 key suppliers suggests that only one-third have sufficient capability in this area.
RPO suppliers should consider creating an optimal mix of onshore-nearshore-offshore delivery mechanisms to leverage the benefits of global sourcing and create differentiation in a market filled with onshore-centric models. Web-based candidate sourcing and pipeline building, non-voice screenings, offer letter management, applicant tracking, and technology management are some of the recruitment processes that are quite amenable to offshoring.
Industry specific knowledge. Providing RPO services is different from other HRO areas such as payroll or benefits where the approach and knowledge are largely similar across different industries. It becomes more significant when RPO scope involves higher value-added activities than purely back-office administration. A clear understanding of the business drivers within a particular industry and an ability to align and tap talent pools that meet the requirement from a skill-set, certification, and experience perspective are both important for suppliers to differentiate.
Technology. The role of technology cannot be overstated within broader HRO as well as RPO markets. While creating the backbone for improving the process efficiency, it can simultaneously create greater impact through effective deployment of such tools that provide actionable analytics. Suppliers need to use technology to create standardized models across back-office, non-distinctive processes to leverage and provide economies of scale benefits to their clients, while creating differentiation through high value-added elements around analytics.
Rajesh Ranjan is research director for Everest Group.
