Experts discuss five trends that shaped 2009 and will blaze a trail for this sector in the coming year.
By Debbie Bolla
2009 changed the landscape for recruitment process outsourcing. How did the industry cater to growing globalization needs, expanded talent offerings, decreased hiring volumes, and tighter budgets? NelsonHall’s study Targeting Recruiting Process Outsourcing examined this segment and noted five clear trends for 2009 that will continue to develop and shape the industry into 2010.
Trend #1: Pricing will continue to become more variable.
One of RPO’s lauded benefits has always been its option for variable pricing, and 2009 proved it’s importance even more. “Clients like a variable cost structure because they pay for recruiting when they get it. They like matching the cost with the activity,” noted Kay Colson, principal consultant for CDI.
The decreases in hiring volumes most companies are experiencing make variable pricing very attractive to HR executives because it reduces risk, explained Gary Bragar, lead HR outsourcing analyst for NelsonHall. The report found that 84 percent of vendors are using per hire pricing in their contracts. Of that total, 64 percent are in conjunction with monthly program management fees.
“Buyers have an overall larger appetite for variable pricing,” noted Karen F. Browne, president of workforce solutions at Advantage XPO. “It allows them to forecast expenses within an organization, which has become an enormous challenge in relationship to the economic climate. When you can partner and truly know what the cost per hire is, the only variable is volume.”
Executives are looking to further encourage the adoption of variable pricing by packaging implementation fees through the entire life of the contract. Added Colson, “Including implementation cost as a variable is very appealing to clients right now when they aren’t willing to make the investments. Not many clients are interested in absorbing that type of cost at one shot—they prefer to spread it out through the life of the contract.”
The study reported that only 16 percent of organizations are charged an implementation fee at the initial set up.
Trend #2: SaaS talent management offerings will continue to grow.
“Software is a good option for companies that can’t afford a full outsourcing solution,” said Bragar. “Software can be offered at fairly low cost, allowing companies to pay for what they use with different modules. SaaS talent management offerings are good for vendors and buyers.” The study reported that 60 percent of vendors have their own technology, up from 51 percent in 2007, which is used standalone or integrated with client applications. Also of note, 32 percent of RPO contracts featured vendor technology.
Les Duncan, managing director of corporate accounts for U.K.-based RPO provider Hays, sees technology helping to streamline the process. But he doesn’t see the people component going away. “Technology systems, such as SaaS will continue to play an important role in enabling process efficiency and collating data to provide meaningful management information on hiring activity,” he explained. “However, recruitment will ultimately always be a people business. Forging strong relationships with hiring managers, candidates, and suppliers, and providing consultancy remains of critical value in successful RPO.”
Currently, most offerings are based on a best-of-breed model with limited customization, noted Colson. If models become more user-friendly with options to customize, they may become more popular she believes.
Trend #3: Global demand for RPO continues to be on the rise.
The proof is in the pudding. 2009 saw its fair share of RPO deals that were global in nature. Take, for example, Kenexa. The provider was awarded a contract by LSG Sky Chefs, a corporation with 30,000 employees in 49 countries. It is also providing Amnesty International with its technology solution Kenexa Recruiter BrassRing to help manage its full-time, part-time, and volunteer candidates in a multitude of countries. PeopleScout also expanded its global footprint with a multi-million-dollar RPO contract with global drug development company Covance. The firm has 9,600 employees in 20 countries—PeopleScout will focus on positions in North America, South America, Australia, and Asia.
The demand for one-point solutions is helping to drive this trend. “Buyers are trying to reduce the number of suppliers they do business with and are looking at one contract to manage even if it’s global,” noted Bragar.
Duncan said that Hays has expanded its scope of services for several of its U.K. clients to support services throughout Europe. “The U.K. was an early adopter and to an extent a pioneer in this area,” noted Duncan. “We are starting to see more companies outside of the U.K. adapt to RPO, but it is still limited. There has been a trend toward regional or multi-regional RPO.”
Trend #4: Global growth drives partnership between providers.
To keep up with the needs of global companies, several RPO companies are linking up with international partners to provide unified services in countries that have varying rules and regulations. In 2009, a bevy of providers forged strategic alliances, including Alexander Mann Solutions and The RightThing, and Adecco and hyphen RPO.
“Even with a large breadth of service offerings, you still can’t hope to be best-in-class in every single geography,” noted Rosaleen Blair, founder and CEO of the U.K.-based Alexander Mann Solutions, which has a strategic partnership with U.S.-based The RightThing. “Where we have clients that want to accelerate their geographic footprint, it is in the interest of those clients if we partner with best-in-class in those geographies or in a niche component in the overall solution we are trying to provide.”
Colson agreed. “Every client has a global dimension. What’s happening is everyone is looking for the right partners. To be in the U.S. and recruit around the world is impossible. We are seeing partners within pockets that are emerging and banding together. CDI works through MRI Network. It’s a ready-made partnership. We can get creative in how we do the work.”
With hubs in the U.S., the U.K., and Asia, Browne is a strong proponent of housing expertise across the globe to deploy solutions on an international level. “I think you are at risk when your global strategy is based on a partnership versus your own organic infrastructure,” she said.
Trend #5: Vendors will increasingly become more like partners and provide value-add services.
The role of the provider has morphed significantly this year, and Bragar credits HR executives for improving the business model. RPO service offerings have matured to include workforce planning, brand development, and internal hiring. “Buyers are asking for it, and providers are being proactive,” he said. Take a look at the numbers (see Figure 1). According to the NelsonHall report, in 2009, 88 percent of contracts included talent strategy and workforce planning, compared to only 47 percent in 2007. Brand development also saw a significant spike, with inclusion in fully 92 percent of contracts in 2009 —a figure that came to only 53 percent of contracts in 2007.
RPO providers navigating internal hiring also increased by a significant amount, perhaps a result of the economy. It nearly doubled from 2007—when 53 percent of providers offered internal staffing— to 92 percent in 2009. “This past year, vendors have tried to drive development in companies even with hiring freezes by looking for internal candidates to fill positions created by reorganization,” noted Bragar.
Colson has seen companies pick up some of the responsibility in terms of on-boarding during this hiring lull. Question is: Will this be a permanent change, or will it revert to pre-recession standards once hiring volumes pick up?
There’s no doubt that RPO will face challenges in 2010. As businesses rebuild, outsourcing might be key in getting organizations back to capacity. Cost reduction will still be a major factor, but improving and building the most efficient and successful talent acquisition strategies possible will remain at the forefront for HR executives.
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Navigating RPO in 2010
