RPO & StaffingTalent Acquisition

RPO Still Rapidly Evolving

Although it seems like a highly mature business, outsourced recruitment still needs to iron out some aspects.
By Andy Teng
Recruitment process outsourcing might seem like a mostly mature market, and throughout most of North America, it is, with various flavors of engagement in practice for years now. However, the truth is that end-to-end deals, which some purists say is the only form of RPO, has been in existence only since around the beginning of the decade, and global contracts are just now being executed.
One of the confusing aspects of the RPO marketplace is how it’s defined. Historically, the earliest RPO programs were project-driven staffing programs that involved filling a defined number of positions. Early iterations of these deals vaguely resembled today’s sophisticated implementation; many pioneering contracts were focused more on sourcing rather than the full-service experience, and they typically didn’t last more than a year. Today’s deals can often span three or more years, although first-time buyers may start out with a pilot program that lasts a few months. Also, RPO providers back then functioned more as an adjunct to the internal recruiting staff; today, the opposite is true.
Their staffing heritage made early RPO providers exceptionally good at recruitment,
especially in the area of candidate sourcing. Recruitment expertise, however, is just one component of the overall solution, and these fledgling companies required more rigorous process excellence as well as better tools to ratchet up efficiency. However, compared with internal recruitment departments, the providers demonstrated much better performance in time and cost to hire.
As the market evolved, the industry became bifurcated, with some providers offering integrated solutions that included proprietary technology that could be purchased independent of recruitment service, and others that formed partnerships with applicant tracking software makers to deliver a seamless offering. An example of the former includes Kenexa, which developed its own technology as well as acquire commercially available software (BrassRing). Spherion was an example of the latter; it had a partnership with ATS provider PeopleClick.
By the late 1990s, RPO players began to replace in-house functionality as they demonstrated their competencies and ability to out-perform internal counterparts. They were beginning to be viewed as capable alternatives to an internal recruitment function, and HR executives could confidently turn over a vast majority—in some instances, all of them—of positions to an external provider. Still, most deals remained limited to a few processes in the overall spectrum of recruitment services. Sourcing was a part of just about all contracts; assessments, screening, scheduling, and on-boarding were increasingly added to deals.
But development didn’t just center on integrating these services; providers also understood customers’ desire for better processes strengthened by continuous improvements, technological innovation, and measurement. These companies realized that to truly gain efficiency, they needed to better understand clients’ needs, what they considered a successful hire, trends in the verticals in which customers operated, and other factors. The adoption of Six Sigma by some organizations was in response to the market’s shift.
The first half of the decade witnessed the emergence of today’s standalone market leaders but it also marked the failure of multi-process HRO providers in the space. As the HRO industry transformed during this time, many large, enterprise HRO providers that had touted their recruitment abilities quietly retreated, in part because their RPO offerings woefully under-delivered on promises and because they realized this was a distracting and costly business to them. A number of first-generation HRO contracts that included RPO services were quickly renegotiated to shift recruitment back to the customer or a best-of-breed provider. Clearly, HRO providers’ dabble in RPO had come to an end. Today, most RPO engagements are done through a standalone RPO provider or an HRO provider who has partnered with an RPO.
Despite this shift and the exiting of enterprise HRO providers from the space, the RPO market is a robust place where consolidation is occurring alongside the emergence of new providers. During the past couple of year, notable acquisitions included Adecco’s buyout of TalentTrack and Manpowers’ acquisition CRI among others. At the same time, companies such as TAPFIN and Beeline have moved beyond their traditional staffing business into the RPO space.
As the end of the decade nears, North American market leaders have firmly established themselves (for a look at the top providers, see the July/August 2008 issue of HRO Today). What isn’t so clear is who will emerge as the global leaders. Overseas vendors such as Alexander Mann Solutions (AMS), hyphen RPO, Ochre House, and others are making a name for themselves in Europe, but with the exception of AMS, most are still unknown globally. More likely, key players in the North American market are aiming to establish themselves as global vendors, building a footprint where it makes economic sense and forging partnerships where it does not.
Although RPO might seem like a fully mature practice, some aspects are still under development. However, with demand high even in this environment, it’s likely that the industry will continue at its current dynamic pace. 

Tags: HRO Today Forum APAC, HRO Today Forum Europe, HRO Today Forum North America, HRO Today Global, HRO Today STA, RPO Staffing, Talent Acquisition

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