From recognition to learning to recruitment, providers are declaring that the watchword for 2011 is growth. But when? Where? How?
By the Editors
Kimberly Smithson-Abel, Vice President of Strategy & Business Development,
Inspirus
What are you forecasting in your outsourcing sector for 2011?
We are forecasting continued moderate-to-strong growth in the outsourcing of enterprise workforce recognition programs and systems for 2011. More and more, businesses are using workforce recognition and reward programs to capture discretionary effort from their employees as well as to attract and retain key talent.
What are you hearing from customers or colleagues?
Customers are expecting more from their workforce recognition programs, and demands for systems and smart services are becoming more and more sophisticated from the marketplace. That plays well to Inspirus’ strengths as an end-to-end workforce recognition provider—offering fully integrated performance solutions, enterprise workforce recognition systems, and client services.
In what areas are you anticipating growth?
We’re seeing two areas for growth:
1. Clients who are looking to build a “great place to work” culture; and
2. Clients who are looking to drive key performance metrics to realize revenue growth and/or cost savings
Clients looking to build a great place to work are focusing on enterprise workforce recognition programs and programs that empower managers to recognize discretionary effort on-the-spot. In building a great place to work, more and more companies realize that they need to look beyond recognizing the top 10 percent of their workforce and focus instead on making recognition accessible to the entire organization.
In a tough business climate, clients are always looking for ways to optimize growth while controlling costs. Aligning the workforce and developing supporting programs that identify key performance metrics, communicate those metrics and progress towards goals, and then rewarding results enables companies to execute their strategies and annual plans. Specific programs we are seeing significant growth in are sales, safety, call center performance, and wellness rewards.
The key to growth in outsourcing workforce recognition programs is that companies want all their programs—culture building and performance—on a single, self-administered system with integrated communications and reporting.
Dave Letts, General Manager, Raytheon (RPS)
What are you forecasting in your outsourcing sector for 2011?
Most experts are predicting single-digit growth rates in the global learning business process outsourcing (LBPO) market over the next one-to-two years. Established commercial markets with a higher propensity to outsource learning, such as financial services, might be improving but will remain lower compared to pre-economic downturn growth rates. We believe emerging markets such as healthcare and energy continue to show promise, as well as governments that are focused on the re-skilling of their younger populations, especially in emerging nations. The government and defense markets are providing the most promising opportunities, allowing us to leverage best practices between both public and private sectors for double-digit growth in 2011.
While the overall forecast in the market per analysts is in the low single digit, RPS is forecasting growth in 2011 of over 10 percent. This is primarily due to our broad commercial and government / military experience that allows us to move across vertical markets around the world.
In response to beginnings of economic recovery and concern that baby boomers will start to retire, there is an emphasis on organizing and getting the most benefit from leadership training and tying it in a meaningful way to broader talent management and succession planning activities.
What are you hearing from customers or colleagues?
Current customers remain committed to our value proposition, as business cases are proving to be viable. At the same time, we see many organizations that are considering learning outsourcing moving toward out-tasking specific functions to best-in-class providers, rather than engaging in a large, end-to-end learning engagement. Organizations are recognizing that tools, processes, and experience in niche capabilities—such as training technology, content development, and web-enabled learning—are best handled by LBPO providers with far greater experience and a flexible work force.
In what areas are you anticipating growth?
We are anticipating growth in established markets, such as manufacturing and defense, as well as in emerging markets, including energy, health care, and government vocational development programs in Europe, Middle East, and Asia. Military outsourcing opportunities remain strong, as the government budget pressures will strive for greater efficiencies and the shift of workforce risk to a well-established LBPO partner.
Tim Callahan, Chief Operating Officer, Graebel Companies, Inc.
What are you forecasting in your outsourcing sector for 2011?
In 2011, Graebel projects 15-to 20-percent growth due to market share gains. This forecast does not reflect any significant change or pick-up in the economy that is projected to remain fairly flat.
What are you hearing from customers or colleagues?
There is a shared feeling that the U.S. economy has bottomed, and the worst is over. However, the economic recovery will remain slow. And, specifically, the real estate market will continue to be challenging for at least another 18-months.
In what areas are you anticipating growth?
Overall, Graebel anticipates continued strong growth in our fully-outsourced global and domestic U.S. relocation and household goods move management services, because the Fortune 500 are focused on sourcing cost-effective suppliers with proven highly personalized services that are matched with advanced technologies and reporting and thought leadership from their relocation partner.
There is a strong growth trend among “new economy” companies, and this is reflected in their relocation volumes growing at a much faster pace than “old economy” corporations.
Mike Wright, Outsourcing Sales Leader, Aon/Hewitt
What are you forecasting in your outsourcing sector for 2011?
We see a strong flow of HR business process outsourcing opportunities. Clients are less comfortable staying with providers who have an uncertain future and who lack clarity of purpose or commitment in HR outsourcing. With continued industry consolidation, clients are looking for providers with financial stability when signing multi-year contracts.
For Benefits Outsourcing, we’re continuing to see more clients understanding the value of a total benefits outsourcing offer, where they can combine their health care and retirement services with a single provider. This kind of integration—if the provider has the right tools—allows employees to make smart decisions about both their retirement and their health care, and allows them to view the two comprehensively so they can make appropriate trade-offs. This is true for both the large and middle markets. Activity in the middle market for benefits outsourcing continues to heat up, as more organizations begin to explore the benefits of an outsourced model.
Across both benefits and broader HR outsourcing, clients are focused on service improvement, but the real priority in most business sectors is cost reduction. Where there are opportunities to reduce costs through outsourcing, clients are very receptive.
Overall, we see the industry as an attractive one, across all aspects of HRO. Benefits outsourcing is a more mature industry for the large market, but significant opportunities still exist, particularly in the health and welfare arena. The middle market is continuing to grow quickly, with more and more companies adopting an outsourcing approach. HR BPO is still emerging, with more and more success stories to tell about the broad deals.
What are you hearing from customers or colleagues?
Clients are interested in cost reduction, but they’re looking for bigger-picture savings. Not only do they want a solid arrangement with their HRO provider, but they also want the providers to help them reduce their overall health care costs, improve the productivity of their workforce by actively managing the time off of their employees, and provide the right tools for their employees to make smart retirement decisions that take the best advantage of the companies’ contributions. Beyond cost reduction, clients are very focused on quality. With several providers in the industry, clients no longer have to stand for poor quality, and it is often the first thing that will send a client relationship out to bid.
Fundamentally, clients want to reduce their costs, and they want savings beyond the direct savings affiliated with outsourcing. They want providers to help them reduce their healthcare costs, look at and improve employee productivity, and help them identify trends within their workforce that can help them retain their talent. But beyond that, clients want a reliable service provider. The tolerance level for mistakes has gone down significantly, and with increased competition in the market, poor quality can taint a relationship and send a client packing. High-quality delivery is Aon Hewitt’s number one priority, and has enabled us to maintain near 100% retention.
In what areas are you anticipating growth?
We’re seeing signs of growth across all areas of HR outsourcing. In the benefits and HR BPO spaces, more and more providers are struggling both financially and operationally, creating opportunities for clients to switch providers. Specifically, broad HR BPO deals are continuing to emerge, but the pace has slowed. Instead, there’s been an increase in single-service outsourcing. Those opportunities can often be the starting point for expanded relationships down the road.
Aon Hewitt continues to see a significant growth trajectory, as more and more clients are willing to sign on for smaller deals and then expand and grow, based on outstanding performance and the opportunity for reduced vendor management costs and effort. Moving to fewer providers also allows an improved and integrated experience for employees, which helps them make smart decisions about their health care, retirement, and employment, and ultimately can help clients reduce their costs. Absence management is just one example of a smaller outsourcing arrangement that delivers meaningful savings for clients and can be the start of a broader outsourcing HR outsourcing opportunity.
Rebecca Callahan, President, SourceRight Solutions
What trends are you forecasting for talent acquisition / managed services outsourcing in 2011?
At SourceRight Solutions, we’re seeing a growing RPO trend towards exempt-level hiring. Historically, RPO was more transactional, and now we’re being called into situations where our full range of skills and tools are in use, as we source hard-to-find, passive candidates to fill the positions that are pivotal to the client’s business. There’s also a trend to be increasingly more consultative in helping clients determine the best talent strategies and solutions. Plus, I’m seeing a new type of position: Global Talent Acquisition Leader—and it’s this person who is gaining more control over organizational talent acquisition strategy, effectiveness, and spend.
What are you hearing from colleagues related to the talent acquisition / managed services outsourcing market?
All of us have witnessed that organizations let their recruiters go during the downturn. For this reason, our clients are turning to us not only to help recruit but to also be part of broader strategic discussions with their hiring managers. Leveraging your MSP/RPO partner to counsel on how talent is developed and where the next wave of talent is coming from is becoming more commonplace.
In what specific functional, technical or service areas are you anticipating growth?
We’re definitely seeing growth in IT and financial services. More professionals are opting to be part of the contingent workforce, so that’s another trend that will continue in 2011, and it will be interesting to work with this emerging, free agent talent pool as we seek to fulfill the uptick in exempt hiring requirements. As a result, we anticipate growth in improving the management of “blended” workforces across all categories of talent—full-time, part-time contingent, contract, and alumni—which will require integrated infrastructure, tools, and analytics to strategically optimize the resourcing and management of talent globally.
Karen Browne, President, AdvantagexPO
What trends are you forecasting for managed service programs?
In 2009, industry analysts estimated that total spend under management was $66 billion. In the U.S., this represents 50 percent of the temporary staffing market, while it only represents 10 to 15 percent of the global temporary staffing market. We project that within the next 3 years, 65 percent of the U.S. temporary staffing market will be included in the total spend under management, with European spend under management growing from 5 to 10 percent to 25 to 30 percent of their temporary staffing market. We expect Asia Pacific growth to be slower than Europe, given differences in employment laws.
2. What are you hearing from customers or colleagues?
Clients are indicating a continued desire for MSP solutions. An increasing number of clients who do not currently have an MSP are evaluating alternative approaches (i.e., master supplier, vendor-neutral MSP, vendor on premise, use of VMS technology, etc.) and committing to an MSP program. Clients who have an existing MSP program are expanding the program geographically or expanding the program to include additional types of workers. Interest is primarily driven by a desire for cost savings, a desire for higher quality workers, and concerns regarding employment risks. We also see declining interest in “vendor neutral” solutions as clients seek partners who combine program management capabilities with staffing expertise.
3. What areas are you anticipating growth?
The areas in which we expect growth in 2011:
- Expansion of existing programs to address all contract worker skill sets
- Expansion of existing programs to incorporate SOW consultancies
- Expansion of the scope of existing programs from national to multinational
- Enterprise workforce solutions addressing temporary and permanent employees under one program
