With provider investments and partnerships on the rise, the market is shifting.
By Rajesh Ranjan
The RPO market is relatively new as compared to other HRO point solutions, but it has quickly moved into a phase of rapid growth. And it has held its own despite—and in certain cases due to—the past two years’ economic downturn. Its aggregate revenue has reached $1.1 billion, with new deals doubling in 2010. This level of growth demonstrates RPO’s ability to reduce hiring costs, provide scalability, deliver better quality of hires, enable an improved decision-making environment, support downsized internal hiring departments, and deliver on demand for specific hiring expertise.
But the results of Everest Research Institute’s (ERI) 2010 RPO Annual Report found that while buyer interest in global RPO (which is defined here as one provider delivering service in multiple continents) is very high, uptake is quite low. In fact, only 10 percent of ERI’s sample size of RPO deals signed in 2010 were global, as compared to 74 percent that were local in scope.
With buyers seeking global RPO solutions—driven by considerations including a more standardized, cross-enterprise talent acquisition process, more effective talent deployment across the organization, improved management control and insight, overall reduced costs, and desire to reduce the number of vendors in their outsourcing portfolios—why are most organizations still adopting a single-country approach with multiple providers?
Barriers to Global RPO
Global RPO adoption is low for many reasons. On the demand side, because global RPO solutions involve much longer implementation timelines, the current economic situation compels many companies to focus on a shorter-term ROI, which can be more readily achieved with a single-region approach. When it comes to global RPO deals, the companies considering them tend to go into the process believing that a one-size-fits-all model is possible across all geographies; however, local differences in buying behaviors, pricing, and legal and regulatory considerations force a reconsideration of the global RPO model. Additionally, challenges including existing RPO relationships and internal issues such as entrenched work practices, fear of a loss of control, resistance to change, cultural variations in communications styles, or changes in the factors driving the desire for global RPO can stand in the way of a global strategy.
On the supply side, while service providers have regional strengths, few can take the huge step toward providing a truly global service offering. Even those providers with coverage in many regions are struggling to create a global RPO model. The problem is that the recruitment process requires local expertise in front-end sourcing and talent acquisition, and that expertise is difficult to gain across the vast number of locales required to provide a global RPO umbrella.
To date, there have been few unqualified global RPO success stories, and the tendency of providers to sell a global RPO deal by promising more than they can deliver has resulted in negative perceptions. As a result, buyers have had little choice but to take a multi-vendor approach in order to achieve the global coverage they are seeking. However, in some cases the multi-vendor approach has been driven by buyer organizations’ diverse recruitment needs or a desire to decentralize their
Solutions are Now Emerging for Truly Integrated Global RPO
While all the above play a part in low global RPO adoption rates, the single largest barrier is the service providers’ lack of integrated global RPO capabilities. But in 2009 and 2010, these solutions, rooted in technology and process integration, finally began to emerge.
They arrived in the form of organic growth by traditional staffing and executive search firms, as well as through partnerships and acquisition strategies by pure-play and multi-process HRO providers. The traditional staffing and executive firms—such as Manpower, Futurestep (part of Korn/Ferry), et al.—are investing to integrate their local/regional offerings into one global solution.
Partnerships to enable global RPO service delivery, meanwhile, include those between SourceRight Solutions and Hays, Pinstripe and Ochre House, Allegis Group Services and Talent2, IBM and Manpower, etc. Acquisitions to achieve global RPO capabilities include Kenexa’s purchase of Quorum International to strengthen its reach in Europe, the Middle East, and Asia (EMEA); Alexander Mann’s acquisition of Capital Consulting to enhance its ability to serve the European and Asian markets; and Adecco’s purchase of TalentTrack to buoy its position in North America.
Whether it comes through organic growth, partnerships or acquisitions, global RPO delivery proficiency requires the creation of a backbone of integrated, standardized processes and technologies, along with a “hub-and-spoke” delivery model to accommodate local considerations. From there, it’s a pretty straightforward resolution equation: Providers that develop robust, integrated, global RPO solutions will be able to satisfy the single-vendor, multi-region RPO requirements of the buyer community.
Rajesh Ranjan is research director at Everest Group.