BenefitsPayroll & CompensationUncategorized

Looking Very Favorable

Predictions for next year across five HR sectors.

By Amy L. Gurchensky

Across the board, 2015 was an exciting year for human resources outsourcing (HRO) and services. Cloud-based human capital management technologies, private health insurance exchanges, robotics process automation, cloud HR services, and robo-advisors all made an impact on how HR drives business forward.

The year will end with overall HRO contract activity up more than 11 percent year-over-year with nearly 80 percent of activity coming from private sector organizations. Mergers and acquisition activity was led by recruitment process outsourcing (RPO) and benefits administration vendors, with benefits administration suppliers also leading partnership activity to strengthen capabilities.

Innovation will lead the 2016 market and we are forecasting activity in many of the sectors. Here are some potential predictions by HRO service lines.


Payroll is and will continue to be a staple HRO function that is often the gateway to further discussions, especially regarding complementary offerings like time and attendance and benefits. Payroll is also a core process within multi-process HR outsourcing (MPHRO) contracts. In fact, demand for multi-country payroll services tends to fuel these wider HRO contract discussions.

In 2016, payroll trends will include cloud-enabled payroll systems with an emphasis on expanding geographic reach and integrated platforms that include complementary offerings. ADP is continually investing in product developments that extend across the broad spectrum of HCM services, and momentum for Ceridian’s new Dayforce Managed Services offering, which combines its Dayforce platform and payroll and benefits administration services, will pick up.

Down market, traction will increase for tailored payroll offerings, including NGA HR’s new U.S. payroll platform for mid-sized organizations, Managed Payroll for the Cloud.

Benefits Administration

The Affordable Care Act (ACA) has kept benefits administration front and center. With the Cadillac tax looming in the near distance, organizations will increasingly keep demand for benefits administration services high in 2016.

Private health insurance exchanges have transformed the landscape. In 2015, additional providers entered the space and vendor consolidation was in full effect. While suppliers are focused on increasing scale for private exchanges moving forward, further enhancements to health and wellness (H&W) services will be made, especially around employee wellness services.

In terms of defined contribution (DC) administration, there has been great attention around increasing education and ways to encourage individuals to save for retirement, which will become more tailored to participants. In 2016, the market will also begin to address the larger issue of launching initiatives that create a steady stream of income for individuals during retirement.

Due to the increased complexity within benefits administration, demand for total benefits outsourcing (TBO) bundles will continue to decline. Organizations will instead seek best-of-breed suppliers for defined benefits administration, DC administration, and H&W administration.

As the needs and issues within benefits administration become more sophisticated, many vendors will narrow their portfolio of offerings to focus on a limited number of services. Therefore, 2016 will include M&A activity similar to Mercer’s divesture of its DC administration business to Transamerica Retirement Solutions and Ceridian’s sale of its H&W administration business to Morneau Shepell to focus exclusively on its LifeWorks EAP offering.

Given the general chaos and confusion that ACA has created in the market, companies will likely rely on their existing service provider for immediate solutions to ensure compliance at this stage. As knowledge increases, organizations will eventually go out to market for competitive bids, but this will be out in the horizon beyond 2016.


Interest for RPO services has remained high over the last five years, fueled by the war for talent due to skill shortages, which will continue to create challenges as the workforce ages. RPO offerings, however, have become more comprehensive to address congruent issues that affect an organization’s ability to attract top talent.

In 2016, organizations will expand their attention beyond the core RPO functions of sourcing, recruiting, selection and assessment, administration, and onboarding to include additional ancillary services such as employer branding.

Vendors will continue to expand their RPO portfolios to include other related offerings like career transition services. This will essentially round out the recursive process for an individual from candidate to employee to candidate.

Conversations on the broader talent management process will continue. Take-up rates for integrated endto-end offerings from the same vendor (packaging workforce planning, recruiting, learning, performance management) will remain low in 2016. Organizations will instead cluster certain talent management processes together from the same RPO specialist.

Keep an eye on workforce planning, which will take a more prominent position over the next 12 months within RPO. This will drive an increased demand for analytics and labor market data.

Learning BPO (LBPO)

While LBPO is often viewed as a discretionary HR process, the need for training programs become a focus when organizations are looking to engage, develop, and retain existing talent.

The overall LBPO market is estimated to grow nearly 6.2 percent in 2016 to nearly $4 billion, driven primarily by the need to implement a centralized, standardized, and automated training process that can support a dispersed and diverse global workforce.

Multi-country LBPO contracts will account for between 40 and 45 percent of activity in 2016, focusing largely on regional activity within Europe. Selective LBPO bundles that include two learning processes will dominate next year, with full, end-to-end LBPO bundles accounting for between 15 and 20 percent of contracts. Top verticals for LBPO include energy and utilities as well as financial services.

Microlearning, just-in-time learning, mlearning, and social learning have already transformed the training landscape. Over the next year, these approaches will continue to be utilized in a blended fashion with other modes of delivery, including gamification and corporate MOOCs. This will make training more effective and help accommodate all types of learners.

Multi-Process HR Outsourcing (MPHRO)

As predicted last year, cloud-based MPHRO activity gained some serious traction in 2015. Aon Hewitt alone has migrated nearly 50 percent of its traditional HR BPO client base from an on-premise HR system to a cloudbased platform, focused on Workday. Aon Hewitt is also hedging its bets in Europe with the Workday platform through its acquisition of Kloud earlier this year. In fact, Aon Hewitt is not alone with its investments in Workday. In September, IBM announced its intent to acquire Meteorix LLC, a Workday service partner providing consulting, implementation, and post-production services.

In the wider MPHRO market, most organizations continue to operate on legacy systems to ride out previous technology investments. However, demand for HR consulting services for advice on what cloud-based HR system to select and when migration should occur has increased rapidly and will continue to be a dominant theme in 2016.

Other activity in the next year will be the result of expanded offerings around HR cloud services, including SaaS implementation services and post-deployment support including release management, which may or may not include HR BPO services.

In terms of a prevailing cloud-based HCM platform, Workday and SAP SuccessFactors are neck in neck, with Workday favored more by U.S. headquartered organizations and SuccessFactors preferred elsewhere. Over the next year, the market will continue to mainly rely on both of these cloud technologies as well as Oracle Fusion, with nearly 45 percent of MPHRO service providers focused on providing a flexible cloud approach. Approximately 25 percent of MPHRO vendors have focused their offerings around the Workday platform exclusively, nearly 20 percent of suppliers have constructed their MPHRO services around SAP SuccessFactors, and the remaining 10 percent are using proprietary cloud-based technologies.

With vendor priorities and roadmaps in place for 2016, innovation and advancements within each HRO service line will come to fruition throughout the next 12 months. As organizations continue to evolve their existing services with suppliers to capitalize on these developments and outsource new HR services, the prospects for the overall HRO market are very favorable.

Tags: December-2015

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