Even during the turmoil that was visible for a large part of this year, HRO didn’t really lose momentum. Enterprises had visibly started feeling the pinch of the global economic slowdown and there were uncertainties and hidden fears on how this would impact the outsourcing world. But, in some way, the fears meant good news for the HRO industry.
What driven the HRO movement? The traditional cost saving objective was always there. Under a tight economic scenario and budgetary pressures, enterprises shifted their focus on core issues, and non-core areas other HR management were considered better left into the hands of an external service provider. Along with that the increasing complexity in handling HR transactions led to the move for many. This, when done in house, requires staff with specialized knowledge that most often companies can’t afford or find quite expensive. Outsourcing was thus the way out.
But on the whole, things were not the same. There were visible impacts of the changing economic scenario and the resulting shifts in customers’ mentality. Here’s a low down on the five HRO trends that ruled the year 2011:
Multi-process deals became shorter and smaller. The multi process HRO transactions gained interest again after some time. But the size of these deals had gone down. There was a clear preference for small, shorter term deals as buyers didn’t want to commit to anything for a long time. The idea was to start slowly and later move on to bigger deals if it appears to be paying off. This also meant a challenge for service providers in retaining their small clients and turning the short term deals into long, strategic relationships.
Best of the breed concept gained popularity. Enterprises preferred to deal with different service providers for their different HR needs. The underlying reason was to get the best out of every deal. Also as most service providers were not able to offer everything under the same roof, the chase for best of the breed was quite justified.
Multi-country presence became essential. Multinational companies wanted to be able to manage their HR activities from everywhere. This called for partnerships with service providers with a multi country presence. Buyers no longer wanted to deal with vendors who played in selective locations but looked for partnerships that ensure global presence. HRO provider, Northgate Arinso pointed out that continuing globalization has become an essential element of a successful HRO strategy.
The mid market was a big attraction for HRO this year. There was significant demand coming from this segment and to capitalize on the opportunity, service providers had also come up with specialized packages for the mid market buyers. Commenting on their mid-market strategies, Ann Vezina, Executive Vice President and Group President of HR Services, ACS, said, “Services need to be scalable for any size employer with the ability to grow as mid-market organizations grow and their needs expand.”
Last but not the least, the cloud was very much in throughout the year. When everything is moving to the cloud, why would HRO stay behind, was the message. So, we saw more and more enterprises taking their HR activities to the cloud. With its numerous benefits, Platform-based HRO became the fancy of buyers.
This is the story till now. Which of these trends find their way into the coming year and which ones die a silent death, is yet to be seen. We will be back with more updates on that very soon.