As the economy is reviving, the HRO market is regaining its lost momentum. The number of deals has gone up over the last few quarters and adoption rates are improving. According to Krishna Baidya, Industry Manager, Frost & Sullivan, “The HRO market has received a great boost as increased number of multi-process outsourcing deals, involving HR services such payroll, recruitment, training and development etc have started pouring in.”
A major chunk of the demand is coming from public sectors across regions, as pressures to cut costs are mounting. Sectors like financial services, pharmaceutical and manufacturing are some areas that are currently high on HRO adoption.
Everest Group's 'Human Resources Outsourcing Annual Report 2011' points out few noticeable trends for this year. Demand for global expertise by buyers, integrated HR services, technology innovations and preference for single service contracts will be major factors driving the HRO market in 2011. Increased buyer preference for offshore service providers as a low cost HRO partner will most likely be an important trend to look forward this year. GIA's 'Human Resource Outsourcing: A Global Strategic Business Report (2011)’ expects United States and Europe to continue dominating the global HRO market.
Going Strong
“In 2010, the Multi Process HRO (MPHRO) market grew by six per cent to reach an ACV of $ 3.07 B. More than 40 new deals were signed during this time and there were also significant number of extensions to the existing ones,” says Rajesh Ranjan, Research Director, Everest Group. This coupled with reduction in the number of contract terminations indicate improved buyer satisfaction. As enterprises are becoming more careful in their outsourcing strategies and are reevaluating partnerships, there are some notable changes in the types of HRO contracts being signed. The visible trend is that the size of contracts is reducing and the contract period is going down. Enterprises are also including lesser number of processes in the MPHRO deals. Commenting on this, Michael Custers, VP Marketing, Northgate Arinso, says,“We are seeing fewer 'big bang' outsourcing contracts combining finance, HR, and procurement outsourcing, in favor of a more controlled and smarter approach focused on a select number of HR processes and rapid financial and quality returns.” The idea behind this is to start slowly and later move to bigger deals if the deal appears to be paying off. “Such change in customers' mentality is keeping vendors on their toes in the increasingly competitive market. Through such outsourcing, buyers are seeking to scale up quickly or gain access to contingent workforce with the required skills, gain cost advantage at various geographical presences they may have and deliver consistent experience,” says Baidya.
Print
Email
Comments
Reprints
