The mid-market is getting to be an attractive market for established and large HRO players. The offerings from these providers are designed to deliver cost reductions, provide access to up-to-date technology and adopt standardized processes.

The report, Gathering Momentum: Mid-market HRO, identifies companies with 3,000 to 15,000 employees as mid-market and these companies have less complex HR demands, have more flexible timelines compared to the larger employers (with more than 15,000 employees).

 “To take advantage of the barely penetrated mid-level market, providers have developed profitable offerings by leveraging economies of scale and standardized solutions. This is why we’re seeing a significant increase in HRO suppliers — including offshore providers — and offerings focused on the mid-market buyer. And this, in turn, is good for the buyer because they now have more suppliers and offerings from which to choose. The issue now becomes how to choose wisely,” said Monica Barron, VP, HRO Research.

Though 51 percent of the mid-market is HRO active, only 16 percent of them actually contribute to the total market in terms of annual contract value. However, the study predicts that this trend is expected to change and the HRO service providers will grow at a faster rate in the mid-market than the large market in the coming years. In terms of annualized revenues, the global HRO market is growing at a decelerated rate and reached $2.8 billion in 2007.

“As of December 2007, 116 out of 229 HRO transactions were in the mid-market segment. … Besides Americas and Europe, which represent a huge market potential of 5450 and 6350 companies, respectively, Asia Pacific too holds a huge HRO market potential with as many as 5050 companies. However, with just three HRO transactions in the Asia Pacific, the current penetration is a low 0.1 percent,” explains Rajesh Ranjan, Research Director, Everest Research Institute.

Ranjan also states that the current trend is to give proprietary offerings in comparison to the standardized ones. Some of the leading providers who already have focused offerings based on proprietary technology platforms for mid-market HRO include ADP, Ceridian, NorthgateArinso, Logica, Accenture, and Capita. ACS, Fidelity and Infosys have made announcements to move in the same direction.

On the other hand, providers such as Hewitt, ExcellerateHRO, IBM, Xansa and Xchanging have already targeted the mid-market segment, but they do not have focused offerings for them.