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It's difficult to identify an over-arching pattern in the post-recession outsourcing landscape. Instead, several mini-trends help build a picture of an industry that's quietly weathering the storm. Andy Allen repoits
iven the economic backdrop of the post year, one could hardly expect HR and RPO providers to be reporting record-breaking deais. And it is fair to say the mood in the industry has ; been restroined. Yet scratch the surface of the HR outsourcing business and things are far from grim. Rather than any single
to be conclusive, Most outsource providers report either brisk business, often coming from different directions to the usual, or a slight lull in activity. The CIPD, too, is finding it hard to see which way things are moving. In its survey. HR outsourcing and the HR function: threat or opportunity?, from June this year il Found 29 per cent of organisations were outsourcing ospects of their HR activity. Over the long term, most have been increosing their use of HRO. Over the past five years 20 per cent have reported significant increases in HRO activity, while ¿t^ per cent have reported o slight increase. Only 11 per cent have reduced their reliance on HRO. Yet it is hard to identify whether this long-term movement is happening now. "We're seeing things moving in both directions. Some people are moving things out ond some are taking things back in-house." soys Rebecca Cloke. organisation and resourcing adviser at the CIPD. What seems certain is that there is a move oway from big generolist deals towards more specialist ones.
shattering mega-trend one can identify severol micro-trends converging on the industry. It is these trends that HRO and RPO (recruitment process outsourcing) providers believe will help their market emerge strongly from the current downturn. However, on the big question of whether the overall direction in the industry is towards more outsourcing or less it is hard
co. says: "The amount of deals is definitely up in RPO. The client was on the point of signing a deal for a multi-million pound HR transformation programme when the board decided outsourcing would be inappropriate when it was having to make cuts elsewhere. according to Bruce. As an example of how promisinglooking deals can be quashed from above. chief executive officer at Alexander Mann Solutions. "Organisations are examining what their principal challenges are and prioritising what they want to outsource. • Anthony Bruce." says Hearn. Clarke cites a potential European client of on outsourcing provider he worked for eariier this year before joining Xchanging." he says. UK HR transformation leader at PricewaterhouseCoopers says: 'There are fewer landmark deals in the HRO space." she says. It is something other suppliers are seeing on a general level. There are people we've been talking to for 12 to 18 months and in that time it's been taken to board level. They have all read about large outsourcing deals that haven't worked. "The opportunity to make a 20 to 25 per cent cut in your HR cost is not getting the same visibility at board level os toking out a large chunk of cost somewhere else in the core process. So people are increasingly seeking out niche suppliers. is for clients ta Initially consider a wide range of services but when they finally sign the deal.PM Guide to Outsourcing Overview corporote agenda by wider business concerns in the current climate. to settle for a more limited range. international development director at Kenexa. product marketing and development at ADP. what of Anthony Bruce's assertion that RPO is faring better than HRO? This is backed up by many providers in that area. but they're talking about it for a prolonged period of time. The 'lift and shift' approach wasn't looking corefully enough at the problem. The very fact that such issues are attracting attention at senior level means in her view that they are likely to be treated with more urgency. according to Rosaleen Blair. ]erry Collier. So. They're making sure that works well and then they're taking another step. 'We've found that because CFOs are getting involved it's enabling things to happen In a strategic way. Stuart Hearn. "Clients recognise the need to change. This need not be a bad thing. Xchanging HR Services. As Hearn of Plus HR puts it.peoplemanagement. alongside payroll. whereas previously they might have "bundled" all services together with a single one. "Financial directors are all over these decisions. At the same time they may well choose a niche supplier for certain services. managing director. a partner at Plus HR. says: "What we are seeing from large companies is interest in outsourcing very particular sen/ices. believes the scarcity of these "allencompassing mega deals" can be put down to clients retrenching and considering their HR needs more carefully." 'There has definitely been an increase in public-sector organisations looking at outsourcing' Ian D'Cunha." The consequence of this is that lead times on signing contracts are increasing .uk/outsourcing NOVEMBER 2009 5 . director. According to Peter Clarke." A notable trend. "Quite often they will extract whole processes and say this provider can't do recruitment as well as a specialist can for the same price. though not without qualifications. He believes many smaller deals are able to go through without this kind of board-level scrutiny as they can pass "underneath some corporate threshold in terms of cost".something widely acknowledged among providers. The good news is that those factors have had little impact on smaller deals. according to Clarke." he says." he says. HR initiatives have been pushed down the www. Where the deals are taking place is in the RPO area.
we will see a huge surge in demand for RPO services as job markets pick up and staff who believe they hove been badly treated during the downturn seek work elsewhere. believes the massive recruitment spend of public-sector orgonisations omounts to o huge opportunity far RPO providers. a partner at HR transformotion odviser Orion Partners. James Ranksley.PM Guide to Outsourcing Overview "The size of those deals is down because clients are doing less recruiting and they are certainly taking a lot longer to sign. One possible area of growth." he says. he believes. says: 'There has definitely been on increose in publicsector orgonisations going out and looking at what is achievable in terms ofHRO. This pressure will only increose under a Conservotive government." says Bloir. at Talent2. At Alexander Mann Salutions the facus with many clients has switched to internal recruitment. could be from local authorities looking to form shared service centres." Very soon.he stresses that outsourcing is on emotive subject within the public sector. had 70 to 72 per cent Internal mobility over the past year. that there is a division between councils that oppose outsaurcing and those that believe it is essential to look ot the outsourcing market because of the difficulties of setting up and mointaining shored service centres. "Three of four councils that band together to create a shared service centre can came up quite quickly agoinst the realisatian that this is a complex thing ta do. CEO. outsourcing providers believe. At that point many will consider asking an outsaurcing pravider to run the centre. "With the Gershon report.peoplemanagement. business development director at NorthgateArinso. There is a widespread belief that calls far efficiency in back-office functions in Sir Peter Gershon's review have increased the pressure on public-sector bodies to outsourceallorpart of their HR function." he soys. Constance stresses though. according ta Simon Constance. It is eosy to exaggerate doubts about their willingness to outsource.uk/outsourcing . Europe. this has really come to the fare and I think that there is going to be a lot more interest. "Whether this interest will actually come to anything is a different story. Blair is confident that other factors will boost the RPO market as it does so. • 6 NOVEMBER 2009 www." Ronksley odds on importont qualifier though . "One organisation that over the past two to three years has had 11 to 12 per cent internal mobility. Not only is she seeing a fresh demand from new sectors such OS phormaceuticais and healthcare but also significant extra Interest from public-sertor organisations." While recognising that this trend will probably disoppeor os economic circumstances change. "Our team has probably been engaged 70 per cent in moving people internally in client organisations over the past nine months in particular. but the increase in numbers is being driven by the fact this is a good time to make changes before the next surge of recruiting. Collier believes.co. Andrew Grant.
"Bringing on board NorthgateArinso allowed us to transform HR. As the outsourcing markets mature other developments occur. reward and learning and development." he says. it understood Emap's challenges. Emap was already buying an in-house payroll solution from NorthgateArinso ond initially began to consider outsourcing payroll with the same provider. establishing new structures and procedures that support Emap's core values for accountability and high performance. not only for RPO providers but HRO providers as a whole." Grant adds. In addition. "They can't make empty promises like some were doing 10 years. But he stresses that cost is not the oniy factor behind the decision to outsource. no doubt many will be keen to see if this trend emerges more strongly over the year ahead. says Ronksley of NorthgateArinso. Perhaps some SMEs have been less hardhit than larger companies. "In the past we saw very small companies wanting a bit of HR help. Over the past year he has increasingly seen HR departments participate in the outsourcing agreements themselves. It eventually chose NorthgateArinso to provide an end-to-end service. managing director at Reed Consulting. Whot we're seeing now is increasing HR involvement and HR is negotiating less on price and placing a greater emphasis on quality.peoplemanagement.someone unlikely to be found In the marketplace." she concludes. • Case study: outsourcing at Emap When media group Emap came under private equity ownership in 2008 it began looking to outsource HR to give it the freedom to concentrate on strategic issues. They may be looking for a single individual to combine the roles of an HR administrator. outsourcing give SMEs greater access to technology that they lack the capital to purchase. for example . he points out. They've been outsourcing IT and infrastructure for 20 years. says clients are demanding providers that "are able to deliver on the dream". The lack of consolidated business information had a direct impact on day-to-day strategic decision-making." says Hearn.PM Guide to Outsourcing Overview "I don't think that's the case any more. employees had different appraisal forms depending on what part of the business they were in. At the other end of the scale but equally welcome. covering the entire employee lifecycle from HR and payroll to flexible benefits and recruitment. which took nine months ta complete. such as employee relations. Since the introduction of the outsourcing arrangement. resourcing. Later it looked at a much more comprehensive outsourcing arrangement. the company's previous business model had led to disparate processes and procedures being in place throughout the business's autonomous units In HR.uk/outsourclng NOVEMBER 2009 9 ." says GrayEmap moved from having internal generalist HR and payroll teams to a structure where specialist heads of service managed specific HR streams. Dan Ferrandino." Given that a frequent complaint from HR itself is that it has been all too often on the outside looking in when outsourcing deals have been signed. says Gray. "Outsourcing used to be completely procurement led. HR manager and HR director.co. "The SME market is taking an upswing. Stuart Hearn at Plus HR says: "There has been a lot more interest from SMEs. HR has been able to focus more on where the business is going strotegically. NorthgateArinso took responsibility for transactional and operational elements of HR such as the Tupe transfer of staff as well as setting up an HR advice line. As Emap performance director Tracey Gray explains. Like many other providers. "Having recently moved into private equity ownership itself." fat a small business." he says. is increased demand from SMEs. outsourcing may be a good alternative to hiring an in-house HR specialist. but we certainly never saw peaple wanting to outsource their HR. considering a range of providers. for example. www. not just in the type of clients or services but in the quality of deals being signed. Ferrandino believes that the drive to save costs through outsourcing has played a major role in sustaining the demand for RPO services.
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