MSP NEAT EVALUATION FOR KELLYOCG: NEAT Evaluation: MSP (Talent Management Focus) Market Segment: Talent Management Focus

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1 NEAT EVALUATION FOR KELLYOCG: MSP Market Segment: Talent Management Focus This document presents KellyOCG with the NelsonHall NEAT vendor evaluation for MSP (Wider Talent Management focus market segment). It contains the NEAT graphs of vendor performance, the latest market analysis summary for MSP and a summary vendor analysis of KellyOCG in MSP. An explanation of the NEAT methodology is included at the end of the document. The vendors researched are: Advantage xpo, Alexander Mann Solutions, Allegis Global Solutions, Capita, DCR Workforce, Hudson, KellyOCG, Pontoon, Resource Solutions, ReThink Talent Management, TAPFIN, and Volt. NEAT Evaluation: MSP (Talent Management Focus) NelsonHall November 2015

2 Buy side organizations can access the NEAT tool here. Vendor Analysis Summary for KellyOCG Overview The majority of KellyOCG's MSP clients are large enterprises. Current MSP clients include: A wind turbine manufacturer, Germany: ~500 contractors in scope A pharmaceutical, consumer healthcare and animal healthcare products company: in 2002 KellyOCG implemented master vendor and vendor neutral hybrid models for this client An automotive organization: annual contingent hires of 1,100. This is a master vendor relationship; the client piloted KellyOCG's analytics portal and is currently using it as part of the service A consumer goods organization: managing a ~$26m spend across 69 suppliers and with ~500 contingent workers A medical devices, pharmaceutical and consumer packaged goods company: for total annual managed spend of $1.5bn. The contract started as a master vendor relationship in 1996 and developed into a global MSP contract. Scope now includes the Americas (U.S and Puerto Rico), EMEA and Asia Pacific. Financials Kelly Services' 2014 revenues were $5,563m, up 2.8% y/y (or up 3.8% in CC) from $5,413m in The KellyOCG division's revenues were $587m, up 15.2% y/y from $475m in KellyOCG does not report MSP revenues separately, but NelsonHall estimates these as $160m for KellyOCG's greatest MSP revenue growth in 2014 was experienced in statement of work related services; revenues increased ~100% from The table below shows KellyOCG's breakdown of spend under management (SUM) by MSP service type. Exhibit 1 KellyOCG: MSP Spend Under Management by Service Type 2014 Service Type Share of SUM (%) Vendor neutral and hybrid 50 Master vendor 43 Direct hire MSP 4 Statement of work 3 Source: NelsonHall estimate NelsonHall November 2015

3 The majority of statement of work activity is in the U.S. (~70%), with ~15% derived from Europe. Strengths Ability to scale to multiple geographies; capability is demonstrated through its servicing of 18 global MSP clients Strong proprietary supply chain methodology applied to managing contingent workforce acquisition SCOR, GTSC model 2.3 Talent supply chain analytics portal available to clients and recruiters, with the ability to capture information on both permanent and contingent labor Breadth of global footprint, with a large client base across Europe as well as being one of the largest MSP providers in Malaysia, Singapore and South America Ability to provide blended services with RPO Significant client base and expertise in manufacturing, pharmaceuticals, energy and utilities, and consumer services industries Ability to leverage the global reach of parent Kelly Services, which has delivery locations and employees throughout the Americas, Europe and Asia Pacific Certification of recruiters in sourcing technologies and methods, e.g. certifications in social recruiting, and now also workforce planning, for customers partnering with HCI Ability to drive new engagements, such as SOW programs. Challenges Limited experience in construction, retail, and hospitality sectors Positioning MSP services alongside its staffing business as a complementary offering, without threatening revenue generation in staffing, will be a challenge KellyOCG, being part of the wider Kelly Services staffing organization, is not 100% independent. Its ability to attract organizations which are using Kelly's staffing services today may be challenging as Kelly Services has a vested interest in maintaining its staffing revenues. Strategic Direction KellyOCG plans to support its growth primarily through additional service development for SOW, as well as by marketing its new consulting capability to assist companies in understanding their savings opportunities by using MSP services. Plans include: Further developing its SOW offering, particularly independent contractor SOW services Increasingly targeting consultative engagements, to assess opportunities for expanding recruitment services to include career transition and vendor management services NelsonHall November 2015

4 Further developing service models using a talent supply chain approach to support blended workforce requirements, for both permanent and contingent workforce Partnering with online freelancing communities to enhance its offering Further investing in talent supply chain management analytics by adding labor data for additional countries, to support client demand for key markets. Outlook KellyOCG is likely to see additional momentum in , for the following reasons: Its analytics tool helps demonstrate savings opportunities through improved contingent workforce management, and is expected to attract a significant number of clients. The tool is user friendly and few MSP providers are able to demonstrate a tool that is so interactive and effective in managing suppliers KellyOCG's SOW activity is likely to increase, with ~15% of clients likely to adopt these services in the next two to three years, as client awareness of the benefits of using an MSP to manage engagements of this nature increases KellyOCG is one of the few MSP vendors which can effectively service across Europe as well as having a large U.S. capability Its recent investments in building out its supply chain management MSP methodology will be valued by large enterprise companies that are looking for a high level of structure, to support the management of the contingent workforce. Furthermore, NelsonHall expects that KellyOCG will likely acquire an RPO company to supplement its MSP services. This would also enable greater value in an MSP relationship, as it would enable KellyOCG to compare and manage permanent and contingent workforces seamlessly, and optimize the blend to suit a client's situation. NelsonHall November 2015

5 MSP: Market Summary Buy-Side Dynamics The top drivers of MSP are: Enhancing compliance and mitigating the risk of using multiple suppliers Improving cost visibility and cost reduction across contingent worker spend Consolidation of agencies and improving visibility of agency usage Enhancing quality of hire in hard-to-fill roles. The principal benefits derived from MSP are: Reducing contingent worker costs, on average by 10% Improving process consistency and cost visibility across countries Agency rationalization Reducing time to fill times, on average by 24% Improving hiring manager satisfaction. Industries which dominate the market (with approximate share) are financial services (26%), technology (16%), and manufacturing/engineering (14%). The job functions most represented are IT (28%), industrial/manufacturing (19%), and administration (15%). Over the next three years, MSP is expected to increasingly blend with RPO. Approximately 12%-15% of the MSP market is expected to be bundled with RPO services, and this will increase as buyers look for expanded service scope and have more flexible buying patterns to meet wider workforce challenges in specific area. Market Size & Growth The MSP market is currently focused on vendor neutral models and localized service delivery. However, there is an increasing appetite for direct sourcing as well as SOW contracts, as organizations seek greater effectiveness and look for outcome based models. In addition, MSP services will increasingly blend with RPO services to meet wider workforce challenges. Global MSP spend under management (SUM) was $85bn in 2014, growing at 18% to reach $195bn by Global MSP revenues were $3.3bn in 2014 and forecast to reach $7.6bn by 2019, with EMA growing at 21% per annum to reach $3.2bn by While the MSP market is currently dominated by vendor neutral, SOW will exhibit strong growth over the next five years and account for 38% of the MSP market in Global MSP contracts will increase in importance and will account for 25% of spend under management by 2019, with another 25% of the market taking the form of multi-region or multi-country contracts. NelsonHall November 2015

6 Success Factors The critical success factors for MSP vendors are: Establishing capability in new countries through partnership, supplier networks, or organic growth Managing change management at local levels Increased use of analytics for business insight and visibility of the wider market contractor rates is an important enabler Building partnerships with clients and obtaining greater visibility of workforce insights of the client environment as well as the supply base, to better manage the uncertainty in demand volumes. Workforce consulting capability and analytics offerings are key success factors Tapping into multiple talent pools and ensuring passive candidates are targeted, including integrating with disruptive contingent networks such as freelancer management systems. Outlook Over the next few years: The global MSP market revenue is forecast to be ~$7.6bn by 2019, with a 18% CAAGR Continental Europe and emerging markets will become increasingly important, and will account for 34% of the global MSP market SOW programs will become more important in support of outcome based contracts, with the direct model increasingly popular for the mid-market SOW market is expected to grow at 32% y/y CAAGR until 2019, and will account for a 36% share of the market Global MSP contracts will account for 25% of spend under management by 2019, with another 25% of the market taking the form of multi-region or multi-country contracts Analytics and labor insights will increase in sophistication to support supply chain management and sourcing Over the next three years, 12%-15% of the MSP market is expected to be bundled with RPO services. NelsonHall November 2015

7 NEAT Evaluations for MSP NelsonHall s (vendor) Evaluation & Assessment Tool (NEAT) is a method by which strategic sourcing managers can evaluate outsourcing vendors and is part of NelsonHall's Speed-to- Source initiative. The NEAT tool sits at the front-end of the vendor screening process and consists of a two-axis model: assessing vendors against their ability to deliver immediate benefit to buy-side organizations and their ability to meet client future requirements. The latter axis is a pragmatic assessment of the vendor's ability to take clients on an innovation journey over the lifetime of their next contract. The ability to deliver immediate benefit for the Payroll BPO NEAT assessment is based on the criteria shown in Exhibit 2, typically reflecting the current maturity of the vendor s offerings, delivery capability, benefits achievement on behalf of clients, and customer presence. The ability to meet client future requirements assessment is based on the criteria shown in Exhibit 3, and provides a measure of the extent to which the supplier is well-positioned to support the customer journey over the life of a contract. This includes criteria such as the level of partnership established with clients, the mechanisms in place to drive innovation, the level of investment in the service, and the financial stability of the vendor. The vendors covered in NelsonHall NEAT projects are typically the leaders in their fields. However, within this context, the categorization of vendors within NelsonHall NEAT projects is as follows: Leaders: vendors that exhibit both a high ability relative to their peers to deliver immediate benefit and a high capability relative to their peers to meet client future requirements High Achievers: vendors that exhibit a high ability relative to their peers to deliver immediate benefit but have scope to enhance their ability to meet client future requirements Innovators: vendors that exhibit a high capability relative to their peers to meet client future requirements but have scope to enhance their ability to deliver immediate benefit Major Players: other significant vendors for this service type. The scoring of the vendors is based on a combination of analyst assessment, principally around measurements of the ability to deliver immediate benefit; and feedback from interviewing of vendor clients, principally in support of measurements of levels of partnership and ability to meet future client requirements. NelsonHall November 2015

8 Exhibit 2: Ability to deliver immediate benefit : Assessment criteria Assessment Category MSP Offerings MSP Delivery Customer Presence Benefits Achieved Vendor neutral offering Statement of work offering Direct sourcing offering Assessment Criteria Wider talent management/hr capability Delivery capability in support of N. America Delivery capability in support of U.K. Delivery capability in support of Continental Europe Delivery capability in support of APAC Delivery capability in support of LATAM Ability to scale operations VMS technology delivery Application of analytics Level of investment in talent communities Partnership approach Ability to benchmark process and offer roadmap Re-engineering of paper-based processes Large companies (more than 15k employees) Mid-size companies (500 15k employees) Small companies (less than 500 employees) Customer presence in N. America Customer presence in U.K. Customer presence in Continental Europe Customer presence in APAC Customer presence in LATAM Multi-country customer presence Cost savings: improved pricing/negotiations and cost control, improved cost visibility Use of low cost locations for labor arbitrage Identifying key process levers and establishing process excellence roadmap Rationalization of agencies and elimination of poorly performing agencies Ongoing or one-off Lean/Six Sigma process improvement Improved process and consistency of process Overall service performance Support for new country entry Use of partnerships and vendor management if required Other benefits achieved NelsonHall November 2015

9 Exhibit 3: Ability to meet client future requirements : Assessment criteria Assessment Category Suitability to meet future client needs Assessment Criteria Perceived suitability to meet future needs Overall performance Delivering streamlined processes to improve user experience Mechanisms in place to deliver client innovation Innovation and creativity Ability to be proactive (ideas for change) Ability to support the business through change Strength of partnership Vendor service culture Ability to challenge requests for service where appropriate Value for money Commercial terms and conditions Ability to make technology improvements Understanding wider talent management needs Support for new country entry This report covers one of the three separate NEAT market segment evaluations for MSP, which are: Overall Multi-Country Focus Talent Management Focus. For more information on these and other NEAT evaluations, please contact the NelsonHall relationship manager listed below. Sales Enquiries NelsonHall will be pleased to discuss how we can bring benefit to your organization. You can contact us via the following relationship manager: research.nelson-hall.com Guy Saunders at guy.saunders@nelson-hall.com Important Notice Copyright 2015 by NelsonHall. All rights reserved. This document has been licensed for distribution subject to the Terms & Conditions of the NelsonHall NEAT Agreement. NelsonHall exercises its best efforts in preparation of the information provided in this report and believes the information contained herein to be accurate. However, NelsonHall shall have no liability for any loss or expense that may result from incompleteness or inaccuracy of the information provided. NelsonHall November 2015