Topic: Multi-Process Human Resources Outsourcing (MPHRO) Annual Report 2013: The Sun is Rising in the East

Transcription

1 Topic: Multi-Process Human Resources Outsourcing (MPHRO) Annual Report 2013: The Sun is Rising in the East Human Resources Outsourcing (HRO) Annual Report: May 2013 Executive Summary

2 Our research offerings for global services Subscription information The full report is included in the following subscription(s) Human resources In addition to published research, a subscription may include analyst inquiry, data cuts, and other services If you want to learn whether your organization has a subscription agreement or request information on pricing and subscription options, please contact us: [email protected] Market Vista Global services tracking across functions, sourcing models, locations, and service providers industry tracking reports also available Banking, financial services, insurance Procurement Human resources PricePoint Healthcare Information technology Recruitment process Service provider Intelligence Finance & accounting Cloud Vista Global sourcing Transaction Intelligence Custom research capabilities Benchmarking Pricing, delivery model, skill portfolio Peer analysis Scope, sourcing models, locations Locations Cost, skills, sustainability, portfolio Tracking services Service providers, locations, risk Other Market intelligence, service provider capabilities, technologies 2

3 Background and scope of the research Background of the research The MPHRO market witnessed an uptake in new deal signings in 2012 compared to last two years, with increased momentum from emerging markets (especially Asia Pacific) and the mid-market in North America. With the SMAC (social media, mobile solutions, analytics, and cloud/platform/saas offerings) phenomenon making a mark in the MPHRO space, the high interest around third-party SaaS-based (especially Workday) solution turned into actual adoption. Buyers expectations continue to increase and they are increasingly seeking advanced analytics, better change management, and other value-added services in their solution mix. On the other side, service provider landscape continues to undergo major flux with newer entrants, provider exits, and a high M&A activity. In such a dynamic space, providers need to align their offerings and capabilities to up the buyer experience and satisfaction levels. In this research, we analyze the MPHRO market across various dimensions: Market overview and key regional trends Buyer adoption and solution trends Service provider landscape Outlook for 2013 The scope of analyses includes: HRO deals in which a minimum of three HR processes are included All MPHRO deals signed as of November 2012 The buyer employee size is 3,000 or more All geographies and industries 3

4 Everest Group s HRO research is based on multiple sources of proprietary information (page 1 of 2) 1 Everest Group s proprietary database of 475+ MPHRO deals (updated annually) The database tracks the following elements of each MPHRO deal Buyer details: Including industry, location, and signing region Deal details: Including TCV, ACV, contract term, start date, buyer employees served, and primary pricing structure Scope: Process coverage and geographic coverage (employees covered by each region) Technology ownership and maintenance Global sourcing Service providers covered in the analysis 2 Everest Group s proprietary database of operational capability of 20+ MPHRO service providers (updated annually) The database tracks the following capability elements for each service provider Major MPHRO clients and recent wins Overall MPHRO revenue, total clients, and buyer employees served Recent HRO-related developments (investments and partnerships) HRO delivery locations and level of offshoring Technology offerings within HRO HRO service suite Confidentiality: Everest Group takes its confidentiality pledge very seriously. Any information we collect that is contract specific will only be presented back to the industry in an aggregated fashion 4

5 Everest Group s HRO research is based on multiple sources of proprietary information (page 2 of 2) 3 Buyer surveys and interactions Global survey and one-on-one executive-level interviews to understand how organizations perceive performance of their MPHRO provider. The survey/interviews focused on different aspects of an outsourcing relationship, including: Key drivers for outsourcing MPHRO Contract details (including process scope, signing year, and duration) Overall performance of the service provider including key strengths and improvement areas Detailed assessment of service provider performance across different elements, such as: Performance against key HRO metrics Performance across various HR processes Performance during the implementation and transition phases Governance and relationship management The analyses in this report are presented at two levels: Overall market analysis that highlights the overall market composition/dynamics The current market trends based on deal activities up to November 2012 The sample size varies for different analyses based on the deal detail availability 5

6 Everest Group separates Multi-Process HRO (MPHRO) from Single-Process HRO (SPHRO) Strategy Judgment-intensive Transaction-intensive MPHRO Outsourcing of multiple HR processes to one service provider in an integrated way HR strategy Employee relations Regulatory and compliance Global mobility Performance & succession Learning Recruitment Compensation Benefits Payroll Employee data management HR information systems and reporting Employee contact center SPHRO Outsourcing of single standalone HR process Major SPHRO markets are: Payroll outsourcing Recruitment Process Outsourcing (RPO) Learning Services Outsourcing (LSO) Benefits Administration Outsourcing (BAO) This report focuses on MPHRO market For this study, we have included MPHRO deals in which A minimum of three HR processes are included The buyer employee size is 3,000 or more The analyses includes all deals signed as of November

7 Summary of key messages (page 1 of 3) Market overview and key regional trends The current MPHRO market shows interesting dichotomy reflected in the following: While the new deal volume is up compared to the last two years, the market grew at a modest pace of 2% in 2012 Though the developed markets (North America and Europe) are still underpenetrated, the emerging markets (especially Asia Pacific) are growing faster Similar trend is observed in the large market (>15,000 employees) vs. mid-market (3,000-15,000 employees) where mid-market is growing faster though there is ample head room for potential growth in the large market Scope expansion over the course of the relationship (either mid-way or during end-of-term) shows definitive buyer satisfaction, though deal terminations indicate that the MPHRO model continued to be refined to create alignment with buyers objectives In terms of key regional trends Mid-market organizations drove growth in North America, the largest market for MPHRO. Higher acceptance of standardized solution, enabled by increasingly mature platform- / SaaS-based MPHRO solution, is helping in making the business case work in mid-market Local and regional deals characterized EMEA activity. Beyond United Kingdom, Continental Europe and Middle East saw increased adoption compared to the past Notwithstanding unique challenges, MPHRO is fast finding acceptance in the emerging markets with local-headquartered buyers leading the way in recent times MPHRO market growth across geographies US$ billion North America EMEA Asia Pacific x% CAGR Latin America 7

8 Summary of key messages (page 2 of 3) Buyer adoption and solution trends Standardization, cost reduction, and access to better technology continue to remain critical drivers for MPHRO However, in mature geographies, buyers increasingly look for value-added services (such as mobility, analytics solutions, and chat features) The contract length for the deals signed in 2012 increased marginally. Buyers in emerging economies are cautious in their approach and sign shorter deals compared to their western counterparts Buyers approach HRO in a phased manner from a process scope perspective. Talent management components are often included in the second phase of the MPHRO arrangement The SMAC (social media, mobile solutions, analytics, and cloud/platform/saas offerings) phenomenon is making its mark in the MPHRO space. There is an increasing pull for these from the buyer community though current maturity of these components differ Beyond providers proprietary and ERP-based Business-Process-as-a- Service (BPaaS) solutions, the high interest around third-party SaaS-based (especially Workday) solutions is turning into actual adoption in MPHRO Within HR analytics, buyers want to move beyond basic reporting and increasingly seek advanced analytics (mainly descriptive analytics) in their solution mix Global sourcing is an integral part of MPHRO construct now. While India continues to be the location of choice, Southeast Asia and Latin America are emerging as other global sourcing destinations Average contract length in MPHRO deals Number of years Up to 2006 Average = 6 years Impact of SMAC phenomenon in MPHRO space Social media Mobility Cloud Analytic 8

9 Summary of key messages (page 3 of 3) Service provider landscape MPHRO space was a hotbed for mergers and acquisitions in The major theme behind such a high Merger and Service provider share distribution 2012; Number of active deals and active ACV in US$ billion Acquisition (M&A) activity was advance technology capability (for example, IBM Kenexa and Aon Hewitt OmniPoint) While ADP has the lion s share of the MPHRO market in terms of number of deals, the market is more competitive 100% = Others % % in terms of ACV 2% HP The mid-market is largely an open field for providers such 5% Xerox 2% 3% as ADP with Ceridian exiting the MPHRO space 3% 7% Capita Many Indian-heritage players made their mark in terms of 9% deal signings in , albeit in smaller-sized deals. This deal activity was primarily due to their success in Asia ADP 34% 11% Pacific 12% Service providers need to improve the integration across all HR processes, provide robust implementation / Accenture 6% 12% NorthgateArinso transition management, and also include value-added IBM 6% services in the offering to up the buyer experience and 9% 16% satisfaction levels Aon Hewitt 6% Active deals Active ACV 9

10 Table of contents (page 1 of 2) Topic Page no. Section I: Introduction and overview 6 Everest Group research methodology 7 MPHRO definition 10 Section II: Summary of key messages 12 Market overview and key regional trends 13 Buyer adoption and solution trends 14 Service provider landscape 15 Section III: Market overview and key regional trends 16 Summary 17 New deal activity 18 Market growth (overall and across regions) 19 Buyer adoption trend by geography 20 North America 21 EMEA 22 Asia Pacific 23 Section IV: Buyer adoption and solution trends 25 Summary 26 Key drivers for MPHRO 28 Increasing expectations from buyers 29 Analyses dimensions 30 Deal length 31 Industry 32 Process scope 33 10

11 Table of contents (page 2 of 2) Topic Page no. Section IV: Buyer adoption and solution trends (continued) Pricing structure 35 Global sourcing 36 Technology 39 Impact of SMAC 1 phenomenon 39 Adoption of SaaS-based solutions 40 Adoption of analytics 43 Section V: Service provider landscape 45 Summary 46 MPHRO service provider landscape 47 Service provider share analysis 49 Service provider market share by geography 51 Areas of improvements for service providers 52 Section VI: Outlook for Market overview and key regional trends 55 Buyer adoption and solution trends 56 Service provider landscape 57 Appendix 58 Glossary of terms 59 HRO research calendar 61 Additional research recommendations 62 1 Social media, Mobile solutions, Analytics, and Cloud/platform/SaaS offerings 11

12 This study offers three distinct chapters providing a deep dive into key aspects of the MPHRO market; below are four charts to illustrate the depth of the report MPHRO market growth across geographies US$ billion North America EMEA Asia Pacific Latin America Impact of SMAC phenomenon in MPHRO space Average breadth of new contracts vs. extensions in MPHRO deals ; Percentage Employee relations Regulatory Global mobility Performance & succession Learning Recruiting Compensation Benefits Payroll EDM HRIS Contact center New contracts Extensions Service provider market share distribution 2012; Number of active deals and active ACV in US$ billion 100% = Others Social media Mobility Service provider 8 Service provider 6 Service provider 6 Service provider 5 Cloud Analytic Service provider 4 Service provider 3 Service provider 2 Service provider 1 Active deals Active ACV Source: Everest Group (2013) 12

13 Market success More detailed analysis of the MPHRO service provider landscape including PEAK Matrix will be published in the near future, in upcoming reports Leaders Measures success achieved in the market Major Contenders Emerging Players Delivery capability Measures ability to deliver services successfully Captured through five subdimensions MPHRO service provider landscape Detailed analysis of service provider market shares Relative positioning of service providers on the Everest Group PEAK Matrix, and analyses along the various assessment dimensions Service provider trends and key investments made MPHRO service provider compendium Detailed profiles of 20+ service providers playing in the MPHRO space Four page profile on each MPHRO service provider Each profile provides a comprehensive picture of the provider s service suite, scale of operations, client portfolio, recent developments, delivery locations, and Everest Group s detailed assessment of its capabilities 13

14 HRO research calendar Topic Published Current Release date Multi-Country Payroll Outsourcing (MCPO) No Longer a Pipe Dream Multi-Country Payroll Outsourcing (MCPO) Service Provider Landscape and Capability Assessment Benefits Administration Outsourcing (BAO) Annual Report 2012 The Horse is Ready to Bolt Multi-Country Payroll Outsourcing (MCPO) Service Provider Profile Compendium Benefits Administration Outsourcing (BAO) Service Provider Landscape and Capability Assessment Benefits Administration Outsourcing (BAO) Service Provider Profile Compendium 2013 MPHRO Annual Report 2013: The Sun is Rising in the East MPHRO Service Provider Landscape with PEAK Matrix Assessment 2013 MPHRO Service Provider Profile Compendium 2013 Role of Analytics in HRO The Rise of Procurement and HR Collaboration Effectively Managing HR-spend Talent Management Outsourcing Will we Attain Nirvana? Learning Services Outsourcing (LSO) Annual Report 2013 Growth of Horizontal BPO in LATAM LSO Service Provider Landscape with PEAK Matrix Assessment 2013 LSO Service Provider Profile Compendium 2013 Benefits Administration Outsourcing (BAO) Annual Report 2013 Evaluation of BPaaS Solutions for FAO/PO/HRO October-2012 November-2012 December-2012 December-2012 February-2013 March-2013 April-2013 Q Q Q Q Q Q Q Q Q Q Q

15 Additional HRO research recommendations The following documents are recommended for additional insight into the topic covered in this report. The recommended documents provide either additional details on the topic or complementary content that may be of interest: 1. Benefits Administration Outsourcing (BAO) Service Provider Landscape and Capability Assessment (EGR R-0839); This report examines the dynamics of the global BAO service provider landscape and its impact on the BAO market. It gives an overview of the market and analyzes how the service providers differentiate themselves. Based on the comprehensive Everest Group PEAK Matrix, each of the 10 BAO service providers are segmented into Leaders, Major Contenders, and Emerging Players. Additionally, it provides key insights on the individual PEAK dimensions and implications for buyers and service providers 2. Multi-Country Payroll Outsourcing (MCPO) No Longer a Pipe Dream (EGR R-0755a); This report provides a comprehensive coverage of the MCPO market and analyzes it across various dimensions such as market overview, key business drivers, buyer adoption trends, solution characteristics, and service provider landscape 3. Is BPaaS the Model for You? (ERI R-0667); This research aims to compare Total Cost of Ownership (TCO) of Business-Process-asa-Service (BPaaS) solutions with the traditional BPO using a comprehensive financial model and creates a comprehensive framework to evaluate BPaaS sourcing 4. IBM's Acquisition of Kenexa Advent of Holistic Talent Management "Solution"? (EGR V-0745); This breaking viewpoint document analyses the recent acquisition announcement of Kenexa by IBM For more information on this and other researches published by Everest Group, please contact us: Rajesh Ranjan, Vice President: Arkadev Basak, Senior Analyst: Shruti Agrawal, Senior Analyst: HRO Team: Everest Group Two Galleria Tower Noel Road, Suite 2100 Dallas, TX [email protected] [email protected] [email protected] [email protected] Phone: [email protected] 15

16 Everest Group Leading clients from insight to action Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research, and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies, and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations, and private equity firms in six continents across all industry categories. For more information, please visit and research.everestgrp.com. Dallas (Corporate Headquarters) [email protected] Toronto [email protected] India / Middle East [email protected] New York [email protected] London [email protected] Stay connected Websites Blogs