RPO Market Dynamics and Key Trends. September 25, 2012

RPO Market Dynamics and Key Trends September 25, 2012

Agenda Introduction RPO market Overview and key trends Relative assessment of ManpowerGroup s RPO capabilities Q&A Appendix Everest Group PEAK Matrix 2

Introduction Rajesh Ranjan leads the BPO research practice at Everest Group Email: rajesh.ranjan@everestgrp.com 3

We define RPO as transfer of ownership of all or part of recruitment processes or activities on an ongoing basis HR strategy Employee relations Regulatory and compliance Global mobility Performance management Learning Recruitment Compensation Benefits Payroll Employee data management HR information systems and reporting Employee contact center Strategy Judgment-intensive Transaction-intensive Recruitment Strategic consulting Sourcing Applicant tracking Screening Pre-employment testing Employment offers / selection management Background checking On-boarding Vendor management For this study, we include RPO deals in which: A minimum of four or more recruitment processes are included The outsourcing deal is active and is at least one year in deal length The deal scope should not be limited to temporary hires only The buyer employee size is 3,000 or more This study does not include out-tasking arrangements (typically handled by recruitment agencies, staffing companies, or executive search firms) that are managed on a project-by-project basis rather than through an ongoing long-term arrangement Source: Everest Group (2012) 4

Everest Group s RPO research is based on multiple sources of proprietary information 1 2 3 Proprietary Everest Group s database of over 600 RPO deals (updated annually) The database tracks the following elements of each RPO deal: Buyer details: Including industry, location, and signing region Deal details: Including TCV, ACV, term, start date, total hires managed, and primary pricing structure Scope: Process coverage and geographic coverage (at country-level) Technology ownership and maintenance Global sourcing Proprietary Everest Group s database of operational capability of over 20 RPO service providers (updated annually) The database tracks the following capability elements for each service provider: Major RPO clients and recent wins Overall RPO revenues, total clients, and RPO employees Recent RPO-related developments (investments and partnerships) RPO clients split by geography, industry, scope, and buyer size RPO hires split by geography, source of hires and type of hires RPO delivery locations and level of offshoring RPO service suite Ongoing buyer surveys and interactions Best practices around service delivery model in multi-country RPO In-depth data collection and interview exercise across 14 large and complex multi-country RPO arrangements across the globe The objective was to assess variations in MCRPO delivery models and to identify best practices towards achieving desired outcomes Ongoing interaction with buyers both as part of syndicated research relationships as well as custom research engagements Confidentiality: Everest Group takes its confidentiality pledge very seriously. Any contract-specific information collected is only presented back to the industry in an aggregated fashion 5

The RPO market continues to witness significant growth across the globe Growth of RPO market Active ACV in US$ billion RPO market share by geography US$ billion 2010-11 growth 100% = 1.4 1.4 1.1 46% Central and South America 41% Asia Pacific 10% 4% 27% EMEA 23% 63% 24% North America 2010 2011 Source: Everest Group (2012) 7

Impact delivered Beyond cost savings and efficiency, achieving business impact is increasingly important in RPO High Impact on efficiency Impact on effectiveness Impact on overall business Strategic impact Business impact Low Cost impact Time Target Outcome Process efficiency Technology cost avoidance Labor cost reduction Scalability Better quality of new hires New-hire attrition reduction Increased hiring manager satisfaction Predictive analytics Alignment of workforce plan to overall business strategy Employer of choice Optimal deployment of talent Table stakes Increasingly important More of aspiration currently Source: Everest Group (2012) 8

RPO markets display varying characteristics across developed and emerging markets Developed markets Emerging markets Market size/ maturity Key drivers Most mature RPO markets Over 85% of the current market Steady phase of good growth Moving beyond table stakes towards more strategic objectives Driven by locally headquartered companies Less mature than the developed markets Less than 15% of the current market Explosive growth (over a low base) Table stakes are key drivers, though they differ from developed markets Driven more by western headquartered than local companies; demand beginning to emerge from fast-growth local companies/sectors Key characteristics Lesser inclusion of core technology (ATS) with RPO though augmentation is often required Labor arbitrage is a value lever High adoption of multi-country RPO Access to affordable core technology is important Process-arbitrage is the value lever Leapfrogging to advanced solutions (e.g., outcome-based pricing models) 9

Significant end-of-term situations in the next three years represent both opportunity and risk Share of relationships up for renewal in RPO deals Number of deals 332 deals with 405,000 new hires per annum in scope are up for renewal in the next three years 18% 7% 100% 25% 24% 26% Up to 2011 2012 2013 2014 In or after 2015 Total Sample size: 477 active RPO deals signed between 2007 and September 2011 Source: Everest Group (2012) 10

Increasing collaboration between HR and procurement is likely to push the growth of blended RPO 1 Buyer response Percentage of buyers 100% = 113 Survey question Are you increasingly collaborating with the procurement organization for HR-related spend? May be 21% 44% Yes No 35% Sample size: 113 buyers responding to Everest Group/SSON survey on shared services/outsourcing Source: Everest Group (2012) Prevalence of blended RPO Percentage of deals/service providers Only permanent hires Blended RPO RPO deals 82% 18% 100% = 483 RPO service provider with meanigful experience 73% 27% 100% = 22 1 Inclusion of both permanent and contingent hiring with a single service provider Sample size: 483 RPO deals signed between 2007 and September 2011; 22 RPO service providers who participated in the survey Source: Everest Group (2012) 11

Average number of countries in a multi-country deal Multi-country RPO (MCRPO) is on accelerated growth path though limited service provider have large multi-country RPO experience Growth curve of new-deal activity in MCRPO Number of deals Service providers with most experience in large multi-country RPO deals Service provider share within multi-country RPO deals 1 10 48 8 Talent2 CDI&WorldConcert Kenexa Ochre House Hays Futurestep AMS 6 PeopleScout 31 Pinstripe 20 23 4 The RightThing KellyOCG ManpowerGroup Hudson RPO 2 Aon Hewitt Randstad Sourceright 0 0 5 10 15 20 25 2008 2009 2010 2011 Number of multi-country deals signed Source: Everest Group (2012) 12

M&As continue to redefine the RPO landscape, a trend likely to accelerate Key reasons for M&As Entry into RPO market Access to RPO technology Broaden RPO service suite Strengthen RPO capability 2006 2007 2008 2009 2010 2011 2012 13

25 th percentile Market success 75 th percentile Everest Group RPO PEAK Matrix 2012 Performance Experience Ability Knowledge ManpowerGroup is a Leader and Star Performer Everest Group Performance Experience Ability Knowledge (PEAK) Matrix for RPO Leader High 75 th percentile The RightThing Leaders ManpowerGroup Major Contender Emerging Player Star Performer Pinstripe PeopleScout Randstad Sourceright Major Contenders KellyOCG AMS Kenexa Seven Step RPO Talent2 Volt Momentum Futurestep Aon Hewitt Hudson RPO Hays Low Capita Resourcing Emerging Players Low Yoh CDI&WorldConcert Ochre House Allegis Group Services IBM Accenture 25 th percentile RPO delivery capability 1 (Scale, scope, technology, and delivery footprint) High 1 Service providers scored using Everest Group s proprietary scoring methodology given on page 34 Note: Please refer to Appendix for details on Everest Group s PEAK Matrix and Star Performer methodology Source: Everest Group (2012) 15

Delivery capability We assessed ManpowerGroup against top quartile performers across PEAK Matrix dimensions to identify areas of strengths as well as potential gaps to bridge PEAK Matrix Dimensions 1 Market success 2 Scale Z Top quartile performers metric (average) 3 Scope Y ManpowerGroup s metric Will help understand Manpower s strengths and gaps to bridge 4 Technology capability X Metric of other providers (average) 5 Delivery footprint 16

Market success: ManpowerGroup, along with other top quartile performers are increasing the gap against competition 1 ManpowerGroup Other top quartile performers (avg.) Others (avg.) Number of active deals Number of deals Number of new deals signed (2010-2011) Number of deals 163 29 ~6.5X 44 25 ~2X ~10X 16 3 ~5X Top quartile performers by market success 17

Delivery capability Scale: While ManpowerGroup is the largest RPO provider, it is yet to fully capture the benefits of economies of scale 2 ManpowerGroup Other top quartile performers (avg.) Others (avg.) Average RPO FTEs Number of FTEs 2245 Average number of hires/fte Number of hires 99 870 64 436 54 Top quartile performers by scale 18

Delivery capability Scope: Manpower lags behind in complex requirements such as blended RPO and multi-country RPO 3 ManpowerGroup Other top quartile performers (avg.) Others (avg.) Experience in blended RPO Number of deals Average country coverage in multi-country deals Number of countries 9 6 5 2 3 Top quartile performers by scope 19

Delivery capability Technology: Deals involving technology support comprise a relatively small portion of ManpowerGroup s portfolio 4 ManpowerGroup Other top quartile performers (avg.) Others (avg.) Percentage of deals involving technology maintenance Percentage of deals 49% 39% 33% Top quartile performers by technology 20

Delivery capability Delivery footprint: ManpowerGroup leads the market in terms of global footprint but is yet to leverage offshoring 5 ManpowerGroup Other top quartile performers (avg.) Others (avg.) Delivery presence in geographic regions 1 Number of regions 7 Quantum of offshoring Percentage of offshore FTEs 45% 5 10% 3 1% Top quartile performers by delivery footprint 1 Regions include North America, Latin America, UK, Continental Europe, China, S.E. Asia, and India 21

ManpowerGroup Additional perspectives from the buyer side 22

Opportunities and threats for ManpowerGroup Opportunities A globally integrated approach combined with local expertise to grab the fast growing multi-country RPO need A combined (RPO + MSP) solution to tap total talent acquisition opportunities Intentional deployment of talentism and industry/sector expertise to up the value proposition Underpenetrated and growing emerging markets Expansion into adjacent areas such as assessment (and potentially learning), especially in the emerging markets Threats Traditional HRO/BPO players increased focus and attention (both organic and inorganic) on the stand-alone RPO market Competition creating natural barrier of entry around sophisticated requirements (blended RPO, multi-country RPO, analytics) Commoditization of the traditional market (along with unrealistic expectation setting) Terminations/non-renewals and its impact on potential buyer sentiments Existing buyers desire to build internal recruitment capability 23

25 th percentile 75 th percentile Everest Group classifies the RPO service provider landscape based on its PEAK Matrix Performance Experience Ability Knowledge (PEAK) Matrix Everest Group Performance Experience Ability Knowledge (PEAK) Matrix for RPO High 75 th percentile Leaders Market success 2 Major Contenders 2 nd or 3 rd quartile performance across market success and capability Top quartile performance across market success and capability Low 4 th quartile performance across market success and capability Emerging Players Low 25 th percentile RPO delivery capability 1 (Scale, scope, technology, and delivery footprint) High 1 Service providers scored using Everest Group s proprietary scoring methodology given on page 20 2 Based on a combination of total number of RPO clients, recent successes, buyer satisfaction, and total number of hires managed Source: Everest Group (2012) 25

Market success Service providers are positioned on Everest Group PEAK Matrix based on evaluation of two key dimensions Measures success achieved in the market. Captured through a combination of total number of RPO clients, recent successes, buyer satisfaction, and total number of hires managed Major Contenders Emerging Players Leaders Delivery capability Measures ability to deliver services successfully. Captured through four sub-dimensions: Scale Scope Technology capability Delivery footprint Measures the scale of operations through: Overall company revenues Number of current RPO clients RPO FTEs Number of hires managed Measures the scope of services provided through: Breadth of RPO services Geographic scope Number of industries served Experience in blended RPO Measures the capability and investment in technology through: Overall technology capability Investments in developing RPO technology Recruitment-technology maintenance experience Usage experience of recruitment platforms Measures the delivery footprint and the global sourcing mix through: Delivery footprint across four regions Offshore delivery capability 26

Market success Additionally, Everest Group designates the Star Performers title to providers that demonstrate the strongest forward movement over time on the PEAK Matrix Methodology Everest Group selects Market Star Performers based on the relative year-on-year movement of each service provider, on the PEAK Matrix Year 1 Service provider Year 0 Capability In order to assess advancements on capability, we evaluate the performance of each service provider on PEAK Matrix across a number of parameters including: Annual growth in scale Increase in scope of services Expansion of delivery footprint Technology enhancements / investments In order to assess advancements on market success, we evaluate the performance of each of the service providers on PEAK Matrix across a number of parameters including: Increase in number of RPO clients Growth in recent successes Increase in number of hires managed The top-quartile performers on each of the identified parameters are identified and the Star Performer rating is awarded to the service providers with: The maximum number of top-quartile performances across all of the above parameters AND At least one area of top-quartile performance in both market success and capability advancement The Star Performers designation relates to year-on-year performance for a given service provider and does not reflect the overall market leadership positions. Those identified as the Star Performers may include Leaders, Major Contenders, or Emerging Players Market Star Performers 27

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