Managed Service Programs (MSP)

NEAT EVALUATION FOR KELLYOCG: Managed Service Programs (MSP) Market Segment: Wider Talent Management Focus This document presents KellyOCG with the NelsonHall NEAT vendor evaluation for Managed Service Programs (MSP) in the Wider Talent Management Focus market segment. It contains the NEAT graph 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, Hudson, KellyOCG, Pontoon, Resource Solutions, TAPFIN, and Volt. NEAT Evaluation: MSP (Wider Talent Management Focus) Buy side organizations can access the NEAT tool here. NelsonHall 2014 1 September 2014

Wider Talent Management: Market Segment Summary NelsonHall has assessed the MSP value proposition of KellyOCG against the needs of Wider Talent Management-Focused clients. Wider Talent Management is the ability to support wider HR and talent needs to supplement MSP or contingent workforce management. Examples are RPO, labor research to support sourcing decisions, employment branding, transition and technology capability, analytics, workforce planning, as well as other HR outsourcing and HR or talent management consulting services. Wider Talent Management-Focused clients want to ensure they leverage market-wide insights including in talent demand and supply, in addition to overall MSP and RPO capability, to effectively design and manage the size and shape of its contingent workforce. NelsonHall identifies Wider Talent Management-Focused clients as buy-side organizations that require from their MSP supplier: Labor market analytical tools to support insights into workforce market dynamics for both contingent temporary and permanent staff, where the vendor has access to market-wide data as well as where data is consolidated across clients, and client and industry benchmarks are supported HR consulting capability to design and optimize workforce plans to best support business objectives and domain knowledge, i.e. knowledge of recruiting and supplier management processes. This business knowledge of MSP complements breadth of industry and job family proficiency Continuous improvement programs in place driving new developments. Examples of where KellyOCG has shown its ability to meet these criteria include: Labor market: Investment in talent supply chain management analytics for contingent labor, delivered through a portal. KellyOCG is investing $1m to aggregate and create benchmarks by location/industry/size. The Talent Supply Chain Analytics tool accesses historical data as well as predictive components and, where cycle times are long, it will indicate where additional suppliers are needed Depth and breadth of recruitment process domain knowledge combined with HR consulting capability: - Overall breadth of MSP process capability (direct and vendor neutral) combined with its RPO capability - Evidence of creating talent pools for contingent workers, e.g. an engineering client with an aging workforce needed to retain IP so it created a retiree pool. The retirees are processed through the payroll and are not set up as independent contractors. It has 536 retirees in the pool and 479 have undertaken engagements. The client requests the pool be used first to source, due to the retirees knowledge - Driving certifications of recruiters in sourcing technologies and methods, e.g. certifications in social recruiting and now also workforce planning, for customers partnering with HCI - Industry expertise delivery by KellyOCG includes: life sciences (pharma and biotech), natural resources (oil/gas and energy), high technology (hardware and software), consumer goods, finance and insurance, and automotive. NelsonHall 2014 2 November 2014

Continuous improvement programs in place driving new developments: Kelly Services has an Office of Innovation which evaluates employee suggestions to determine the impact to the business and drive improvements. One development that has transpired from this is its partnership with ODesk. NelsonHall 2014 3 November 2014

MSP: Market Summary Buy-Side Dynamics The top drivers of MSP are: Compliance/risk mitigation Cost or just a lack of visibility of contingent worker spend Having too many agencies to manage; there is a need to consolidate vendors/agencies and improve visibility of agency usage Facing an inability to attract new and specialized agencies Bringing consistency of process. The principal benefits derived from MSP services are: Reduction in contingent worker acquisition costs, by an average of ~6% Reduction in time-to-fill days, by an average of ~24% Improvement in hiring manager satisfaction, by ~10% Improvement in diversity and attrition Ability to tap into new pools of talent. Standalone MSP contracts average three years in length. It is not unusual during a contract to refine the sourcing model, so that what might start as a master vendor model or vendor neutral model can develop into a hybrid, partial direct model or partial statement of work model, depending on skillset and job functions in scope. Operationally, a direct model can be cheaper to manage as overheads of staffing offices which are highly distributed do not have to be passed onto clients. This is driving an increase in the uptake of the direct model. Most statement of work engagements are embedded or bolted onto a broader contract encompassing a master vendor or vendor neutral contract. Gainshare is relatively common for MSP: approximately 50% of vendors use gainshare clauses in contracts, which are typically structured around the gain realized if a worker rate or ratecard can be reduced. Market Size & Growth The global MSP market was valued at ~$63bn spend under management in 2013, with revenues of ~$1.25bn globally. It is forecast to grow at +16.3% per annum, to reach $134bn in 2018. North America is the largest MSP market, with ~53% revenue share, followed by Europe, Asia Pacific and Latin America. The emerging markets of Europe (outside of the U.K.), Asia Pacific and Latin America are expected to have the highest growth, of ~35%, primarily driven by contract expansion and the growth of multi-geography contract wins. The profile of MSP services, by share of spend under management, is: Vendor neutral services (61%) Master vendor services (22%) Statement of work (SOW) (9%) Direct MSP (8%). NelsonHall 2014 4 November 2014

Success Factors The critical success factors for MSP are: Partnership approach to support changing client requirements and unplanned peaks in volumes. Volumes presented during a sales cycle often are different from those that ensue. Sourcing approaches are often refined based on volumes and commercial arrangements Access to labor market information and analytics Sourcing capability, through access to talent pools and networks, to meet specific needs. Outlook Over the next few years: Continental Europe and emerging markets will become increasingly important and will account for 34% of the global MSP market Consistency of process across geographies and IP protection will become increasingly important drivers of MSP adoption SOW programs and the direct model will increase in importance and will account for 28% of the MSP market by SUM, by 2018. SOW programs will become more important in support of outcome-based contracts, with the direct model increasing in importance to the mid-market Large organizations (with <15k employees) will continue to dominate the market in 2018 Nearshore/offshore service delivery (typically Manila) will increase in importance to support sourcing, reporting and analytics activities, as well as contingent labor contact centers Global MSP contracts will increase in importance and will account for 10% of spend under management by 2018, with another 31% of the market taking the form of multi region or multi-country contracts Financial services and technology organizations will continue to be the industries most represented in the market, while oil and gas, construction and energy are expected to rise in significance Technologies (like Fieldglass) will adapt to provide improved coverage of local requirements and language capability, with vendors increasingly using proprietary IP to analyze performance and talent across organizations. Analytics and labor market analysis benchmarks are likely to be the largest investment areas of MSP and contingent outsourcing vendors. Furthermore, an ability to leverage social networks and freelancer management systems will be increasingly important 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 over the next three years; this is expected to increase as buyers look for expanded service scope and have more flexible buying patterns to meet wider workforce challenges in specific areas. NelsonHall 2014 5 November 2014

Vendor Analysis Summary for KellyOCG Overview KellyOCG primarily offers vendor neutral MSP models, though hybrid programs are also offered, to leverage a blended master vendor and vendor neutral sourcing strategy. KellyOCG has ~490 employees servicing 206 MSP programs, supporting 13 languages and delivering MSP services directly in 38 countries. It services additional countries through its staffing supplier network, to support a total of ~140 countries. Spend under management is greatest in the vendor neutral model, although KellyOCG has the greatest number of clients and the greatest number of workers managed using a master vendor model. Approximately 11% of its spend under management is for SOW MSP programs. Because of its heavy focus on vendor management, it has a mature supplier management offering which includes: Diversity and inclusion Supply chain development: mentoring suppliers on operations to drive service excellence Supply chain rationalization Partnering Regional advisory boards: collaborating with suppliers to share insights on industry trends and workforce legislation that could impact client delivery. In addition to its core MSP services, KellyOCG offers supplementary MSP services including readiness assessments, talent pool development (to connect organizations with retiree workforces), as well as identifying management services and payrolling. Key MSP delivery centers (with associated FTEs) include: Troy, U.S.: with 330 employees Budapest, Hungary: with 56 employees Telford, U.K.: with 30 employees Kuala Lumpur, Malaysia: with 60 employees Sao Paulo, Brazil: with ~20 employees. KellyOCG is vendor neutral in terms of technology, though it has developed a tool, 'Talent Supply Chain Analytics' (TSC Analytics), for supporting supply chain benchmarking for clients across the entire supply chain. KellyOCG's primary client base is mid to large enterprises in the Americas, Europe and Asia with >5k employees, which hire at least 300 contingent workers annually. KellyOCG's industry focus is across five key verticals: life sciences and biotechnology, high tech, natural resources and energy, consumer goods, and financial services. In January 2013, KellyOCG restructured its sales and operational teams into these verticals. Later in 2014 a sixth vertical, automotive, is planned. NelsonHall 2014 6 November 2014

In 2013, a total of 36 new contracts were awarded to KellyOCG, bringing an additional $1.1bn spend under management. Wins were representative across all strategically targeted verticals. Significant wins in 2013 included: An automotive manufacturing company with $150m SUM An energy company which was an existing customer (with $40m SUM) which expanded scope. Strengths Ability to scale to multiple geographies; capability is demonstrated through its servicing of 18 global MSP clients Footprint in Continental Europe as well as a presence in Russia. KellyOCG has one German origin MSP client and its RPO business has three French origin clients, 11 German origin clients and one Italian origin client Recognizable client names such as Nissan, BP Kraft and Kimberley-Clark Ability, within KellyOCG, to provide blended services with RPO 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. NelsonHall anticipates that SOW will be the highest growth offering within the MSP service line. As of June 2014, KellyOCG already has three clients which are currently implementing an SOW service; 12 other clients have indicated an appetite to contract with this service in 2014. 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 Like a number of other MSP vendors, KellyOCG faces challenges to provide management dashboards across permanent and contingent staff and processes; the technologies (ATS and VMS systems) are on different platforms. Strategic Direction KellyOCG plans to support organic growth primarily through developing its consulting capability and increasing its usage of consulting services across its clients, to support a broader service provision and contract expansion. Plans include: Increasingly targeting consultative engagements to assess opportunities for expanding recruitment services to include career transition and vendor management services Investing in training consulting teams as well as educating clients on the value of and approaches for developing strategic workforce plans, EVPs, recruiting strategies and performing tool assessments. In January 2014, Kelly announced that it is bringing a workforce planning course to Europe as part of Human Capital Institute (HCI). Today, NelsonHall 2014 7 November 2014

KellyOCG has five clients delivering workforce planning across the permanent and contingent workforces Further developing service models using a talent supply chain approach to support blended workforce requirements, for both permanent and contingent workforces Expanding geographically. Additional countries that are likely to be considered include Australia, New Zealand, Korea, Japan, Poland, Sweden, Spain, Netherlands, Luxemburg, Romania, and Columbia. Latin America is experiencing high growth and MSP services will soon be live in Costa Rica. Services are already live in Mexico and Brazil and its clients are expanding services into Chile and Peru KellyOCG is investing $1m into aggregating and creating benchmarks by location/industry/size, by developing its Talent Supply Chain Analytics tool, which accesses historical data as well as predictive components. Outlook NelsonHall expects that KellyOCG will see growth in MSP in key European markets where the labor regulations are conducive to the contingent labor model. Considerable growth in Latin America is also predicted. This is likely from client expansions and is visible from its current pipeline activity. KellyOCG's SOW activity is likely to increase, with 15% of clients adopting 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 experienced significant momentum, with >23% growth in MSP revenues in 2013, and continues to attract MSP clients which are not purely U.S. based organizations. It has successfully penetrated the U.K. and Continental European market, and is one of the few MSP vendors which can effectively service across Europe as well as having a large U.S. capability, with 70% of its MSP revenues deriving from the U.S. KellyOCG has the largest MSP market share in Continental Europe. With a dominance in the U.K., Switzerland, Belgium and Ireland. KellyOCG is well positioned to continue at the same growth levels, as client appetite (to engage a flexible workforce strategy to support greater business agility and speed to market) continues to be high. NelsonHall 2014 8 November 2014

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 2014 9 November 2014

Exhibit 2: Ability to deliver immediate benefit : Assessment criteria Assessment Category MSP Offerings MSP Delivery Customer Presence Benefits Assessment Criteria Vendor neutral offering Statement of work offering Direct sourcing offering 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 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 Reduced cost of recruitment Overall service performance Support for new country entry Use of partnerships and vendor management if required Other benefits achieved Pricing approach NelsonHall 2014 10 November 2014

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 Impact of benchmark and roadmap methodology Mechanisms in place to deliver client innovation Perceived innovation record Perceived business value Market momentum Perceived flexibility of approach Level of investment in supplier networks Investment in contingent staff recruitment function Investment in country expansion Investment in wider HR services and talent market insights Perception of support for larger market and high volume needs This report covers one out of six separate NEAT market segment evaluations for MSP, which are: Overall Direct Management Focus High Volume Focus Multi-Country Focus Vendor Management Focus Wider 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 2014 by NelsonHall. All rights reserved. Printed in the United Kingdom. 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 2014 11 November 2014