Topic: Multi-Process Human Resources Outsourcing
(MPHRO) – Annual Report 2013: The Sun is Rising in
the East
Human Resources Outsourcing (HRO)
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Global sourcing Cloud Vista
Human resources Recruitment process
Transaction Intelligence PricePoint Service provider
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
Everest Group’s HRO research is based on multiple sources of
proprietary information
(page 1 of 2)
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
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
1
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
Everest Group’s HRO research is based on multiple sources of
proprietary information
(page 2 of 2)
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
Everest Group separates Multi-Process HRO (MPHRO) from
Single-Process HRO (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) HR strategy
Employee data management Payroll
Benefits Compensation
Recruitment Learning
Employee contact center HR information systems and reporting
Global mobility Regulatory and compliance
Employee relations
Performance & succession
Strategy
Judgment-intensive Transaction-intensive
Outsourcing of multiple HR processes to one service provider in an integrated way
MPHRO SPHRO
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
Summary of key messages
(page 1 of 3)
Market overview and key regional trends
1.49 1.04 0.27 0.09 1.62 1.12 0.34 0.11 North America EMEA Asia Pacific Latin America
MPHRO market growth across geographies
US$ billion
2009 2012 x% CAGR
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
Summary of key messages
(page 2 of 3)
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
Buyer adoption and solution trends
Average contract length in MPHRO deals
Number of years 4 5 6 7 Up to 2006 2007 2008 2009 2010 2011 2012 Average = 6 years
Impact of SMAC phenomenon in MPHRO space
Cloud Analytic
Mobility
Summary of key messages
(page 3 of 3)
MPHRO space was a hotbed for mergers and acquisitions in 2012. The major theme behind such a high Merger and 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 in terms of ACV
The mid-market is largely an open field for providers such as ADP with Ceridian exiting the MPHRO space
Many Indian-heritage players made their mark in terms of deal signings in 2011-2012, albeit in smaller-sized deals. This deal activity was primarily due to their success in Asia Pacific
Service providers need to improve the integration across all HR processes, provide robust implementation /
transition management, and also include value-added services in the offering to “up” the buyer experience and
satisfaction levels 6% 16% 9% 12% 6% 12% 6% 11% 34% 9% 3% 3% 7% 5% 2% 2% 31% 26%
Active deals Active ACV
402 3.18
100% =
Service provider landscape
Service provider share distribution
2012; Number of active deals and active ACV in US$ billion
Table of contents
(page 1 of 2)
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
Table of contents
(page 2 of 2)
1 Social media, Mobile solutions, Analytics, and Cloud/platform/SaaS offerings Section IV: Buyer adoption and solution trends (continued)
– Pricing structure 35
– Global sourcing 36
– Technology 39
Impact of SMAC1phenomenon 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 2013 54
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
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
Impact of SMAC phenomenon in MPHRO space Service provider market share distribution
2012; Number of active deals and active ACV in US$ billion
Average breadth of new contracts vs. extensions in MPHRO deals
2011-2012; Percentage
2009 2012
North America EMEA Asia Pacific Latin America
Employee relations Regulatory Global mobility Performance & succession Learning Recruiting Compensation Benefits Payroll EDM HRIS Contact center New contracts Extensions
Active deals Active ACV 100% =
Service provider 1
Source: Everest Group (2013)
More detailed analysis of the MPHRO service provider
landscape including PEAK Matrix will be published in
the near future, in upcoming reports
Measures success achieved in the market
Measures ability to deliver services successfully Captured through five subdimensions
Emerging Players Leaders Major Contenders M a rk e t s uc c e s s Delivery capability
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
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
HRO research calendar
Topic Release date
November-2012 Multi-Country Payroll Outsourcing (MCPO) – Service Provider Landscape and Capability Assessment
December-2012 Multi-Country Payroll Outsourcing (MCPO) – Service Provider Profile Compendium
February-2013 Benefits Administration Outsourcing (BAO) – Service Provider Landscape and Capability Assessment
March-2013 Benefits Administration Outsourcing (BAO) – Service Provider Profile Compendium 2013
April-2013 MPHRO – Annual Report 2013: The Sun is Rising in the East
Q2-2013 MPHRO – Service Provider Landscape with PEAK Matrix Assessment 2013
October-2012 Multi-Country Payroll Outsourcing (MCPO) – No Longer a Pipe Dream
December-2012 Benefits Administration Outsourcing (BAO) Annual Report 2012 – The Horse is Ready to Bolt
Q2-2013 MPHRO – Service Provider Profile Compendium 2013
Q2-2013 Role of Analytics in HRO
Published Current
Q3-2013 The Rise of Procurement and HR Collaboration – Effectively Managing HR-spend
Q3-2013 Talent Management Outsourcing – Will we Attain Nirvana?
Q3-2013 Learning Services Outsourcing (LSO) – Annual Report 2013
Q3-2013 Growth of Horizontal BPO in LATAM
Q4-2013 LSO – Service Provider Landscape with PEAK Matrix Assessment 2013
Q4-2013 LSO – Service Provider Profile Compendium 2013
Q4-2013 Evaluation of BPaaS Solutions for FAO/PO/HRO
Additional HRO research recommendations
Phone: +1-214-451-3110 Email: [email protected]
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For more information on this and other researches published by Everest Group, please contact us:
Rajesh Ranjan, Vice President: [email protected]
Arkadev Basak, Senior Analyst: [email protected]
Shruti Agrawal, Senior Analyst: [email protected]
HRO Team: [email protected]
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-2013-3-R-0839); 2013. 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 GroupPEAK 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-2012-3-R-0755a); 2012. 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-2012-10-R-0667); 2012. This research aims to compare Total Cost of Ownership (TCO) of Business-Process-as-a-Service (BPaaS) solutions with the traditional BPO using a comprehensive financial model and creates a comprehensive framework to evaluate BPaaS sourcing
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