The Revolution in Recruitment Process Outsourcing | Article

recruiting employees - RPOAn area in outsourcing facing dramatic change in 2009 is recruitment process outsourcing (RPO). In fact, Kim Davis, senior vice president, Adecco RPO, refers to the change as “the RPO Revolution.”

There are two schools of thought regarding the growth of an outsourcing market: (a) the market (buyers) drives demand for services, or (b) service providers create demand. Davis says that RPO providers held firmly onto the thought for a long time that they knew best and could create demand for their offerings and services. But over the last nine to 12 months, the industry has seen a correction in that thought.

As a result the narrow definition of RPO service offerings has expanded. It now includes points-of-service or on-demand types of product offerings. Rather than delivering the complete, entire recruitment process, points-of-service or on-demand product offerings are the delivery of specific components of the recruitment model such as candidate sourcing and/or candidate sourcing and candidate screening…all the way through on-boarding and new-hire assimilation. Points-of-service and on-demand offerings also are offered on an event, or project-need, basis.

RPO is evolving

In creating demand for their services, providers have historically defined recruitment process outsourcing as delivering a full life-cycle solution (end-to-end services.) Although providers also delivered point solutions when clients demanded such, the industry historically has viewed these services as staffing augmentation and contracting rather than outsourcing.

However, in the last six months, Davis says there has been strong market demand for points-of-service solutions. Part of it is a result of the U.S. economic crisis, which has caused a slow-down in most companies’ hiring requirements. Thus, the RPO industry is not experiencing the same growth, especially for full life-cycle recruitment solutions, as it experienced at the start of 2008.

Revenue is up for a few RPO firms such as Adecco; but Davis says some major RPO providers are reducing their staff — some by as much as 50 percent. Others have merged, and some have already exited the space. Provider consolidation is occurring for several reasons:

  • The economic climate has resulted in fewer larger RPO opportunities
  • The RPO market is going global, and there are only a few providers today that are capable of delivering a global RPO solution
  • There are too many RPO players, given the overall market size

In addition, some buyers that purchased full life-cycle solutions had less-than-optimal experiences. The solutions were oversold, under-priced, and missed client expectations. As a result, buyers brought their recruitment process back in house and are hesitant or cautious to place all of their eggs in one basket. They are willing to dip their toes back into the water again — but typically only through a point-of-service solution or an on-demand basis.

Given this market change, providers had no choice but to modify offerings to what customers wish to purchase and the scope of services that meets their comfort level.

Davis believes it’s clear that the market is dictating a change to evolve RPO and expand the definition to include point solutions as outsourcing. As he says, the buyer in this model still defines the scope and desired outcomes and leaves control to the provider to determine how best to achieve the desired result. Voila outsourcing. “It’s no different from the original pure definition, other than size and scope,” he says.

Davis is of the opinion that RPO providers historically have often positioned themselves as transformation experts; however, they “have been slow to embrace change as it relates to their own business model.”

He serves on the RPO Alliance Board of Directors. RPO Alliance participants — who are RPO service providers — differ in opinion as to whether point-of-service solutions really qualify as outsourcing and “some have fought changing the definition of RPO, feeling it compromises the full life-cycle solution. We providers should stop fighting and embrace RPO in its diversity of models and multi-functional aspects.” That would include services for hiring needs on an event basis, not just a long-term, multi-year service agreement. In this model, services can be turned off and on as needs arise and can augment or be complimentary to a client’s existing resources on an “on-demand” model. This maximizes efficiency and results for the employer.

He adds that the RPO Alliance Board agrees that market demand has changed and industry leaders now need to look at redefining the space. “RPO providers limit the industry by trying to force a full life-cycle-only solution while the market is demanding much more,” states Davis.

Pricing has also evolved

The current economic environment also has driven a change in pricing and risk models in RPO. Buyers want to shift more risk to their providers. “Most prospects want to pay only for those services required at a particular time, causing pricing to become a pay-per-performance delivery model,” states Davis. Although this is a reflection of the current economic crisis, he predicts the model will “remain as a permanent fixture even after the market recovers.”

“The world is definitely more price sensitive,” he continues. New price points have caused providers to become more creative and to deploy technology in new, unique ways. Davis says this is resulting in better client outcomes while concurrently achieving a better candidate experience. Technology (and not just those applications designed for recruitment) is a key part of the answer. It enables the RPO providers to deliver a better, more predictable, repeatable, and cost-effective solution.

Offshoring RPO is changing, too

How can an RPO provider cost-effectively deliver services to a global company? Davis warns it’s very difficult to offshore RPO, given the culture, legal, and candidate-sourcing strategy differences from one country to another.

Some RPO firms today are attempting to accomplish a global RPO solution through strategic partnerships and alliances. “This, however, doesn’t work so well,” states Davis. “The delivery models are different. It’s like working with multiple providers. There is no true synergy.”

He believes the answer is for a provider to have its own in-country resources and knowledge around the world. “Therefore, only a few firms have the capability to deliver RPO on a global basis,” says Davis. He says this is the reason he sold his former RPO company (TalentTrack) to Adecco. “They operate in 70 countries and have 6,700 offices and 37,000 colleagues around the world. I realized they had the right philosophy — deliver in country by using the proven U.S. RPO delivery model as the blueprint.”

The silver lining

Davis says today’s global economic slow-down has dramatically reduced business hiring requirements, resulting in internal recruitment resources to diminish to extremely low levels. However, there is a silver lining for the RPO industry, a strong compelling need for businesses to cut costs. RPO effectively meets this challenge by providing a vehicle to reduce costs through the delivery of a recruitment solution on a variable, real-time basis.

When the economy improves and hiring requirements increase, he believes companies will have no choice but to look for effective, alternative methods to augment what is already in place. He predicts the winners will be the Tier-1 RPO providers that were there in these difficult times, that have the infrastructure and financial stability to operate in a manner where they can scale up or down and turn services off and on, based on immediate needs.

Lessons from the Outsourcing Journal:

  • The definition of recruitment process outsourcing (RPO) is expanding. In addition to the former definition of a full life-cycle solution (end-to-end process), RPO now includes points-of-service or on-demand offerings on a project-need basis.
  • The economic slow-down has resulted in fewer larger RPO opportunities. This has led to some providers exiting the space and many others merging.
  • The RPO market is going global, and there are only a few providers today that are capable of delivering a global RPO solution.
  • The RPO pricing model has changed to a pay-per-performance model, accommodating buyers that use RPO services on an as-needed basis.
  • RPO providers are deploying technology (and not just RPO applications) in new, unique ways. This enables providers to deliver a better, more predictable, repeatable, and cost-effective solution.


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