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Research & Insight

Research & Insight

2012 Top 10 Most Popular Articles and Papers

Four Trends That are Changing Human Resources Outsourcing

Outsourcing Center, Beth Ellyn Rosenthal, Senior Writer

Renewals are the big news in human resources outsourcing. Mohammed Haque, Vice President & Head of Enterprise Solutions Service practice at Genpact, estimates about $40 billion in contracts will come up for renewal from 2010-2012. How buyers go about renewals is about to change. Buyers are becoming “much more aggressive in going out and getting a look at what’s going on in the landscape,” says Rohail Khan, Executive Managing Director for ACS Total Benefits Outsourcing. He predicts the automatic sole-source renewal without a market check “is going the way of the dodo bird because organizations want more visibility to the bottom line. They want to know the value of the supplier’s contribution.” In the past, he says renewals were typically sole source. Buyers are also hiring more third-party advisors to help them out with their renewals, he adds. “Buyers are no longer willing to assume their suppliers are providing value.” The current economy accelerated this trend, he reports. “Buyers want to know if they are getting the right value for their money,” he explains. “Then the question becomes: ‘Are we with a partner that’s investing and innovative?’ Because today it’s not just about cost effectiveness.” Buyers, he says, want to be sure their suppliers “will be able to serve them as they move forward.” Shifting adoption patterns: taking a more focused approach With buyers more critically evaluating the benefits they stand to achieve from HR outsourcing, more are considering phased approaches that focus on one defined area at a time, according to Katrina Menzigian, Vice President, BPO Research, Everest Group. “These areas may be along individual process areas such as multi-country payroll, benefits, or recruitment or along categories of HR processes, transactional versus talent management,” states Menzigian. Several factors are driving this tighter focus, including the desire to match up-front investment with pay-back benefits, the need to feel confident in supplier capabilities, and the realities of a shifting supplier landscape. In the near future, it’s conceivable that some clients will have to balance a mix of suppliers until more suppliers are able to demonstrate a broader set of compelling capabilities, she says. The importance of global capabilities Don Schulman, General Manager, Finance and Administration for IBM, adds that buyers facing renewal are also now asking whether they want their work “split across multiple outsourcers” or instead “want to consolidate it all together within a partnership that enables standardization across multiple locations, processes, and clients — one that has a flexible model that’s global in nature.” Abid Ali, Head of BPO at Tata Consultancy Services, agrees global capabilities will become even more important in supplier selection. “While India has a significant advantage in delivering BPO services, customers are working with providers that have a global delivery footprint.” He says they are looking for “existing suppliers that can deliver in new markets for them rather than looking for new suppliers in those areas.” Sue Marks, CEO of Pinstripe, says buyers with operations in 50 countries, for example, will want to select a supplier with proven capabilities in all those regions. “It is extremely important to understand the local nuances, “she explains. Khan points out multinational companies are now asking for global benefits administration solutions. He says ACS is developing technology so that these companies can “tackle the big unknown chunk of spending they’re not aware of. We can help them understand their overall global spend.” Process convergence Process convergence is another trend. In the past, HR organizations viewed employee retirement and health/welfare selection decisions as separate transactions. “There weren’t a lot of connect points,” Khan points out. Today he says progressive HR managers are asking how they can make health and welfare decisions converge. He says both buyers and suppliers are trying to figure out how this will impact HR decisions going forward. Changes in benefits administration A fourth trend is the integration of what Khan calls “the natural adjacencies of benefits administration.” They are things like wellness, voluntary benefits, absence management, and on- and off-boarding. All have advantages for HR buyers. For example, a more efficient off-boarding process can ensure an organization doesn’t pay people longer than it should. And enterprises can minimize their healthcare costs with a wellness program to change behavior. “Buyers want to extend the definition of HR outsourcing” to include these things, he says. In this economy, employers will not be able to give employees as many benefits as they historically have offered. “Finding ways to help employees derive benefits will absolutely be part of the HRO requirement,” Khan continues. In addition, the current economic situation is forcing CEOs to have laser vision on their costs. HR spend is part of the selling, general, and administrative (SG&A) expenses. “Organizations are understanding the value of a wellness program. They can understand where absenteeism, which is a direct hit to their bottom line, is showing up. They will be forced to focus on solving these kinds of problems,” the ACS executive continues. Khan posits these types of buyer challenges “will force providers to focus on innovation and investment to expand the notion of benefits administration to the natural adjacencies.” The new preference for platforms Marks points out early HRO buyers outsourced “bits and pieces” of the process. Now, “buyers are looking for the complete end-to-end solution where the supplier can provide the process services as well as the platform.” Adds Khan, “It’s not going to be good enough just to be an administrator and a manager of transactions.” Haque says buyers want to outsource the complete HRO services package, which includes talent management, recruitment, learning, and development as long as the supplier has developed the core HR services like payroll, time and attendance, and workflow administration. “In the past, people outsourced the process or the platform. Now they want to outsource them together and have the supplier charge them on a per-employee per-year basis.” Khan predicts this convergence will force providers “to be clearer and more explicit about their investment strategies and how they translate innovation into real …

Companies Need Customer Expectation Management Because Successful Customers Create Profitable Businesses

Outsourcing Center, Beth Ellyn Rosenthal, Senior Writer

Competition is fueling customer churn and testing customer loyalty. Vijayalakshmi S. Paduvalli describes how customer expectation management helps companies extend market share and expand relationships in today’s challenging economy.

Manufacturing the Future

Katherine Swarts, Business Writer

Manufacturers are increasingly willing to spend money on outsourcing to save money. Old skill sets are disappearing, making the cost of finding the right talent a primary driver in choosing outsourcing.

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