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8/3/2019 Shaping Up Shipping Out

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Shaping up orshipping out?It's difficult to identify an over-arching pattern in the post-recession

outsourcing landscape. Instead, several mini-trends help build a pictureof an industry tha t's quietly weathering the storm. Andy Allen repoits

Given the economic backdrop of the

post year, one could hardly expect

HR and RPO providers to be

reporting record-breaking deais. And it is fair

to say the mood in the industry has

; been restroined.

Yet scratch the surface of the HR

outsourcing business and things are far

from grim. Rather than any single

shattering mega-trend one can identify

severol micro-trends converging on th e

industry. It is these trends that HRO and

RPO (recruitmen t process outsourcing)

providers believe will help their market

emerge strongly from the current downturn.

However, on the big question of w hether

the overalldirection in the industry is

towards more outsou rcing or less it is hard

to be conclusive, Most outsource providers

report either brisk business, often com ing

from different directions to the usual, or a

slight lull in activity. The CIPD, too, is finding

it hard to see which way things are moving.

In its survey. HR outsourcing and the HR

function: threat or opportunity?, from

June this year il Found 29 per cent of

organisations were outsourcing ospects of

their HR activity. Over the long term, most

have been increo sing the ir use of HRO.

Over the past five years 20 per cent have

reported significant increases in HROactivity, wh ile ¿t̂ per cent have repo rted o

slight increase. Only 11 per cent have

reduced their reliance on HRO.

Yet it is hard to ide ntify w hether this

long-term movement is happening now.

"We're seeing things moving in both

directions. Some people are moving things

out o nd some are taking things back

in-house." soys Rebecca Cloke.

organisation and resourcing adviser at the

CIPD. Wha t seems certain is that there is a

move oway from big generolist deals

towards more specialist ones.

NOVEMBER 2009 www.peoplemanogement.co.uk/outsourci



PM G uide to Outsourcing Overv i

Anthon y Bruce, UK HR t ransformat ion

leader at PricewaterhouseCoopers says:

'There are fewer landmark de als in t h e H R O

space. Where the deals are taking place is in

th e RPO area, along s ide payrol l ."

A no table t r e n d , a c c o r d ing t o Bruc e , is

for c l ients ta In i t ia l ly cons ide r a wide range

of serv ices but when they f inal ly s ign the

d e a l , t o s e t t le fo r a m or e l im i t ed r a nge .

At the same t ime they may wel l choose

a n iche s upplier for c er ta in serv ices.

whereas previous ly they mig ht have

" b u n d l e d " all serv ices tog ethe r wi th a

s i n g le o n e .

"Qui te o f ten they wi l l ext rac t whole

processes and say th is provider can ' t do

rec ru i tme nt as wel l as a spec ia l is t can for

t h e s a m e pr ice, " he says.

It is some th ing o ther suppliers are seeing

on a gene r a l level. Stuart H e a r n , a par tne r a t

Plus HR , says: " W h at we a r e s ee ing f r om

la r ge c om p a n ies is i n t e r es t i n o u t s ou r c i ng

very part icular sen/ices. They have all read

about large outsou rc ing de als that haven' t

w o r k e d . So people are increas ingly seeking

ou t n iche suppliers ."

'There has definitely been

an increase in public-sectororganisations looking

at outsourcing'

Ia n D'Cunha, d i r ec t o r , p r oduc t

m a r ke t i ng a nd d eve l op m en t a t A DP ,

bel ieves the scarc i ty o f these "al l -

enc om p a s s ing m e ga de a ls " c an b e

p u t d o w n t o c l i e n t s r e t r e n c h in g

a n d c o n s i d e r in g t h e i r HR n e e d s

more careful ly.

" O r ga n i s a t i ons a r e exa m in ing wh a t

t h e i r p r i nc ip a l c h a ll enges a r e a nd

p r i o r i t i s i ng wh a t t h ey wa n t t o ou t s ou r c e .

T h ey 'r e m a k ing s u r e t h a t wo r ks we l l and

t h en t h ey ' r e t a k ing a no t h e r s t ep . T he ' l i f t

a nd s h i f t ' ap p r oa c h wa s n ' t l ook ing

c o r e f u ll y en ou gh a t t h e p r ob l em . " h e s ays .

A c c o r d ing t o P e t e r C la rke , m a na g ing

di rec tor . Xchanging HR Serv ices, HR

in i t ia t ives h ave b een p us h ed do wn t h e

c o r p o r o t e a g en da b y w ide r b us ines s

c onc e r ns i n t h e c u r r en t c l im a t e .

" Th e op p o r t un i t y t o m a ke a 2 0 t o 2 5

p e r c e n t c u t i n yo u r H R c o s t is n o t g e t t i n g

the same v is ib i l i ty a t board level os tok ing

ou t a la r ge c h unk o f c os t s om e wh er e e ls e

in the core process," he says.

T he go od news i s t h a t t h os e f ac t o r s

have had l i t t le im pact o n smal ler d eals,

a c c o r d ing t o C la rke . H e b e li eves m a ny

s m a ll e r dea l s ar e a b le t o go t h r ou gh

wi t h ou t t h i s k i nd o f b oa r d- leve l s c r u t i ny a

t h ey c a n p as s "un de r ne a t h s om e

c o r p o r a t e t hr es h o l d i n t e r m s o f c o s t " .

A s a n e xa mp le o f h ow p r om is ing -

l ook ing de a ls c a n b e q ua s h ed f r omabove. Clarke c i tes a po te nt ia l European

c l ie n t o f o n o u t s o u r c i n g p ro v id e r h e

wor ked f o r ea r i ie r t h i s year b e f o r e

j o i n i n g X c h a n g i n g .

T he c l i en t was on t h e p o in t o f s i gn ing a

dea l fo r a m u l t i- m i ll i on p oun d H R

t r a n s f o r m a ti o n p r o g r a m me w h e n t h e

b o a rd d e c i d e d o u t s o u r c i n g w o u l d be

ina p p r op r ia t e wh en i t was h a v ing t o m a k

c u t s e l s ewh er e .

A s H ea r n o f P l us H R p u t s i t ; " Fina nc ia l

d i r ec t o r s a r e a ll ove r t h es e dec i s i ons . "

T he c on s eq uenc e o f t h i s i s t h a t l ea d

t i me s o n s i g n i n g c o n t r a c ts a r e i n c r e a s i n g

- s om et h ing w ide l y a c knowl edged

a m o n g p ro v id e r s .

" Cl ie n t s r e c o g n i s e t h e n e e d t o c h a n g e .

b u t t h ey ' r e t a l k ing a b ou t i t f o r a

p r o l onge d p e r i od o f t im e . T her e a r e

p eop l e we ' ve been t a lk ing t o f o r 1 2 t o 1 8

m on t h s a nd i n t h a t t im e i t ' s b een t a ken

to board level ," says He arn.

T his need no t b e a b a d t h ing , a c c o r d in

t o R os a leen Blair, c h ie f exec u t ive o f f ic e r

a t A l exa nde r M a nn S o l u t i ons .

' W e 've f oun d t h a t b ec aus e CFOs ar e

g e t t i n g i n vo l ve d i t ' s e n a b li n g t h i n g s t o

happen In a s t ra te g ic way," she says. Th e

ver y fa c t t h a t s uc h i s sues a r e a t t r a c t i ng

a t t en t i on a t s en io r l eve l m ea ns i n h e r v ie

t h a t t h ey a r e li ke l y t o b e t r ea t ed w i t h

m o r e u r g e n c y .

So. wh a t o f A n t h on y Bruc e 's a s s e r t i on

t h a t R P O is f ar i ng b e t t e r t h a n HRO? This

backed up by many providers in that area

t h o u g h n o t w i th o u t q u a l if ic a t io n s .

] e r r y Co l li e r , i n t e r na t i on a l deve l op m en

d i r ec t o r a t K enexa . says: " Th e a m o u n t o

dea ls i s de f i n i t e l y up i n RPO. •

w w w . p e o p l e m a n a g e m e n t . c o . u k / o u t s o u r c i n g N O VEMBER 2



Guide to O utsourc ing Overv iew

" Th e s i ze o f th o s e d e a l s i s d o wn

b e c au s e c l i e n t s a r e d o i n g l e s s r e c r u i t i n g

a n d th e y ar e c e r ta i n l y ta ki n g a l o t l o n g e r

t o s i g n , b u t th e i n c r e as e i n n u m b e r s i s

b e i n g d r i ve n b y the f ac t th i s is a g o o d

t i m e to m a ke c h an g e s b e f o r e th e n e x t

s u r g e o f r e c r u i t in g . "

Very s o o n . Coll ier believes , we will see a

h u g e s u r g e i n d e m a n d f o r RPO services as

job markets p ick up and s taf f who bel ieve

th e y h o ve b e e n b a d l y t r e a te d d u r i n g th e

d o wn tu r n s e e k wo r k e ls e wh e r e .

A t A le xa n d e r M a n n S a lu t i o n s th e f a c u swi th m a n y c li e n ts h a s s w i t c h e d to i n te r n a l

r e c r u i t m e n t .

" Ou r t e a m h a s pr o b a b ly b e e n e n g a g e d

7 0 pe r c e n t i n m o v i n g p e o p le i n te r n a l l y in

c l i e n t o r g a n i s a t i o n s o ve r th e p a s t n i n e

mo nt hs in par t icu lar ," says Bloir.

" O n e o r g a n i s a t io n t h a t o v e r t h e p a s t

two t o th r e e ye a r s ha s h ad 1 1 to 1 2 p e r

c e n t i n te r n a l m o b i li ty , h a d 7 0 to 7 2 pe r

c e n t I n te r n a l m o b i l ity o ve r th e p as t year."

W h i le r e c o g n i s i n g th a t th i s t r e n d w i l l

p r o b a b ly d i s o p p e o r o s e c o n o m i c

c i r c u m s ta n c e s c h a n g e , B la ir i s c o n f i d e n t

th a t o th e r f a c to r s w i l l b o o s t th e R P O

m a r ke t as i t d o e s so . Not o nly is she

s e e i n g a f re s h d e m a n d f r o m n e w s e c to r s

s u c h OS p h o r m a c e u t i c a i s a n d h e a l thc a r e

b u t a ls o s i g n i fi c a n t e x t r a In te r e s t f r o m

p u b l i c - s e r to r o r g a n i s a t i o n s .

There is a wides pread bel ie f that c alls

far ef f ic iency in back-of f ice func t ions in S i r

P e te r Ge r s h o n 's r e v ie w h a ve i n c r e a s e d th e

p re s s u r e o n p u b li c -s e c to r b o d i e s t o

o u t s o u r c e a l lo r p a r t o f t he i r HR f u n c t i o n .

T h is p r e s s u re w i l l o n l y i n c r e o s e u n d e r a

C o n s e r vo t iv e g o v e r n m e n t , o u t s o u r c i n gproviders bel ieve,

James Ranks ley. bus iness development

d i r e c t o r a t N o r t h g a t e A r in s o , says: ' T h e r e

h as d e f i n i t e l y b e e n o n i n c r e o s e i n p u b l ic -

s e c t o r o r g o n i s a ti o n s g o i n g o u t a n d

looking at what is achievable in te rms

o f H R O .

" W i th th e Ge r s h o n r e p o r t , thi s h a s r e a ll y

c o m e to th e f a r e a n d I th i n k th a t th e r e is

g o i n g t o b e a l o t m o r e i n t e r e s t ."

R o n ksle y o d d s o n i m p o r to n t q u a li fi e r

th o u g h - h e s t re s s e s th a t o u ts o u r c i n g i s o n

e m o t i ve s u b je c t w i th i n th e p u b li c sector.

"Whether th is in teres t wi l l ac tual ly come

to a n y th i n g is a d i f fe r e n t s to r y ," he s a ys .

On e p o s s i ble a r e a o f g r o wth , ac c o r d i n g

ta S i m o n Co n s ta n c e , a p ar tn e r a t HR

t r a n s f o r m o t i o n o d v is e r O r i o n P a r tn e r s ,

c o u l d be f r o m lo c a l au th o r i t i e s l o o k i n g to

f o r m s h a r e d s e r v ic e c e n t r e s .

" Th r e e o f f o u r c o u n c i l s th a t b a n d

t o g e t h e r t o c r e a t e a s ha re d s e r vi c e c e n t r e

c a n c a m e u p q u i te q u i c k ly a g o i n s t th e

r e a l i s a t ia n th a t th i s i s a c o m p le x th i n g ta

do," he soys.

A t th a t p o i n t m a n y w i l l c o n s i d e r a s k i n ga n o u ts a u r c i n g p r av id e r t o r u n th e c e n t r e .

Cons tance s t resses t h o u g h , th a t th e r e is a

d i v i s io n b e twe e n c o u n c i l s th a t o p po s e

o u ts a u r c i n g a n d th o s e th a t b e li e ve i t is

e s s e n t i al t o l o o k o t th e o u ts o u r c i n g m a rke t

b e c au s e o f th e d i f fi c u l t i e s o f s e t t i n g u p

a n d m o i n ta i n i n g s h o r e d s e r vi c e c e n t r e s .

A n d r e w G r a n t, CEO, Eu rope, a t Talen t2,

b e li e ve s th e m a s s ive r e c r u i tm e n t s p e n d o f

p u bli c -s e c t o r o r g o n i s a t i o n s o m o u n t s t o o

h u g e o p p o r tu n i ty f ar R P O p ro v i d e r s . I t is

e o s y t o e x a g g e r a t e d o u b t s a b o u t t h e ir

w i ll in g n e s s to o u ts o u r c e , h e b e li e ve s . •

NOVEMBER 2009 w w w . p e o p l e m a n a g e m e n t . c o . u k / o u t s o u r c i n



PM Guide to Outsourcing Overvie

"I do n't think th at's the case any more.

They've been outsourcing IT and

infrastructure for 2 0 years." Grant adds.

At the other end of the scale but

equally w elcome, not only for RPO

providers b ut HRO providers as a who le, is

increased dem and from SMEs.

Stuart Hearn at Plus HR says: "There

has been a lot more interest from SMEs.

Perhaps some SMEs have been less hard-

hit than larger companies."

fat a small business, he points out,

outsourcing may be a good alternative to

hiring an in-house HR specialist. They may

be looking for a single individual to

combine the roles of an HR administrator.

HR manag er and HR director, for exam ple

- someone unlikely to be found In

the m arketplace.

"In the past we saw very small

companies wan ting a bit of HR help, butwe certainly never saw peaple wanting to

outsource the ir HR." says Hearn,

In addition, outsourcing give SMEs

greater access to technology that they

lack th e ca pital to purchase, says Ronksley

of N orthgateA rinso. "The SME market is

taking an ups wing." he says.

As the outsourcing markets mature other

developments occur, not just in the type of

clients or services but in th e qua lity of deals

being signed.

Dan Ferrandino. managing director at

Reed Con sulting, says clients aredeman ding providers that "are able to

deliver on the dream".

"They can't make empty promises like

some were doing 10 years," he says. Like

many o ther providers. Ferrandino

believes tha t th e drive to save costs

through outsourcing has played a major

role in sustaining the dem and for RPO

services. But he stresses tha t co st is

not the oniy factor behind the decision

to outsource.

Over the past year he has increasingly

seen HR departments pa rticipate in the

outsourcing agreements themselves.

"Outsourcing used to be completely

procurement led. Who t we're seeing now

is increasing HR involvement a nd HR is

neg otiatin g less on price and placing a

greater emphasis on quality."

Given that a frequent com plaint from

HR itself is tha t it has been all too o ften

on the outside looking in when

outsourcing deals have been signed, no

doub t ma ny will be keen to see if this

trend emerges more strongly over the

year ahead. •

Case study: outsourcing a t Em ap

When m edia group Emap came under

private equity ownership in 2 008 it

began looking to outsource HR to give

it the freedom to concentrate on

strategic issues.

As Emap performance director

Tracey Gray explains, the com pany 's

previous business model had led t o

disparate processes and procedures

being in place throughout the

business's autonomous units

In HR. for example, employees had

different appraisal forms depending

on what part of the business they

were in. The lack of consolidated

business information had a direct

impact o n day-to-day strategic

decision-making.

Emap was already buying an

in-house payroll solution from

NorthgateArinso ond initially began t o

consider outsourcing payroll with the

same provider. Later it looked at a

much more comprehensive

outsourcing arrangement, considering

a range of providers.

It eventually chose NorthgateArinso

to provide an end-to-en d service,

covering the entire em ployee lifecycle

from HR and payroll to flexible

benefits and recruitment.

"Having recently moved into private

equity ownership itself, it understood

Emap's challenges," says Gray-

Emap moved from having

internal generalist HR and payroll

teams t o a structure where specialist

heads of service manage d specific

HR streams, such as employee

relations, resourcing, reward and

learning and development.

NorthgateArinso took responsibility

for transactional and operational

elements of HR such as the Tupe

transfer of staff as well as setting up

an HR advice line.

Since the introduction of the

outsourcing arrangem ent, which took

nine months ta complete, HR has been

able to focus more on where the

business is going strotegically.

says Gray.

"Bringing on board NorthgateArinso

allowed us to transform HR,

establishing new structures and

procedures tha t support E map's core

values for accountability and high

performance," she concludes.

www,peoplemanagement.co.uk/outsourclng NOVEMBER 20



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