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NelsonHall’s 2014 HRO Predictions By Service Line

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Per NelsonHall’s blog of December 12, 2013 was a healthy year for HRO, with overall contract activity up ~37%. We now take a look at what we can expect in 2014 by HRO service line.

MPHRO

  • We predict the Global MPHRO market will grow at mid-single digits CAAGR through 2017
  • The Shared Service Transformation segment will continue to grow mainly as a result of contract expansions and renewals with existing clients, but the Multi-Country Standardization and Core Business Focus segments have the highest growth rate 
  • MPHRO offerings will continue to be structured around a core model with recruitment services as the most popular add-on as companies focus on adding back talent; in the near-medium term, demand will increase for learning, performance and compensation administration
  • Increased partnership activity, primarily for technology, with acquisitions focused on strengthening existing standalone HRO offerings (typically by vendors with $400m+ in HRO revenues)
  • Higher levels of multi-shoring from offshore vendors as clients demand onshore and nearshore support; Philippines and China will grow as preferred offshore locations
  • Workday use will increase as MPHRO providers such as Aon Hewitt market this platform as part of its offering
  • Proportion of mid-market clients will continue to grow making up the greater share of new contracts and MPHRO pipelines

Benefits

  • The global benefits administration market will grow at mid-high single digits CAAGR through 2017
  • Demand for DB and DC core services will primarily consist of second generation contracts and beyond; H&W administration as well as additional H&W services, specifically health insurance exchanges and health and wellness services, will grow as a result to control costs and comply with changing legislation
  • Vendors will increase headcount and add chat services from onshore centers to enhance delivery strategies
  • Multi-country benefits admin activity by MNCs will continue to grow moderately with providers that can leverage existing benefits brokerage and consultant relationships

Learning

  • Learning BPO (LBPO) market will grow at mid-high single digit CAAGR through 2017, led by the Government sector
  • Selective LBPO contracts continue to outpace full LBPO, led by content development, including the conversion of ILT to e-learning. However, full LBPO continues its resurgence as clients re-invest in learning but do not want to rebuild their internal learning organizations and instead seek greater value by outsourcing a larger share of their learning if not in its entirety
  • Client learning spend accelerates for job skill training and professional development for purposes of attraction, development and retention of talent
  • Vendors continue to strengthen and integrate their talent management service and technology offerings. SaaS talent management continues to accelerate combined with LBPO and across all HRO service lines
  • Clients budget for social learning and seek LBPO vendors for collaborative technology. Within two years, clients will also seek help to monitor and measure the effectiveness of their social learning programs
  • ILT continues to remain important but e-learning delivery continues to exceed ILT, including increased usage of VLT for geographically dispersed workforces and m-learning to access content for self-paced e-learning on smartphones and tablets

Payroll

  • Solid mid-single digit global growth, led by Latin America and Asia Pacific
  • Compliance is increasingly important to reduce risk by ensuring adherence to ever-changing tax laws and regulations, for both domestic and multi-country payroll
  • Multi-country payroll continues double-digit growth as MNCs look to standardize and consolidate onto one global platform with one vendor for consistency of process, technology and service for increased efficiency
  • Mid-market outsourcing continues high growth due to demand for platform-based payroll
  • Pricing is per payslip or per employee per month and is expected to decrease due to pricing pressures from payroll buyers
  • Where MPHRO services are provided, payroll will continue to be the initial footprint

RPO

  • RPO will continue to be the fastest growing HRO service, with mid-teen CAAGR through 2017
  • Vendor consolidation and partnerships continue to expand into new geographies to meet demand for global RPO
  • Talent shortages deepen resulting in increased employer branding and talent pool development. Vendors increasingly help their clients with a more robust on-boarding process that includes new hire and employee engagement, employee surveys, and retention strategies. More vendors perform internal hiring of employees for their customers and also play a larger role in recommending progression of employees
  • Blended RPO and MSP, including temporary hiring, increases to develop optimal workforce strategies
  • For deeper insight, please see NelsonHall’s Targeting RPO market analysis published soon

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