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Cloud & Multi-Process HR Services: Journey to the Cloud and Beyond

Market Analysis

by NelsonHall Analyst

published on Sep 06, 2018

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Report Overview:

NelsonHall's market analysis of the global cloud & multi-process HR services industry and trends consists of 103 pages.

Who is this Report for:

NelsonHall’s “Cloud & Multi-Process HR Services: Journey to the Cloud and Beyond” report is a comprehensive market assessment report designed for:

  • Sourcing managers investigating sourcing developments within cloud HR services and multi-process HR services
  • Vendor marketing, sales and business managers developing strategies to target service opportunities within cloud HR services and multi-process HR services
  • Financial analysts and investors specializing in the cloud HR services and multi-process HR services sectors.

Scope of this Report:

The report analyzes the global market for cloud HR services and multi-process HR services and addresses the following questions:

  • What are the top drivers for adoption of cloud HR services? Of multi-process HR services?
  • What are the benefits currently achieved by users of cloud HR services? Of multi-process HR services?
  • What factors are inhibiting user adoption of cloud HR services? Of multi-process HR services?
  • What is the average contract length for multi-process HR services, and how is this changing?
  • What pricing mechanisms are typically used within cloud HR services engagements?  Within multi-process HR services?
  • What is the market size and projected growth for the cloud HR services market overall, by service offering (i.e., advisory, implementation, and AMS support), and by cloud HCM platform (i.e., Workday services, SAP SuccessFactors services, Oracle HCM Cloud services, proprietary, and other)? For the multi-process HR services market overall, by geography, and on-premise v. cloud?
  • What is the profile of activity in the global multi-process HR services market by industry sector?
  • Who are the leading cloud HR services vendors globally, by service offering, and by cloud HCM platform? Leading multi-process HR services vendors globally and by geography? 
  • What combination of services is typically provided within cloud HR services contracts, and how is this changing? Within multi-process HR services contracts, and how is this changing? 
  • What is the current pattern of delivery location used for multi-process HR services, and how is this changing?
  • What new developments have occurred in the last year and how is this changing?
  • What are the challenges and success factors within cloud HR services? Within multi-process HR services?

Key Findings & Highlights:

The current cloud HR services market is organized around each of the leading cloud HCM platforms, including Workday, SAP SuccessFactors, and to a lesser extent Oracle HCM Cloud.

The main drivers of cloud HR services include a lack of time and resources to properly vet all the HCM system choices, followed by a need for support in making the business case and determining ROI, and complex legacy environments creating challenges for data migration and integrations.

The journey to the cloud for buy-side organizations typically follows a stair-step approach, commencing with either advisory services or implementation, followed by AMS support, and then HR BPaaS.

 The current multi-process HR services market is declining as revenues from on-premise deals erode due to the adoption of cloud-based HCM platforms, which have lower TCVs.

The primary benefits of outsourcing multi-process HR services includes the ability to leverage the vendor’s technical and functional knowledge and skills (especially with respect to operating on cloud HCM platforms), a reduced total cost of ownership, and process improvement.

The modern approach to buying multi-process HR services includes a narrow scope of HR BPS processes, typically workforce administration and payroll for ~3-5 years, with the underlying HCM technology platform 100% cloud-based.  Vendors operating in the multi-process HR services market place a heavy emphasis on incorporating digitalization, RPA, and machine learning to processes.

Table of contents:

Table of contents:

  • Preamble
  • Definition of Cloud HR Services
  • Definition of Multi-Process HR Services
  • 1. Changing Shape of Multi-Process HR Services
  • The current cloud HR services market is characterized by a stair-step purchasing approach, with either advisory or implementation services as the gateway offering…
  • … by 2022, the cloud HR services market will shift to a bundled purchasing approach
  • The current overall multi-process HR services market size is declining y/y due to lower TCVs for deals leveraging cloud HCM technology…
  • … however, the cloud-based multi-process HR services market will grow at a compounded average annual rate of 4.5% through 2022
  • 2. Customer Requirements
  • Industry issues affecting the cloud HR services market include HCM system choices, migration challenges, and ongoing system management
  • Industry Issues Affecting the Cloud HR Services Market
  • Support for cloud HR services typically follows a stair-step approach, commencing with either advisory services or implementation, followed by AMS support and then HR BPaaS
  • Drivers of cloud HR services include complex legacy environments, with outsourcing providing access to knowledgeable certified system consultants
  • Case Study: A communications company needed to establish a global HR infrastructure and HR programs to support growth and turned to Accenture… resulting in management consulting and project management for the deployment of Workday
  • Case Study: A financial services company was seeking process redesign support prior to its implementation of SAP SuccessFactors and turned to Deloitte… resulting in one integrated system for full visibility
  • Case Study: An energy company was seeking a full-scale HR transformation by implementing Workday and turned to Alight Solutions… resulting in the elimination of 30 HR and IT systems
  • Case Study: A financial management company was seeking to replace expensive heavily customized legacy HR systems and turned to DXC Technology… resulting in the deployment of Workday
  • Case Study: A non-profit was lacking the skills to manage Workday tickets and turned to Capgemini… resulting in the resolution of all incoming tickets within the SLAs
  • Case Study: A technology company was seeking post-deployment support of their Workday environment and turned to NGA HR… resulting in maximized functionality
  • Industry issues shaping the multi-process HR services market include cloud HCM systems, compliance, and globalization
  • Industry Issues Affecting the Multi-Process HR Services Market
  • Cloud-based platforms have fueled the evolution of the multi-process HR services market, which now focuses on modernizing processes by incorporating digitalization, RPA, and machine learning
  • The top driver for multi-process HR services is to gain access to vendor expertise, followed by cost reduction
  • Case Study: A financial services company was seeking a BPaaS partner with experience operating on Workday and turned to OSV… resulting in growth without added headcount
  • Case Study: A consumer products company was seeking to restructure HR as it was splitting into two organizations and turned to Conduent… resulting in strategically focused HR
  • Case Study: A security services company was merging with another company and turned to ADP for BPaaS support… resulting in the reduction of the HR organization
  • Cloud HR services tend to be priced separately by offering, even when services are bundled together
  • Per employee pricing dominates multi-process HR services contracts, with demand for consumption-based pricing increasing
  • Contract lengths for multi-process HR services continues to shorten, with the overall average at 4.8 years
  • 3. Market Size and Growth
  • The global cloud HR services market will reach $3.4bn by 2022, with a 5.7% CAAGR
  • For the next five years, majority of the cloud HR services market will focus on pre-deployment and deployment activities
  • Workday services lead the global cloud HR services market, accounting for ~27%
  • Combined, cloud HR services for Workday, SAP SuccessFactors, and Oracle HCM Cloud represent nearly 70% of the market
  • The global multi-process HR services market size is declining 5.8% y/y as revenues from legacy on-premise deals erode
  • The global multi-process HR services market is led by the U.S. which is also the largest region for next generation cloud-based multi-process HR services deals
  • Approximately 40% of the 2017 multi-process HR services market is leveraging cloud HCM platforms, with the inflection point at 2019
  • The manufacturing sector accounts for nearly one quarter of the market due to legacy contracts leveraging on-premise technology, with strong growth expected from financial services, technology, and pharmaceuticals
  • 4. Vendor Market Shares
  • ADP holds ~9% of the global cloud HR services market, providing support for its Workforce Now, Vantage HCM, and GlobalView platforms
  • Market leaders of the cloud HR advisory and implementation services market include the Big 4 consultancy firms
  • The cloud HR AMS services market is led by vendors with proprietary platforms
  • Several Workday services vendors such as Alight Solutions, OSV, and DXC Technology have also deployed Workday HCM internally
  • Leaders of the global SAP SuccessFactors services market tend to have longstanding relationships with SAP
  • ADP dominates the global cloud proprietary services market with ~46% market share
  • The multi-process HR services market is led by Alight Solutions, ADP and IBM, all who have made heavy investments in the cloud HR services market…
  • … followed by Capita, SD Worx, and NGA HR, who collectively hold ~15% market share
  • North America multi-process HR services market is led by Alight Solutions, whose clients leverage both on-premise and cloud HCM technologies…
  • …challenged by ADP, whose offering is exclusively provided on its proprietary cloud HCM platforms
  • European multi-process HR services market is led by Capita with ~17% market share, followed by SD Worx, IBM, and Alight Solutions
  • … with Indian-headquartered vendors including Neeyamo, and Infosys collectively generating $9m in multi-process HR services revenues in EMEA
  • U.K. multi-process HR services market is dominated by U.K.-based provider Capita, with nearly 25% market share…
  • … with Alight Solutions, Conduent, NGA HR, and DXC Technology also present
  • The APAC multi-process HR services market is led by IBM, followed by Alight Solutions, Excelity, and DXC Technology
  • The LATAM multi-process HR services market is led by U.S.-based vendors that serve multi-country contracts that include employee populations in LATAM
  • 5. Vendor Offerings
  • Cloud HR services focus on technology-oriented activities, while multi-process HR services focus on managed process support
  • Advisory services are typically leveraged by large market organizations and are often bundled with implementation services
  • Rapid deployment solutions are becoming a key part of the cloud HR services offering
  • While many vendors offer cloud HR services across different HCM platforms, there are vendors focused exclusively on one platform
  • Vendor strength for cloud HR services by platform tends to be high for one or two of the leading third-party cloud HCM platforms…
  • … with many vendors also providing cloud HR services for other third party platforms such as DXC Technology for Cornerstone OnDemand
  • Core multi-process HR services offerings focus on HR admin, payroll, benefits, recruiting and learning, with additional services extending to broader relocation and exit management offerings
  • There are three technology scenarios underlying multi-process HR services, with majority of vendors taking an agnostic platform approach
  • On the journey to the cloud, organizations typically transition through each platform evolution
  • Approximately 40% of the multi-process HR services market is operating in a cloud environment…
  • … with majority of vendor HR BPaaS capabilities strongest on Workday and SAP SuccessFactors
  • Some vendors offer proprietary portals as an alternative to cloud HCM system interfaces
  • End-to-end cloud and multi-process HR services deals are extremely rare; the core multi-process HR services bundle includes HR/workforce administration and payroll
  • The average number of services in scope within multi-process HR services contracts in 2017 was 2.7 processes
  • Vendor consolidation within the cloud HR services market has been increasingly active, with the emphasis on expanding Workday Services practices to new geographic markets
  • 6. Vendor Targeting
  • Targeting for cloud and multi-process HR services varies by each particular service, but overall tends to focus on mid & large companies
  • Vendors with agnostic platform approaches to the cloud HR services market tend to target multiple geographic regions…
  • … while platform specialists such as Zalaris and Kainos largely targeting one region
  • Cloud-based multi-process HR services contracts are primarily focused on a single country, mostly from the U.S., followed by continental Europe
  • Multi-process HR services continue to make strides with midmarket organizations due to affordability
  • All vendors’ client portfolios contain a combination of both mid and large market clients, with mid-market activity continuing to increase…
  • … the proportion of single country multi-process HR services contracts remained relatively unchanged over the last two years
  • While multi-process HR services vendors do not target by vertical, majority of vendor revenues tend to come from one to three verticals…
  • …with manufacturing and financial services as a top sectors across most vendors
  • 7. Delivery Capabilities
  • Successful delivery of cloud HR services is dependent on platform certified consultants
  • Emphasis on multi-shoring for multi-process HR services remains high to leverage lower-cost resources for non-complex transactions
  • Nearly all multi-process HR services vendors leverage offshoring…
  • … India remains the preferred offshore location…
  • … followed by the Philippines, and then China
  • Immediate delivery priorities for vendors are focused on omnichannel strategy development and expanding delivery networks
  • The application of RPA in cloud and multi-process HR services is increasing
  • Partnerships with end-to-end HCM platform vendors are essential for cloud HR services delivery
  • For multi-process HR services, partnerships exist for both service delivery and technology
  • 8. Vendor Challenges and Success Factors
  • The main inhibitor for cloud HR services is the desire to maintain the status quo and ride out previous technology investments
  • Inhibitors to Cloud HR Services
  • The assumption that operating on cloud HCM platforms is straightforward is the top inhibitor for the adoption of multiprocess HR services
  • Inhibitors to Multi-Process HR Services
  • The primary vendor challenge for cloud HR services is addressing customer apprehension about change resulting from the cloud transformation project
  • Challenges to Cloud HR Services
  • The negative connotation with legacy deals from the early 2000’s is a big hurdle for multi-process HR services vendors
  • Challenges to Multi-Process HR Services
  • The top vendor selection criteria for cloud HR services is expertise and proficiency with the desired cloud technology
  • Vendor Selection Criteria for Cloud HR Services
  • Ability to make the business case, demonstrate significant cost reduction, and create a collaborative environment are important vendor criteria for multi-process HR services
  • Vendor Selection Criteria for Multi-Process HR Services
  • Long-term success for cloud HR services vendors depends on geographic expansion
  • Critical Success Factors for Cloud HR Services
  • Establishing a value-add differentiator is critical for vendors operating in the multi-process HR services market
  • Critical Success Factors for Multi-Process HR Services
  • Appendix I: Vendors Researched for Analysis
  • Vendors Researched for Analysis – I
  • Vendors Researched for Analysis – II
  • Vendors Researched for Analysis – III

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