Pontoon's recently reimagined Services Procurement contingent hiring solution enables a simplified, client-centric journey, with best practice at its core and underpinned by industry-leading technology.

In 2021, Pontoon conducted a thorough evaluation of its existing offering, other solutions in the market, and what current and future clients were looking for from Services Procurement. The result is a solution designed around three primary pillars: manage the process, facilitate the buy, and outsource the category. The approach is modular, offering the flexibility needed for a broad mix of clients, with each pillar increasing in level of complexity and value. Pontoon’s client engagements range from small and mid-sized to billion-dollar global programs.

Whereas a traditional MSP is a holistic program needing organizations to embrace an all-encompassing change in their contingent hiring processes, Services Procurement and Statement of Work (SOW) can be perceived as an evolutionary service offered as a part of an MSP.

Build a solid foundation on which to grow

The aim is to start with the foundational elements of Services Procurement rather than an immediate introduction of a high-level procurement service. By starting at a managed level, procurement professionals can focus on their core business priorities, day-to-day operations can continue uninterrupted, and adoption rates are driven up.

Pontoon believes that its approach would ensure success and establish a solid foundation to build steady, manageable, and successful change, irrespective of a company’s readiness and Services Procurement ambitions.

It has deployed its new approach with a U.S.-based healthcare client who started their Services Procurement journey on the first pillar: manage the process. When Pontoon first met the client to discuss MSP services leveraging the client’s existing ATS and VMS platforms, they stated their ambitions to embrace SOW services quickly. However, cognizant of the risks of moving too fast, Pontoon followed its tried-and-trusted approach in first establishing itself as the client’s MSP vendor. The focus was on delivering results (process efficiency, visibility, compliance, and cost-savings) and building trust (achieving a consistently high stakeholder satisfaction score) before helping them navigate Services Procurement/SOW. In the initial phase, Pontoon took on some of the tasks and activities in the ATS to ensure the contingent workforce records were compliant across both platforms. Within six months, Pontoon leveraged data and analytics to identify action items to optimize the existing supplier pool, ensuring selected suppliers were best suited to the client’s needs.

As the client’s MSP vendor, Pontoon was aware that internal stakeholders had brought in SOW resources (though SOW was out of program scope), and it was therefore likely there would be a degree of worker misclassification. Pontoon suggested it run a project with the client to analyze those resources, and subsequently identified 20% as incorrectly classified. Pontoon was comprehensive and thorough during the resulting discovery process. The rigor applied from understanding how an organization’s contingent labor can be hired, hidden, and allocated in different ways enabled Pontoon and the client to gain full visibility of all SOW resources, ensuring that both parties could collectively isolate the actual SOW versus contingent spend.

Invest the time and enjoy the discovery… 

Pontoon emphasizes that a successful Services Procurement/SOW program requires a methodical approach, bringing net new contracts under the program scope in the first instance and avoiding mid-contract changes. The client, with 105 SOWs in flight and 600 workers associated with them, would not be able to cope with the disruption of immediately changing all contractual terms. Similarly, the client’s existing VMS technology would require significant work to update this change in volume.

Pontoon walked the client through the Services Procurement/SOW Discovery, Data, and Recommendation steps, determining how it would implement Services Procurement/SOW and walking through every workflow step, establishing who would take responsibility for specific actions.

Pontoon identified that cost savings would be ~12% (which, projected forward, equated to $4m per year), essentially driven by the solution design team through rate card and invoicing compliance. The team determined what the client wanted from a rate card strategy perspective, backed it up with market data, and ensured it aligned the right strategy to the client’s brand perception.

Typically, these programs are supplier-funded. However, in this case, the client is financing the program, encouraging more suppliers to get on board, notably big consultancy firms. In such circumstances, this can be a harder sell to a leadership team. However, the business case created for the procurement team to present to their leaders showed the added value that Services Procurement/SOW could bring and how they would outweigh the cost of the client-funded expenses. In preparation for Services Procurement/ SOW, the tech stack for SOW was streamlined and aligned to the broader MSP – comprising the VMS and a few additional tools for onboarding and analytics.

…and the recommendations will reap rewards

The business case evolved into a complete policy change, with non-compliance post go-live resulting in withholding budget sign-off. By coincidence, the new policy gained executive approval on the third anniversary of the initial MSP launch.

Pontoon would like this client-funded model to be repeated to prospects, to drive better adoption rates and to better support client business objectives.

Pontoon is now working on the second pillar of the program's evolution. Using its accumulated data, it anticipates supporting the client with enhanced vendor selection and assessing bids so that the client can take on more strategic elements internally. It is clear that results have been delivered by taking a systematic, manageable approach, paving the way for further success.  

This is the second part of a 2-part blog presenting an analysis of key trends from NelsonHall's HR Technology & Services team. Here, Nikki Edwards looks at talent management services, including recruitment and learning services.

Recruitment Services

RPO and CWS/MSP vendors shone in 2020, as they supported their clients through their COVID-19 challenges, adding another dimension to an already-complex picture of Talent Acquisition (TA) trends. Vendors initially advised on digital tools to enable remote hiring and onboarding of talent, and broader services around working from home, keeping safe, and maintaining wellbeing.

This was immediately followed by vendor taskforces re-allocating resources to meet organizations’ urgent hiring ramp-ups (particularly in healthcare, pharmaceuticals, and food retail), while supporting clients who were scaling back or needed a different modus operandi. The year closed with recruitment vendors supporting their clients with mid- to long-term TA planning, as remote, and digital hiring and working were becoming the new business-as-usual.

Outlook

While organizations focus on essential hiring in 2021 amidst economic uncertainty, and realize they cannot single-handedly navigate the rapidly-evolving TA trends and ongoing pandemic challenges, they will reach out for third-party vendor support to help them strategize and execute plans to ensure they are hiring-fit and work-fit for the future. As vendors continue to evolve their TA solutions (services and tech/tools), they will also contribute to advancing key TA trends:

A total talent/holistic approach to hiring. NelsonHall research in 2020 showed 90% of major enterprises interviewed recognize the need to embrace a holistic approach to talent acquisition, comprising full-time/permanent, contingent, and internal talent (the latter having been somewhat neglected to date).

Organizations are considering using contingent workers (such as freelancers and gig workers) over full-time/permanent workers to avoid long-term employment costs. Vendors already offering total talent solutions are in a stronger position to support them, as they can vary the proportion of each delivery channel based on changing demands and relocate resources accordingly. With the need for worker compliance intensifying, giving organizations better visibility of data/insights concerning their internal talent is a growth area, closing the gap on this under-used talent pool.   

Building talent by upskilling and reskilling organizations’ workers. On the one hand, organizations will continue to seek talent which is in short supply (for example, digital skills, other niche STEM skills, some trades skills). Yet on the other, those organizations will face the reality of skillsets being augmented or replaced by automation, requiring affected workers to be upskilled or reskilled in new areas.

The ‘build’ element of the buy, borrow, build, and bot approach to TA has never been so important. The COVID-19 pandemic highlighted how organizations’ digital skills fell woefully short of what is required for 2021 and the need to address this (notably in areas from basic use of collaboration platforms to advanced cybersecurity). All recruitment vendors will play a role in skills development and embrace the opportunity uniquely according to their client base and their specific needs. 

Expansion of talent advisory services. With a more highly distributed and flexibly working workforce here to stay, RPO and CWS/MSP vendors will expand their portfolios to offer services around the future of work. This could encompass the evolution of employer branding/recruitment marketing services pivoted to focus on compelling EVP building – showcasing/storytelling values demonstrated by client organizations through the pandemic.

Opportunities abound in areas beyond TA, encompassing broader HR and organizational issues. Consulting will cover working with a fully-remote, globally spread workforce (covering topics such as tech/tools, employee communications, employee engagement, workforce wellbeing/safety (shielding), workplace redesign, to business continuity planning and building corporate resilience). 

Next-generation platforms/tools. In readiness for the new era of work, recruitment vendors will continue investing in data, AI-based predictive analytics (for example, the impact of automation on skills augmentation or replacement), intelligent automation (looking at workflow bottlenecks), niche human clouds, and learning tech (for reskilling/upskilling). Also, chatbots, voice-enabled tools, the use of AI for resume parsing, candidate matching, and assessments will continue apace.

Learning Services

In 2020, Learning Services vendors supported clients in digitalizing in-person training content for cloud-based peer-to-peer platform delivery in a bid to continue essential training (for employee onboarding and business compliance needs). Vendors saw increased demand for specific skills training, notably digital skills and reskilling for COVID-19-specific healthcare/pharmaceutical initiatives. Within a few months, vendors were supporting clients in choosing the most appropriate modalities for delivering learning digitally, whether via simple videos or animation, for example. Although there was some return to socially-distanced classroom training at the close of 2020, organizations recognized that digital learning solutions and updated skillset training were going to be the priority for 2021 as geographically-dispersed, remote workforces become the long-term norm.      

Outlook

Organizations will continue to have reduced training budget spend in 2021, until the economic situation improves in a COVID-19 vaccinated world. Vendors must maintain/increase support for their clients as they navigate further challenges, which may include the downsizing or removal of in-house learning teams, while ensuring their employees learn in a safe, collaborative environment, cognizant of pandemic-induced restrictions. Vendors will continue with their planned developments in services/learning tech/tools driven by existing PESTLE factors, yet also advance several learning trends:

Digital/virtual modalities for geographically-dispersed/remote workers. Priority will be on blended learning (with a significant proportion of VILT to enable most learning to take place remotely, with any return to in-person learning reserved for final skills demonstration/reinforcement), and eLearning. Learning will be in bite-sized chunks, embracing engaging modalities to drive self-service pull versus push learning. Such modalities will include video, animation, gamification, simulation, virtual reality (VR), augmented reality (AR), and alternate reality.

Curated content over created content. Learning Vendors will continue to curate content (where there is an abundance of ready-made material available), as organizations seek quick fixes to plug gaps in their content libraries. Created content will remain popular for niche/specialist content, where it is tailored for a specific organization or product, or for compliance reasons.

Learning tech/tools (including tech admin). Augmenting organizations’ existing LMS/LXPs/HCM learning modules with other platforms/tools to enhance the learning experience will expand vendors’ ecosystems. Platforms will include curated content, extended reality, EPSS, microlearning, rapid authoring, and alternate reality. Mobile learning, learner data/analytics, and learning systems admin will continue to grow in importance.   

Other services. Consulting services will expand to focus on digitalization of learning (including tech/tools advice as above), driving learner engagement, and reskilling/upskilling, based around the new organizational structures of the future. Administrative services may increasingly focus on third-party learning vendor management, for example, as procurement teams shed administrative duties, and traditional classroom support diminishes in importance. 

In Part 1 of this blog, Pete Tiliakos & Liz Rennie look at the key outsourcing trends around core HR functions, including cloud HR transformation, payroll, and benefits administration services.

My initial research into Impact of COVID-19 on Recruitment Services: Vendor Perspective (March 2020) highlighted several stand-out dilemmas that client organizations face. Notably, some organizations need to continue hiring and the only way to do so is by embracing technology (sometimes reluctantly), enabling them to carry out recruitment steps remotely. Also, some sectors were ramping up hiring (in an already-tight labor market), while other industries had ceased all hiring activity for the immediate term. Without the appropriate technology in place, how would organizations needing to furlough workers, and end contingent worker contracts in the short-term, be able to rehire them later?

I recently spoke to Cory Hansen, VP of MSP Operations at Allegis Global Solutions, to establish how they have been helping organizations navigate the COVID-19 pandemic. I was keen to focus on their expanded (via acquisition) healthcare vertical (representing 20% of their MSP clients), the cyclical nature of demand for hiring support of contingent workers in the sector, and their use of technology to track those workers.     

Allegis Global Solutions’ initial approach

Following initial focus on preserving employee health and safety, enabling its employees to work from home, then supporting its clients to do so too (by setting up its MSP COVID-19 taskforce), there was a wave of MSP clients that needed to either ramp-up or reduce their workers with immediate effect.

Within 12 hours, Allegis Global Solutions had set up a COVID-19 Operational Demand Center (with a Leader, a Recruitment Manager, a Supplier Manager, and three specialist recruiters) to control all the different client demands centrally. Being able to holistically see all recruiters and manage their movement, from program teams seeing declining recruitment to program teams seeing recruitment surges, was essential. More importantly, Allegis Global Solutions needed a grip on the movement of all contingent workers (whether those of their existing clients or new organizations reaching out for the first time for COVID-19 support).

Healthcare sector focus

The Healthcare vertical, with three clusters of clients with hiring needs at different times throughout the pandemic, would add another layer of complexity. Life Sciences (including Medical Devices, Pharmaceuticals, etc.) were ramping up hiring from the get-go. One client, manufacturing items to combat COVID-19, required an additional 250 resources, which Allegis Global Solutions delivered within three weeks, leveraging their existing supply chain. Another client needed to reach a target of delivering 100,000 medical devices to hospitals, requiring 100s of extra staff to manufacture those devices.  Also, clinical clients were ramping up, but with the complexity of worker reassignment. Allegis Global Solutions uses its proprietary platform to keep track of the workers. Information stored comprises key details of the worker; the supplier representing them; the manager they report/reported to; the client they are/were deployed with; and the original requisition number. This enables Allegis Global Solutions to successfully reassign workers to new jobs and track their location so they can be hired for a new assignment or rehired in their original position, should circumstances allow.

One client, providing occupational health services, was adapting its services to support the COVID-19 pandemic (temperature screening, nurse provision, etc.), requiring tracking of their redeployments.  Similarly, hospital network workers were being redeployed from areas (such as elective surgery, where demand has slumped) to ICU, which was desperate for additional resources.

Allegis Global Solutions’ proprietary technology proved its worth when it was asked by a State Governor’s office to stand up a hiring solution within 24 hours. The solution required 1000s of clinicians to be on the front line to save lives at existing and temporary hospital sites, as well as to skill nursing facilities throughout the State. Twelve hours later there was a verbal agreement in place to deliver MSP-type services for them (normally a 12-month engagement cycle) and deploy technology (a four-to-six-week process, usually). The project was to supply talent and create an outreach web portal for talent (possessing medical skillsets). The program could potentially have needed 12-15K extra hires as a worst-case scenario. Further complexity has come from the need to interface with and source talent from several existing hospital networks, which would normally be competing with each other. To date, there have been over 1000 clinicians hired and dozens of individuals reassigned from other jobs.

Allegis Global Solutions has been leveraging its ACUMEN Business Intelligence technology, too, where at the presentation layer, it can get access to as much data as it needs to see what is happening in real-time. It keeps track of all clients, what jobs are open, and what jobs have been cancelled. Also, it identifies where there is a surplus of workers who can be redeployed to another client with a spike in demand. It has been a useful repository of pay data, too. The already severe clinical staffing shortage has been exacerbated with COVID-19, as clinical workers have demanded a 30%-100% pandemic/ quarantine premium in addition to their basic pay to consider a temporary role. This data set from the pandemic will be invaluable for the future if similar events happen again.

Looking ahead

As per the NelsonHall March 2020 research, Allegis Global Solutions is one vendor advising its healthcare clients (especially frontline clinical workers) on the quickest way to leverage technology to aid remote hiring, especially for virtual interviewing (where face-to-face interviewing has been the norm), timely background screening/credentialing (including drug testing), and the virtual onboarding of workers. Allegis Global Solutions has helped clients to prioritize the components, from the most important to the least important, making concessions allowing contingent workers to start work, with checks following on later than would otherwise be permitted.

Into Q3 and beyond, essentially a lag of several months, the healthcare payer providers will see an uptick in work, resulting in a surge in demand for extra staff from Allegis Global Solutions, as end customers will make claims, require preventative testing, and the window for open enrollment looms (with expectations of enrollments being higher than ever before). This activity may be post-clinical ramp-up or sit alongside (depending on how long the COVID-19 pandemic remains at a “requiring social distancing” level). It will, however, add further data/tracking insights into the impact of the COVID-19 pandemic via its proprietary platform and ACUMEN. When the pandemic is over, it will be interesting to see the patterns of reassignment and rehire of workers throughout the period. 

Conclusion

For me, what the COVID-19 pandemic has highlighted is that organizations have left themselves exposed through their slow uptake of digital transformation (especially in the recruitment space). On a positive note, it has made everyone aware of the importance of technology in their daily lives (and how it has enabled organizations to have some level of business continuity). It has forced organizations to embrace digital transformation at an initial break-neck speed, such that there is now no turning back. The Allegis Global Solutions case study highlights that organizations cannot embrace digital transformation/ recruitment transformation single-handedly. Organizations must seek out a suitable partner who can guide them on their transformation journey.

As 2017 comes to a close, it’s an ideal time to reflect on key developments and innovations within HR services, and what to expect in 2018 by HR service line. This week, I’ll discuss specifics around two aspects of talent management (recruiting and learning), and next week I’ll explore payroll and benefits administration in more detail.

Overall, the level of 2017 HR services contract activity held steady at a healthy rate. The majority of new contract activity was from mid-market organizations (defined as those with between 500 and 15k employees), while in large organizations, the focus was more on renewals.

The use of intelligent technologies, including RPA, machine learning and advanced analytics, across all HR services domains increased throughout the year, and more importantly, established a strong foundation for further developments in 2018. 

Recruiting

Finding the right talent is one thing, but knowing how long they will stay at any company is an entirely different ballgame, especially since millennials have developed a reputation for frequently changing jobs. To help organizations create more certainty around hiring needs, in the last year, vendors have begun to launch predictive analytics to determine employee turnover.

Even with predictive tools in play, there is a constant shortage of skilled labor in the market, which will keep demand for recruiting services high. In 2018, the global RPO market is forecast to grow ~11%, and the size of the MSP market will increase ~8%.

However, one of the biggest challenges organizations face is managing their talent, with HR responsible for permanent employees, and procurement overseeing contingent workers. To bridge the gap, in 2018 there will be a rise in the number of providers offering blended total talent management services similar to Alexander Mann and RTM.

Learning

For good reason, so much of the market’s attention is on the recruiting function. While acquiring the right talent is critical for any organization’s success, training and developing the workforce is crucial for its longevity.

Over the last year, many vendors have spent a good portion of time encouraging buyers to view learning BPS as more than a transactional service, and one that can impact an organization’s bottom line simply by tying training to specific performance objectives.

This new approach has gained some traction in 2017, but there is still lots of progress to make over the next year. To ensure success, 2018 deals will be small, focusing on one or two learning functions that are closely tied to a specific performance objective, enabling the supplier to demonstrate that the desired business outcome was achieved. This confidence will likely result in expanded contract scopes in 2019 and beyond.

But the success of this approach depends heavily on analytics to establish whether the training delivered accomplished the stated goal. Therefore, 2018 developments will be focused on analytics. In addition, expect to see artificial intelligence and cognitive capabilities leveraged for adaptive learning.

Stay tuned for part two of this blog series next week. 

The gig economy has been a recent trending topic. While the concept of gig workers is nothing new, the attention being paid to it is, especially since this is an area whose growth has been facilitated by the digital marketplace. Here, I take a quick look at the challenges gig workers present for HR.

Gig workers present a challenge on several fronts, especially when it comes to managing the workforce, since contingent workers are often managed separately from permanent employees. In fact, ADP research finds that only ~40% of organizations report that HR owns all talent (i.e. permanent and contingent workers). And the use of contingent workers by organizations will only increase in the future, especially within certain occupations such as IT, media, and communications.

To support this growing trend, some MSP vendors are offering blended services with RPO, essentially moving towards a total talent management model. For example, Alexander Mann Solutions provides this blended model to an energy client, supporting 500 contingent workers and 3k permanent employees per annum.

But there are other concerns with the gig economy, specifically around the financial wellness of contingent workers. Over the last five years, benefits administration vendors have been launching initiatives focused on providing educational and decision-support tools to empower participants to make good financial decisions. More recent developments focus on holistic financial wellness offerings that extend beyond planning for retirement, and incorporate assistance around student loan debt management, budgeting for college, and saving for emergencies. Unfortunately, however, contingent workers do not typically receive employer-paid benefits.

Current estimates of the size of the gig economy vary greatly ranging from ~10% to ~35% of the U.S. workforce. And it is important to note that many gig workers also have traditional full-time jobs (i.e. hybrid gig workers), which will provide them access to employer benefits, including retirement plans and health insurance, as well as annual and sick leave. But does this represent enough gig workers to the point that HR shouldn’t be concerned? Findings from a recent study by Prudential suggest not.

The Prudential study, Gig Workers in America: Profiles, Mindsets and Financial Wellness, found that 16% of pure gig-only workers and 25% of hybrid gig workers have assets in an employer-sponsored retirement plan compared to 52% of permanent workers. And when it comes to some voluntary benefits such as disability insurance, the stats are even worse for contingent workers.

It’s clear that employers will continue to leverage gig workers. Therefore, HR suppliers need to first recognize the issues that this class of workers creates across the HR lifecycle, from hiring to managing talent, to assistance with financial security, and then create solutions that address the blind spots and gaps in order to optimize HR.

We interviewed MSP vendor clients in North America, Europe, and Asia Pacific, looking at ~50 specific MSP service criteria. We ascertained importance and satisfaction levels, plus a measure of future importance. Below is a small selection of potential benefits from MSP, showing the levels of importance and satisfaction for each.

MSP Client Importance & Satisfaction Levels

Areas where vendors are underperforming against client expectations include ability to apply Vendor Management System (VMS) technology to streamline and approve processes, improved compliance and risk management, benchmarking ability, and reduced cost of contingent workforce.

Improving compliance and risk mitigation and streamlining and improving processes via VMS technology are the two biggest challenges for MSP vendors, scoring #1 and #2 respectively in current and future importance. While client satisfaction is fairly good at 84% and 78%, it still falls -6% and -10% short of the importance placed on this performance measure (and -14% short in terms of future client importance on both criteria). Our latest research identifies compliance, including local/global compliance to minimize organizational risk (legal, financial, industry-specific, etc.) as one of the top client drivers for companies outsourcing MSP today, and this has become one of the biggest challenges for MSP vendors.

Comments from vendor clients regarding ability to apply VMS technology to streamline/improve processes included:

“We don't dictate the pace on technology, it is for the vendor to do that themselves. If they use technology to support it or not, I don't necessarily mind. As long as the service is being delivered, they could have a thousand people working behind the scenes, or they could be providing it through technology – I don't really mind. There is low visibility, but it is for the vendor to get the balance.”

“They have still got some further improvements to do.”

“We've heard (from the vendor) that when we bring the new Beeline tool in, our efficiency improves 40% because we're doing that much manual labor. So, they need to put up or shut up on that when we get the tool.”

“When we went live in 2010, we launched the VMS, coupled with the vendor as our MSP, so it was done collectively. I think it was important that we were very efficient in leveraging the VMS tool. I would put the onus on the tool, Fieldglass, as much as on the vendor.”

Comments regarding compliance included:

“That will become more important as we continue to get hit with regulatory stuff.”

“That is front and center… that's most important to us. Being in financial services, there is no way that cannot be rated 5 for the future importance.”

Vendors are exceeding client expectations by a healthy margin in the areas of reduced turnover rates; improved ability to support high volumes and better manage resourcing peaks & troughs; application of tools to track worker visibility/value; and reduced time to fill posts. Additional areas where clients gave high satisfaction marks to MSP vendors included:

• Strength of partnership: 90%
• Value for money: 88%
• Diversity management: 86%
• Day-to-day administration/management of contingent workforce: 86%.

In summary, client satisfaction with MSP across a range of service criteria is holding up well, and exceeding expectations well in some cases. However, as continuous improvement is important for clients outsourcing MSP services, it is wise not to become complacent in areas where they are doing well. In the meantime, focusing on those areas showing a significant delta between expectation and performance must be the priority for MSP vendors.

NelsonHall’s NEAT comparative vendor assessments look in detail at vendors’ ‘ability to deliver immediate benefit’ to their clients, and their ‘ability to meet future client requirements, and assist strategic sourcing managers in assessing vendor capability while cutting the time and cost associated with their sourcing projects.

The MSP NEAT shows how MSP vendors are positioned overall in terms of their ability to deliver MSP services, as well as within three distinct market segments (i.e. areas of focus designed to meet specific MSP requirements): these are Strategic Talent Sourcing Focus, Talent Analytics Focus and Multi-Country Focus. The NEAT online tool also enables buy-side organizations to input their own weightings and tailor the MSP dataset to their specific requirements across over 50 individual vendor evaluation criteria. In this way, sourcing managers can configure the NEAT evaluations in accordance with their own priorities and business requirements for service offerings, delivery capability, customer presence, benefits achieved, and other criteria. To find out more, contact Guy Saunders.

As H1 2017 comes to a close, it’s a good time to reflect on recent key activity and where the market is headed for the rest of the year and beyond. Here, I round up what’s trending now in payroll, benefits administration, recruitment, and learning.

Payroll

The most common theme in the payroll market is global and multi-country activity. NelsonHall estimates that multi-country payroll will grow 4x the rate of single-country payroll services through 2020, accounting for nearly a quarter of the market. Supporting this prediction were several new contract awards, including Neeyamo signing a contract with a global CPG company headquartered in the U.K., with payroll delivery extending to ~60 countries across six continents; and Ramco signing a multi-million dollar HCM and global payroll contract with Panasonic Group for ~20k employees across 21 entities.

In anticipation of the multi-country trend, some regional payroll providers made acquisitions to increase their presence and expand their geographic footprint. For example, Nordic-based Zalaris acquired Sumarum AG to expand its capabilities in Germany to better serve MNCs, and its geographic expansion plans aren’t ending there. Australia-based Ascender was also on a roll, acquiring NGA HR’s Australia and New Zealand payroll business, including NGA’s proprietary Preceda and PS Enterprise platforms, as well as Japan-based Workcloud; both acquisitions help to facilitate Ascender’s 2020 strategy to be a leader in payroll in the APAC region.

Benefits Administration

In benefits administration, the focus is centered on the employee experience, including education, integration, and connectivity. A recent survey by T. Rowe Price found that plan sponsors believe they have a duty to help prepare their employees for retirement, and that ~48% have a metric to track the retirement preparedness of employees. Currently, many DC administration vendors have implemented initiatives focused on education to ensure retirement readiness, and these programs are now expanding to address other financial issues such as budgeting and student loan debt management, with targeted messaging for participants based on their situation and goals. The objective will continue to push towards total financial wellness for participants throughout their lives.

To date, initiatives around integrating health and wealth have largely focused on offering retirement plan participants access to HSAs to help individuals prepare for healthcare expenses in retirement.  Since 2010, Fidelity’s HSA administration offering has experienced double-digit growth y/y, and over an 18 month period, Fidelity added ~65 new employer HSA clients, representing ~181k participants.

Empower Retirement is the latest plan administrator to add such an offering, partnering with Optum to launch The Empower Health Savings Account, which includes:

• Access to investment advice
• Health plan selection and enrollment
• Retirement plan management
• Inclusion of wellness programs and health savings account management.

The next phase of integrating health and wealth together will likely focus on the annual enrollment process, and include helping participants view the impact of their choices so better decisions about trade-offs can be made. 

Finally, a big part of the employee experience is providing access to benefits information on mobile devices and increasing functionality on mobile devices. In H1, Businessolver joined other vendors with the launch of its mobile app, MyChoice, which allows users to:

• View their current and future benefits elections for medical, dental, vision, voluntary, and supplemental plans
• View medical savings account balances
• Upload their medical ID cards and benefit documents for dependent verification
• Receive reminders via push-alerts
• Chat with a representative to answer general benefits questions.

Recruitment

In recruitment, the focus is shifting towards total workforce services by offering blended RPO and MSP services to organizations. Traditionally, services for the contingent workforce were offered separately from RPO. In anticipation of demand for total talent management services, supplier strategies vary, from adding MSP services to reorganizing portfolios (as was the case for TrueBlue, who transitioned its MSP business from Staff Management | SMX to PeopleScout).

Recruitment continues to be an area for strong growth, as evidenced by delivery expansions in H1, including:

• Allegis Global Solutions opening a recruitment services delivery center in central Birmingham, U.K.
• Alexander Mann Solutions opening an expanded global client service center in Shanghai
• Pontoon opening a new office in Bangalore
• Korn Ferry Futurestep opening a European talent delivery center in Manchester, U.K.

Learning

Not only is there increasing pressure to making training programs more effective, many corporate L&D departments are facing mounting pressure to demonstrate the impact of training on the bottom line. Many vendors have responded by organizing learning BPS offerings around specific performance improvement objectives, including:

• Strategic transformation
• Revenue and competency
• Compliance
• Cost reduction
• Learner engagement.

Learning developments will consequently be made depending on a vendor’s core performance objective focus. For example, with respect to the learner engagement objective, Raytheon Professional Services has built a number of electronic performance support systems (EPSS) for clients to improve performance and productivity by coaching employees through tasks.

There is so much hype around RPA and AI technology that RPO, MSP, and Total Talent vendors could get carried away in the race to launch the latest RPA or AI technology feature at the expense of delivering excellent customer service. 

Cielo has a more grounded approach to technology, suggesting that “Technology is only as valuable as the human experience it improves” and is reflected in its current technology strategy to improve customer service. Here I take a look at Cielo’s TalentCloud, which comprises 3 elements: SkyRecruit, SkyAnalytics and SkyLabs.

SkyRecruit

SkyRecruit is Cielo’s CRM platform. Launched in 2015, it has been rolled out to all its global clients and is Cielo’s operating engine, with the advantages of its employees being able to work with different clients using a common platform.  Having a choice of 13 modules, its two most popular modules are sourcing and events. Candidate nurturing is one module which Cielo sees as essential for building candidate engagement. Whilst there are core modules, the majority are taken up by clients once they are ready to do so according to their business needs. Cielo has recently enhanced SkyRecruit in several ways.

Firstly, Cielo has introduced a process bot for automated sourcing. This is particularly effective where there are high recruitment volumes, such as in retail. The process bot finds a high number of suitable candidates and uploads those details into SkyRecruit – a process now taking one minute compared to 15 minutes by a human. Candidates are automatically sent jobs of interest to them, candidates can engage with a recruiter and move through the hiring process. Whilst talent pools can then be created by the process bot, the real value comes in how the process bot organizes the talent pools and communicates with candidates on an ongoing basis through social media, etc. taking into consideration candidate preferences for working with certain client brands.

Secondly, Cielo has introduced Celia, its intelligent job search chat bot. Celia starts a conversation with a candidate to find out what type of job/location they are looking for, and then can pinpoint relevant jobs and answer questions from candidates. If the chat bot cannot answer a specific question, it then escalates the question to a human recruiter to engage in the conversation.  Celia learns the answer from the escalated question, so that next time the same question arises, Celia can answer it. Celia will never replace humans, but will answer an increasingly complex range of questions, releasing humans to focus on more value-add activities.   

Thirdly, Cielo has introduced assessment as part of the hiring process. This includes DISC profiling. As soon as a candidate applies for a role, a series of questions is asked (taking just over two minutes of candidate time), the answers to which build up a DISC profile of the candidate. Suitable jobs are sent to the candidate, based on their results. For example, a candidate with a “high D” profile would be advised of sales roles. For customer service roles, assessment focuses on emotion recognition to determine how well candidates can read its potential customers.

As SkyRecruit is mobile-enabled, candidates can apply via smartphone. A candidate can go through all stages of the hiring process in one transaction – be sent a job, apply and go through a series of assessment questions (DISC, emotion recognition, etc.) and be screened by an interviewer. Using voice tools gives a 75% application completion rate compared to a 30% completion rate when using video interviewing as part of its hiring process. Currently, feedback on performance is given to the candidate by the recruiter. The aim in the future is to automate the entire process.

SkyAnalytics

This is a relatively new addition to Cielo’s portfolio, and has already had a major enhancement – now built on the Birst platform – which is being rolled out to its clients. All client data, irrespective of its source, is visible on one platform.  But rather than Cielo presenting a plethora of graphs in a single view, bombarding the client with too much information, it has had a re-think. Cielo now only presents the key measures that are important to a client, yet has built more depth into the analytics, so that a client can drill down into those key measures. The data shows where the hiring manager and recruiter need to focus their efforts to enhance hiring performance.

SkyLabs

SkyLabs is the formalization of Cielo’s researching and testing of new tools and technologies in the areas of RPA, AI, natural language processing, etc. The features already discussed have come via SkyLabs. Cielo is learning as it innovates and monitors items which impact progress. For example, RPA requires stable technology systems and volume process repetition, so if a client decides to change its ATS after 3 months, it has an impact on the progress of RPA. Cielo is also looking at micro-automations, where simple process steps are automated. Cielo’s employees are at the heart of this automation. The process bot can learn from videos of Cielo’s employees completing talent acquisition tasks, such as uploading a file. Processes that can be replaced by automation free up Cielo’s employees to undertake roles that add more value to its clients. Cielo has also made some progress in the use of voice interfaces with the Amazon Echo. Cielo can ask Alexa a range of questions about the talent acquisition process, such as the number of interviews booked on a particular day of the week.

Cielo’s commitment to continuous improvement is demonstrated by sharing its Cielo TalentCloud three-year roadmap with clients. This allows clients to see other interesting developments scheduled, and while Cielo continues to focus on improving processes, candidate experience, hiring manager experience, etc., clients can be assured that Cielo will maintain its focus on providing a personal touch.

Following several years of growth, the HR outsourcing market continues to ride the crest of the wave, and is gearing up for a prosperous 2017 following investments across all service lines. We will shortly be publishing an in-depth blog on HRO predictions for 2017, but first I take a quick look at what happened in 2016 to lay the foundations for things to come, specifically in payroll services, benefits administration, RPO, learning services, and cloud-based HR.

Payroll Services: HCM Integration & Multi-Country Expansion

Highlights in the payroll market in 2016 included an emphasis on integrating payroll systems with HCM software, which is especially important when it comes to multi-country payroll, an area targeted for huge growth over the next three years. In anticipation of multi-country demand, vendors have continued to expand their payroll capabilities, with ADP’s payroll services now extending to ~111 countries, and NGA HR launching a payroll offering across 33 LATAM countries.

Other 2016 milestones reached in payroll services include Paychex exceeding 1m worksite employees serviced across its payroll and PEO offerings, and OneSource Virtual (OSV) exceeding 500 clients, while maintaining a client satisfaction rating of 98%.

Benefits Administration: Private Exchange Momentum

Private exchanges continued to gain momentum over the last year. Fidelity investments expanded its PIX, focused on SMBs, beyond Massachusetts and New York to Colorado and California, and Morneau Shepell launched a retiree PIX in Canada, adding 3M Canada as its first client. Vendor priorities have been focused on integrating voluntary benefits into the exchanges as well as within traditional H&W administration offerings.

Private exchanges are growing at 6% CAAGR through 2020, and Willis Towers Watson, with ~20% market share, is gearing up to capitalize on the growth in 2017 after recently expanding its delivery center in Arizona, to which it will continue to add headcount over the next year.  

With respect to DC administration, Fidelity enjoyed another successful year, adding $65bn in new DC plan sales across ~1.3k employer clients in H1 alone. In addition, as of mid-year, Fidelity already had another $14bn in commitments for 2017.

Benefits administration acquisitions really heated up in H2, with Mercer making some key purchases, including Pillar Administration in Australia (which now makes it the largest superannuation provider in the country) and Thomsons Online Benefits, adding its global cloud-based benefits technology platform, Darwin.

RPO: M&A Hotspot

There were ~25 HRO acquisitions in 2016, ~40% of which were focused on RPO. Many of the acquisitions focused on expanding or strengthening geographic capabilities, especially for Randstad who acquired Penna in the U.K., Obiettivo in Italy, Careo Group in Japan, and BMC in the Netherlands.  

And, while the U.S. and the U.K. markets are the most active for RPO, emerging markets in APAC and LATAM have high growth potential over the next few years.  

Learning Services: Shift to Performance Targeting

The most significant change in the learning services market is the shift away from a transactional approach that pushes a catalog of service offerings towards an approach that leads with targeting performance objectives. On the backend, automation and analytics are key components of the performance-centric approach.  

Trending themes by learning function include the following:

• Content: content curation services
• Delivery: digital modalities
• Administration: RPA
• Technology: cloud-based Learning Management Systems.

Cloud-based HR Services: Focus on Rapid Deployment

The cloud-based HR services market, including cloud consulting, implementation, AMS support, and HR BPaaS, took 2016 by storm. Key priorities were focused on launching guided implementation tools for rapid deployments, for example:

• NGA HR launched NGA FastTrack to rapidly deploy SAP SuccessFactors
• Ceridian launched Dayforce Activate, which shortens the implementation lifecycle to provide clients with a faster ROI
• Neeyamo launched Rapid Deployment for SAP SuccessFactors, which allows go-live to be achieved in 21 days
• Aon Hewitt launched a rapid deployment offering for mid-market organizations (1.5k-7k employees) who are migrating to Workday from a payroll service bureau provider, activating Workday core HR, U.S. absence, U.S. benefits, and U.S. payroll, including payroll settlement, check print, garnishment admin, and tax filing services in ~5 months.

Other initiatives were focused on ramping up delivery capabilities, with Zalaris opening a COE for SAP SuccessFactors in the Nordics, OSV opening a center in Ireland to provide support around Workday, and Neeyamo launching a SuccessFactors Employee Central service center.

All cloud-based platform providers, including SAP SuccessFactors, Workday, Oracle, ADP, Ceridian, and Ultimate have robust pipelines and roadmaps for continued innovation, making this one of the key areas to follow in 2017.

Mid-market adoption of Managed Service Provider (MSP) programs is seeing high growth driven by the increasing need to manage costs, along with greater uptake of the direct hire MSP model (which is more common in mid-market organizations where there is a limited need to use specialist agencies). Here I take a brief look at the launch of a new mid-market MSP offering from Allegis Global Solutions (AGS).

Growth of the Mid-Market

In the direct hire MSP model, the vendor places workers through specialized teams using the client’s brand, with a typical target of achieving ~85% or more direct hires before approaching specialist agencies.

The mid-market (500 – 15,000 employees) grew from 30% market share in 2013 to 37% in 2014, with the small market (<500 employees) growing from 4% in 2013 to 6% in 2014. During this time the large market decreased from 66% to 57% market share.

The top MSP mid-market outsourcing drivers include:

• The need for cost visibility and cost reduction
• Compliance with, and adherence to, increasingly complex regulations
• Quality of hire/better talent with the right cultural fit.  

AGS’ SIGMA MSP launch

AGS launched SIGMA MSP, a standalone contingent workforce management solution, in July 2016.  SIGMA was designed to support companies that traditionally rely on master-supplier relationships for candidate fulfillment, and provides:

• Requisition fulfillment via dedicated supply chain resources
• A preconfigured technology platform to streamline the acquisition, on-boarding, payment, and off-boarding of contingent workers
• Business intelligence via data and reporting through ACUMEN, AGS’ analytics platform, which includes identifying non-employee worker trends
• Faster implementation time than traditional MSP models, due to preselected vendors and the preconfigured technology platform. Estimated deployment is 8-10 weeks depending on complexity, ~50% less time than a standard enterprise solution.

The program is targeted at small to mid-market companies that spend between $5m and $50m annually on contract labor services. As a product, SIGMA represents a deviation from AGS’ traditional offering. It combines the benefits of an MSP program with a vendor-on-premise partner or a preferred supplier.

SIGMA is targeted at companies that are:

• Looking for an MSP solution that can be implemented quickly, but still provides the fundamental MSP service benefits, including increased visibility and control over their contingent workforce resources, spend and compliance
• Not requiring an expansive supply base
• Not requiring overly complex vendor management system integrations or configurations, and are using less IT resources.

NelsonHall forecasts that the global MSP market will reach ~$4.6bn by year-end 2016, by when I expect the mid-market to have grown to ~40% market share, equating to $1.85bn in revenue.

NelsonHall has just commenced its 2016 global MSP project, and a comprehensive market analysis report, along with detailed vendor profiles and a NEAT vendor evaluation will be published in early Q1 2017.

As earnings are released, it’s a good time to reflect on HR outsourcing trends by key service line. Here’s a brief round-up of market activity across payroll, RPO, and learning services in H1 2016.

Payroll

Payroll activity has been bustling in Europe YTD, with a strong emphasis on ramping up capabilities. SD Worx made two acquisitions to accelerate its growth across Europe, including Ceridian U.K. and Ireland, and Fidelis HR in Germany. Already the largest payroll provider in Benelux, SD Worx strengthens its footprint across EMEA through these acquisitions.

Continuing its expansion, Workday launched payroll in France.  At the same time, Workday partners providing cloud-based HR services such as OneSource Virtual (OSV) and NGA HR have been expanding delivery capabilities in Europe as follows:

• NGA HR opened a new center in Bristol, England, that will also be an innovation hub for cloud HR, payroll, analytics, and HR BPaaS
• OSV launched the next phase of its European service center in Derry, Ireland, which currently has ~100 employees.

For leading payroll outsourcing providers, multi-country capability is a critical success factor, and most vendors continue to expand their footprint globally, e.g. ADP recently added payroll support for Angola, Azerbaijan, Guam, Mozambique, Puerto Rico, Tanzania, and Zambia.

For more insights into the payroll market, NelsonHall will be publishing its Next Generation Payroll Services market analysis in August.

RPO

The RPO market continues its evolution. NelsonHall estimates that ~43% of all RPO contracts include multiple countries in scope. Therefore, many vendors have been focused on expanding their geographic presence. Examples include:

• Randstad in Japan and Italy via its acquisitions of Careo Group and Obiettivo Lavoro respectively
• Cielo in Asia Pacific by expanding its delivery support in Singapore
• Adecco Group in the U.K. by acquiring Penna’s career and talent solutions business
• Alexander Mann Solutions by opening a second delivery center in Poland.

Learning

Contract activity for learning BPO (LBPO) was up significantly relative to H1 2015 across various verticals, including manufacturing, with wins focused on the automotive sector including:

• Raytheon Professional Services won a three year contract with BMW in Northern Europe for delivery, administration and management, deployment, and local adaptation services
• GP Strategies winning an automotive training contract with a Korean OEM as well as an operations training contract with a European Luxury OEM.

Also noteworthy was HSBC’s two-year extension with GP Strategies; HSBC is GP Strategies’ largest LBPO client.

Stay tuned for more highlights and trends from H1 2016 specific to benefits administration. 

KellyOCG is the outsourcing and consulting group of Kelly Services Inc., and represents the largest growth segment of Kelly Services. In 2015, Kelly Services reported revenues of $5,518m, down 0.8% y/y (or up 4.7% in constant currency), while KellyOCG’s revenues were $674m, up ~15% y/y from $587m in 2014 and +16.6% in constant currency. KellyOCG’s operating profit in Q4 2015 was $14m, up 44.3% y/y, while gross profit was $48m, up 13.5% y/y. The largest profit and revenue growth came from MSP followed by RPO.

Within MSP, KellyOCG has 4,600 registered and active suppliers with $7.2bn total spend under management, which according to NelsonHall, puts KellyOCG among the top tier of global service providers. There are ~232 MSP clients across the Americas, EMEA and Asia Pacific with a 99% client retention rate.

KellyOCG has ~50 RPO clients, including ~14 new clients since January 2015, and in 2015 performed ~47,000 hires in the Americas, EMEA and Asia Pacific. Its longest running RPO client has been with them for ~20 years. A recent trend has been clients starting with project RPO for a specific number of hires and then, once benefits are realized, expanding into full RPO clients. 

Talent Management Consulting

KellyOCG began providing talent management consulting services in Q1 2015. Services are typically provided with RPO and MSP and include:

• Talent Strategy Advisory, which includes: Strategic Workforce Planning, Process Optimization, Business Care Development, Talent Strategy Alignment
• Talent Attraction and Engagement, which includes: Specialized Career Events, Employer Branding, Candidate Experience Measurement, Talent Community Management
• Workforce Governance and Execution, which includes: Program Structure & Governance, Market & Competitive Intelligence, Program Performance Management, Change Leadership
• Talent Counseling, which includes: Career Transition, Outplacement, Executive Coaching, Leadership Development
• Workforce Analytics, which includes: Labor Market Intelligence, Talent Supply Chain Analytics, Business Process Analytics, Predictive Analytics.

Talent Supply Chain (TSC) Analytics

KellyOCG’s TSC Analytics Portal helps to give clients insights to drive change, and focuses on:

• Rate analytics: providing insights on current spend and competitiveness by supplier, geography, and marketplace
• Supplier optimization: providing insights on supply chain attributes of time, cost, and quality
• Order efficiency: providing insights on cycle type, benchmarking on efficiency of the supply chain, and on risk due to aging orders
• Workforce planning: providing insights on percentage breakdown of workforce, trends, alignment to workforce plan, how sourcing aligns and compares, where changes can be made to optimize cost, and where talent pools can be implemented. This includes the ability to view attrition by region, country, state, client, vertical, etc. and also compare how a particular client compared to all other clients. Scatter diagrams can also be used to view tenure and attrition rates for FT and temp workers.

Predictive analytics are also provided, e.g. clients can predict when aging orders are going to cancel, and also predict cycle times, and recommend what can be done to improve performance.

Over the last year, KellyOCG has focused investment on delivering analytics to support its MSP offering and has recently deployed its offering across RPO and is now focused on enriching the data. New clients will have the toolset implemented within 3 to 6 months. All clients get the analytics portal included with the program and can do their own analysis or, if they prefer, can pay extra for help with analysis.

In Summary

In NelsonHall’s latest RPO Market Analysis published last week, we report that the key client drivers for RPO adoption include the ability to improve performance and meet business demands, and clients are looking for providers with broader talent management consulting capability and talent analytics for improved decision making. In this regard, KellyOCG is addressing the right client issues.

Future market needs will include more upfront strategic talent consulting and longer term workforce planning. Service offerings are expected to develop in the areas of consulting services, analytics, and assimilating labor market data, to support better planning and sourcing choices. Increasingly, RPO contracts will be bundled with consulting services as RPO clients expect higher quality and more value.

NelsonHall has just published a comprehensive global RPO Market Analysis report, plus associated RPO vendor profiles, including KellyOCG. For more details, contact Guy Saunders.

• TrueBlue’s acquisition of Aon Hewitt’s RPO business
• The completion of the merger between Pontoon and its sister company, hyphen
• Orion International’s acquisition of Novotus

TrueBlue acquires Aon Hewitt’s RPO business

TrueBlue, via its PeopleScout RPO business, acquired Aon Hewitt’s RPO business and also announced a broader, ongoing relationship to connect PeopleScout’s recruiting services with Aon Hewitt’s assessment, employee engagement and analytics talent services. Prior to the acquisition, PeopleScout had ~1.5k employees and local presence in 14 countries across North America, Europe and Asia Pacific. It provides services to ~70 countries for ~60 RPO clients, six of which have >10k hires per annum each.

The acquisition expands PeopleScout’s global delivery capabilities, and brings in 650 Aon Hewitt employees based in the U.S., Canada, Asia Pacific, and Europe. In 2014 Aon Hewitt provided RPO services to ~100 clients across 64 countries, supporting nine languages.

In NelsonHall’s 2015 RPO market analysis, PeopleScout was ranked 9th globally by revenue, with Aon Hewitt ranked 5th in global standalone RPO revenues (4th including RPO as part of MPHRO contracts). NelsonHall is in the process of conducting its seventh global RPO market analysis, but even based on 2014 revenue estimates, the combined company would have been ranked number one.

Though not an acquisition of Aon Hewitt’s selection and assessment business, via the broader relationship, PeopleScout will have access to Aon Hewitt’s strengths including in:

• Specialists in selection and assessment, with ~125 employees, including ~30 I/O psychologists, involved in the development, management and administration of tests and assessments
• Aon Hewitt’s proprietary pre-employment assessments and platform, used to assess ~10m candidates annually covering sixteen languages and five continents: North America, South America, Europe, Asia and Africa.

Pontoon and hyphen merger completes

Pontoon and its sister company hyphen completed the merger first announced in October 2015, with hyphen's ~300 U.K. employees joining Pontoon's workforce. The combined brands will operate under the Pontoon name. Pontoon is now the global HR outsourcing brand for Adecco Group. 

The merger consolidates Adecco’s MSP and RPO providers into a single business unit with ~ 1,500 employees, and 150 clients operating in 92 countries. Hyphen, headquartered in London, also has offices in Singapore and Sydney. Pontoon opened its Manila office in 2012, and leverages Krakow as a nearshore center for European languages. Pontoon RPO delivers services to 40 countries in 20 languages and plans to expand across countries in Latin America.

In NelsonHall’s 2015 RPO market analysis, Pontoon was ranked 10th in North America and 5th in Continental Europe. In our 2015 MSP market analysis, Pontoon was ranked 3rd in 2014 global MSP spend under management, 3rd in North America, 2nd in EMEA, 2nd in APAC and 1st in Latin America.

Though NelsonHall had not previously estimated hyphen’s revenues separately, hyphen strengthens the Pontoon brand. Prior MSP contract awards included  Bank of America, Merrill Lynch, Experian, Tesco, Credit Suisse, Lloyds Banking Group, Jaguar Landrover, Prudential and National Grid. Prior RPO contract awards included CGI.

We previously noted that hyphen’s MSP brand in the U.K. competes with the Pontoon brand, with a lack of business alignment, but the merger of the two companies will eliminate the internal competition. In addition, hyphen’s local presence in London, Poland, Singapore and Sydney will strengthen Pontoon’s geographical reach to provide both single-country and multi-country contracts for clients. Multi-country contracts represent ~36% of all RPO contracts, with 6% being global contracts covering three or more regions, and NelsonHall estimates multi-country contracts will represent ~50% of all contracts by 2019. Global MSP contracts account for ~15% of the market, as significant contract expansions and global awards were undertaken in 2014; with another 22% of the market representing multi-region or multi-country contracts. NelsonHall estimates Global MSP contracts will increase in importance and will account for 25% of spend under management by 2019, with another 25% of the market taking the form of multi-region or multi-country contracts.

Orion International acquires Novotus

The third M&A deal in January was Orion International (a specialist in U.S. military recruiter) acquiring Novotus, a provider of RPO and recruiting services. The acquisition will see Novotus leveraging Orion’s sales team and providing a military recruiting offering to its customers, and Orion leveraging Novotus’ RPO capability.

Orion International is headquartered in North Carolina and has five other regional offices in the U.S. Based in Austin, Texas, Novotus expanded to Houston in 2013 to accommodate growth. Houston is used to service RPO, sourcing services, temporary staffing and contingency services along with executive search services.

In the last few years, RPO providers have increasingly focused their recruiting efforts to include military veterans, a subject I’ll be looking at in a future blog.

Overall, HRO contract activity is up ~11% y/y in 2015.  Renewals and contract extensions account for 25% of that activity, vendor changes ~20%, and new deals 55%. Regional and global multi-country contracts continued to grow in most HRO towers, especially payroll, which is also a strong driver for multi-country MPHRO contracts. 

Although trending down slightly in the last three years, mid-market activity remains high globally. Contracts included:

• Xerox awarded a Total Retirement Outsourcing (TRO) services contract for 1.2k employees by Tennants Consolidated in the U.K.
• Zalaris awarded a MPHRO contract for 1k employees by Borregaard in Norway, including HR admin, payroll, travel expense, time and attendance, and personnel document archiving solution
• Raet awarded a payroll contract for 6.7k employees by Philadelphia Zorg in the Netherlands.

Public sector activity is up nearly 5% y/y and accounts for ~20% of contracts, including:

• Voya Financial and City and County of Honolulu: DC administration
• Equiniti and Her Majesty’s Passport Office: payroll and time and attendance
• TIAA-CREF and Lane County, Oregon: DC administration.

M&A activity continues to increase y/y with ~27 deals to date, up from 25 acquisitions in 2014. By service line, M&A activity within benefits administration remained high, while acquisitions within RPO have become increasingly aggressive y/y. The majority of the RPO M&As have been focused on expanding or strengthening existing RPO services, especially to add recruitment consulting capabilities such as Capita acquiring ThirtyThree, WilsonHCG acquiring Sumner Grace, and ReThink Group acquiring Consort Group. To a lesser degree, RPO vendors are also keen to expand their geographic footprint, with the emphasis on the U.S., U.K., and Canada.

New offerings launched recently that will gain momentum in 2016 include cloud-based HR services, including HR technology consulting/strategy, HR SaaS implementation services, and post-deployment support, which may or may not include HR BPO services. The biggest focus for most organizations has been on developing a cloud-based HR technology strategy, though some vendors such as Aon Hewitt who launched its offering about two years ago are further along the continuum, providing post-deployment application management support on Workday exclusively to many clients.

Much of this HRO activity from 2015 will shape the deals and future direction vendors will pursue in 2016. Other 2015 developments that will continue to evolve in 2016 include private health insurance exchanges and the use of robotics process automation within HR.