Capgemini has launched a new offering in its digital HR portfolio, Digital Learning Operations (DLO). A key feature of DLO is platform flexibility, important because next-gen platforms are better at delivering just-in-time training personalized for the learner. DLO is also important because its Digital Content Factory focuses on providing content via digital modalities, which are in high demand by organizations.   

DLO is the third offering in Capgemini’s digital HR portfolio, which also includes the use of RPA (DLO currently has eight bots around learning BPaaS and vendor management). It follows Capgemini’s launch last year of Digital Employee Helpdesk (DHD) and Digital Employee Operations (DEO).

Prior to the launch of these digital HR offerings, Capgemini’s HR business was focused on providing transactional support to organizations. Its HR ambitions are focused on supporting clients in the digital transformation of their HR function and driving business outcomes beyond the efficiency play.

DLO components

The modular DLO offering has four components:

• Content design, development, and curation services via its Digital Content Factory for a variety of modalities including traditional classrooms, virtual classrooms, e-learning, web learning, blended learning, gamification, mobile learning, podcasts, videos, interactive videos, virtual reality, and augmented reality
• Learning BPaaS, including course catalog management, learner administration, learner resource management, and LMS administration
• Vendor/supply chain management, including invoice processing and payments
• Learning platforms including Microsoft’s LMS365, SumTotal’s SME and Enterprise systems, and Skillsoft’s Percipio.

Expanding on the last point, offering a variety of next-gen learning platforms is a key feature of DLO, enabling it to meet different types of organizational requirements:

• Microsoft LMS365 is aimed at organizations seeking a quick solution (implementation averages four weeks)
• SumTotal SME is targeted at companies with 0.5k to 3k employees seeking a scalable out-of-the-box LMS with pre-configured workflows
• SumTotal Enterprise is targeted at organizations with > 1.5k employees seeking a modular product, which can be customized to deliver training to the extended enterprise, including contingent workers (modules include learning, talent management, and HR)
• Skillsoft Percipio is for organizations seeking cognitive content curation, multi-device support, and personalized support by bringing more control over the content and user experience across multiple modalities.

Next-gen learning platforms are becoming increasingly important as organizations migrate to cloud-based HCM systems and realize a specialized learning platform is needed to supplement the HCM to deliver personalized and just-in-time training to the workforce (the concept of just-in-time training goes back to the early 2000s, and since then it has evolved from delivering training at the point of need to include the most effective delivery method for the individual learner).

The learning modules in HCM platforms provide the basics of an LMS. But next-gen learning platforms are dynamic and intelligent, making them suitable and ideal for the multi-generational workforce.

DLO clients, benefits & demand

Capgemini already has four large enterprise clients for DLO, including:

• An aeronautical and space manufacturer that has a presence across the U.S., Europe and Asia, looking to migrate from a 90% classroom-based training environment to a ~50% digital learning environment over the next three years  
• A North American retailer seeking to transform delivery of learning content to employees and vendors while controlling costs and increasing transparency and compliance for reporting. Capgemini implemented a cloud-based LMS in three weeks and in 22 weeks developed 36 hours of web-based content including interactive content and games. This has resulted in $2m in cost savings to date and a 40% reduction in training duration.

Benefits of DLO to early adopter clients include:

• 25% - 40% reduction in total cost of service
• 20% - 45% reduction in vendor spend
• 40% - 50% productivity savings.

Demand for DLO is strong, with bookings growth of 35% and a forecast revenue growth of ~15% over a base revenue from ad hoc learning services it has been quietly providing to some clients. 

In line with NelsonHall research on buy-side requirements, which shows a clear preference for the flexibility of modularity, demand so far for DLO is following a pattern of:

• Large enterprises: content services and vendor management services
• Small and mid-sized enterprises: learning platform and content services.

Wider market perspective

While Capgemini’s offering covers multiple learning services, there is a clear emphasis with the Digital Content Factory.  

Per NelsonHall’s 2018 Next Generation Learning BPS market analysis, delivery modalities continue to favor digital learning methods, and these will continue to increase in importance. Nearly 65% of buy-side organizations surveyed state that the use of digital modalities is very important, and ~80% say this will be the top priority by 2021. 

So, vendors with content capability skewed in favor of delivering digital training (including interactive videos, VR, and AR) will be in high demand, making the delivery of Capgemini's DLO just-in-time.

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.

This is the second of two articles on the multi-process HR BPS market. NelsonHall’s latest market analysis report on the multi-process HR BPS market recognizes two types of strategies adopted by vendors taking a modern approach to multi-process HR services: intelligent technologies and cloud-based HR services. Here, I take a quick look at both strategies.

Intelligent technologies

The intelligent technologies approach to multi-process HR services emphasizes the use of automation tools, AI, and advanced analytics to enhance multi-process HR BPS services. Services in scope within these deals tend to include workforce administration, payroll, and often administrative functions around talent management processes, as well as analytics, leveraging on-premise or hybrid technology arrangements.

The top drivers for buyers under the intelligent technologies approach include:

• Improving process controls and driving efficiency
• Streamlining HR processes through automation to reduce process duplication
• Obtaining greater transparency and visibility through advanced analytics.

The biggest inhibitors and challenges with this approach include the following:

• Often, organizations are looking to address larger transformational issues first, including moving to a cloud-based HCM platform, or at least consolidating the number of systems used
• The challenge of demonstrating how intelligent technologies will generate cost savings over the life of the contract; this includes introducing continuous technological improvements that reduce costs beyond the initial year.

To succeed, suppliers must look to continuously develop intelligent technologies, especially machine learning, for different HR processes, and be able to deploy intelligent technologies for on-premise systems (since there will be a certain proportion of organizations that will delay the adoption of cloud platforms).

Cloud-based HR services

The cloud-based approach to multi-process HR services, on the other hand, emphasizes support around broader offerings, such as HR SaaS implementation and ongoing AMS services, in addition to multi-process HR BPS services. The service scope of these deals includes workforce administration and payroll, with an increasing focus on managed benefits, and can include deployment and/or ongoing release management support. The key distinction here is that the underlying technology is 100% cloud-based, including for core HR and payroll.  

Buyers of this approach are adopting it because they are seeking a technology transformation to a more manageable model and also lack the time, skills, or expertise to operate internally in a HR cloud environment.

Impediments to adopting this approach include a desire to ride out previous technology investments, and also the impression that cloud HR software is so intuitive that organizations can operate it internally as the ‘be-all and end-all’ solution. Other issues with the cloud-based HR services approach include ensuring integration with other HR systems.  

Under this approach, it is imperative for vendors to create fast and secure data sharing capabilities with third party applications for seamless integration, with an eye on incorporating intelligent technologies, particularly chatbots, in the near future.

While many providers tend to hone capability in one of these areas, ancillary developments are often made in the other due to competing market demands for cloud HR technology adoption and improved service quality.

Click here for the first article in this two part series: State of the Multi-Process HR Services Market

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.

Principal issues & operational priorities

Some of the more prominent issues and operational priorities cited by respondents included the following:

• Proactive and innovative solutions that are aligned with the needs of today’s learners, including deploying learning that is digitally enabled
• Delivering effective training for multiple generations as well as upskilling employees to offset the aging workforce
• Continuing to drive costs down
• Leveraging more enhanced analytics and metrics
• Reducing overall project time
• Leveraging automation to drive efficiencies
• Supplementing internal training with external informal training, while ensuring all training is relevant and engaging
• Globalizing learning deployment.

These issues and priorities, in turn, directly impacted the benefits organizations were seeking to obtain from outsourcing learning BPS services.

Drivers for outsourcing learning BPS

Approximately 21% of respondents were seeking better costs, and delivery in a more cost-effective manner, when going to market for a learning BPS vendor. The next highest objective organizations were striving to obtain by outsourcing was an innovative service model and innovative delivery methods.

Other reasons cited by organizations included efficiency and standardization (13%), improving technology (13%), transformation/redesign (12%), and improving quality and reliability (12%).

Top vendor selection criteria

Approximately 30% of respondents made their decision on which supplier to use based on the vendor’s knowledge and professionalism, while demonstrating that they are easy and pleasant to work with.

After expertise, respondents were equally concerned with the portfolio of learning BPS services available, as well as pricing.

Current satisfaction levels

Current buyer satisfaction levels from learning BPS reveals that there is plenty of room for improvement, and that the learner experience and learning content should be the main priority for vendors over the next few years.

Cost savings will remain a top concern, but it will also be equally important for suppliers to modernize technology and improve standardization, while driving business results for organizations.

Areas for improvement

Respondents cited many areas vendors can improve on to meet future requirements, but a frequently mentioned request was around innovation. Specifically, organizations want vendors to proactively share innovative best practices, as well as do more strategic thinking around client-specific training problems and develop appropriate solutions that resolve these problems.

Other areas cited for improvement included:

• Communication and enhancing critical thinking skills for unanticipated issues
• Reporting, both in consistency and depth of reporting
• Automation to drive resource continuity as well as a higher level of quality
• Staying responsive and not over-committing.

NelsonHall’s NEAT vendor assessments look in detail at vendors’ ability to deliver immediate benefits to their clients, as well as 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. To find out more, contact Guy Saunders.

My colleague, Gary Bragar, recently discussed RPA and AI initiatives in HR, including payroll, recruiting, and learning. Within learning BPS, the majority of RPA investments have been made at a basic level within learning administration, specifically around training scheduling. For example, it previously took ~40 FTEs to manage the entire scheduling process for ~1k classrooms, including identifying classrooms based on availability, identifying onsite facilitators for training days, sending notifications, etc. Through RPA, the same workload can be completed in 15 minutes.  

Vendors such as Raytheon Professional Services (RPS) and IBM, however, have used more advanced applications of RPA and AI throughout the learning lifecycle. IBM, for example, is currently expanding RPA to the design and development of learning content via its Cognitive Content Collator (C3). IBM is leveraging Watson to interpret structured and unstructured data to drastically reduce the number of man hours spent annually on tagging and chunking content and then matching it with curriculum, competence, and goals. Specifically, it takes ~50k man hours to tag, chunk, curate, and map structured courses for ~10k hours of learning content; with IBM’s C3, these activities are completed in 55 hours.

With respect to AI and cognitive, IBM has launched ‘Personalized Learning,’ which offers a consumer-grade experience for learners that provides recommendations to employees based on job role, business group, skill set, and personal learning history to encourage continuous employee development and skill growth. The experience includes ‘content channels’ that support a variety of needs and interests to facilitate simpler browsing, as well as a five-star rating system, and will include virtual job coaches that pull content for an individual to help them develop certain skills.

While interest in RPA and AI technologies by organizations is high, overall adoption rates for these technologies in learning BPS has been low for two reasons. First, RPA requires investment by organizations, which is often problematic since a company’s learning budget is typically low. In addition, RPA requires that an organization exposes its technology and data to the service vendor, which they are often hesitant to do, since learning technology relationships are often separated from service relationships.

Current adopters of RPA in learning BPS tend to be from heavily regulated industries, including financial services, healthcare/pharma/life sciences, oil and gas, and automobile manufacturing. These organizations are realizing a significant reduction in training resources, which is creating more time for value-added activities.

Over the next year, adoption rates for RPA within learning BPS will increase and still be applied mainly to learning administration services. To be successful, vendors will not only have to demonstrate the business case, expected ROI, and previous successful deployments of RPA, but will also need to have a consultative partnership in place within the client organization.

NelsonHall recently published its latest market analysis report on learning BPS, which recognizes the evolution of the learning BPS maturity model from traditional training to integrated training, and now to performance training. Here, I take a look at this latest approach to learning BPS.

Through the performance-driven approach, buyers seek one of five main objectives:

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

Over the last few years, demand for full end-to-end learning BPS contracts, including content, delivery, administration, and technology services, has remained low, and this trend has continued with respect to deals leveraging the performance training model.

While each of the five performance objectives can include all or a variety of learning functions, there are common learning functions associated with each one. That is, strategic transformation typically includes learning consulting/strategy services; revenues and competency often includes content and delivery services; compliance tends to include content services; cost reduction contains learning administration services; and learner engagement focuses on learning technology services.

NelsonHall expects most learning BPS suppliers to cater to all five training objectives, but each vendor’s strength within each objective will vary and be largely dependent on their heritage. For example, vendors that excel at reducing costs typically have a background that heavily emphasizes the use of offshoring, in addition to heavy investments in RPA.

Another significant impact of the performance training approach will be on Kirkpatrick analytics. Today, the majority of learning BPS contracts leverage Kirkpatrick level 1 learner satisfaction to obtain immediate feedback from a training session, as well as Kirkpatrick level 2 to determine how much training was retained. However, when it comes to Kirkpatrick level 3 (job impact) and level 4 (organizational impact), utilization rates are low. On the surface, the performance-centric approach will help facilitate a connection back to the business, but there will need to be methods in place to measure the effectiveness.

Although not a result of the performance training approach, learning BPS services will become more widespread globally due to digital advances, including virtual training and cloud-based learning technologies.

While the performance training approach is characterized by digital learning, the use of digital modalities will continue to penetrate the entire market and be favored within the integrated training model. Digital formats in high demand include e-learning, virtual training, games, and interactive videos.

In light of the recent increase in digital learning, it is important to note that, although it is declining, utilization of instructor-led training (ILT) in traditional classroom settings remains high, mainly because it facilitates face-to-face engagement, collaboration, networking, and recognition opportunities. With respect to ILT, the focus will be on making ILT more effective by leveraging digital modalities before, during, and after the classroom experience.

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.

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. 

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.

Recent LBPO activity has been largely from Europe, a trend which began to pick up in 2014. Activity is widespread across Europe, including the U.K., Germany, Nordics, Denmark, and Benelux.  Recent wins include NIIT Ltd.’s multi-year contract to provide managed training services to Citi in EMEA, where it has a presence in 54 countries. To support growth in Europe, NIIT has opened a new delivery center in Dublin, Ireland, providing bespoke content management, training management, and delivery services. QA is also moving to a new, larger learning center in Manchester, U.K.

Europe is also the target for emerging LBPO suppliers, such as InfoPro Learning, which began expanding its focus from content development to providing end-to-end LBPO services in 2014.  Much of InfoPro Learning’s recent growth has been from contract expansions with its existing clients, but its future growth strategy includes targeting European headquartered organizations.

Elsewhere, Australia has also been a hot market, with one of the larger deals including Raytheon’s competitive win with an Australian supermarket chain. 

While the average contract length has been trending down over the last few years, primarily due to the surge in selective LBPO contracts, there has been a slight increase from an average duration of 3 years in 2014 to 3.25 years in 2015.

Multi-country LBPO contracts have also become more prevalent. In 2014, multi-country LBPO contracts accounted for ~32% of activity, which increased to ~38% in 2015. In addition to NIIT’s contract with Citi, it also signed a LBPO contract with Vestas Wind System across 25 countries, including Denmark. Other examples of multi-country LBPO contracts include Raytheon’s win with Honda Motor Europe Ltd. in the U.K., Germany, and pan-European countries, and IBM’s contract with a global aerospace company.

Selective LBPO contracts consisting of two learning processes dominate activity and vendor pipelines. In 2014, the most common bundle included learning administration and vendor management services, but in 2015 selective LBPO contracts have been more mixed, though relatively consistent across the different bundling options.

Full LBPO bundles accounted for ~15% of 2014 contract activity and ~19% of 2015 activity, including Raytheon’s competitive win with Telstra, and Xerox’s renewal with a pharmaceutical company.

While the year is not yet over, it is clear that European, multi-country and selective contracts are where the action is right now in Learning BPO.

The widespread use of mobile technologies cannot be ignored, and now the trend is for on-demand and just-in-time (JIT) learning. Microlearning is also increasing in importance: while millennials are often cited as the reason for the rise in microlearning, it is a very effective learning mechanism that has been happening informally in the workplace for years.

Vendors focused on providing learning services are shortening modules from one hour to twenty minutes, which is also sometimes broken down even further into several five minute modules, with information overload in mind and retention as the goal.

All these developments in the learning space call into question the appropriate mix of learning modes. So what will the future of blended learning look like?

Intrepid Learning Inc. (Intrepid) is betting that corporate MOOCs will be part of the future blended environment. In late 2014, Intrepid sold its learning BPO (LBPO) business to Xerox Services with the exception of its two cloud-based learning products, and subsequently relaunched itself as an independent technology company. 

Intrepid has had good success to date with its technology-focused offerings.  After launching its corporate MOOC in late 2013, Intrepid’s priority was to implement it within its existing LBPO client base. Now with a growing list of clients, including Microsoft, which has three corporate MOOCs, Intrepid is focused on making product enhancements, including adding additional language capabilities, which will be essential to Intrepid’s future success with companies in other countries who are looking to implement a localized product.

Prior to its relaunch, Intrepid’s LBPO business was primarily focused on the U.S., and while it is still targeting U.S.-based MNCs, it is also attracting the attention of companies headquartered elsewhere.

To date, Microsoft is Intrepid’s best example of providing one of its corporate MOOCs globally, with aproximately 50% of its learners located in Europe, 30% in APAC, and 20% in North America. 

Obviously corporate MOOCs won’t replace other methods of learning, but they will expand the options available for delivering learning and training. The reality is that people learn differently.  Organizations looking to increase the effectiveness of their training will create the highest probability of success by implementing a variety of methods to accommodate all types of learners.  Corporate MOOCs, gamification, simulations and virtual worlds are just some methods that can be implemented with more traditional training mechanisms to make learning more effective and increase retention, which should be the main goal of any training.

The first approach is about honing learning offerings around one specific learning function. Sometimes this is about refining one function while providing other learning services as an add-on; an example is Expertus, who has developed its ExpertusOne platform, which often includes learning administration services. Alternatively, it can be about focusing on offering just one or two learning functions. An example of the latter is Intrepid Learning who, in late 2014, sold its traditional learning BPO business to Xerox, focusing exclusively on two learning technology products it launched a year earlier: Learning Hub and Corporate MOOC.

The second approach is about building a holistic transformational learning offering where the objective is to ultimately take over an organization’s learning function or to incorporate learning services into a wider talent management suite. An example is Accenture’s talent development offering, which includes learning, recruitment, performance management, succession planning, compensation management, and workforce forecasting and analytics. However, even with an all-encompassing objective, such suppliers recognize that buyers are proceeding cautiously and purchasing selective learning functions at a time. 

One thing is clear: in the last few years, vendors have taken the time to define their core capability and set it in motion, which has also involved making acquisitions as well as divestments. For example, both GP Strategies and Capita have been particularly acquisitive. Many of GP Strategies’ acquisitions have been focused on expanding its geographic footprint in the U.K. and Europe, while Capita’s acquisition of KnowledgePool in 2013 was arguably the most significant since it essentially added a private sector learning business to its portfolio. 

Talent2, on the other hand, sold its Registered Training Organizations (RTO) business, which consisted of five RTOs offering training and assessments to businesses as well as consumers, to focus on its core learning and HR advisory services.

Regardless of the differing strategies in play, suppliers across the board share the same goal of making training targeted, effective, and readily available for their clients.

NelsonHall is currently conducting a global market analysis on learning services. Further trends from this research will follow.

While learning M&A activity was high in H1 2013, this year, M&A activity in H1 2014 was strongest in the benefits administration market, and it’s occurring in both the U.S. and U.K. as vendors strengthen their DC contribution capability.  In the U.K., JLT acquired Ensign Pensions Administration for £9.9m and Aon Hewitt acquired Lorica Employee Benefits.  In the U.S., Great-West has been busy merging its DC administration business with Putnam’s following the reorganization by its parent company, and then acquiring JP Morgan RPS business to further expand its DC administration business.  Elsewhere, Mercer enhanced its exchange services through the acquisition of Transition Assist. 

That primary theme of benefits administration M&A activity on DC administration is further evidenced by Vanguard’s announcement that it is exiting the DB administration business to focus its efforts on DC administration.

There has also been a high level of M&A activity in the RPO market this year.  Seaton and WilsonHCG each made an acquisition to expand their geographic footprint, HRX and CPH respectively, while Alexander Mann and TrueBlue each acquired a company to expand or enhance their service capabilities, Talent Collective (for talent acquisition services) and SeatonCorp (to develop RPO and MSP capabilities) respectively.

Finally within payroll, there were two acquisitions.  Historically, payroll acquisitions are rare, but almost always focus on strengthening or adding capabilities in a new country / region.  In H1, TMF acquired Tass Axia to strengthen its payroll presence in Indonesia, and Visma acquired Adga to strengthen its payroll presence in Sweden.

The level of M&A activity in H1 2014 contrasts strongly with that of last year. Acquisition activity for learning services, was the strongest area of activity back in H1 2013 with Xerox and GP Strategies both making two acquisitions: LearnSomething and Formation by Xerox and Prospero and Lorien Engineering Solutions by GP. This year, learning acquisitions have slowed with just one acquisition by GP, Effective-People and Effective Learning Companies, and the objective of this acquisition is to strengthen GP’s HCM technology capability beyond learning to include recruiting, onboarding, compensation, succession planning, and HR analytics. 

Benefits Administration:

Benefits administration was a hotbed of activity in H1!  Contracts were awarded across various service lines in the U.S. as well as in the U.K. There was a solid stream of pensions and retirement administration contracts including TRO activity.  In addition, demand for benefits administration SaaS was quite strong.  Examples of deal announcements include:

• JLT won the DB and DC administration contract by Santander UK covering 100k employees
• Fidelity won the DC administration contract for FirstEnergy for 21k employees
• WageWorks expanded its contract with Lowe’s and is providing spending account administration and COBRA administration
• Towers Watson renewed its retiree exchange contract with Eastman Chemical Company
• Capita expanded its contract with Wood Group in the U.K. to include occupational health services.

RPO:

The level of RPO activity continues to be strong.  Like benefits administration, deals flowed steadily from the U.S. and U.K.  Contract examples in H1 include:

• FutureStep and TalkTalk: 2-year deal in the U.K. including internal and external recruitment as well as contractor and permanent roles
• Hudson and United Biscuits: 3-year multi-country contract covering end-to-end recruitment processes including specialist role recruitment and executive search
• Alexander Mann and Statoil: initially focused on Norway, the contract will extend to the U.K., Canada, North America, and South America to recruit ~5k hires per year.

Payroll:

Payroll continued its steady deal flow worldwide with wins across the mid and large market sectors.  Examples include:

• SafeGuard World and easyJet in the U.K. for 8k employees
• Aditro and Fennia in Finland for 1.5k employees
• MidlandHR and Hope Construction Materials in the U.K. for 800 employees.

Learning:

After a long hiatus, activity for learning services really ramped up in H1. Over the last few years, demand for learning services seemed to come mostly from the public sector.  H1 showed a healthy level of learning activity in both public and private sectors.  

MPHRO:

MPHRO activity was also abundant in H1, where the activity was centered around HR administration and payroll services.  Activity consisted of new contracts like Zalaris and Statoil for statutory leave and reconciliation of HR accounts (for Norway), travel & expense services (worldwide), and HR reporting.  Other activity included vendor changes such as NGA HR and BMS.  Also notable is the volume of mid-market MPHRO deals.

The level of M&A activity was in line with H2 2013.  Much of this was in the benefits and RPO areas, which is where we are seeing outsourcing activity.