RPO Market Undergoes Explosive Growth –Opportunities and Challenges Ahead

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Everest Group research analysts will identify emerging trends, highlight challenges, illustrate the current service provider landscape, and identify some possible differentiation themes for providers.

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RPO Market Undergoes Explosive Growth –Opportunities and Challenges Ahead

  1. 1. Today’s Webinar is brought to you by Everest GroupToday’s WebinarRPO Market Undergoes Explosive Growth – Opportunities and Challenges AheadSynopsis: Everest Group research analysts will identify emerging trends, highlightchallenges, illustrate the current service provider landscape, and identify some possibledifferentiation themes for providers.About Everest GroupEverest Group is an advisor to business leaders on global services with a worldwide reputation for helpingGlobal 1000 firms dramatically improve their performance by optimizing their back- and middle-office businessservices. With a fact-based approach driving outcomes, Everest Group counsels organizations with complexchallenges related to the use and delivery of global services in their pursuits to balance short-term needs withlong-term goals. Through its practical consulting, original research and industry resource services, EverestGroup helps clients maximize value from internal transformations, shared services, outsourcing and blendedmodel strategies. Established in 1991, Everest Group serves users of global services, providers of services,country organizations and private equity firms, in six continents across all industry categories. For moreinformation, please visit www.everestgrp.com and www.everestresearchinstitute.com.For more information, contact Mark Williamson at mark.williamson@everestgrp.com 1 Proprietary & Confidential. © 2011, Everest Global, Inc.
  2. 2. Q&ATo ask a question during the Q&A session Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen – this will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 2 Proprietary & Confidential. © 2011, Everest Global, Inc.
  3. 3. RPO Market Undergoes ExplosiveGrowth – Opportunities andChallenges AheadWebinarApril 28, 2011
  4. 4. Introductions Rajesh Ranjan Research Director Everest Group rajesh.ranjan@everestgrp.com Sayan Chatterjee Senior Research Analyst Everest Group sayan.chatterjee@everestgrp.com 4 Proprietary & Confidential. © 2011, Everest Global, Inc.
  5. 5. Contents Market definition and overview Buyer adoption and solution characteristics Service provider landscape Key takeaways 5 Proprietary & Confidential. © 2011, Everest Global, Inc.
  6. 6. There are three kinds of sourcing models used forrecruitment services Low Degree of outsourcing High Selective/componentized Comprehensive Out-tasking model outsourcing model outsourcing model  Can include one or  Includes components of recruitment  End-to-end outsourcing ofKey more recruitment process; can be front-office recruitment process to thecharacteristics processes (employer branding, sourcing, etc.) service provider that  Short-term project- or back-office components includes both front-office based work (applicant tracking, offer letter and back-office  Typically restricted to management, technology components one type of hire at a management, etc.)  Ongoing long-term time  Ongoing long-term (multi-year) (multi-year) relationship (e.g., executive hire, relationship  Typically includes almost all temp hire)  In case of fuller scope, typically types of hires  Restricted to external includes one or two types of hires/  Includes both external and hires; does not include job-families internal hire management internal hire  Can include both external and management internal hire managementConsideration  The need is specific and  In some specific recruitment  The buyer wants tofor adoption one time processes, buyers need expertise transform the entire  Buyers want to keep on an ongoing basis recruitment function direct control over the  The buyer wants to dip its toe in the  The buyer wants to expand recruitment process outsourcing model the value creation beyond the “selective” model Focus of our discussionSource: Everest Group (2010) 6 Proprietary & Confidential. © 2011, Everest Global, Inc.
  7. 7. We define RPO as transfer of ownership of all or part ofrecruitment processes or activities on an ongoingbasis Strategy Judgment-intensive Transaction-intensive HR Recruitment strategy  Strategic consulting  Sourcing Employee relations  Applicant tracking Regulatory and compliance  Screening Global mobility  Pre-employment testing Performance management  Employment offers/ Learning selection management Recruitment  Background checking Compensation  On-boarding  Vendor management Benefits Payroll Employee data management HR information systems and reporting Employee contact centerEverest’s analysis include only those RPO deals in which: A minimum of four or more recruitment processes are included The outsourcing deal is active and is at least one year in deal length The deal scope should not be limited to temporary hires onlySource: Everest Group (2010) 7 Proprietary & Confidential. © 2011, Everest Global, Inc.
  8. 8. In the last couple of years, RPO moved from the“pioneer” to the “emerging rapid growth” stage along amarket maturity curveEvolution in the single-process HRO market Benefits Payroll Employee data management  Accelerated adoptionMarket value creation  Evolving specifications and service provider capabilities  Increased M&A and partnerships  Slower adoption rates; however, among service providers to growth and scale still available expand capabilities and quicken  Accepted model(s) and time to market standards  Well-established specifications and service provider capabilities  Consolidated market dominated Learning by a few players Compensation Recruitment Pioneer Emerging rapid growth Reaching maturity MaturitySource: Everest Group (2010) 8 Proprietary & Confidential. © 2011, Everest Global, Inc.
  9. 9. The RPO market is growing at a rapid pace withexplosive growth in new deal signings in 2010 Extensions New deal signings New annual hiresTime trend for deal activity Time trend for average deal sizeNumber of deals Average number of hires per deal 180 1,571 1,600 1,519 160 1,371 1,400 140 29 1,200 120 1,098 1,000 100 800 80 48 33 600 60 126 21 400 40 52 58 20 39 200 0 0 2007 2008 2009 2010ESample size: 406 RPO deals signed between 2007 & August 2010 Source: Everest Group (2010) 9 Proprietary & Confidential. © 2011, Everest Global, Inc.
  10. 10. Traditional drivers such as cost savings and scalabilitycontinue to be important for first-generation buyers.Second-generation buyers look for more strategic value Impact on efficiency Impact on effectiveness Impact on overall business High Stage III Impact delivered Stage II Strategic impact Stage I Business impact Cost impact Low Time Key drivers in first- Key considerations in More of aspiration generation deals second-generation deals currentlySource: Everest Group (2010) 10 Proprietary & Confidential. © 2011, Everest Global, Inc.
  11. 11. While a high number of renewals indicates broadersatisfaction, the rapid growth has put some strain onservice delivery, leading to few non-renewals/terminations Deal renewal activity Number of deals 100% = 154 Deal terminated before contract expiry Deal not renewed 5% 10% 85% Deal renewedSample size: 154 RPO deals signed between 2007 & August 2010 Source: Everest Group (2010) 11 Proprietary & Confidential. © 2011, Everest Global, Inc.
  12. 12. Contents Market definition and overview Buyer adoption and solution characteristics Service provider landscape Key takeaways 12 Proprietary & Confidential. © 2011, Everest Global, Inc.
  13. 13. North American buyers continues to lead RPOadoption. Continental Europe saw increased adoptionin 2010 Buyer adoption trend by signing region Number of deals 100% = 228 117 2% Asia Pacific 20% 14% South America Continental Europe 6% 11% UK 16% 14% North America 59% 60% 2007-2009 2010Sample size: 345 RPO deals signed between 2007 & August 2010 Source: Everest Group (2010) 13 Proprietary & Confidential. © 2011, Everest Global, Inc.
  14. 14. Notwithstanding the high interest around global RPO,most buyers adopted a single-country approachin 2010 Buyer adoption by geographic scope of deal Number of deals 100% = 228 117 10% Global 16% 16% Regional 19% 74% Local 65% 2007-2009 2010Sample size: 345 RPO deals signed between 2007 & August 2010 Source: Everest Group (2010) 14 Proprietary & Confidential. © 2011, Everest Global, Inc.
  15. 15. Large buyers continue to be the major adopters of RPO Buyer adoption trend by size of organization Number of deals 100% = 708 Mid-market 37% 3K-15K employees Large-market 63% >15K employeesSample size: 708 RPO deals as of August 2010 Source: Everest Group (2010) 15 Proprietary & Confidential. © 2011, Everest Global, Inc.
  16. 16. Although usage of base fee plus a variable pricingmodel decreased, it still remains the most frequentlyused Pricing structure trend Number of deals 100% = 222 113 2% 5% Other Fixed price 12% 19% Variable price 30% 29% Base fee plus variable price 56% 47% 2007-2009 2010Sample size: 335 RPO deals signed between 2007 to August 2010 Source: Everest Group (2010) 16 Proprietary & Confidential. © 2011, Everest Global, Inc.
  17. 17. Most deals in 2010 were focused around the corerecruitment processes leading to less inclusion ofancillary processesInclusion of recruitment processes within RPO deals 2007-2009Number of deals 2010 77 Strategic consulting 74 91 Sourcing 91 Core recruitment 86  Applicant tracking 84 process 91 Screening 91 Employment offers/ 68  selection management 66 90 Pre-employment testing 82 79 Background checking 61Ancillary recruitment process 71 On-boarding 54 64 Vendor management 44Sample size: 345 RPO deals signed between 2007 to August 2010 Source: Everest Group (2010) 17 Proprietary & Confidential. © 2011, Everest Global, Inc.
  18. 18. There is still limited adoption of offshoring in RPOcompared to BAO and multi-process HRO. However,this is gradually changingInclusion of offshoring Time trend of offshoring in RPONumber of deals Number of deals100% = 345 595 219 100% = 228 117Includes offshore Includes offshore 17% 18% 20% component component 48% 62% No offshore No offshore 83% 82% 80% component component 52% 38% RPO BAO Multi-process 2007-2009 2010 HROSample size: 345 RPO deals signed between 2007 to August 2010, 595 BAO deals signed between 2007 and April 2010 and 219 MPHRO deals signed up to October 2009 Source: Everest Group (2010) 18 Proprietary & Confidential. © 2011, Everest Global, Inc.
  19. 19. Contents Market definition and overview Buyer adoption and solution characteristics Service provider landscape Key takeaways 19 Proprietary & Confidential. © 2011, Everest Global, Inc.
  20. 20. Service providers in the stand-alone RPO market comefrom a variety of backgrounds and have varyingcompetitive strengths and strategies Pure-play RPO background Contracting/staffing background RPO market space Multi-process HRO background Executive search background 20 Proprietary & Confidential. © 2011, Everest Global, Inc.
  21. 21. RPO service providers can differentiate themselvesalong multiple dimensions 1 Value proposition 2 Global solution 3 Industry specificity Areas of differentiation 4 Offshore leverage 5 Technology strategy 6 Total talent acquisition solution 21 Proprietary & Confidential. © 2011, Everest Global, Inc.
  22. 22. Identifying and assessing service provider selectioncriteriaService provider evaluationcategories and subcategories DescriptionCultural fit As evidenced in the service provider’s ability to convey sensitivity to Partnering ability client’s concerns around quality and flexibility Flexibility ValuesSolution design and quality Based on the service provider’s ability to demonstrate a compelling Quality of execution solution and strategic vision for its offerings Service levels Transition and operations riskFinancial impact Any defensible benchmark savings offered through case studies or <Number of years> cost NPV service provider’s best practices or convincingly cost-effective Financial risk solutions. Financial health of the service provider itself should also be given due weightingService provider capability Assessment of service provider’s RPO capability in terms of scale Scale of current operations, scope in terms of recruitment function Scope capability and quality, technology capability, and geographic spread Technology Geographic delivery capabilitySituation specific factors such as experience within a particular industry and type of hires/jobfamilies should also be considered 22 Proprietary & Confidential. © 2011, Everest Global, Inc.
  23. 23. Contents Market definition and overview Buyer adoption and solution characteristics Service provider landscape Key takeaways 23 Proprietary & Confidential. © 2011, Everest Global, Inc.
  24. 24. Key takeaways for buyers and service providers ofRPOFor buyers Due diligence to understand service providers’ capacity situation is important in this fast growing market place Integration of the solution more important than model (single provider model vs. partnership based model) per se for a multi-country/global RPO requirements Global sourcing is an important lever to realize cost efficiencies Have provisions in the contract to protect interest in case of a provider’s acquisitionFor service providers Not all business is good business Creating differentiation to stay ahead of competitors is key Evaluate and create partnerships on the basis of synergy accruing out of strategic, operational, technical, and cultural alignment Strike the right balance between customization and standardization 24 Proprietary & Confidential. © 2011, Everest Global, Inc.
  25. 25. Forthcoming and published research in RPO PublishedTitle Release Date  Mapping onto the Workforce of Tomorrow: How RPO Can Play a Role August-2010  Recruitment Process Outsourcing (RPO) Annual Report 2010 – A Year November-2010 of Rapid Growth and Intense Competition  RPO - Service Provider Landscape and Capability Assessment January-2011  Recruitment Process Outsourcing (RPO) – Service Provider Profile April-2011 Compendium  Multi-country RPO – Hype versus Reality Q3-2011  Contingent workforce outsourcing Q3-2011  Recruitment Process Outsourcing (RPO) Annual Report 2011 Q4-2011In addition to the above reports, we publish multiple point in time view point documents based on keymarket developments (e.g., mergers and acquisitions, major deal, breakthrough innovation, etc.) 25 Proprietary & Confidential. © 2011, Everest Global, Inc.
  26. 26. Q&A Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen – this will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit Upcoming Webinar Meter-to-Cash BPO Market for Utilities An Opportunity for Buyers and Service ProvidersDate: Tuesday, May 10, 2011Time: 9:00 a.m. CDT; 10:00 a.m. EDT; 2:00 p.m. GMTPresenters: Saurabh Gupta, Vice President, Everest Group Kuldeep Lulla, Senior Analyst, Everest GroupMore Information: Visit www.everestgrp.com/category/webinars 26 Proprietary & Confidential. © 2011, Everest Global, Inc.
  27. 27. For more information Attendees will receive an email with a link to download today’s webinar presentation. A recording of the webinar will be available within 24 hours on our website, www.everestgrp.com/category/webinars For more information related to today’s topic, please contact:  Rajesh Ranjan, Research Director, rajesh.ranjan@everestgrp.com  Sayan Chatterjee, Senior Research Analyst, sayan.chatterjee@everestgrp.com For background information on Everest Group, please visit:  www.everestgrp.com  www.everestresearchinstitute.com Thank you for attending today’s presentation 27 Proprietary & Confidential. © 2011, Everest Global, Inc.
  28. 28. Everest Group leads clients from insight to actionContact us for more information about our consulting, research, and industry resources. Dallas (Corporate Headquarters) Canada info@everestgrp.com canada@everestgrp.com info@everestresearchinstitute.com +1-416-865-2033 +1-214-451-3000 +1-214-451-3110New York India/Middle Eastinfo@everestgrp.com india@everestgrp.com+1-646-805-4000 +91-124-496-1000 +91-124-496-1100 UK Netherlands & Continental Europe unitedkingdom@everestgrp.com benelux@everestgrp.com +44-870-770-0270 +31-20-301-2138www.everestgrp.com | www.everestresearchinstitute.com | www.sherpasinblueshirts.com 28 Proprietary & Confidential. © 2011, Everest Global, Inc.

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