HRO: So Old, Yet So New

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Outsourcing and offshoring of HR presents many opportunities and challenges, what is needed is for more HR professionals to have outsourcing business skills (namely process, operations, project …

Outsourcing and offshoring of HR presents many opportunities and challenges, what is needed is for more HR professionals to have outsourcing business skills (namely process, operations, project management) and for more outsourcing professionals to have a greater understanding of HR issues and its impacts.

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  • 1. Small, Shorter Term Human Resources Sourcing Strategies, Trends, Deals in HRO Pg 20 Transformation Pg 28 and Observations Pg 32 www.globalservicesmedia.com July 2011 The gateway to the global sourcing of IT and BPO servicesSpecial Report So Old, HRO Yet So New
  • 2. Software Paradise, 后Hangzhou Sourcing Demonstration City of Chinasourcing Hangzhou Hangzhou was defined as the “China Service Outsourcing Demonstration City” in February 2009. Hangzhou is also the one of eleven software industry base cities in mainland China. It has currently formed the several industries including telecommunication, software, integrated circuit, digital TV, animation games and E-commerce.The revenue of software business in Hangzhou was achieved at 47 billion RMB in 2009, the software export revenue reached at 460million USD. There were total 112 enterprises passed CMMCMI, ISO27001 certification. There were 20 IT software enterpriseshave list on public market, two companies ranked at Top 10 of self-brand software products, total 15 enterprises have list at the key software enterprises name list of the national strategic planning. In order to accelerate the development of outsourcing industry, Hangzhou Municipal Government set up the leading team to draw up the development plan, issue the supporting policy to make the rapid development of outsourcing industry in Hangzhou. The total delivered amount of offshore outsourcing business reached at 919mllion US Dollars, risen to 352% compared to the same period of last year (2008).Hangzhou government has put more focus on the financial service outsourcing that is considered as the medium and high end outsourcing industry, Hangzhou now is creating to become the financial delivery center. International Financial Outsourcing Center Promotion & Undertaker: Great-Idea International Outsourcing Consulting Center
  • 3. Hangzhou, China A City of Financial Delivery Center To Combine the Global Resources and Facilitate theIntegration & Upgrade of the Global Service Capability Please Attention October Trip in Hangzhou China Sourcing Summit & Delegation to China Sponsors: Ministry of Commerce of the People’s Republic of China Ministry of Industry and Information Technology of the People’s Republic of China Ministry of Education of the People’s Republic of China Host City : Hangzhou People’s Government Official Promotion: Hangzhou Municipal Foreign Trade & Economic Cooperation Bureau International Financial Outsourcing Center Contact: Tel-8610 85863613 Fax-8610 59081093 Email-salida-liu@great-idea.com.cn
  • 4. Global ServiceS A CYBERMEDIA PuBlICAtIOnAn integrated media platform which connects thevarious constituents of the global technology and Pradeep Gupta business processing services industry ecosystem. Chairman & Managing Director Cyber Media (India) Ltd. E. Abraham MathewDirectory of ServiceS PresidentNewSletter Ed nair EditorA regular digest of key industry happenings. ed@cybermedia.co.in Satish GuptaDiGital MaGaziNe Associate Vice PresidentThe fortnightly digital magazine features research satishg@cybermedia.co.inreports, articles and experts’ views. Available on Smriti Sharmawww.globalservicesmedia.com smritis@cybermedia.co.inwebiNarS Smita Vasudevan smitav@cybermedia.co.inGlobal Services’ web-based seminars aim to impart Sourabh Chandra Pushpuseful information related to outsourcing indus- sourabhc@cybermedia.co.intry in the form of presentations and discussionsby industry specialists. niketa Chauhan niketac@cybermedia.co.inreSearch Gary BindraWe deliver indepth analysis and research reports gurdeepb@cybermedia.co.inon sourcing subjects. Virendra Kumar x-virendrap@cybermedia.co.inMicroSiteS Global ServicesOnline resource center designed to provide Cyber Media (India) Ltd.focused content on special subjects to the out- CyberHouse, B- 35, Sector 32sourcing community. Gurgaon-122001, India Tel: +911 24 4822222eveNtS Fax: +911 24 2380694 Contact:From multi-day, high-level, resort conferences to globalservices@cybermedia.co.inintimate breakfast discussions we offer a numberof opportunities that connects the outsourcing Disclaimercommunity. All rights reserved. No part of this publication may be reproduced by any means without prior written permission from the publisher.cUStoM ProGraMCustomized services rendered through different letterS to the eDitormedia platforms. Send letters to ed@cybermedia.co.in, or to any of our writers. We reserve the right to editoSoUrce booK all letters. Postings submitted to our blogs andA directory of global outsourcing service providers. letters to the editor may be published in ourwww.osourcebook.com digital magazine or Website.
  • 5. April 2011 features 16 HRO: SO OLD, yET SO NEW [COVER STORy] by Prerna Tandon Outsourcing and offshoring of HR presents many opportunities and challenges, what is needed is for more HR professionals to have outsourcing business skills (namely process, operations, project man- agement) and for more outsourcing professionals to have a greater understanding of HR issues and its impacts. 20 SMALL, SHORTER TERM IN HRO [HRO] DEALS SETTING NEW TRENDS by Smita Vasudevan HRO providers are not seeing too many opportunities for multi process deals, but there lies a clear opportunity in transforming small, short- term deals into longer strategic outsourcing relationships. xperts8 DESTINATION EuROPE –[SPECIAL REPORT] NEARSHORING CONTINuES TO DRIVE DEMANDby Smita Vasudevan 28 HuMAN RESOuRCES TRANSFORMATION – IS OuTSOuRC-Emerging markets within Europe will be seeing significant ING A SOLuTION?nearshore activities this year, with niche IT capabilities and by Kumar Parakala, KPMGmultilingual skills offering new opportunities. 32 THE FRENCH BANkING SECTOR: SOuRCING STRATEGIES, TRENDS, AND OBSERVATIONS By Nigel Hughes, Global Services Director, Compass Management Consulting GlObal SeRvIceS DIGITal MaGazINe Next Issue: software develoPment
  • 6. Editor’s NotE Ticking Again t his year is seeing a resurgence of interest in BPO, based on the level of contract activity and contract values. The BPO market had a sluggish trend through the entire period of recession and the time there- after. In the GS100 survey we found that there was a y-o-y growth of 8.3 % in terms of number of BPO customers signed on during 2010 despite a fall in total contract value (TCV). This clearly points at a fall in contract sizes for BPO contracts, accompanied by fall in contract periods also. HRO seemed to be sunset segment in BPO. Large end-to-end deals in comprehensive HR BPO services have slowed for the past 12 to 18 months. A revival will surely be marked by disruption and then a reinvention would happen. Ed Nair The good news is that HRO is regaining its lost momentum. Demand Editor for global expertise in HR, integrated HR services, and technology innova- ed@cybermedia.co.in tions in HR service delivery are the drivers. There has been a rise in single service HRO contracts. A recent IDC report states that HR BPO marketA revival will surely would grow at a CAGR of 4.4% through 2015. Specific segments like be marked by RPO, employee data management, talent management, and learning havedisruption and then robust demand profiles. HR technology itself is on the rise and with thea reinvention would availability of subscription-based models for software the adoption is going to increase. Increasingly, many of these sub-segments in HR would be happen. driven and delivered using technology. The cover story this month encapsulates these trends very well. The other main story focuses on Europe as an outsourcing destination, despite all the economic woes faced by the region. In fact, the services industry can be an instrument for overall economic development for a lot of countries in Europe. Enjoy the summer !!! GS
  • 7. YOUR STRATEGICTECHNOLOGYPARTNERBuilding solutions forFinance, Telecom, IT,Automotive and Energysectors 4500+ best in class engineers 18 offices in 11 countries Track record of building highly complex solutions Expertise in business and technology domains Focus on innovation and R&D Best-in-class processes CONTACT US: MICHAEL MINKEVICH ROMAN TRAKHTENBERG VP Technology Services Managing Director, Luxoft USA E-mail: MMinkevich@luxoft.com E-mail: RTrakhtenberg@luxoft.com Tel: +7 (495) 967-8030 x4427 Tel: +1 (212) 964 9900x 240www.luxoft.com Mobile: +7 (495) 364-9137 Mobile: +1 (917) 930-205
  • 8. Special Report destination Europe – Nearshoring Continues to drive demandEmerging markets within Europe will be seeing significant nearshoreactivities this year, with niche it capabilities and multilingual skillsoffering new opportunities.Smita VasudevanI n the post recession phase, when low cost countries the biggest trend for Europe in 2011. With a huge IT tal- like India, China and Philippines remain the most ent pool, multiple language skills and favorable time zones, attractive destinations on the global outsourcing Eastern European markets can be seen as the destination map, Europe, at the other end of the spectrum, is of choice for nearby countries and for the uS. Alexanderalso capturing good amount of attention. Although cost- Semenov, Head of Sales Department, Reksoft, says, “Europelier, numerous other factors are driving demand to Europe. still retains its strong position for outsourcing high-end solu-Experts are of the opinion that nearshoring activities in tions development.” Lots of new IT trends and developmentsboth IT and BPO space will have a significant impact are reshaping the European ITO space. Cloud is influencingon the market this year. Ian Marriott, Research Vice the market in a big way. According to Forrester ReportPresident, Gartner Research, says, “We see lots of oppor- “Market Overview: European IT infrastructure Outsourcingtunities in Europe for services to move within the region (2011)”, cloud services remain the most discussed serviceand much of the work is going nearshore from uk or uS.” in the infrastructure outsourcing market. Resistance to the An increasing number of companies are choosing to keep cloud will change as enterprises realize the flexibilities thatwork closer to home and nearshoring is thus being seen as cloud offers.8 Globalservices www.globalservicesmedia.com July 2011
  • 9. destinations 2011compendiuma one stop resource on outsourcing destinationsDestinations compendium brings together the myriad dynamics of the outsourcing locations. It covers research report on top 100 outsourcing cities, countries-in-focus, regional dynamics, city profiles, experts opinion on location assessment.http://microsites.globalservicesmedia.com/destinations Dont miss this opportunity! Book your space now! Contact Niketa at niketac@cybermedia.co.in
  • 10. Special Report BPO activities, especially voice operations continue to see Nearshoring to Europe is thus on a high and will be driv-significant momentum. This is fairly justified, as there is hardly ing demand significantly in the future. Marriott points out,any other location currently that can support six to eight lan- “Offshoring looks at a balance of low cost and low risk. Whenguages within a single city. Emerging markets like Serbia and enterprises try to drive down costs, the risks tend to go up.”fairly established ones like Poland and ukraine are offering Offshoring to countries like India, China and Philippines can regional Dynamicshuge potential for growth due to the availability of multilin- be a low cost alternative to nearshoring, but there are othergual skills and good quality resources. factors that balance out or overshadow the cost benefits. When companies start outsourcing, they prefer keeping it closer toWhat Makes Europe Attractive? countries becoming members are: home and work with companies that speak the same language Shortage of resources in one region can drive demand to and have a cultural compatibility. “This is reason why more • Political stability and greater integrationother regions where resources are available in plenty. This is percentage of work is going nearshore than offshore” adds • Increased tradewhere Eastern Europe scores big. As per studies and surveys Marriot. This holds true especially in case of mid-market com- • Increased inward investmentconducted by ‘IT Sourcing Europe’ there is a huge gap in panies that are new to outsourcing. • Social policies and subsidiesIT talent and resources in the Western Europe. Interestingly, Another factor adding to its global appeal is a mature  Eastern Europe has attracted a lot of investments from service providers and cli-Eastern Europe has seen a significant surge in its IT resources legal framework.“Benefits from privacy legislation and align- ents (captive operations) in the last 3-5 years making it a strong “offshore cluster”over the last couple of years, which justifies the large number ment with legal systems offer high confidence to enterprises and a “skills cluster” of Western European enterprises outsourcing to countries within the European union” says queuing up to this region. Dmitry Marriot. These regions come out as safer alternatives, especiallyGlobal Clientèle Loschinin, President & CEO, when data protection and security laws may not be that strong  With 63 percentage of all developed countries in Western other parts of the world. Luxoft, says, “Eastern European in Europe, it is the largest cluster of buyers across the world. This attracts large business firms from across countries have shown a signifi- the world to have centers risetheeducatedto cater to the domestic markets in these cant in in region and qualified The Opportunities Within developed economies.IT talent. Romania, for exam- Poland, ukraine, Czech Republic and Romania are some  Eastern Europe henceple, has seen global clientele12 of the this has countries in the European outsourcing space. caters to the more than a indirectly, leading successfully built a strong brand for “Nearshore to Eastern Europe”, offering cost differential Serbia, Slovakia etc are also percent growth in the number Emerging ones like Bulgaria, of 15-20 percentage compared to Western Europe. of experienced IT professionals capturing lots of attention. Semenov says, “Customer inter-  Clients say productivity per employee higherproviding Europe than offshore development centers continue to move employed at companies in Eastern est and the providers’ loca- tions like India, Philippines and China. Dmitry Loschinin, IT outsourcing services. In addi- eastwards. This interest is closely connected with the level of President & CEO, Luxoft  High skill sets available for ukraine islike Product Development (Turkey, Ukraine, tion, processes another Eastern technical education and resources availability in these coun- Russia), Regional has witnessed similar growth,5–6 locations of There are many new locations coming to the fore. ‘TheEuropean country that Multilingual Skills (top a nearly tries.” previous list), and10 percent (Russia sinceacross the region). R&D increase and 2008.” Central & Eastern Europe IT Outsourcing Review 2010’ Europe: Centers of Excellence Region/ Country/ City Core Specialization Companies Established Figure 1 Europe: Centers of Excellence. • Specializes in R&D, Infrastructure SAP, Quest Software, IBM, Microsoft, Western Europe Ireland Dublin Accenture, Marino Software, PMI Services and Custom Development Application Software, Infosys, Deloitte, Amazon • High value processes in Financial Barclays, Accenture, InfoTech, HCL, U.K. Belfast Analytics, R&D and Applications Capgemini, HP-EDS, KPMG, Xerox, Development Management ECOM, First Data • Business Analytics, Finance and Google, IBM, Motorola, Fujitsu, HCL, Poland Kraków Accounting Outsourcing, multilingual Capgemini, ACS, Hewitt, Quantum, Contact Support, HR Outsourcing Sabre • Focused on HR Outsourcing, R&D Sun Microsystems, Accenture, GE, Czech Eastern Europe Prague processes and emerging destination for SAP, Google, Intel, Capgemini, Republic Engineering design services Mahindra Satyam, IBM • Focused on HR Outsourcing, R&D in SAP, Microsoft, Sun Microsystems, Hungary Budapest Software Development and Testing TCS, Genpact, Cognizant, Canon, Mahindra Satyam, SCA • Specializes in Engineering Design and Intel, Motorola, Sun Microsystems, Russia St. Petersburg R&D services. Boeing, HP, Auriga, Google, Luxoft, EPAM, Arcadia Page 10Source: Global Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’10 Globalservices www.globalservicesmedia.com July 2011PRIMARY VALUE PROPOSITIONIt is a viable nearshore destination for Western European clients for several reasons:
  • 11. Europe: Showcasing the ChallengesDestination Europeand Opportunitiesidentified Croatia, Moldova, Latvia, Slovenia and Albania asthe newly established markets.The Emerging Nearshore Marriot points out, “If we take a broad look at locationswithin Europe, there are application services, remote infra-structure and business processes being outsourced. MNCservice providers are moving to Poland and Czech Republicfor infrastructure services and there are also significant BPO Western Europe has done a significant amount of nearshoring to Eastern Europe.centers being set up in Poland.” Over the years, the gap in GDP between Western Europe and Eastern Europe has Numerous service providers are rushing into the scene widened instead of declining, which has helped in attracting clients from the former to capture the untapped to the latter. This has helped in making nearshoring to Eastern Europe an attractive Prominent nearshore options: opportunities and to opportunity. Eastern Europe expand their footprint It has been a destination of choice for Western Europe for more than a decade and 6 poland: kraków, Warsaw, within Europe. Sitel has this attractiveness has become stronger over the years. Gdansk, Wroclaw extended its European operations with its new 6 Czech Republic: Prague, Brno CHALLENGES call center location in 6 hungary: Budapest  Clients face dilemma- No single country can take care of all languages. But Serbia. The company sees 6 Russia: St. Petersburg, Estonia can take care of the 5 major languages. lots of opportunities in Moscow, Nizhniy Novgorod,  Most smaller countries do not offer scale the region and considers Rostov-on-Don, Novosibirsk it as a major step in its 6 Romania: Bucharest, ADVANTAGES strategy to double opera- Cluj-Napoca  Europeans are conservative businessmen compared to their American counterparts tions in Eastern Europe in 6 Ukraine: kyiv, Lviv and are more comfortable keeping work closer to home. Thus nearshoring is a the next three years. But favored option. 6 Belarus: Minsk why Serbia ? Tim Schuh,  Considering a cut off population of 10 million, only Russia, Ukraine, Poland, 6 slovakia: Bratislava General Manager, North Romania, Belarus, Czech Republic, and Hungary have the advantage of a sizable EMEA, Sitel, says, “We Bulgaria: Sofia talent pool have always tried to be 6 slovenia: Ljubljana  Multiple factors enable to be perfect nearshore options for Western Europe like: early adopters in the mar- 1. Financial Attractiveness 3. Trade laws (European Union) 6 serbia: Belgrade ket. Sitel has significantly 2. Cultural compatibility 4. Excellent Education 6 estonia: Tallinn expanded its operations 6 Croatia: Zagreb in Nicaragua and Poland. Major clients nations in the region are: We wanted to be the first 6 Latvia: Riga  United kingdom  Denmark global outsourcer in the 6 Lithuania: Vilnius  Spain  Finland Serbia market.” Its deci- 6 Malta: Valletta  France  Germany sion to expand into Serbia  Italy  NorwaySource: Global Shore 2010 webinar was based on lots of fac-‘europe: Global Shorethe challenges andSource: Showcasing 2010 webinar  SwedenOpportunities’‘Europe: Showcasing the Challenges and tors like language abilities,Opportunities’ good quality labor, work REGIONAL DYNAMICSethics, infrastructure and so on. Hungary, Romania and  European Union member countries in Eastern Europe have significant advantages,Slovakia are the leading locations for voice operations. Poland providing them the edge to become “nearshore locations of choice”is the popular location for Non-voice BPO work like FAO andtransaction processing. “we are predicting  A recent trend is of clients preferring to send work onshore or to nearshore loca- tions. This is true for US itself. This is not necessarily because of a language pref- Indian service providers are also waking up to the that more and more erence. This is being preferred even at a higher cost than offshore locations. Thisrealization that having a nearshore presence in Europe trend is favoring Eastern Europe.is increasingly important, both in the ITO and in BPO enterprises will consider  Being a part of the EU makes the smaller countries offering cost arbitrage veryspace. Mphasis is the recent one to join the bandwagon. attractive nearshore destinations, some other benefits for Eastern EuropeanGopinathan Padmanabhan, Head Global delivery unit, eastern europe as aMphasis, commented in one of its recent press releases,32 GS Destinations Compendium 2010“Poland offers ability to service clients in most conti- strategic outsourcing www.globalservicesmedia.comnental European languages and is well connected withother Western European business centers. The availabil- destination.”11 Globalservices www.globalservicesmedia.com July 2011
  • 12. COUNTRY-IN-FOCUS Ensuring Global Visibility A special feature for countries to showcase their uniqueness There are numerous outsourcing destinations that exist as great alternatives to India and China. Inviting Countries to showcase capabilities that accentuate their uniqueness.Examples of Country-in-focus feature Egypt Philippines Jordan JORDAN For more information write to satishg@cybermedia.co.in
  • 13. Destination Europeity of talent, language skills and an established business For service providers, scaling up can also be an issue ininfrastructure in Poland made it a natural choice for us.” the long run. General Manager, Andrei Pronin, Auriga, com- What benefits do these locations offer to service provid- ments, “The providers tend to be of a smaller scale, and caners? Luxoft that has operations in the Eastern European put together large teams slower than competitors from othercountries like Romania and ukraine believes that there are locations. However, for traditional R&D projects that’s not amany advantages. Loschinin says, “Because Luxoft maintains problem, as big teams are rarely needed.”operations in both countries, we are able to tap into the Service providers would invest more in the near future,abundance of IT talent available, and as a result, our Eastern especially in the Tier 2 cities. Different regions will haveEuropean business is booming. For our global customers, their own specific requirements and service providers willthe deep expertise of our engineers and software developers have to adopt a combination of strategies to make use of theresults in higher-quality products and services, and an overall opportunities.competitive advantage.” Pointing to future prospects, Schuh says, “It is little bit of a mixed bag. The countries are in different phases in termsWill it be a Future Destination of Choice? of their recovery from the recession. There is very positive When it comes to low cost alternatives, Europe has a long momentum in the Eastern Europe. But it’s a little tougher inway to go, but it will surely be a major contender in selec- countries like France and Spain.”tive areas that require better language skills and good qual- Although experts have mixed reactions about theity. Salil Dani, Research Director, Global Sourcing, Everest potential that Europe holds, service providers seem to beGroup, sums up “In the next couple of years demand is likely very positive. Loschinin reveals, “We are predicting thatto increase with countries coming out of debt crisis. Easter more and more enterprises will consider Eastern EuropeEurope will continue to see demand for high order IT skills as a strategic outsourcing destination and we are expect-and niche capabilities, though the overall scale of operations ing significant business growth for our operations withinwould be lower than that in India and Philippines.” Eastern Europe.” GS13 Globalservices www.globalservicesmedia.com July 2011
  • 14. HROSo Old,Yet So New Prerna Tandon Prerna has been one of the pioneers in the HRO space in India. She led the HRO practice in Infosys BPO as VP and SBU Head for over two years growing the business profitably. Later, she joined ANZ Bank as the Global Head of Payroll & HR Operations, responsible for global strategy and execution in this area.
  • 15. Cover StoryHro: so old, Yet so Newoutsourcing and offshoring of Hr presents many opportunities andchallenges, what is needed is for more Hr professionals to have out-sourcing business skills (namely process, operations, project man-agement) and for more outsourcing professionals to have a greaterunderstanding of Hr issues and its impacts.Prerna TandonH uman Resource Outsourcing (HRO) or itself because each of the hire to retire processes is unique Human Resource Services (HRS) is one of and has a unique set of characteristics that need a different the oldest areas to have been outsourced in strategy both from a buyer/providers viewpoint. Some of varied and different models, in bits and parts, the differentiating characteristics are:especially areas such as recruitment, payroll and benefits Recruitment: There are sourcing and search functionsand learning/training. This has resulted in large and very within recruitment, especially at junior and middle levelssuccessful specialized and localized outsourcing firms in that lend themselves to being operated out of a sharedthe HRO space. The advent of offshoring has lent a differ- services environment which is location agnostic. Needlessent flavor and new opportunities, but there are numerous to say that technology enablement is a critical factor forchallenges that buyers and providers are still struggling this to be successful. This has only been possible in thewith. recent past, with internet becoming an important medium for job seekers. However, there are still aspects of recruit-The Sum of the Parts ment that are better performed on shore, especially that Most are still searching for the magic formula of suc- require face to face interaction and allow really experiencedcess. In fact, to club all Hire to Retire (H2R) or Search to recruiters to add value based on their experience of the sec-Separation (S2S) processes under one roof is a mistake in tor and the geography (including networks and contacts).16 Globalservices www.globalservicesmedia.com July 2011
  • 16. HRO: So Old, Yet So New Payroll/benefits: These func-tions, especially transactionalaspects are most easily done in anoutsourced and offshore environ-ment. Once again a robust andcountry compliant technology isthe key enabler. However, there isa very thin layer of knowledge thatis required which best resides withon shore staff. This mostly per-tains to regal regulatory filings andcompliance related activities. Thequestion about does this fall intothe finance or HR function is stillbeing discussed. I have seen sev-eral organizations where payroll ispart of finance function and equalnumber where it is part of the HRfunction. Wherever this might lie,but what is certain is that its important to recognize the with the HR function, closely linked with Learning andfinance and HR components of this sub function and Recruitment and other than administrative tasks do notaddress them appropriately with the right owners. have high scale. International mobility: This HR function impacts avery few number of employees of any organization, but Importance & Complexity of HR Processesmost of these employees are prized high profile talent, HR processes and activities in any firm, though frag-hence most firms endeavor for this service to be best pro- mented and small as far as number of staff performing avided by specialist organizations, for instance immigration single process is concerned, are mostly the most sensitiveservices firms, moving companies etc. However, internal processes and have the opportunity to impact each andstaff provide coordination and administrative type services, every employee of the company at some point of timewhich, though small in numbers are suited for offshoring. during the hire to retire lifecycle, as compared to any of learning: Training and Development as this function the other shared services or functional areas. Additionally,was previously called, now has signification components experience with HR processes is crucial to maintainthat can be outsourced and can be better performed by employee engagement and morale and one bad experi-specialist firms (offshore or on shore), especially if online ence has the ability of becoming the topic of coffee cornerlearning or e learning is a significant part of a company’s conversation and experience sharing, thus disrupting thestrategy. Learning, again is being increasingly used as a dif- agenda of HR managers. Often, I have found that toler-ferentiator by companies. Administrative tasks, e learning ance for errors in HR processes is extremely low.related components such as content design, development, Additionally, from a providers standpoint, HR Processesinstructional design, project management, conversion, have a degree of unparalleled complexity, primarily becauseadministration, testing and tracking are activities that are of zero tolerance from buyers end, the relative importanceincreasingly being outsourced and even offshored. as described above, coupled with diversity of processes in a Employee Data Management and Queries: These limited scale that require varied levels of skills and knowl-functions are mostly the ones that can be completely out- edge ie both voice and transactions, simple data entry tosourced and are location agnostic. Employee Self Service judgment based, local/geography specific knowledge asand Manager Self Service, ESS or MSS enablement, very well as knowledge of company specific rules and policies.widely being adopted, restrict the scale at which thesefunctions need to be performed. However, query handling, The Organization’s Viewpoint: Enablers foragain mostly pertaining to compensation and benefits still Offshoringremains a significant proportion of activities that can be The three tiered model, implemented well and consist-outsourced/offshored. ently, is the key for designing the HR function in a cost talent & Performance Management: These activities efficient manner that not only enables a global organiza-are very niche, mostly periodic in nature, usually centralized tion to grow and operate in different countries, but also17 Globalservices www.globalservicesmedia.com July 2011
  • 17. Cover Storyensures that through transition to shared services (global, factors such as competence in delivery, offshore capability,cost effective and scalable), provides consistent employee knowledge management, SLAs etc.experience. Also, most buyer organizations and HR managers, Briefly, the three tiered model consists of HR Strategy, when asked would normally state that they intend buyingpolicy and design components at the top, business partner superior service, and not lowest cost. Service performanceHR as HR support to business and conduits for change even if it’s at a wee bit higher cost is more important in themanagement and implementation of HR strategy in the buying decision.business and shared services at the base, almost as thestrong foundation on which the HR function resides. Service Providers- Key Success FactorsThis model is being increasingly adopted as HR functions Bundled HR technology in the solution set is thetransform themselves in an effort to support increasing single largest enabler for success in not just delivery butdemands and complexities of businesses in a cost efficient also in winning more and new business. Cost and timemanner. involved in an in house HR ERP implementation can act HR technology is the next fundamental pillar which as deterrent and can work hugely in favor of the providerenables the creation of HR shared services which can then who can provide a BPaaS (Business Process as a service)be outsourced/offshored, with adequate change manage- model. Most large outsourcing providers who have addedment and knowledge transfer routines. HRO in their basket of services have now realized this and Mostly, in the case of HRO, buyers are HR managers have partnered large ERP like Peoplesoft/SAP and provideand not sourcing departments. Often, I have found that HRO service using the underlying technology platform.this translates into greater importance on factors such as Traditional HRO firms have their own home grown,competence and experience in HR, home grown HR tech- highly customized technology platforms that has resultednology and its functionalities and lower consideration on in client stickiness.18 Globalservices www.globalservicesmedia.com July 2011
  • 18. HRO: So Old, Yet So New Provider organizations have to realize that business Change management, the discipline that HR profes-process management techniques and disciplines, if sionals are entrusted with for all major transformationused well can enable them to be successful in this space. projects in any business is just as important for HRA recognition of how HRO comprises several smallish Outsourcing projects. This area, since it happens in HRprocesses, and treating each one, however small in scale it functions’ own backyard, is also, most easily ignored andmight be, as a process that requires strict process discipline overlooked. But due to the nature of HR Outsourcing as itof mapping (SIPOC), training process staff, escalation has the potential of impacting every employee several timesmatrix, ‘what if ’ scenarios, knowledge transfer/manage- during their employment with the company needs to bement are all very critical. adequately addressed through various change management Competent and skilled staff, like in most other areas is techniques and communication.just as important. Service attitude, higher skilled staff capa-ble of performing multiple processes are more important Emerging Trends & New Modelin the HRO space. Anyone who has viewed and been a part of this indus- For complete end to end outsourcing, mix of onsite try has witnessed trends where HRO has moved fromand offshore in the solution mix can be a differentiator processwise specialist in country outsourced mode toand important. Specific geography compliance. legal/ complete function deal based list and shift to now general-regulatory knowledge can be additional advantage in the ist offshored. Newer trends in this space (both technologyoverall delivery capability. ie Workday and process) are now looking at closer inte- gration of all shared services functions that creates scale,Enablers for both Buyers and Providers which was the drawback with HR shared services alone. Just as in any outsourcing, both buyer and provider Creation of scale then enables investment justificationneed to invest in setting the foundation of this relationship both at providers and buyers end. If one has to adoptthat can enable the future delivery of superior service to the customer centric view then this trend makes eminentthe employees of the business. sense to have all internal shared services processes that One key area is to invest in process standardization impact employee lifecycle (not just HR, but even finance,along with policy streamlining. A complete analysis ie employee reimbursements, travel and expenses etc) allof process and policy anomalies and standardizing them reside under a single shared services umbrella. From anprior to outsourcing can assist a seamless transition and on operations and delivery standpoint, these processes cangoing delivery. It is broken processes, too many exceptions then be classified by skills required to perform them i.e.in smallish scale of operations, backed by several policy voice, numeric ability, end user service etc. While from avariations that pose delivery and knowledge management purist standpoint, this makes a good model that addressesconstraints from a providers standpoint. Also, process and the strains that exist in the current model and combinespolicy variations that may have crept in over time, are also ease of delivery and greater end user satisfaction, the chal-in the interest of HR organizations as they attempt to lenge that this poses is that of functional territory andbuild scalable, consistent employee policies and practices. operational control within the structure of any organiza-Hence addressing this aspect is of mutual interest. tion. GS Often, this aspect is over looked, and technology isawarded greater importance. However, the point to note Prerna has been one of the pioneers in the HRO space in India. She ledis that policy, process standardization can enable cleaner the HRO practice in Infosys BPO as VP and SBU Head for over twosmoother technology implementation with fewer customi- years growing the business profitably. Later, she joined ANZ Bank aszations that can be a boon for any technology/application the Global Head of Payroll & HR Operations, responsible for globalimplementation and maintenance professionals. strategy and execution in this area.]19 Globalservices www.globalservicesmedia.com July 2011
  • 19. HROsmall, shorter term dealssetting New trends in HroHro providers are not seeingtoo many opportunities formulti process deals, but therelies a clear opportunity in trans-forming small, short-term dealsinto longer strategic outsourc-ing relationships.Smita VasudevanA s the economy is reviving, the HRO market to look forward this year. GIA’s ‘Human Resource is regaining its lost momentum. The number Outsourcing: A Global Strategic Business Report of deals has gone up over the last few quarters (2011)’ expects united States and Europe to continue and adoption rates are improving. According dominating the global HRO market.to krishna Baidya, Industry Manager, Frost & Sullivan,“The HRO market has received a great boost as increased Going Strongnumber of multi-process outsourcing deals, involving HR “In 2010, the Multi Process HRO (MPHRO) mar-services such payroll, recruitment, training and develop- ket grew by six per cent to reach an ACV of $ 3.07ment etc have started pouring in.” Exhibit 2: After dipping sharply in 2008, new-deal A major chunk of the demand is After dipping sharply in 2008, new-deal activitymarket the MPHRO market activity is back in the MPHRO is back incoming from public sectors across Number of new Number of employeesregions, as pressures to cut costs are deals signed added each yearmounting. Sectors like financial New deals Number of deals Number of employees added each year Number of employees (‘000)services, pharmaceutical and man- 70 57 2,000 61ufacturing are some areas that are 60 1,750currently high on HRO adoption. 50 50 43 46 1,500 Everest Group’s ‘Human 40 1,250 28 1,000Resources Outsourcing Annual 30 750Report 2011’ points out few notice- 20 500able trends for this year. Demand 10 250for global expertise by buyers, 0 2005 2006 2007 2008 2009 2010 0integrated HR services, technology Growth curve of MPHRO new-deal activityinnovations and preference for sin- Number of deals 80gle service contracts will be major 60factors driving the HRO market 40in 2011. Increased buyer prefer- 20ence for offshore service providers 0 2005 2006 2007 2008 2009 2010as a low cost HRO partner will Sample size: 285 deals signed between 2005 and November 2010most likely be an important trend Source: Everest Research Institute (2011) 2 Copyright © 2011, Everest Global, Inc. ERI-2011-X-X-XXXX20 Globalservices www.globalservicesmedia.com July 2011
  • 20. GS100 STUDY GS100 LIST GS100 CATEGORY LISTSINDUSTRY ANALYIS OUTLOOK 2011 REVIEW 2010THE GROWTH STORY DEALS & CONTRACTS read now! ITO & BPO TRENDSProduced by 2011 sPonsors INDECOMM RATED TOP SPECIALIST PRODUCT ENGINEERING PROVIDER
  • 21. HROB. More than 40 new deals were The influence of software-as-a-servicesigned during this time and there (SaaS) will be fairly visible on thewere also significant number of global HRO industry. The riseextensions to the existing of SaaS is likely to popularizeones,” says Rajesh Ranjan, Hybrid HR models. AccordingResearch Director, Everest to Custers “Hybrid HR allowsGroup. This coupled enterprises to leverage theirwith reduction in the in-house infrastructure fornumber of contract workforce administration,terminations indicate seamlessly integrate it withimproved buyer satis- an outsourced multi-countryfaction. As enterprises payroll solution (HRO), andare becoming more careful deploy your talent manage-in their outsourcing strategies ment processes in a SaaS/and are reevaluating partner- OnDemand model.”ships, there are some notablechanges in the types of HRO RPO is Hotcontracts being signed. The Recr uitment Processvisible trend is that the size of Outsourcing (RPO) is relativelycontracts is reducing and the new as compared to most othercontract period is going down. areas in HRO, but it has maturedEnterprises are also includ- fast. The segment is growing,ing lesser number of proc- though certain areas are stillesses in the MPHRO deals. not developed fully. In terms ofCommenting on this, Michael global RPO, there hasn’t beenCusters, VP Marketing, much of development as thereNorthgate Arinso, says,“We are not many service provid-are seeing fewer ‘big bang’ out- ers capable of delivering asourcing contracts combining comprehensive global offering. Thisfinance, HR, and procurement outsourcing, in favor of apparently is the reason why buyers have been depend-a more controlled and smarter approach focused on a ing on multiple service providers for their global RPOselect number of HR processes and rapid financial and needs. Employment branding is an RPO area that isquality returns.” The idea behind this is to start slowly increasingly gaining focus. Enterprises are looking forand later move to bigger deals if the deal appears to service providers for their employment marketing andbe paying off. “Such change in customers’ mentality is communication initiatives as they find it cost effec-keeping vendors on their toes in the increasingly com- tive to outsource these rather than doing it in house.petitive market. Through such outsourcing, buyers are Technology for recruitment processes are evolving andseeking to scale up quickly or gain access to contingent enterprises are looking for providers who are able toworkforce with the required skills, gain cost advantage offer sophisticated technology solutions. These tech-at various geographical presences they may have and nologies include mobile platforms, and employmentdeliver consistent experience,” says Baidya. marketing and recruitment CRMs. Integrated tech- Payroll has traditionally been the most outsourced nology offerings is most likely to be one of the majorfunction in HRO, considering its complexity and spe- service provider innovations to be witnessed in 2011.cialized knowledge required in the domain. Typically, In terms of the geographical demand, North Americaenterprises are initially starting with outsourcing trans- accounts for more than 50 per cent of the global RPOaction intensive functions like payroll and over time, deals.they move to other areas like learning and recruitment.The opportunity service providers have here is to trans- Service Provider Strategiesform short term agreements into long-term strategic The Everest Report had classified ADP, Aon Hewitt,relationships by offering competitive services combined Northgate Arinso (Convergys), IBM and Accenture aswith innovative technologies that suit specific enter- the leaders, while Genpact, Xchanging and Neeyamoprise needs. are categorized as the emerging players.22 Globalservices www.globalservicesmedia.com July 2011
  • 22. Small, Shorter Term Deals Setting New Trends Service provider strategies are also ACS, says, “As the first wave ofchanging in line with the chang-ing demands of the industry. Many “Services need to “mega-deals” come up for renewal, we expect organizations to look for aproviders are trying to strengthen be scalable for any best of breed solution, rather than atheir offshore presence and add sin- comprehensive solution.”gle process offerings to their line of size employer withservices. Growth is most likely to be The Power of the Midachieved by way of inorganic routes the ability to grow Marketlike mergers and acquisitions. Therecent spate of M&A deals amongst as mid-market The mid market segment is expanding the growth opportunitiesHRO service providers clearly high- organizations grow for global HRO service providers.lights this. One prominent one is Today a large chunk of the businessthe aqcuistion of Convergys’ HRO and their needs is coming from these enterprises andbusiness by Northgate Arinso. providers are developing special-Commenting on how this has con- expand. we are ized strategies to tap this explod-tributed to their business, custerssays, “NGA and Convergys’ HRM prepared to meet ing potential. A research paper by katrina Menzigian, VP, Researchbusiness have been fully integratednow. We have invested a lot in build- their needs in all Relations, Everest Institute ‘How Mid-market HRO is Emerging as aing strong ties with our customers service lines and True Growth Platform, 2011’ statesand exceeding quality standards. We that the mid-market companies havebelieve that both our customers and grow with them increased their adoption of inte-our employees have benefited signifi- grated MPHRO and this segment iscantly from this transaction.” NGA as the economy becoming the growth platform forbelieves that the need for higheremployee engagement, continuing recovers.” many of the leading HRO service providers. Of all the MPHRO dealsglobalization, openness to process signed in 2010, 61 per cent camestandardization, automation of transactions, and focus from the mid market. Cost saving objectives, access toon core strategy to be the most important elements of advanced HR technology and improvements in overalla successful HRO strategy. business efficiency are the major factors driving these companies towards outsourcing.Emerging Models Commenting on their mid-market strategies, Vezina Typically, the pricing models are based on head- says, “Services need to be scalable for any size employercount utilization by enterprises. This is usually the with the ability to grow as mid-market organizationssame for both single-process and multi-process HRO. grow and their needs expand. We are prepared to meetBut as cloud-based and SaaS offerings are becom- their needs in all service lines and grow with them asing more popular, utility the economy recovers.”based pricing models arelikely to be seen more. DriversMid-market enterprises “Cost reduction remains a top driver of MPHRO.will be more open to Other important drivers include managing compli-such kind of a model as ance risk, greater alignment between HR and businessit offers them access to strategy and access to better technology,” says Ranjan.technology applications Enterprises are depending a lot on service providerswithout having to pay in areas other than cost saving and are looking fora high initial cost for partnerships that bring a little extra in the form ofdeployment. Pointing innovation and guidance. Experts believe that providersto the growing demand have a big opportunity here. They may not be seeingfor smaller deals, Ann too many opportunities for multi process deals butVezina, Executive Vice Ann Vezina, Executive Vice there lies a clear opportunity in transforming small,President and Group President and Group President short-term deals into longer strategic outsourcing rela-President of HR Services, of HR Services, ACS tionships. A multiple location strategy can play a vital23 Globalservices www.globalservicesmedia.com July 2011
  • 23. Small, Shorter Term Deals Setting New Trendsrole for service providers. Custers says, “Multi-country What Lies Ahead?process is a great entry point into multi-process “Outsourcing led HR transformation presentsHRO, and we consider it a major driver for growth in several challenges that enterprises must overcomethe overall HRO industry.” Enterprises are targeting to achieve desired results. Everest’s research indi-improvements in different strategic business areas, and cates that service provider selection, managingproviders that are able to offer this will have a visible the outsourcing partnership, stakeholder engage-advantage in the long run. New deals continue to be smaller in size Exhibit 3: ment and alignment, cultural integration, overall and duration New deals continue to be smaller in size and duration TCV of deals over time Average TCV (US$ million) 101 64 59 52 Average TCV = US$66 million 27 14 Upto 2005 2006 2007 2008 2009 Nov-10 Term of deal over time Average number of years 8 7 Average term = 6.1 years 6 5 4 3 Upto 2007 2008 2009 2010 Custers says, “we believe that together with multi- change management, and transition-related issuescountry payroll and learning, recruitment represents an are that have a TCV of more than challenges faced in such Note: Analysis does not include contracts some of the major US$1 billionimportant area of expansion for381 deals signed between 2005undertakings. Service providers and buyers both Sample size: HRO. However, we and November 2010 Source: Everest Research Institute (2011)strongly believe in process integration for HR.RPO can be need to be cognizant of these challenges and take 3deployed as a stand-alone process, to deal more efficiently appropriate measures to overcome these.” says Copyright © 2011, Everest Global, Inc. ERI-2011-X-X-XXXXwith the transactional part of recruitment.” Ranjan GS24 Globalservices www.globalservicesmedia.com July 2011
  • 24. Case Studies That Define Global Sourcing one STop reSourCehttp://microsites.globalservicesmedia.com/live
  • 25. Lanit-TERCOM Creates Comapping forA Joint Venture Between Area9 &Lanit-TercomThe Client: “I can see the service being of real use at a GlaNCEFounded in 2006 as a joint venture for those looking to tap into the valuablebetween Area9 and Lanit-Tercom: resource of other points of view while Client• Area9 (Denmark) is a provider of putting together projects, proposals and A Joint Venture Between Area9educational software solutions, and presentations.” and Lanit-TERCOM (Collaborative Online Presentationan expert in educational computer Planning - Michael Pick )simulators Service Provider• LANIT-TERCOM (a member of Lanit-Tercom Ltd “Comapping has been a cost effectiveLANIT group) is one of the lead- solution and has provided us the structure Service Provideding Russian outsourcing providers and overview that we need to run aof software development services. successful organization” Comapping(300+ employees and >uSD 10M (CopenFysioterai)in turnover). “I was so pleased to find a Company • The smart collaborative toolSituation Analysis: dedicated to thinking outside of the box • Intelligent Autofocus for project management (…) For theThe idea behind the project was to • From left to right organized mind first time, my team can think together!create an online collaborative tool map Comapping will be on my list of needs forfor mind mapping. This tool allows any project I run without a doubt. • No need of installationpeople to organize their ideas, notes (SERMONSPICE.com) • Intended for multiple usersand documents as a mind maps andthen share them with other usersand work on them together. The SucceSS MetricSprimary features of the applications In first 2 years the service has gained more than 10000 users. The usersinclude online use, live collabora- can access theirs maps from any computer connected to the Internet.tion, and support for large maps. users can also work with theirs maps offline by using a desktop client for the service. The solution can be utilized as a standalone server andSolution: integrated into a company network allowing for corporate usage. • Focus corporate knowledge in one place and transform it into usableRIA is a common trend nowadays. business intelligenceLanit-Tercom Inc. has been devel- • Stimulate collaborative thinking by increasing individual and groupoping Rich Internet Applications focussince early 2005, since the earliest • Increase communication effectiveness through a logical and clearstage of the concept. Lanit-Tercom structure for any contentteam delivered the unique web • Increase effectiveness of brainstorming sessions through Comapping´sapplication named Comapping unique collaboration feature• Fully Internet-based FOR MORE iNFORMATiON ON COMAPPiNg CONTACT TO MiCHAEL PLiskiN, TECHNiCAL DiRECTOR michael.pliskin@lanit-tercom.com
  • 26. CASe STuDIeSthe Power of Customer Advocacy Global Services features a rich repository of case studies from wide range of industries involving various technologies. A program with an integrated approach of promoting your case study to the largest community of outsourcing professionals through multiple delivery platforms and formats. EnTERhttp://microsites.globalservicesmedia.com/live Dont miss this opportunity! Book your Case Study now! Contact Niketa at niketac@cybermedia.co.in
  • 27. xperts by kumar Parakala, kPMg Human resources transformation – is outsourcing a solution? NassCoM estimates the global BPo industry spend to grow at a CaGr of 6.1 percent between 2009 to 2014Introduction The current scenario a shared services center or outsourcing The concept of human resources Today, as the global economy con- to a third-party service provider or a(HR) transformation or the exten- tinues to gain further stability, a large combination of these models. Mostsive restructuring of corporate human number of organizations worldwide of the organizations trying to trans-resources departments (HRD) took are expecting HR transformation by form HR have chosen outsourcinghold in the last decade or so. Prior to reducing their total cost of ownership as a major portion of their Humanthat HRD staff was seen as adminis- (TCO) for human resources. With Resource transformation strategy.trators managing the mundane and a focus on achieving this, strategicnot involved or responsible for stra- HR seems to have taken a back seat. Organizations will continuetegic decisions. However, as compe- Several HR surveys done so far have to invest heavily in HRtition increased so did the demand indicated that ‘Cost’ remains a top Outsourcing (HRO)for human assets and a need for priority that an enterprise seeks to NASSCOM estimates the globalattracting, retaining and growing the reduce in case of HR “too”. This could BPO industry spend to grow at abest talent. This required a change be achieved either through in-house CAGR of 6.1 percent between 2009in the mindset of the HRD and tak- cost reduction initiatives or setting-up to 2014, while the HRO spend whiching on more strategic rolebearing in mind the larger Figure 1: Worldwide HRO and Total BPO spendbusiness goals and objec-tives. Soon organizationsbegan to relook their HRdepartments and its func-tions. HR transformationtook root and HRDs startedgetting influenced by ideason modern HR practices ofHR specialists and gurus ofthe time like Dave ulrich.Shared services center (SSC)for HR, outsourcing HR,and HR business partners/leaders and other similarconcepts and models startedgetting implemented. The P = Projectedkey idea of HR transforma- Note: HRO spend includes spend on routine HR services and services delivered during the initialtion was to set HRD free design and implementation of the HR solution as well as on an ongoing basis. This includes serv-from the administrative tasks ices consulting, system integration, training and education, application outsourcing, etc.and focus on the strategic. Source: NASSCOM Strategic Review 201128 Globalservices www.globalservicesmedia.com July 2011
  • 28. HROis 43 percent of total BPO spend, will grow at a slightly lower CAGR of 4.8 percent during the same period to reacharound uSD 83.6 billion by 2014 and still contribute nearly the same percent to the total BPO spend pie. These numbers reaffirm the fact that organizations worldwide will continue to spend a significant portion of theirrevenues on managing their human resources. This also indicates the continuous commitment of enterprises worldwideto their HR outsourcing plans and the strategic intent behind it.Scope for Outsourcing Human Resource Services While human resource outsourcing continues to grow, it is still a very long way from full-scope HR outsourcing incomparison to what we have witnessed in IT outsourcing space. Figure 2: Potential scope of HR services outsourcing (illustrative list)Source: KPMG Research and Analysis What started more than a dec- Figure 3: Transactional vs. strategic HRO servicesade ago still continues today. Mostof the HRO contracts havetransactional HR workgetting outsourced,for example; payrollprocessing, employ-ee backgroundcheck, staffing,training, benefitsadministration,etc. Organizationschoose to retainmore strategicHR initiatives likeorganization develop-ment, change manage-ment, etc. in-house. A feworganizations hire externalconsultants to offer such services,but typically it’s a one-off case in the Source: KPMG Research and Analysis29 Globalservices www.globalservicesmedia.com July 2011
  • 29. Experts large extent, most of the met- rics chosen do not indicate any Global ServiceS HR transformation happening MaGazine in reality. This only indicates that purely outsourcing or set- Past Issues ting-up an HR SSC or hav- 2011 May The ing “n” number of HR busi- issue Promise of ness partners will not ensure HR transformation. iaaS New The ‘how-to’ of HR Opportu- Transformation – A nities in perspective Global It is quite evident that out- Sourcing:history of that organization rather than sourcing an organizations HR IaaS anda cyclical or regular activity. functions will certainly do the ground Analytics At a high level, today’s HR is work for focusing on strategic issuesseen as a more strategic department as the routine, low-end and trans- click Here To readseeking answers to issues relating to actional tasks will no longer eat-upmulti-cultural complexities, leader- HRDs time and energy. At the sameship development or change manage- time certain processes or systems must 2011 april The newment which are core to the organ- be paid attention or be in place to issue rules inization and hence the reasons for expect real HR transformation. Some bPokeeping them in-house. Probably pointers in this direction are men- Learnthey will always remain in-house and tioned below: about whatonly more mundane and transac- will drivetional processes will continue to be n Partner with the “right” service the BPOoutsourced. However, that’s not a provider - The degree of buyerconcern when it comes to using out- satisfaction in a HRO engagement sector insourcing for HR transformation. varies according to certain key this special attributes while evaluating ven- report.The Big Question: Are dors. These are- click Hereorganizations transforming l Per-employee costs To readtheir HR by outsourcing? l Staff Quality of service provider To my mind the top few reasons and their expertisewhy organizations outsource HR are; l Technology capabilities 2011 March contactthey get the opportunity to reduce Those companies which under- issue centercosts, get access to external HR exper- estimate these key attributes and industry:tise, ability to focus on strategic HR focus more on the overall cost savings wherepriorities, relieved of possible labor remain typically less than satisfied do Youregulatory issues, and a possibility of or dissatisfied with their HRO ven- Go Fromimproving service quality. However, dor, leading to spending time and Here?the following parameters are typi- energy in managing vendor relation- Contactcally measured by these organizations ship and service related issues. Service Centersto determine the HRO engagement providers’ offering a combination ofsuccess; operational efficiency, operat- competitive pricing and strong key and theing costs, service quality, employee attributes typically create long-term Challengesatisfaction, HR staff reduction or customer satisfaction. of Socialchanges, etc. It might sound clichéd but part- Media While a vast majority of business nering is the key. The idea is that if click Hereleaders will quote of having achieved the parties involved in the deal work To readtheir HR outsourcing objectives to a closely together as partners they both30 Globalservices www.globalservicesmedia.com July 2011
  • 30. HROcan learn in the process and forge a n top Management role crucial for 2011 February nextwin-win relationship, instead of the successful HR transformation issue & bestiterative negotiations thought to char- - ultimately the success of HR Practicesacterize a typical transactional HRO transformation lies with the top in Globalengagement. management’s involvement and Sourcing drive. They need to believe andn Establish HR transformation propagate the notion within their Thought- metrics - As the saying goes “what organization that talent leads to leading cannot be measured cannot be superior corporate performance. Practi- improved”. While this is true, it is At the same time understand that tioners’ virtually impossible to list out how HR is not the only one account- Viewpoint to measure HR transformation, able for employee and employee the ultimate metric being “how processes but it is every business Client much value is being created”? leader’s responsibility. priorities In the context of HR this could are shiftingmean- establishing HR metrics based Conclusion and thereon input, efficiency, effectiveness and Outsourcing to a third-party ven- is nooutcome based metrics, establishing dor or setting-up an HR SSC or any consistentthe correlation between HR and busi- other model will not guarantee suc-ness scorecards. Examples of such cessful HR transformation. It’s only correlationmetrics could be; ‘on-boarding vs. the beginning and demonstrates a of theattrition’, which could help in pri- change in the delivery mechanism benefitsoritizing HR resources to make maxi- while possibly allowing the HR to of out-mum business impact. Others like focus on strategic issues that will add sourcingrevenue per employee or profits per business value. What happens later to businessemployee could give a financial per- will be the crucial part to determine impact.spective to HR value creation. success. Management has to realize click Here its role in empowering the human To readn Redefine new HR roles with- resources department in taking itself in the retained HRD based on to a new level to realize transforma- 2011 January Utility business initiatives to serve - tion in the true sense. HR business issue compu- Due to off-loading of administra- partners should redefine their staff ting: The tive work, HR roles need to be roles to enable them to think and act reality redefined within the organization. in a more strategic sense in line with check But instead of doing that first, the business units’ top priorities. HR what is essential is to identify the transformation should be measured critical business needs and ini- with appropriate metrics so that effec- In the dec- tiatives of the business units and tiveness of the process is tracked and ade that then realign the HRD with suit- suitable and timely measures are taken went by, able roles and responsibilities that to make the process more robust. the out- will add maximum value to the HR transformation will change the sourcing unit and deliver business results. way organizations behave and deliver. industry HRD also needs to probably re- Success lies not in ‘in-sourcing’ or had many skill its retained staff or employ ‘outsourcing’ but in the synergies momen- new staff to suit the new and more between the transformation objective, tous shifts strategic roles. implementation and the key stake- click Here A failure to redefine HR roles will holders drive to achieve it. GS To readonly mean that the HR spends moretime on keeping a check on the out- Kumar Parakala is Head of IT Advisory,sourced service provider which will KPMG EMA & India and Chief Operating 2010 archivesultimately lead to the failure of the Officer, Advisory in KPMG in India. He is www.globalservicesmedia.transformation initiative. also a global head for Sourcing advisory. com/e-magazine31 Globalservices www.globalservicesmedia.com July 2011
  • 31. xperts By Nigel Hughes, global services Director, Compass Management Consulting the French Banking sector: sourcing strategies, trends, and observations French banks outsource about 20 percent of their it costs. approximately 80 percent of French banks now outsource facilities management, though not as part of a comprehen- sive it services agreement.F rench financial serv- management, though not as part of a In terms of metrics and perform- ices organization have in comprehensive IT services agreement. ance improvement strategies, the con- recent years undertaken BPO with the European banking cept of activity-based invoicing in some new and noteworthy sector has traditionally been limited internally-managed operations is gain-approaches to sourcing strategies, to HR and accounting. However, this ing increasing attention. By allowingincluding a focus on consolidat- is changing as close to 70 percent of each discrete activity to be assessed asing operations through captives, French banks now outsource check it would be with an external provider,and forming partnerships this trend suggestsboth within and outside the growing interest inbanking sector to manage outsourcing.growth Customer sup- My Paris-based Compass port activitiescolleague Guillaume (including call cent-Almeras recently compiled ers) are generally nei-a series of observations of ther outsourced norsourcing strategies among relocated, and dur-French banks. ing the past few years First off, from the French some banks haveperspective, outsourcing does undergone a wave ofnot necessarily mean a reloca- re-inshoring. Credittion of activities. When relo- handling is still high-cation does occur, it is often ly centralized, eventhrough a captive model. In within the majoraddition, sourcing strategies banking groups.tend to encompass a compre- In recent yearshensive range of objectives, large-scale partner-and don’t focus narrowly on ships have been usedcost reduction. to help French banks Overall, French banks outsource processing, with other functions such manage expansion. Four specificabout 20 percent of their IT costs. as securities and electronic banking examples stand out:Approximately 80 percent of French following suit, as evidenced by a joint In 2010, Crédit Agricole SA tookbanks now outsource facilities BNP Paribas and Natixis platform. over asset management activities from32 Globalservices www.globalservicesmedia.com July 2011
  • 32. The French Banking SectorSociété Générale through the creation In 2002, Société Générale, through Cetelem, a BNP Paribasof Amundi, a new joint subsidiary that formed an equal partnership with product.is 75 percent owned by Crédit Agricole Axa to handle employee saving Lacking a competitive advantageSA. In addition, Crédit Agricole SA plans through a common platform. in a particular offering, banks cantook over HSBC’s deposit activities. In 2009, Société Générale entered purchase that offering from a compet- Newcomer Banque Postale has into a partnership with the Banque itor and sell it through their network,used joint ventures as a core element Postale for consumer loans, at the under a custom brand name, or underof its development strategy in key same time handing over European the competitor’s name.sectors such as consumer loans, casu- and Asian asset management to Assuming these trends presage analty insurance, and health insurance. Amundi, in which they own just a 25 increase in merger activity, the new(LBP Financement, 65% owned), percent share. Together with Crédit entities will likely turn to outsourcingdamage insurance (LBP Assurance Agricole CIB, Société Générale set to reduce costs within the combinedIARD, with Groupama), health up a 50/50 joint venture in the organizations.insurance (Efprimo with Mutuelle Newedge brokerage. A final observation: over the pastGénérale). New ventures with LBP Finally, the recent financial crisis decade, French banks have fallenFinancement, LBP Assurance IARD saw Banques Populaires and Caisses behind their global peers in terms(with Groupama), and Efprimo d’Epargne enter into a joint venture of operational efficiency and pro-(with Mutuelle Generale) comple- through the co-purchase of a com- ductivity. The main factors driv-ment Banque Postale’s longstanding mon investment banking subsidary ing this gap have been exceedinglylife insurance offering partnership Natixis, thus forming the group high staffing levels, including a highwith CNP Assurance. With Société BPCE. proportion of managerial staff, andGénérale, LBP also has a shared elec- If this pattern continues, the a lack of process automation andtronic banking platform (Transactis). French banking sector will likely be standardization.Through these initiatives, Banque transformed over the next decade, as a Based on these findings, it can bePostale is leveraging partnerships to clear distinction will emerge between concluded that significant operationaloffer customers a wide range of serv- the production and distribution of improvement opportunities existice offerings, rather than developing services. within the French banking sector. GSthem all in-house. While this model In addition, banks will likely offerhas been used around the world, it is customers a range of products devel- Nigel Hughes is Director of Global Servicenew to France. Interestingly, Société oped by competitors. An example of Development at Compass Management Con-Générale has started to adopt a similar this trend already exists, with Caisses sulting. Bill Huber is Partner and Director ofmodel for some of its activities. d’Epargne offering consumer loans CPO Services at TPI.33 Globalservices www.globalservicesmedia.com February 2011