Ranganatha Maligi, Consultant, Capco
Although reduction in operating costs is not necessarily the first reason to outsource, practically every such decision should result in cost savings. Yet some companies (or departments within companies) actually resist outsourcing, believing that they can do it better and more cheaply in-house. In a few cases, this may be true. But in most, this thought process is not based on a complete and accurate analysis of the facts.
Direct costs:
When considering outsourcing parts, or the entirety, of any business process the following associated costs need to be taken into account: salaries, benefits, training/education, specialized software, travel, phone charges, depreciation/amortization, mail costs and postage, MIS support, office supplies, equipment, management time, information costs, and occupancy charges. It is essential to understand these costs in the context of the activities which make up the function. Unfortunately, most organizations capture costs on a cost element basis (salaries, benefits, rent, and depreciation) rather than on a process or activity basis. Without good knowledge of the process cost, it is not possible to compare the value of an external provider of the service.
The process of determining activity-based costs involves five steps:
1. Identifying all activities which make up the function.
2. Grouping similar activities (10-15 with no one activity representing more than 20% of the total cost).
3. Determining the activity drivers. For example, labor (% of people's time used by an activity) and non-labor drivers (% of office space utilized or number of machine hours required for the activity).
4. Determining the costs of the activity drivers.
5. Producing the list of costs related to each activity. For a truly complete understanding, anticipated future costs of maintaining the process in-house also need to be calculated.
Indirect costs:
Besides the direct costs involved, there are other, cost-related benefits of outsourcing to be considered.
Turn fixed costs into variable costs - For most companies, employee related costs and the associated overhead are relatively fixed, regardless of product or service demand. This can be very costly during slow sales periods. Outsourcing turns these fixed costs into variable costs, as the providers have greater economies of scale and thus can price for variable demand.
Reduce investments in assets - There are current expenses that benefit future years, like investments in training, other employee development, and transformation/re-engineering programs. Outsourcing effectively transfers these ongoing investments to the provider.
Improve cash flows - Future growth is always dependent upon adequate cash flows. Outsourcing some or all of the receivable management functions can assure a company of tying receivable resources directly to sales volumes. Companies experiencing strong growth cannot afford to have cash tied up in receivables while new credit and collection staff take 3-6 months getting up to speed.
Once you have determined your process costs, comparison to industry benchmarks can give you an idea about how you are doing in relation to other companies, and how the provider's quotations stack up. A recent article on BPO quotes a Fortune 500 firm which benchmarked its back-office process against its competitors. The resulting variances were 50-75% in process costs! Obviously given this kind of differentiation, efficient back-office operations can provide significant cost advantages.
Evaluating outsourcing as a strategic management tool requires a complete cost analysis. The following worksheet can assist in the completion of a true cost analysis:
In-house:
Activity costs, inclusive of labor and overhead
+ Raw Materials, inclusive of shipping, storage, handling, and overhead
+ Cost of invested capital
+ Estimated impact of outsourcing on costs and revenue
= Total cost of performing activity in-house
Versus
Outsource:
Proposal for outsourcing
+ Anticipated future pricing adjustments
+ Additional one time costs of outsourcing
+ Additional ongoing costs of outsourcing
= Total cost of outsourcing activity
The value proposition of outsourcing creates a powerful case to leverage this tool not only as a stopgap measure, but also as part of the overall management strategy.
The drive toward outsourcing is "irreversible," according to an Outsourcing Center BPO Special Report, and will have long-term ramifications of: (1) forcing companies to use process-based (activity-based) costing models and (2) eradicating 'cost centers' forever.
1/04/2007
Expand your outsourcing horizons
The advantages of outsourcing technology requirements that are not core to a business are familiar. Many organisations need to reduce back-office costs and improve overall operating efficiencies to maintain a competitive edge.
However, media coverage of such deals may leave industry observers with the impression that they are the preserve of large, multi-national corporations with the IT budgets to match.
Ironically, smaller or mid-sized firms that have less IT expertise or budgets, but with turnovers as large as £200m, may actually have a more compelling business case for evaluating outsourcing's ability to initiate cost savings, provide process efficiency and the freedom to innovate. But that does not just include outsourcing the IT, but the people and processes that IT supports.
Internal administrative departments, such as HR, finance and accounting, procurement and customer call centres are increasingly being outsourced to third parties.
According to analyst firm Datamonitor, the business process outsourcing market is the single fastest growing area of the IT services sector. Growing at a rate of 8% annually, it is estimated to be worth £214bn today and is predicted to grow to almost £375bn by 2008.
John Willmott, chief executive of UK-based research company Nelson Hall, said, "Over the past nine months business process outsourcing has accounted for 38% of outsourcing activity in Europe, with IT outsourcing contributing 62%. So [business process-led outsourcing] is not quite dominant yet. The principal sectors remain financial services and government, though we are seeing increased HR and finance and accounting outsourcing across other commercial sectors."
But he said there was very little activity in the SME business process outsourcing space at present. "The market is very immature in regards to SME offerings. It depends how you define SME, but [this market sector] probably still only makes up less than 10% of the business process outsourcing market in general at this stage. Largely local accountants and payroll services companies serve this market. An example of a payroll company serving SMEs is MidlandHR."
Other companies that can be put in this space include Go4BPO, a provider of mortgage loan, insurance claim and outsourced data entry and transaction processing services in the UK, US and India. And Middlesex-based Damco Solutions specialises in document and data processing, content management, and legal support services for customers as diverse as local councils, legal or financial services firms and wood products manufacturers.
Another example is financial systems and outsourcing specialist BancTec. It recently announced the release of The Mortgageweb, a new automated data exchange system designed specifically for the mortgage market to automate electronic data exchange relating to the mortgage application process for financial services companies.
Rob Liddell, BancTec new product development director, said, "Our research indicates that the majority of lenders and packagers cite manual processes and data re-keying as being highly detrimental to the efficient processing of mortgage applications."
IT service providers, management consultancies and specialist business process outsourcing suppliers are all positioning themselves to gain a share of this growing market, which is increasingly merging the traditional areas of IT services and specialist business process management services.
This can make it harder for an SME to find the right provider for business process outsourcing services. Some specialist services, like payroll, are even being offered by banks as part of small business banking packages.
Willmott said, "Most SMEs want up-to-date technology, and actually, the need to refresh or update systems, and hence processes, is a more important driver in the SME market than for multinationals.
"However, the technology needs to be relatively straightforward to use and relatively low-cost to implement. It also needs to be highly modular so that it can be tailored to the specific needs of the SME."
The needs of an SME are no less specific than a large enterprise when it comes to business-to-business process management. "Suppliers have always tried to provide standard services, and SMEs are no different from any other organisation in needing suppliers to understand them and their place in their industry, as well as provide an account manager who will match the supplier's capabilities with the client's requirements," said Willmott.
"The client needs to feel special and as though the service is designed with them in mind, even if they are a small organisation," he said.
He advocated services that simultaneously offer cost reduction, service improvement and process improvement or innovation. "In general, business process outsourcing is an operations rather than technology player, so IT capability is less important than operational capability," he said.
"Nonetheless, most offerings need to be underpinned by good data capture, imaging, workflow or document distribution, and agent management technology. After that it depends on the area being outsourced."
Independent industry analyst, Derek Miers, said that from a technology perspective, SMEs are most likely to struggle to handle the choreography and orchestration of their electronic data interchange business processes. Basic knowledge of the processes involved are desirable, but not essential.
When outsourcing such core business functions, Miers said companies could consider adding to the in-house technology infrastructure with tools that can help better orchestrate the business processes being outsourced. SMEs should also monitor the service provider's choreography of them according to the service level agreement and pricing conditions of the business process outsourcing contract.
"There are those packages, like Peoplecube, N8 and Digital Fuel, which help automate and monitor workflow administration," said Miers. "They help suppliers and users in modelling the services and reporting on them. A business process outsourcing company may be providing services to 28 different companies, but needs to charge them at a granular level."
Process notation and modelling standards could go a long way to opening up the business process outsourcing market, according to Miers. "Companies should ask about the notion of process modelling protocols like enterprise data fabric, which allows for outsourcing outside the business firewall," he said.
"These standards are all about how an organisation defines the boundaries of how it interacts with other suppliers, like outsourcers', systems. Take a fresh approach to how you understand your processes before outsourcing them."
Peter Redshaw, Gartner investment services research director, said toolsets occupy only a thin slice of the business process outsourcing technology stack, and to a very low level of granularity, which need not necessarily have an impact on an SME's decision to outsource.
"If the brief is business process outsourcing, that might lead to some level of understanding of business process management technology, which is all about methodology, tools and standards. But a deal will essentially be about process workflow, which is a very specific part of business process management," he said.
Rather than pursuing a deeper understanding of in-house technology investment, Redshaw urged a pragmatic approach to business process management technology. SMEs should ensure that the benefits available offset the inevitable extra management and governance requirements involved in running a successful business process outsourcing contract.
"These are often white label services that deal with high-volume, low-value transactions. And for small firms, where it can be difficult to get economies of scale, it does not add any value to keep tweaking code to stay ahead of regulations. These deals can give access to offshore resources too," he said.
Allan Cook, director of IT strategy and outsourcing consultancy Akubra, agreed. According to Cook, the real challenge is getting the SLAs and exit strategy right.
"Setting up and automating the processes themselves comes from the workflow and business process management engines that have orchestration technologies built-in as a commodity. Focus less on the technology and more on the enablement of SLAs and contract governance."
Cook pointed out process technologies used to deliver business specific applications with a web front-end form the basis of a majority of functional and business specific outsourcing offerings.
"The outsourcers are exposing as much integration and specialisation as web services as they possibly can, to make the service as simple to use and attractive as possible," he said.
"There are some industry areas where older methods of integration are more linked to the type of technologies used on the back end. In financial services, for example, applications are probably built on mainframe technology.
"Any business process outsourcing service should be able to display the process exchange inside a browser and handle authentication," said Cook.
Cook pointed out that the design of the contract is actually much harder than the design of the technology. "When considering whether to outsource a process, it is more about the risk associated with outsourcing and the cost than what technology is involved - interoperability and workflow have been around for some time."
Outsourcing, regardless of what size of company, is now less about technology and more about service and cost. "It is not a technology problem you are solving, it is a business one. The technology is just there to plug the companies together now," said Cook.
Finding the right service provider is the most important consideration. And in a rapidly expanding market, where large organisations have laid the groundwork for exposing some heavy technical processes to non-technical users using web standards, the SME's choice is likely to be greater than ever before.
However, media coverage of such deals may leave industry observers with the impression that they are the preserve of large, multi-national corporations with the IT budgets to match.
Ironically, smaller or mid-sized firms that have less IT expertise or budgets, but with turnovers as large as £200m, may actually have a more compelling business case for evaluating outsourcing's ability to initiate cost savings, provide process efficiency and the freedom to innovate. But that does not just include outsourcing the IT, but the people and processes that IT supports.
Internal administrative departments, such as HR, finance and accounting, procurement and customer call centres are increasingly being outsourced to third parties.
According to analyst firm Datamonitor, the business process outsourcing market is the single fastest growing area of the IT services sector. Growing at a rate of 8% annually, it is estimated to be worth £214bn today and is predicted to grow to almost £375bn by 2008.
John Willmott, chief executive of UK-based research company Nelson Hall, said, "Over the past nine months business process outsourcing has accounted for 38% of outsourcing activity in Europe, with IT outsourcing contributing 62%. So [business process-led outsourcing] is not quite dominant yet. The principal sectors remain financial services and government, though we are seeing increased HR and finance and accounting outsourcing across other commercial sectors."
But he said there was very little activity in the SME business process outsourcing space at present. "The market is very immature in regards to SME offerings. It depends how you define SME, but [this market sector] probably still only makes up less than 10% of the business process outsourcing market in general at this stage. Largely local accountants and payroll services companies serve this market. An example of a payroll company serving SMEs is MidlandHR."
Other companies that can be put in this space include Go4BPO, a provider of mortgage loan, insurance claim and outsourced data entry and transaction processing services in the UK, US and India. And Middlesex-based Damco Solutions specialises in document and data processing, content management, and legal support services for customers as diverse as local councils, legal or financial services firms and wood products manufacturers.
Another example is financial systems and outsourcing specialist BancTec. It recently announced the release of The Mortgageweb, a new automated data exchange system designed specifically for the mortgage market to automate electronic data exchange relating to the mortgage application process for financial services companies.
Rob Liddell, BancTec new product development director, said, "Our research indicates that the majority of lenders and packagers cite manual processes and data re-keying as being highly detrimental to the efficient processing of mortgage applications."
IT service providers, management consultancies and specialist business process outsourcing suppliers are all positioning themselves to gain a share of this growing market, which is increasingly merging the traditional areas of IT services and specialist business process management services.
This can make it harder for an SME to find the right provider for business process outsourcing services. Some specialist services, like payroll, are even being offered by banks as part of small business banking packages.
Willmott said, "Most SMEs want up-to-date technology, and actually, the need to refresh or update systems, and hence processes, is a more important driver in the SME market than for multinationals.
"However, the technology needs to be relatively straightforward to use and relatively low-cost to implement. It also needs to be highly modular so that it can be tailored to the specific needs of the SME."
The needs of an SME are no less specific than a large enterprise when it comes to business-to-business process management. "Suppliers have always tried to provide standard services, and SMEs are no different from any other organisation in needing suppliers to understand them and their place in their industry, as well as provide an account manager who will match the supplier's capabilities with the client's requirements," said Willmott.
"The client needs to feel special and as though the service is designed with them in mind, even if they are a small organisation," he said.
He advocated services that simultaneously offer cost reduction, service improvement and process improvement or innovation. "In general, business process outsourcing is an operations rather than technology player, so IT capability is less important than operational capability," he said.
"Nonetheless, most offerings need to be underpinned by good data capture, imaging, workflow or document distribution, and agent management technology. After that it depends on the area being outsourced."
Independent industry analyst, Derek Miers, said that from a technology perspective, SMEs are most likely to struggle to handle the choreography and orchestration of their electronic data interchange business processes. Basic knowledge of the processes involved are desirable, but not essential.
When outsourcing such core business functions, Miers said companies could consider adding to the in-house technology infrastructure with tools that can help better orchestrate the business processes being outsourced. SMEs should also monitor the service provider's choreography of them according to the service level agreement and pricing conditions of the business process outsourcing contract.
"There are those packages, like Peoplecube, N8 and Digital Fuel, which help automate and monitor workflow administration," said Miers. "They help suppliers and users in modelling the services and reporting on them. A business process outsourcing company may be providing services to 28 different companies, but needs to charge them at a granular level."
Process notation and modelling standards could go a long way to opening up the business process outsourcing market, according to Miers. "Companies should ask about the notion of process modelling protocols like enterprise data fabric, which allows for outsourcing outside the business firewall," he said.
"These standards are all about how an organisation defines the boundaries of how it interacts with other suppliers, like outsourcers', systems. Take a fresh approach to how you understand your processes before outsourcing them."
Peter Redshaw, Gartner investment services research director, said toolsets occupy only a thin slice of the business process outsourcing technology stack, and to a very low level of granularity, which need not necessarily have an impact on an SME's decision to outsource.
"If the brief is business process outsourcing, that might lead to some level of understanding of business process management technology, which is all about methodology, tools and standards. But a deal will essentially be about process workflow, which is a very specific part of business process management," he said.
Rather than pursuing a deeper understanding of in-house technology investment, Redshaw urged a pragmatic approach to business process management technology. SMEs should ensure that the benefits available offset the inevitable extra management and governance requirements involved in running a successful business process outsourcing contract.
"These are often white label services that deal with high-volume, low-value transactions. And for small firms, where it can be difficult to get economies of scale, it does not add any value to keep tweaking code to stay ahead of regulations. These deals can give access to offshore resources too," he said.
Allan Cook, director of IT strategy and outsourcing consultancy Akubra, agreed. According to Cook, the real challenge is getting the SLAs and exit strategy right.
"Setting up and automating the processes themselves comes from the workflow and business process management engines that have orchestration technologies built-in as a commodity. Focus less on the technology and more on the enablement of SLAs and contract governance."
Cook pointed out process technologies used to deliver business specific applications with a web front-end form the basis of a majority of functional and business specific outsourcing offerings.
"The outsourcers are exposing as much integration and specialisation as web services as they possibly can, to make the service as simple to use and attractive as possible," he said.
"There are some industry areas where older methods of integration are more linked to the type of technologies used on the back end. In financial services, for example, applications are probably built on mainframe technology.
"Any business process outsourcing service should be able to display the process exchange inside a browser and handle authentication," said Cook.
Cook pointed out that the design of the contract is actually much harder than the design of the technology. "When considering whether to outsource a process, it is more about the risk associated with outsourcing and the cost than what technology is involved - interoperability and workflow have been around for some time."
Outsourcing, regardless of what size of company, is now less about technology and more about service and cost. "It is not a technology problem you are solving, it is a business one. The technology is just there to plug the companies together now," said Cook.
Finding the right service provider is the most important consideration. And in a rapidly expanding market, where large organisations have laid the groundwork for exposing some heavy technical processes to non-technical users using web standards, the SME's choice is likely to be greater than ever before.
Chinese tech park woos Indian IT, BPO players
Even as the visit of the Chinese President preoccupied Indian officialdom in the New Delhi, Indian and Chinese technology teams have been meeting in Mumbai and Bangalore to explore areas of cooperation.
A team from the Suzhou Industrial Park (SIP), based in China's garden city (80 km inland from Shanghai), has been showcasing its extensive infrastructure for high tech development and manufacturing.
The Park is China's number one target of foreign investment and is already home to over 2,500 registered companies, spread across electronic hardware, software services and bio-sciences. The biggest success for the team last week was the three-way agreement inked with the Gurgaon-based Quatrro BPO Solutions (headed by India's outsourcing pioneer Raman Roy), SIP and one of the Park's major `tenants' Suzsoft.
The deal will start joint studies aimed at promoting the business processing industry in China, specifically a BPO industry in SIP.
Business philosophy
Speaking to The Hindu on the sidelines of the SIP showcase in Bangalore, Suzsoft CEO James Tong said, "it is our business philosophy to partner with the best. We are excited to be associated with Mr. Raman and his Quatrro team.''
Ma Ming, SIP Administrative Committee Chairman, said, "Mr. Raman and his team are indeed the pioneers of BPO and SIP. Suzhou is the leader in IT and hi-tech services in China.
"My role, as a representative of the Chinese Government in this three party joint MoU, is to provide the platform and the `catalyst incentives' necessary for BPO to flourish in China.''
Quatrro will not be the first Indian player to partner with SIP. N. Murali Mohan, Vice President of the Bangalore-based IIHT Ltd explained that the company was present in Suzhou as part of its initiative jointly with Broadengate, a technology outsourcing company in Shenzhen, to provide training and services in technology infrastructure management.
Suzsoft's own BPO operations in SIP are headed by Sanjeev Joshi, who said over 800 Indian students in Suzhou studying at the medical college there had already created a mini India in one of China's fastest growing second tier IT destinations.
A team from the Suzhou Industrial Park (SIP), based in China's garden city (80 km inland from Shanghai), has been showcasing its extensive infrastructure for high tech development and manufacturing.
The Park is China's number one target of foreign investment and is already home to over 2,500 registered companies, spread across electronic hardware, software services and bio-sciences. The biggest success for the team last week was the three-way agreement inked with the Gurgaon-based Quatrro BPO Solutions (headed by India's outsourcing pioneer Raman Roy), SIP and one of the Park's major `tenants' Suzsoft.
The deal will start joint studies aimed at promoting the business processing industry in China, specifically a BPO industry in SIP.
Business philosophy
Speaking to The Hindu on the sidelines of the SIP showcase in Bangalore, Suzsoft CEO James Tong said, "it is our business philosophy to partner with the best. We are excited to be associated with Mr. Raman and his Quatrro team.''
Ma Ming, SIP Administrative Committee Chairman, said, "Mr. Raman and his team are indeed the pioneers of BPO and SIP. Suzhou is the leader in IT and hi-tech services in China.
"My role, as a representative of the Chinese Government in this three party joint MoU, is to provide the platform and the `catalyst incentives' necessary for BPO to flourish in China.''
Quatrro will not be the first Indian player to partner with SIP. N. Murali Mohan, Vice President of the Bangalore-based IIHT Ltd explained that the company was present in Suzhou as part of its initiative jointly with Broadengate, a technology outsourcing company in Shenzhen, to provide training and services in technology infrastructure management.
Suzsoft's own BPO operations in SIP are headed by Sanjeev Joshi, who said over 800 Indian students in Suzhou studying at the medical college there had already created a mini India in one of China's fastest growing second tier IT destinations.
The Top 21 Enterprise HRO Providers
Our annual list of the top provider's of the year: Who made it on and who dropped out of sight?
By Margo Alderton & Jay Whitehead
Growing, growing, grown: Last years list of 23 became this years 21. All the incumbents got bigger, mostly by acquisition. And the newcomersCGI, Adecco, and Manpowerare huge companies in their own right. The Tier 1 large-account game is becoming the Land of the Big. And those mid-market players are not doing too badly either.
Each year, we publish our annual list of the top enterprise HRO providersthose providers who offer end-to-end HRO services. And each year, the names are very familiar to those in the industry. But this years list marks a number of interesting changes.
Due to the flurry of M&A activity that took place in the market starting in mid 2004, youll see a number of changes on the list. Starting with Hewitt Associates acquisition of HRO pioneer Exult, followed not soon after by EDS and Towers Perrins joint venture to form ExcellerateHRO, and the most recently announced acquisition of Mellon HR&IS by ACS, youll note that the number of providers on the 2005 list has shrunk, although the range of services offered has actually expanded, and the total contract volume has ballooned.
We predict this M&A activity will continue in 2004. While there will be some dislocation, we consider this a marvelous example of a favorite private equity investor termcreative destruction. Sure, partnering among the larger enterprise-level (Tier 1) HRO providers is winnowing down the list of names. But we are also seeing European players such as ARINSO ramping up their North American operations. And there is some new blood as well. Witness CGI Groups entry into the market with its City of Montreal account (sounds like CGI has taken a page from ARINSOs book and is
making the migration from IT to HRO). And check out the global staffing players Manpower and Adecco, who are now both offering new services and expanding their reach into the North American market.
So on to the list of the new and improved top enterprise providers of 2005.
Criteria for the list: Providers must have at least one documented end-to-end HRO client,1,000 employees or larger, and be able to provide national service. Providers are listed in alphabetical order.
Top Enterprise HRO Providers
Accenture HR Services accenture.com/hrservices
Examples of End-to-end Clients: Best Buy, TSA, BT (second-generation), Sandvik, City of Copenhagen
HRO Services: Customer Contact Services, Exit Services, Information Services, Learning Services, HR Advisory Services, Pay & Benefits Services, Performance Services, Resourcing Services
Description: This provider offers customized, integrated HR solutions that span the entire employee lifecyclefrom recruitment to retirementfor larger enterprises. They also have a more standardized, integrated offering for medium-sized companies and individual services available a la carte. 2005 marked the signing of one of the biggest second-generation HRO contracts, as Accenture client BT re-signed a 10 year HRO contract with expanded global services.
ACS (Global HR Solutions) acs-inc.com/hro
Examples of End-to-end Clients: Chubb, Delta Airlines, Motorola, Goodyear, General Motors Europe
HRO Services: Benefits Administration, Compensation, Core Process Redesign, Employee Assistance Program, Employee Service Center, HR Information Systems and Employee Portal, Learning Services, Payroll, Performance Management, Relocation, Selection and Assessment, Staffing (contd on next page)
Description: One of the many M&A players in the HRO market this year, ACS recently acquired Mellon HR&IS to expand upon its benefits and consulting capabilities. Providing end-to-end BPO solutions to commercial and government clients worldwide, ACS offers a suite of transactional, professional, and
advisory HRO services.
Adecco (Global HR Solutions) adecco.com
Examples of End-to-end Clients: confidential
HRO Services: Payroll, Recruiting, Staffing, Training, HRIS, Employee Service Center, EAP
Description: With 125,000 clients for its global staffing business, Adecco also operates under additional brands such as Lee Hecht Harrison (outplacement) and Ajilon (specialized professional staffing).
Administaff administaff.com
Examples of End-to-end Clients: Access Worldwide, Fresh Success
HRO Services: Employment Administration (payroll, payroll taxes), Benefits Administration, Recruiting and Selection, Performance Management, Training and Development, Government Compliance, Employer Liability Management, Owner Support
Description: This national PEO has expanded beyond the small enterprise market to providing full-service HR support to medium-sized enterprises. With
multiple regional service centers and sales offices nationwide, Administaff was listed among Americas Most Admired Companies for four years in
Fortune magazine.
ADP (Employer Services) adp.com
Examples of End-to-end Clients: Tyco, IHG
HRO Services: Payroll, Benefits Administration, HR Information Management, 401(k)/Retirement Services, Screening and Selection Services, Expense Management, Time and Labor Management, Tax and Compliance Management
Description: Known for their data processing and payroll services, ADP also provides full-service, comprehensive HR services including traditional and Internet-based outsourcing solutions to employers in more than 26 countries. In addition to payroll solutions and tax returns, ADP also offers complete outsourcing services through ADP TotalSource, a PEO.
Advantec advantecHR.com
Examples of End-to-end Clients: Coral Beach Hotels & Clubs, Crown Auto
HRO Services: Benefits, Payroll, Recruitment, Risk Management, Human Capital Management Consulting
Description: Another PEO that is reaching into the mid market, this company provides a range of HR services to clients nationwide. Services include a strong focus on HR consulting and ongoing training as well as innovative technology.
Aon Consulting aon.com
Examples of End-to-end Clients: AT&T
HRO Services: Benefits, Communication, Compensation, Expatriate, Investment and Management Consulting, Retirement
Description: Aon Consultings global network of resources delivers solutions in the areas of employee benefits, compensation and rewards, communication, HRO, process redesign, and talent selection and development. With a recent reorganization of its HR outsourcing group, Aon hopes to better integrate its IT and consulting experience and leverage its experience in human capital throughout the upcoming quarters.
ARINSO International arinso.com
Examples of End-to-end Clients: GM Europe (partner with ACS), Kone, Schindler, Finnair, Elia
HRO Services: Consulting (business analysis, process improvement, transformation management, service-center design); Integration (HRMS, e-HR, enterprise portals); Operations (BPO, application maintenance, infrastructure management, payroll services); Health and Wealth Benefits
Description: This European IT giant has expanded to offer HRO services to more than 100 companies in more than 20 countries. Its recent signing of several U.S. HRO contracts has made it an up-and-coming player in the North American Market.
Ceridian ceridian.com
Examples of End-to-end Clients: Comerica Inc, Johns Manville, FMC Corporation, Symetra Financial, Sony Ericsson, Unisource
HRO Services: Staffing, HR Administration, Payroll and Compensation, Compliance, Employee Effectiveness, Benefits Administration, HRMS
Description: Providing HR solutions for employers in the United States, Canada, and Europe and serving almost 18 percent of the U.S. workforce in some capacity. Ceridian Small Business Solutions unit offers fast, Internet-based HR solutions for smaller businesses and Ceridian Centrefile offers HRO services in the United Kingdom and Europe.
CGI Group cgi.com
Example of End-to-end Clients: City of Montreal
HRO Services: HR Administration, Payroll, Time Management, Training & Development
Description: One of the newest players in the end-to-end HRO field, when CGI Group signed on the Montreal account, they offered a full suite of HR and payroll
services to more than 25,000 employees.
CheckPoint HR checkpointhr.com
Examples of End-to-end Clients: American Stock Exchange
HRO Services: Payroll, Benefits, HRMS, Recruiting and Staffing, Training, Compliance
Description: Targeting small and mid-sized companies, CheckPoint HR provides HR and payroll outsourcing through both Web-based HRMS and personalized
customer service.
Convergys (Employee Care) convergys.com
Examples of End-to-end Clients: State of Texas, State of Florida
HRO Services: Benefits, Payroll, Administration, Recruiting and Staffing, Learning and Development
Description: With two decades of outsourcing experience, this company offers full-service HRO to almost 600 clients in more than 60 different countries. Through their 50 service centers worldwide, they serve more than 2.5 million employees and 7 million retirees.
EADS eads.com
Examples of End-to-end Clients: Airbus
HRO Services: Business Transformation Outsourcing (payroll, training, time management, insurance and pension plans, recruitment and administration) and Application Management (applications maintenance and management of HRIS)
Description: In 2004, The European Aeronautic Defence and Space Company (EADS), a global leader in aerospace, defense, and related services, announced a joint venture with IBM to provide HR services. The venture, called HR Technologies and Management, or HRTM, launched with 100 employees and 35 business customers, including Airbus.
ExcellerateHRO (formerly EDS and Towers Perrin) excelleratehro.com
Examples of End-to-end Clients: CIBC, Infineon
HRO Services: Payroll, Training, Recruitment, Employee Relationship Management, Relocation and Expatriation, Knowledge Management and Reporting, Benefits Administration, HR Consulting
Description: One of the movers and shakers of 2004, ExcellerateHRO is a joint venture between EDS (which owns 85 percent) and Towers Perrin (which owns 15 percent). The new company expands upon EDS broad portfolio of business and technology solutions with Towers Perrins additional benefits and consulting experience.
Fidelity Employer Services Company (FESCo) fidelity.com
Examples of End-to-end Clients: Bank of America, ABB
HRO Services: HR Administration, Payroll, Defined Benefit/Contribution, Health and Welfare, Compensation, Consulting
Description: Offers a comprehensive suite of HR and benefits outsourcing to corporations around the world with more than 9,000 employees in six regional locations across the country.
Gevity gevityhr.com
Examples of End-to-end Clients: ComUnity Lending
HRO Services: HRIS, HR Administration, Recruiting and Staffing, Compensation and Pay
Description: Continuing their growth with the acquisition of other PEOs such as Epix, Gevity offers integrated HRO solutions to small and medium-sized businesses in the United States.
Hewitt Associates hewitt.com
Examples of End-to-end Clients: PepsiCo, Duke Energy, Capgemini, Sun Microsystems, Sony, BP, Prudential
HRO Services: HR Administration, Payroll, Benefits, Retirement and Financial Management, Recruiting, Training and Development
Description: Leaders of the flurry of M&A activity in 2004, when Hewitt Associates acquired HRO service provider Exult this year, they not only added a number of brand name clients to their roster, they also gave their traditionally consulting-focused services a strong dose of pure-play BPO power. Since the announcement, Hewitt has signed on a number of brand-name clients to a list that already included more than half of the Fortune 500 companies.
IBM Global Business Services ibm.com
Examples of End-to-end Clients: Procter & Gamble
HRO Services: Payroll, Benefits Administration, Compensation, Expatriate and Relocation, HRIT
Description: Although the HRO industry is still awaiting IBMs announcement of an additional end-to-end HRO deal since their signing of Procter & Gamble, Big Blue has been making big strides in defining themselves as a leader in the BPO (or BTO, Business Transformation Outsourcing as IBM defines it) market. Another company participating in the M&A mating game, this year marked IBMs acquisition of other BPO providers, such as FAO provider Equitant.
Manpower manpower.com
Examples of End-to-end Clients: Toyota Motor Manufacturing Kentucky, Suntrust Online
HRO Services: Staffing, Assessment and Training, On-site Workforce Management, Outplacement, BPO
Description: A global leader in employment services with offices in more than 65 countries, although best known as a staffing services provider, Manpower also offers full-service HRO to a number of clients. The company operates under additional brand names of Right Management Consultants, Jefferson Wells, Elan, Brook Street, and Empower.
RSM McGladrey Employer Services rsmmcgladrey.com
Examples of End-to-end Clients: BBB Services Corp
HRO Services: Benefits Brokerage and Administration, Payroll, HR Administration
Description: Although known for their strong focus on benefits services (due in part to the 2004 acquisiton of MyBenefitSource), RSM McGladrey also offers
end-to-end HRO services to hundreds of clients nationwide.
Xchanging xchanging.com
Examples of End-to-end Clients: BAE Systems
HRO Services: Recruitment, Payroll, Training and Development, Outplacement, Benefits, Compensation, Incentives
Description: Created through the spin off of BAE Systems in 1998, this U.K. company offers BPO, FAO, ITO, and HRO. Although BAE remains its only end-to-end HRO client, it offers a number of other BPO services to clients as renowned as the London Stock Exchange, Lloyds, and Boots.
By Margo Alderton & Jay Whitehead
Growing, growing, grown: Last years list of 23 became this years 21. All the incumbents got bigger, mostly by acquisition. And the newcomersCGI, Adecco, and Manpowerare huge companies in their own right. The Tier 1 large-account game is becoming the Land of the Big. And those mid-market players are not doing too badly either.
Each year, we publish our annual list of the top enterprise HRO providersthose providers who offer end-to-end HRO services. And each year, the names are very familiar to those in the industry. But this years list marks a number of interesting changes.
Due to the flurry of M&A activity that took place in the market starting in mid 2004, youll see a number of changes on the list. Starting with Hewitt Associates acquisition of HRO pioneer Exult, followed not soon after by EDS and Towers Perrins joint venture to form ExcellerateHRO, and the most recently announced acquisition of Mellon HR&IS by ACS, youll note that the number of providers on the 2005 list has shrunk, although the range of services offered has actually expanded, and the total contract volume has ballooned.
We predict this M&A activity will continue in 2004. While there will be some dislocation, we consider this a marvelous example of a favorite private equity investor termcreative destruction. Sure, partnering among the larger enterprise-level (Tier 1) HRO providers is winnowing down the list of names. But we are also seeing European players such as ARINSO ramping up their North American operations. And there is some new blood as well. Witness CGI Groups entry into the market with its City of Montreal account (sounds like CGI has taken a page from ARINSOs book and is
making the migration from IT to HRO). And check out the global staffing players Manpower and Adecco, who are now both offering new services and expanding their reach into the North American market.
So on to the list of the new and improved top enterprise providers of 2005.
Criteria for the list: Providers must have at least one documented end-to-end HRO client,1,000 employees or larger, and be able to provide national service. Providers are listed in alphabetical order.
Top Enterprise HRO Providers
Accenture HR Services accenture.com/hrservices
Examples of End-to-end Clients: Best Buy, TSA, BT (second-generation), Sandvik, City of Copenhagen
HRO Services: Customer Contact Services, Exit Services, Information Services, Learning Services, HR Advisory Services, Pay & Benefits Services, Performance Services, Resourcing Services
Description: This provider offers customized, integrated HR solutions that span the entire employee lifecyclefrom recruitment to retirementfor larger enterprises. They also have a more standardized, integrated offering for medium-sized companies and individual services available a la carte. 2005 marked the signing of one of the biggest second-generation HRO contracts, as Accenture client BT re-signed a 10 year HRO contract with expanded global services.
ACS (Global HR Solutions) acs-inc.com/hro
Examples of End-to-end Clients: Chubb, Delta Airlines, Motorola, Goodyear, General Motors Europe
HRO Services: Benefits Administration, Compensation, Core Process Redesign, Employee Assistance Program, Employee Service Center, HR Information Systems and Employee Portal, Learning Services, Payroll, Performance Management, Relocation, Selection and Assessment, Staffing (contd on next page)
Description: One of the many M&A players in the HRO market this year, ACS recently acquired Mellon HR&IS to expand upon its benefits and consulting capabilities. Providing end-to-end BPO solutions to commercial and government clients worldwide, ACS offers a suite of transactional, professional, and
advisory HRO services.
Adecco (Global HR Solutions) adecco.com
Examples of End-to-end Clients: confidential
HRO Services: Payroll, Recruiting, Staffing, Training, HRIS, Employee Service Center, EAP
Description: With 125,000 clients for its global staffing business, Adecco also operates under additional brands such as Lee Hecht Harrison (outplacement) and Ajilon (specialized professional staffing).
Administaff administaff.com
Examples of End-to-end Clients: Access Worldwide, Fresh Success
HRO Services: Employment Administration (payroll, payroll taxes), Benefits Administration, Recruiting and Selection, Performance Management, Training and Development, Government Compliance, Employer Liability Management, Owner Support
Description: This national PEO has expanded beyond the small enterprise market to providing full-service HR support to medium-sized enterprises. With
multiple regional service centers and sales offices nationwide, Administaff was listed among Americas Most Admired Companies for four years in
Fortune magazine.
ADP (Employer Services) adp.com
Examples of End-to-end Clients: Tyco, IHG
HRO Services: Payroll, Benefits Administration, HR Information Management, 401(k)/Retirement Services, Screening and Selection Services, Expense Management, Time and Labor Management, Tax and Compliance Management
Description: Known for their data processing and payroll services, ADP also provides full-service, comprehensive HR services including traditional and Internet-based outsourcing solutions to employers in more than 26 countries. In addition to payroll solutions and tax returns, ADP also offers complete outsourcing services through ADP TotalSource, a PEO.
Advantec advantecHR.com
Examples of End-to-end Clients: Coral Beach Hotels & Clubs, Crown Auto
HRO Services: Benefits, Payroll, Recruitment, Risk Management, Human Capital Management Consulting
Description: Another PEO that is reaching into the mid market, this company provides a range of HR services to clients nationwide. Services include a strong focus on HR consulting and ongoing training as well as innovative technology.
Aon Consulting aon.com
Examples of End-to-end Clients: AT&T
HRO Services: Benefits, Communication, Compensation, Expatriate, Investment and Management Consulting, Retirement
Description: Aon Consultings global network of resources delivers solutions in the areas of employee benefits, compensation and rewards, communication, HRO, process redesign, and talent selection and development. With a recent reorganization of its HR outsourcing group, Aon hopes to better integrate its IT and consulting experience and leverage its experience in human capital throughout the upcoming quarters.
ARINSO International arinso.com
Examples of End-to-end Clients: GM Europe (partner with ACS), Kone, Schindler, Finnair, Elia
HRO Services: Consulting (business analysis, process improvement, transformation management, service-center design); Integration (HRMS, e-HR, enterprise portals); Operations (BPO, application maintenance, infrastructure management, payroll services); Health and Wealth Benefits
Description: This European IT giant has expanded to offer HRO services to more than 100 companies in more than 20 countries. Its recent signing of several U.S. HRO contracts has made it an up-and-coming player in the North American Market.
Ceridian ceridian.com
Examples of End-to-end Clients: Comerica Inc, Johns Manville, FMC Corporation, Symetra Financial, Sony Ericsson, Unisource
HRO Services: Staffing, HR Administration, Payroll and Compensation, Compliance, Employee Effectiveness, Benefits Administration, HRMS
Description: Providing HR solutions for employers in the United States, Canada, and Europe and serving almost 18 percent of the U.S. workforce in some capacity. Ceridian Small Business Solutions unit offers fast, Internet-based HR solutions for smaller businesses and Ceridian Centrefile offers HRO services in the United Kingdom and Europe.
CGI Group cgi.com
Example of End-to-end Clients: City of Montreal
HRO Services: HR Administration, Payroll, Time Management, Training & Development
Description: One of the newest players in the end-to-end HRO field, when CGI Group signed on the Montreal account, they offered a full suite of HR and payroll
services to more than 25,000 employees.
CheckPoint HR checkpointhr.com
Examples of End-to-end Clients: American Stock Exchange
HRO Services: Payroll, Benefits, HRMS, Recruiting and Staffing, Training, Compliance
Description: Targeting small and mid-sized companies, CheckPoint HR provides HR and payroll outsourcing through both Web-based HRMS and personalized
customer service.
Convergys (Employee Care) convergys.com
Examples of End-to-end Clients: State of Texas, State of Florida
HRO Services: Benefits, Payroll, Administration, Recruiting and Staffing, Learning and Development
Description: With two decades of outsourcing experience, this company offers full-service HRO to almost 600 clients in more than 60 different countries. Through their 50 service centers worldwide, they serve more than 2.5 million employees and 7 million retirees.
EADS eads.com
Examples of End-to-end Clients: Airbus
HRO Services: Business Transformation Outsourcing (payroll, training, time management, insurance and pension plans, recruitment and administration) and Application Management (applications maintenance and management of HRIS)
Description: In 2004, The European Aeronautic Defence and Space Company (EADS), a global leader in aerospace, defense, and related services, announced a joint venture with IBM to provide HR services. The venture, called HR Technologies and Management, or HRTM, launched with 100 employees and 35 business customers, including Airbus.
ExcellerateHRO (formerly EDS and Towers Perrin) excelleratehro.com
Examples of End-to-end Clients: CIBC, Infineon
HRO Services: Payroll, Training, Recruitment, Employee Relationship Management, Relocation and Expatriation, Knowledge Management and Reporting, Benefits Administration, HR Consulting
Description: One of the movers and shakers of 2004, ExcellerateHRO is a joint venture between EDS (which owns 85 percent) and Towers Perrin (which owns 15 percent). The new company expands upon EDS broad portfolio of business and technology solutions with Towers Perrins additional benefits and consulting experience.
Fidelity Employer Services Company (FESCo) fidelity.com
Examples of End-to-end Clients: Bank of America, ABB
HRO Services: HR Administration, Payroll, Defined Benefit/Contribution, Health and Welfare, Compensation, Consulting
Description: Offers a comprehensive suite of HR and benefits outsourcing to corporations around the world with more than 9,000 employees in six regional locations across the country.
Gevity gevityhr.com
Examples of End-to-end Clients: ComUnity Lending
HRO Services: HRIS, HR Administration, Recruiting and Staffing, Compensation and Pay
Description: Continuing their growth with the acquisition of other PEOs such as Epix, Gevity offers integrated HRO solutions to small and medium-sized businesses in the United States.
Hewitt Associates hewitt.com
Examples of End-to-end Clients: PepsiCo, Duke Energy, Capgemini, Sun Microsystems, Sony, BP, Prudential
HRO Services: HR Administration, Payroll, Benefits, Retirement and Financial Management, Recruiting, Training and Development
Description: Leaders of the flurry of M&A activity in 2004, when Hewitt Associates acquired HRO service provider Exult this year, they not only added a number of brand name clients to their roster, they also gave their traditionally consulting-focused services a strong dose of pure-play BPO power. Since the announcement, Hewitt has signed on a number of brand-name clients to a list that already included more than half of the Fortune 500 companies.
IBM Global Business Services ibm.com
Examples of End-to-end Clients: Procter & Gamble
HRO Services: Payroll, Benefits Administration, Compensation, Expatriate and Relocation, HRIT
Description: Although the HRO industry is still awaiting IBMs announcement of an additional end-to-end HRO deal since their signing of Procter & Gamble, Big Blue has been making big strides in defining themselves as a leader in the BPO (or BTO, Business Transformation Outsourcing as IBM defines it) market. Another company participating in the M&A mating game, this year marked IBMs acquisition of other BPO providers, such as FAO provider Equitant.
Manpower manpower.com
Examples of End-to-end Clients: Toyota Motor Manufacturing Kentucky, Suntrust Online
HRO Services: Staffing, Assessment and Training, On-site Workforce Management, Outplacement, BPO
Description: A global leader in employment services with offices in more than 65 countries, although best known as a staffing services provider, Manpower also offers full-service HRO to a number of clients. The company operates under additional brand names of Right Management Consultants, Jefferson Wells, Elan, Brook Street, and Empower.
RSM McGladrey Employer Services rsmmcgladrey.com
Examples of End-to-end Clients: BBB Services Corp
HRO Services: Benefits Brokerage and Administration, Payroll, HR Administration
Description: Although known for their strong focus on benefits services (due in part to the 2004 acquisiton of MyBenefitSource), RSM McGladrey also offers
end-to-end HRO services to hundreds of clients nationwide.
Xchanging xchanging.com
Examples of End-to-end Clients: BAE Systems
HRO Services: Recruitment, Payroll, Training and Development, Outplacement, Benefits, Compensation, Incentives
Description: Created through the spin off of BAE Systems in 1998, this U.K. company offers BPO, FAO, ITO, and HRO. Although BAE remains its only end-to-end HRO client, it offers a number of other BPO services to clients as renowned as the London Stock Exchange, Lloyds, and Boots.
Talent, infrastructure boost software outsourcing firms
China, the world's second-biggest software outsourcing destination, is closing the gap with India because of the country's improved infrastructure, rich talent resources and government support, industry experts speaking at a Shanghai conference said yesterday.
China now has 12 percent of all global software outsourcing, up from 7 percent two years ago. India's portion is expected to drop to 43 percent from 69 percent in the same period, according to the International Association of Outsourcing Professionals.
"That doesn't mean China is eating into India's market share as the whole industry is growing rapidly," said Michael Corbett, an IAOP executive.
Global software outsourcing revenue grew to US$50 billion last year from US$32.8 billion the year before, according to Gartner Inc, a US-based consulting firm.
The Asia-Pacific region, powered by India and China, recorded an annual growth rate of more than 800 percent in the sector, according to Bleum Inc Chief Executive Eric Rongley.
China has a comparatively strong computer science talent pool, jumping from roughly 40,000 a year in 2001 to 140,000 in 2004, experts said. That allows China-based firms, like Bleum, to receive orders from the United States and Japan, according to Rongley.
At present, Chinese firms depend highly on Japan for outsourcing orders, but the size of that country's market is only one-fifth of that in the West, including the United States and United Kingdom.
China's software outsourcing industry generated about US$3 billion in revenue last year compared with US$23 billion in India, which gets most of the orders from the West, according to David Barrett, a senior lawyer and partner in Simmons & Simmons.
China's infrastructure, including airports, roads and Internet access rate, is a clear advantage in the competition against India, according to Rongley and Barrett.
"The government has also shown strong support for the outsourcing business, with tax incentives, logistics and special funds to encourage innovation," said Ju Dehua, vice president of the Shanghai Software Industry Association.
China now has 12 percent of all global software outsourcing, up from 7 percent two years ago. India's portion is expected to drop to 43 percent from 69 percent in the same period, according to the International Association of Outsourcing Professionals.
"That doesn't mean China is eating into India's market share as the whole industry is growing rapidly," said Michael Corbett, an IAOP executive.
Global software outsourcing revenue grew to US$50 billion last year from US$32.8 billion the year before, according to Gartner Inc, a US-based consulting firm.
The Asia-Pacific region, powered by India and China, recorded an annual growth rate of more than 800 percent in the sector, according to Bleum Inc Chief Executive Eric Rongley.
China has a comparatively strong computer science talent pool, jumping from roughly 40,000 a year in 2001 to 140,000 in 2004, experts said. That allows China-based firms, like Bleum, to receive orders from the United States and Japan, according to Rongley.
At present, Chinese firms depend highly on Japan for outsourcing orders, but the size of that country's market is only one-fifth of that in the West, including the United States and United Kingdom.
China's software outsourcing industry generated about US$3 billion in revenue last year compared with US$23 billion in India, which gets most of the orders from the West, according to David Barrett, a senior lawyer and partner in Simmons & Simmons.
China's infrastructure, including airports, roads and Internet access rate, is a clear advantage in the competition against India, according to Rongley and Barrett.
"The government has also shown strong support for the outsourcing business, with tax incentives, logistics and special funds to encourage innovation," said Ju Dehua, vice president of the Shanghai Software Industry Association.
订阅：
博文 (Atom)
