Issue link: http://www.e-digitaleditions.com/i/210252
10th Anniversary Special HRO 2.0 Analysts' perspective of the last 10 years. By Stephen V. Taylor It was still early days in 2003 and all but the largest and most intrepid corporations in Europe were leery about embracing what still looked like a distinctively American concept slogging its way across the big pond: HRO. While outsourcing was nearing a boom stage in the United States, the buy-in overseas—bar the U.K.—was far less enthusiastic. Farming out functions that were so engrained in the fabric of corporate structures in Europe was still a difficult sell for providers. Still, a few big businesses—fraught with outdated and expensive HR processes—were convinced to make the jump and the bridge the gap with outsourcing. Fastforward 10 years to 2013 and to a European HRO market that is all grown up with little resemblance to the early days when it had limited delivery and vendors options, according to industry analysts. ``HRO has reached a fairly solid state of maturity [in Europe],'' reports Elizabeth Rennie, HRO research director at NelsonHall, a global BPO analyst and advisory firm. The road to maturity was carved out on the back of early comprehensive HRO deals including the seven-year, $1 billion agreement Anglo-Dutch firm Unilever NV signed with Accenture in 2006 to provide end-to-end services. The contracts—and the headlines they produced—helped awaken the market to the fact that staying status quo was no longer possible if they wanted to compete in an increasingly global economy. In Europe, ``for many companies outsourcing has achieved step-change outcomes that the organisations could never have achieved without it," London-based Rennie notes. ``It's often just easier to give the pain to someone else." While some of those early big contracts are still around and being renewed, the past few years have ``seen the demise of comprehensive end-to-end HR administration deals," says Morgan Yeates, research director of HR BPO worldwide at Gartner, an information-technology research and advisory company. Many of those ``didn't achieve either parties' goals [42] HRO TODAY GLOBAL | AUTUMN 2013 and the common reason is that both parties bit off more than they could chew," he recalls. ``The reality was that no single provider could be the best at everything.'' This was the make-or-break moment for the nascent European HRO market. Would businesses already tepid on the outsourcing concept make a run for the door with their HR departments firmly in tow or could the market save itself by adapting a different model? Adapt it did: to HRO 2.0. ``What happened is now there are a lot of single-service specialists," reports Gary Bragar, NelsonHall's HR outsourcing research director. ``What we found in a lot of contract renewals, or second-generation deals, are services such as recruitment being split off from multiservice contracts. There is a war for talent and more clients and vendors are seeing a shortage of talent with the right skill set. To get the best talent, clients are looking for recruiting specialists in that industry rather than a broad-brush approach.'' And just as single-source deals spurred the take-off of the European HRO market, they will continue to attract business, says Rennie. ``If you can build a trusted relationship with a vendor combined with a strong governance model and a joint focus on quality, there is definitely room to support one-provider deals,'' she notes. ``Especially in HR, where the workforce is more and more managed globally. The single-source global deals are the most effective way to manage a global workforce without adding an additional governance overhead. It's worth noting that this governance overhead is on the vendors as well as customers. The capability of the vendors is not in question anymore.'' Adapting to the new wave of outsourcing also meant embracing the ever-emerging breakthroughs in technology, explains Franck Boubon, head of European business advisory services at Information Services Group, or ISG.