Issue link: http://www.e-digitaleditions.com/i/94708
Institutional Knowledge • Transition pain and expense. The transition to outsourced solutions was difficult and expensive; while there may not be as much faith in outsourcing as there once was, it's virtually impossible to go back now. But it doesn't grow for at least four reasons: • Smaller deal sizes. The large deals simply won't continue at the same pace as in the past, so there will be fewer large deals and many smaller deals. • Slow deal decisions. At the same time, continued economic struggles will slow decision making. • Harder sells. While many buyer organisations have bought into the concept, the next level—those who haven't already jumped on the bandwagon—appear harder to sell on the concept. • Unfavorable deal economics. Furthermore, the economics of these lagging buyers' situations might not work for providers. What's Working. . . When we asked practitioners and providers (in a freeform text question) to tell us what's working in HR outsourcing, we found they answered the question in fundamentally different ways. Practitioners generally responded with the types of services that are working in HR outsourcing today—i.e., transactional processes. Providers, on the other hand, generally responded with the benefits that they believe clients are realising through outsourcing. (Of course, both groups offered a variety of different insights—see below—but their perspectives on the question were, in general, quite different.) What's working for practitioners: • Administrative/transactional tasks, such as benefits administration and payroll (this was, by far, the most common comment) • HRIS hosting/SaaS • Back-office and employee-facing systems • Greater efficiency of HR operations • Increased specialisation What's working for providers: • Practitioners and providers have developed a much better understanding of HR outsourcing in general, what works and what doesn't • Competition among providers has resulted in evolving technology, improving platforms, and development of best practises • Enhanced productivity for client organisations • Cost savings, more efficient processes • Increased standardisation in service delivery, which enables investment in technology and process improvements • Transactional processing . . . And What Isn't Again here, practitioners and providers responded differently, but in a much more basic way. Virtually every practitioner response focussed on what providers are "doing wrong," and—as might be expected—virtually every provider response addressed faults on the buyer side. One complaint that was common to both sides? Innovation—an issue that was raised in greater numbers amongst both practitioners and providers. What's not working for practitioners: • Lack of agility • Lack of collaboration • Lack of innovation • Poor implementation: limited understanding of local/business impact and/or client culture • Language issues • Declining service levels • Truly customised consultative solutions What's not working for providers: • Clients' aversion to both decision making and risk taking • Anything that requires strategic input • Communication amongst employees, outsourced providers and companies • Change management within buyer companies • Governance, metrics, investment in staff • Innovation Where is HR Outsourcing Headed? A majority of both providers and practitioners believe that HR outsourcing will grow in the coming years, although providers have much more faith than do practitioners. Amongst those who believe HR outsourcing will grow, the reasons are generally the same between the two groups: • Ongoing pressure to reduce HR costs • Growing regulation increases the need for expertise • Internal HR will continue to shift to a more strategic role leaving transactional processes for providers • SaaS/cloud models drive growth • Increasing market maturity Over the next three years, I think HR outsourcing will... 11% 8% 4% 18% 25% Providers Grow Stay the same Decline No idea FALL 2012 | www.hroglobal.com [29] 78% 56% Practitioners