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Special Report: APAC As buyers and providers evaluate "where to stay," to borrow from Sundarason's analogy, they are learning from the lessons of "past guests" (okay, no more metaphors). HRO and RPO engagements in Europe and the U.S. were the proving ground for what worked and what didn't, as the shift from comprehensive "big bang" HRO to best-of-breed solutions indicates. APAC companies, on the other hand, still seem interested in buying combined HR services from a single provider. Europe and the U.S. might provide lessons, but APAC doesn't have to be a copycat. Better lessons, in fact, might be learned from the early HRO movers in APAC, both Asian companies and foreign global multinationals. As Raghvendra Singh, director of sales, APAC, in the Singapore office of Buck Consultants, puts it, "For as many HRO transformation success stories as exist, there are also challenges and pitfalls." Driving the Train The impetus for HRO in APAC tends to be cost savings, internal HR focusing on strategic objectives, compliance concerns, and a desire for stability. Yes, that sounds like the same drivers in Europe and the U.S., and why shouldn't it? "Leadership in most organisations [in APAC] is supportive of strategic HR, but they still display cost consciousness in most of their spending decisions," Singh explains. Preeti Gupta, senior account director at Text 100, a global PR firm representing leading HR BPO organisations in APAC, says companies in the region are attracted to HRO for its "stability in coping with the peaks and valleys of their businesses." He adds that many APAC companies also are looking to free up their resources to focus on their core competencies. "We've seen significant uptake of HRO as a result." On the other hand, Danny Choo, global managing director at HR BPO provider Talent2 in Australia, contends that the biggest drivers for HRO in APAC are cost savings, the ability to reduce business risk, and the ability to do more for less. "We are also seeing multinational companies in Asia pushing for more combined services from providers that include payroll, performance management, e-learning, and time and attendance," he adds. Many buyers are looking for these bundled services on a multicountry basis, as well. "The ability to deliver a greater range of services in a large geographical coverage under a single contract and SLA [service level agreement] is becoming more attractive, as long as the pricing stacks up," Choo asserts. "Labour arbitrage and the use of shared service centres to deliver services across multiple countries with multilanguage capability are becoming more important in APAC. This is where global enterprise resource planning [ERP] solutions, like SAP and Oracle, struggle to put forward a viable value proposition." Other challenges include quality of delivery and the vast differences in productivity across APAC. Another is "getting offshored workforces in multiple service centres to a consistently high level," Choo says. "Process and regulation complexity also varies a great deal across Asia, but in general HRO requirements are simpler to fulfill with less overhead." While the relative immaturity of HRO in APAC is an impediment, Doug Cummings, senior vice president of global multinational sales at provider ADP ES International, says it increasingly is being surmounted. "The APAC HRO market is much less mature when it comes to outsourcing in general," he says. "This is even more evident with local Asian multinationals, in contrast to their European or American counterparts. Still, much progress is being made." Choo shares this view: "Europe and the U.S. are still more sophisticated markets when it comes to outsourcing compared to Asia, but in the last four or five years we have seen quite a dramatic uptake of outsourced services in APAC, as large global multinational corporations grow into Asia. This has significantly raised the interest and understanding of how outsourcing works and its associated benefits." Although HRO is more widely accepted in the U.S. and Europe than Asia, this doesn't mean that these regions have perfected the product, so to speak. "Outsourcing by companies in the European Union is stymied by stringent regulations on the loss of jobs and data privacy," Singh explains. The opposite is in place in APAC—at least for the time being. "There are no governing Asian standards as such, which makes it easier to execute an outsourcing engagement," he says. So what are companies in APAC looking for when outsourcing HR? Drawing from a recent Text 100 survey of HR managers at Singapore-based companies, Gupta says their key HR desires, in order of priority, are talent search and recruitment (cited by 66 percent of respondents), employee retention (53 percent), employee engagement (35 percent), and learning and development (27 percent). "Not surprisingly, skills shortage was a major issue for respondents," he notes. "Seventy-five percent of HR managers are experiencing problems in this regard." The survey indicates that 90 percent of the respondents are using outsourcing as a solution to these challenges, "with 95 percent seeing clear benefits," Gupta says. "Outsourcing is offering stability to many businesses, while enabling HR to free up resources" to focus on more strategic aims. Other HRO providers and consultants see similar drivers and challenges at play. Cumings says that from a commercial perspective, the business case for outsourcing outside of APAC is usually tied to a reduction in labour costs via arbitrage. But, with labour cost savings typically nonexistent in most APAC countries— an Indian company is not going to get much bang for the buck "offshoring" to India—this business case, says Cummings, "is much more difficult to manage." He explains that both creating and auditing the business case is difficult work, requiring senior management commitment to the process. "Due to the relative inexperience of Asian companies with outsourcing, there is a fear of losing control of data and/or processes that need to be carefully dealt with early on in the engagement," Cummings says. There are other risks of a botched engagement. In the first wave of HRO in APAC, Preeti says there was an overexpectation of the value of HRO. "Many companies focussed on cost savings and assumed that SUMMER 2011 | www.hroglobal.com [13]

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