HROTodayGlobal

Editor's Letter Mapping Out A Strategy The world of outsourcing has seen interesting bits of news recently—some negative, some positive. Whether the glass is half full or half empty, however, is largely a matter of location. As is so often the case, geography is destiny. On the negativity front, the latest TPI quarterly index found an 18 percent net drop worldwide in outsourcing contracts of $25 million or more compared to the second quarter of 2010. At least some of the causes of this are clear. Chief among them are abysmal market conditions in the United States, where the value of such contracts has plunged fully 50 percent since the same time a year ago. The typical shedful of practitioner's dissatisfactions with outsourcing can be trucked out here. Buyers often put so much pressure on service level agreements (SLAs) that providers take self-defeating shortcuts. Likewise, as happened even more frequently with many big engagements five or 10 years ago, some providers are so eager for business that they create nearly impossible promise-to-performance ratios. And, of course, some functions for some companies just simply should not be outsourced or offshored in the first place. Naturally, all of that is partly a reflection of the outsourcing market's maturity, the hard-won lessons learnt by first and second adopters. Which also explains why, pulling apart the TPI metrics, a more encouraging picture emerges. Compared with the previous second quarter, the second quarter of 2011 saw total contract value (TCV) up 13 percent for Europe, the Middle East, & Africa (EMEA), and 55 percent for the Asia Pacific (APAC) region. Concludes TPI's chief research officer, Paul Reynolds: "Despite weakness in the big picture for the quarter and at the half, we anticipate stepped-up second-half activity that will find the market finishing the year at or near typical levels." Granted, that prediction preceded the sociopolitical tomain poisoning that was the debt ceiling debate held by the U.S. Congress—not to mention the subsequent stock market nausea. And, no, the European community has not yet found a satisfying formula for dealing with its vertiginous market mix. And, no, the prospects for Chinese labour arbitrage will not continue ad infinitum. But that doesn't change the fact that outsourcing is increasingly finding adherents in Europe (and in France and Germany, not just the United Kingdom or Benelux or the Nordics.) What's more, its prospects for growth in emerging APAC markets have never seemed stronger. The bullishness of the HRO market in APAC is what informs the various pieces of our Special Report in this issue. Consider one 2011 metric from (see page 16) that was conducted by our friends at Talent 2. HR executives across the region reported astonishingly high rates of "outsourcing one or more function"—with Australia at 87 percent, Hong Kong at 80 percent, and Singapore and China both at 90 percent. Increased over what baseline? When Talent 2 released a parallel survey two years ago, the average regional figure for "at least one outsourced function" was 40 percent. In essence, the market has quickly realised that the old enterprise-level paradigm has shifted. As Talent 2's Mark Condon, general manager for global client solutions, wrote at the time, HR practitioners have begun to understand that outsourcing is not an "all or nothing" proposition. Condon also noted that executives have grown increasingly sophisticated in vetting the practise of engagement. "This same survey," he wrote, "also identified key drivers when selecting a partner: reliability, a proven track record, cultural fit, and understanding of the HR strategy. The key is to design the right solution for individual clients." That is a sentiment echoed throughout our Special Report—in the dispatches (see page 8) from the Summit that was held this spring in Singapore and in the APAC market overview (see "On the Cusp," page 12) by our man, Russ Banham. Looking west, in the HRO Europe Summit Preview that starts on page 17, keynoters for that event (Lynda Gratton and Yan Bello) each provide their own keen insights on the nuances of an increasingly one-world workforce. It's something of a paradox. On the one hand, globalisation is increasingly standardising many walks of business. On the other hand, the savviest global players have internalised that most commercial of shibboleths: One size does not fit all. Dirk Olin, Editor-in-Chief SUMMER 2011 | www.hroglobal.com [5] HRO T The AP AC Market Pulse Study oday Global

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