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The APAC Market Everest's analysis shows that significantly higher levels of deals are now being signed in APAC (see Figure 3). "In the last 12 to 18 months," says Ranjan, "we have seen lots of activity in terms of demand for HRO emanating from Asia Pacific." Most regional deals include payroll, employee data management, and benefits; recruitment, compensation, and global mobility are occasionally seen. RPO still tends to be driven by the global multinational client base, but Everest is noticing greater awareness of it developing amongst regional companies. Figure 3 Buyer adoption trend by signing region Number of deals companies, cost is also a consideration, but with annual economic growth rates still close to 10 per cent, the priority for many is to quicken their time to market with ready-made solutions. Specialist Skills Appeal Malaysia-based Taylor's Education Group, an established private organisation which owns and operates schools, a college, and Taylor's University, experienced exactly the kind of situation which is leading many regional businesses to consider HRO. Abby Loy, executive director of Taylor's, explains that annual organic growth of about 20 per cent—and expansion into Vietnam, Singapore, and possibly China—have brought additional HR challenges, including recruiting and managing Taylor's highly-qualified international academic staff. With increasingly complex HR information needs, an outdated human resource information system (HRIS) system was replaced by an outsourced solution—web-based, modular, offering a high level of data integrity and regional language capabilities. For Taylor's, outsourcing was not only a flexible, scalable, and affordable solution, says Loy: "It brings in a higher level of speciality. It's about the quality of service and the value the supplier can add." Trendwatch 1 Rest of world includes North America, EMEA and Latin America Sample size: 415 MPHRO deals signed as of November 2011 Source: Everest Group (2012) Demand from within the region is likely to remain on an upward path. Talent2's Market Pulse Study found that amongst 576 HR executives surveyed in APAC in June 2011, 58 per cent would consider starting to outsource or increasing their commitment to outsource some HR functions in the next 12 months; in China this increased to 66 per cent. In Australia, China, Singapore, and Hong Kong, more than 90 per cent of HR executives could see potential benefits from outsourcing. Search and recruitment was the area of outsourcing they were most likely to consider, a reminder of the impact of skills shortages in the region. However, individual market dynamics can differ markedly. Until recently Japanese companies took a conservative view of HRO but have become active in exploring its cost-saving potential. In Australia resources and energy businesses are experiencing strong demand, but other sectors are less buoyant; HRO addresses growth-related issues—recruitment, retention, and training—and those associated with reorganisation and cost control. For Indian and Chinese • Demand from within APAC will continue upward as understanding of HRO grows in the region and businesses replicate the HR models their peers are putting in place, says Ranjan, and APAC buyers will move towards more multiprocess contracts. Demand growth will also be influenced by new customer segments: "In the coming years, I expect that HRO will no longer be the sole domain of large organisations. Instead, we'll be joined by mid-tier organisations as they seek to capitalise on the HRO trend," says Slater. • The transition to lower cost locations will continue, in large part due to growing demand from within APAC itself, says Ranjan. Tier 2 and 3 cities in China and India will be key emerging locations, with the Philippines and Malaysia continuing to play an important role. Slater expects "more competition from Vietnam in the coming years as well," while "Indonesia might become interesting," suggests Rogers. • In terms of competitive dynamics, new market entrants may appear: "Within multicountry and multiprocess HRO activity, that hasn't really happened," says Rogers. "But single process solutions offered at the individual country level are bringing in a whole new group of solutions providers." M&A activity could also be a feature; Khan has already observed that there are "many recent examples of regional, specialist, and niche players getting absorbed by the big players, which in turn leads to the consolidation of service centres between the current and new merged entity." • Software-as-a-Solution (SaaS) delivery models which provide flexibility at a relatively low entry cost will play a significant role in the region, as will mobile solutions which appeal to Generation Y. "Providers will have to move faster to match up to the changing expectations of clients. Anytime, anywhere solutions and services will become the norm," says Khan. Perhaps outsourcing will also become a conduit for changing HR methods in the region; alternatively, service models might have to adapt to reflect the priorities and management styles of clients. But without doubt, APAC is set to be an exciting, growing, and challenging HRO marketplace during the next few years. WINTER 2012 | www.hroglobal.com [11]