Issue link: https://www.e-digitaleditions.com/i/65226
The European Market indicating a big shift in Europe and elsewhere away from traditional instructor-led training to virtual instructors," he says. "It's still a live instructor in a classroom, but students are in multiple locations learning via their computers, a much cheaper alternative. More such efforts would be likely in another recession." Similarly, cost-effective cloud-based learning opportunities also are altering the paradigm, he notes: "Consequently, I wouldn't say that a recession means all 'doom and gloom' for learning providers." Worst Cases, Smart Responses Of course, guarded optimism about avoiding disaster should not displace planning for such outcomes. But eliciting worst-case scenarios is easier asked than answered. Oracle's Barenholz continues to affirm that most areas of HRO actually will become more attractive, rather than less, in a recessionary European economy. "The commercial model of HRO typically converts fixed cost into variable cost for our clients," he says, noting the pricing structure's appeal to buyers. Nevertheless, he acknowledges that since HRO cost structures also rely on economies of scale, "an overall major reduction in client employees will perhaps put upwards pressure on unit prices for providers in the market." Which could obviously hurt demand. NelsonHall's Bragar agrees that another recession will likely foster hiring freezes, if not wide-scale downsizing, thereby reducing aggregate HRO business. He notes that the 2008 financial crisis and subsequent Great Recession hurt the market for learning initiatives. Another severe recession, he says, will likely compel companies in Europe to again cut their investments in training. As before, he pointed to alternate solutions such as e-learning that would keep providers' coffers from drying up. In the meantime, he and the other observers are keeping close watch on various metrics to gauge what might lie ahead. Among these are the number of employees trained by RPO providers in previous years and how this compares to efforts today. In the payroll sphere, they're tracking the volume of employees handled by providers. So far, these numbers compare well with prior years, but if they turn south Bragar posits that providers will seek to bundle their services at lower cost. "Why manage dozens of vendors when you can turn to one provider to manage them all, which is efficient and cost-effective?" he says. Still, he also projects that some companies will continue to seek best-of-breed solutions. "If they don't think they're getting the best talent out there, for instance, they will go to a provider that just does talent management," he says. Orion Partners' Constance also predicts more bundling of new services onto additional ones as a "safe option" during a recession. "If clients have a provider in place that is doing a great job, it is one of the first places they will look for future cost savings and service improvement. The pressure for new ways of working from employees and managers will not go away." Such "new ways" demand investments in areas such as mobile access to HR services and collaborative working platforms that support change across businesses, he adds: "Companies struggle to divert these investments to HR right now, and will certainly not do this if things get worse. Buyers have been looking to HRO providers to take them on a journey towards these services as part of their contracts. Providers that have been investing in these areas have a head start." One Up, One Down? A final scenario: If another truly "great" recession were to take hold in Europe, but were avoided in the United States, how would that affect the outcome for HRO providers and their clients on both sides of the pond? This question drew a variety of responses, ranging from Barenholz's suggestion that there would be "no comparative differences" to Constance predicting a quicker pace in the "race to Asia." HRO providers will follow their clients to the Asia-Pacific region (APAC), "as they chase growth outside developed regions" whose economies have stagnated, he says. "We've already seen providers form a flurry of new partnerships with local operators in Asia, particularly in recruitment, as they build scale and decide where to base their hubs in the region. Providers already are beginning to pick up business from companies headquartered in the region, [especially those that] have been slow to adopt the various forms of HRO in the last five years or so." Such services tend to be geared more towards large-scale projects, rather than multiyear, multiprocess deals, he says, adding that this is a "sensible place" for these organisations to begin outsourcing. Bragar predicts the development of more service centres in Europe, with fewer services provided on premises. "In my research, I've found that in Asia Pacific and secondly in Europe, companies seek more high-touch service," he says. "Even though they would rather have a hiring manager or learning instructor on premises or close by, there is a trend now of less onsite service and more service centre delivery. Both will increase." He cites the fictitious example of a European multinational corporation with five different payroll systems, a consequence of regional expansion and mergers and acquisitions. "We will see more centralisation of payroll within organisations—same with recruitment and learning," Bragar says. "That's yet another reason to outsource." WINTER 2012 | www.hroglobal.com [23]