Issue link: https://www.e-digitaleditions.com/i/73199
HROA Report Unpicking Larger Contracts Back in the early-mid 2000's HRO deals were big and complex, with volume and processes industrialised and lumped together in large, multinational contracts—the elephant-sized deals. For the last few years, the swing to single location/city or single process outsource has become the new norm, but what does that mean for the old contracts as they come up for renewal? The watch-word is "unbundle." Buyers are more knowledgeable and particular about what they want and where they receive value, so payroll, recruitment, learning, and more are being unbundled with a "best-in-class" functional approach that could see multiple partners being engaged. But here's the challenge: The objective is to unbundle, but the incremental budget doesn't exist to cover the increased cost due to the reduction in scale; so many clients will need to buy globally in order to be cost neutral. But if they buy best- in-class, how do they pull together all the functional elements and partners in order to maintain end user simplicity and reporting? Does this then create additional cost investment in data-warehousing or integrating technology platforms? With these new considerations, transition and transformation is the name of the game, and this is much broader than the earlier transformational drive. Those that do renew at large contract level could unbundle to specialist firms, for elements such as recruitment, but still look to one provider as the aggregator of the overall contract. If a client decides to be the aggregator, it must recognise it is potentially not set up to do this commercially or from a service perspective. Service providers also have the challenge of helping clients unpicking and landing again any deals, and must work differently with clients to reset their clients with better practices than ever before in order to retain, integrate, and transition the business to the next realm of successful HRO contracts. Conversely, there is a specific (call it niche) market opportunity for large, multi-process HRO deals. This is a result of some larger ongoing transformational projects within sizable European companies. This has come about as a result of the "end of life" of long-lasting HRO contracts, that were closed 5-10 years ago. These limited larger deals possess a much greater focus on the service components of HRO vendors and their software vendors who must provide the underlying technology, equating to a better user experience, higher service level, and, very important, the delivery of reusable assets for customers. What is fair to say is that many of these discussions remain invisible to the market as customers will either sole-source with their existing providers, or might be reluctant to go out to the market and say: "Our previous x years and the decision to go with vendor "A" was not so good." They will do this quietly and will take a look at what innovative providers will step up their game and will deliver on their promises. As per above, the contracts in 2012/2013 (with a few significant exceptions) will continue to be smaller deals, and as such the business case will need to be structured differently. Clients start with smaller pieces or a few towers that they link together, primarily learning, talent, and succession planning. The reliance will be on integrators and technology solutions so that as deals get smaller and more fragmented the focus shifts from big RFPs to smaller technology briefs and a mid-sized focus. There is no budget for change projects, so any projects will have to be self-funded or absorbed into existing costs. Up in the Clouds It is projected that 80 per cent of the world's population will have a mobile phone in the next three years, and wage arbitrage is not a primary driver in some emerging countries, so it is not unrealistic to assume that a key trend will be for everyone to do business on a mobile phone. The technological implications are massive—do the ERP companies believe they will have to be mobile-enabled in the next few years? Software-as-a-Service (SaaS) as a solution is one-to-many in its purest form, and organisations buying these services aren't set up that way, which can cause tension. It's fair to say that many of the larger companies aren't going to write off their ERP systems for SaaS and will go instead for a co-existence. Generally, we can expect very strong growth in mid-market HRO/SaaS projects with SaaS delivered by the software providers directly, and with HRO providers adding substantial value-added services on top of this way of deployment. The social implications are also far reaching—email is old-hat, and chat is taking over with many companies already seeing social media as their preferred means of communication internally and externally. Nobody expects a conversation to be private anymore—if it's online, it's public domain. Think about your own email: How often do you re-check the content just before sending to be sure of its implications in the public domain? The coming months will see real substance behind cloud definitions. Network providers in emerging countries (Middle East and Africa) will enter the race and will need to partner with services companies to deliver SaaS. Whilst the U.S. is the largest driver and developer of cloud services, many cloud solutions will be "built in the East for the East"—when China and India have success, the model will be refined and brought back to the European Union. A great opportunity arises as these countries don't have legacy platforms in place like Oracle or SAP, so the way is clear to put in something new. The (questioned) belief is that the SaaS product will be so good that you won't need a service centre. Bizarrely this was a conversation many had 10 years ago, but now it's not a pipe-dream—it's much more reliable, but with a little scepticism. The discussion starts to become "we'll need 30 people in Dublin with good international language skills rather than the 200 people in Krakow" as SaaS replaces elements required in the service centre. But don't underestimate the chain reaction. To have SaaS, you have to have a certain technology and security infrastructure in place and that underlying structure needs addressing first. Global Business Services No, we're not talking about the internal divisions of major consultancy firms, but about bringing together the back offices of SPRING 2012 | www.hroglobal.com [21]