Issue link: https://www.e-digitaleditions.com/i/86587
Regional Report "The drivers in each case are different," Herrmannsen explains. "The big multinationals with local subsidiaries are clearly looking for efficiencies and some global consistencies, as well as best practices, compliance control, and governance, which full-scope HRO and RPO provide. For the locally owned businesses, cost savings is less of a driver because there is no burning need for cost efficiency, as there is lots of money flowing around." In the future, these differences will converge. "As we see local businesses and the international subsidiaries of multinational companies begin to embrace outsourcing in one form or another, the benefits across the board will become clearer, leading to more end- to-end HRO opportunities," he says. Ellis and Nevill concur. "There are a number of very big local companies that are still trying to understand the role of HRO, and they're looking at Europe and the U.S. for best practices and cutting- edge HR," Ellis says. "They're not looking to do HRO for the sake of saving money—since they certainly don't need to save money. But, they know that to be part of the world economy in future, they have to do this stuff—have a total workforce solution through RPO and efficient processes through HRO." Nevill notes that the Middle East is a region "where you effectively are taking labour arbitrage out of the equation to market HRO," he says. "You have to come in with the value proposition of helping to transform the business to enable growth. That's what companies are open to hearing about. Labour savings arguments will fall on deaf ears." Half-Speed Ahead The Arab Spring, the revolutionary wave of demonstrations and protests that began in December 2010 and ultimately forced autocratic rulers from power in Tunisia, Egypt, Libya, and Yemen, temporarily stalled the growth of HRO. Now that the dust is settling, observers predict half-speed ahead. As Ellis put it, "Certainly, the Arab Spring created the heebie jeebies for a lot of big companies in the region. Now this seems to be easing, albeit slowly." Leach agrees, noting that he recently read an article in an Arab publication indicating that the upheaval and tensions are "by no means over," he says. "By the same token, I don't believe these challenges are having much of a direct impact on investment decisions or outsourcing. In my view, the Arab Spring has had no more or less effect on HRO than the global economic situation has. At the end of the day, both life and business go on." As business goes on, both Ellis and Herrmannsen believe that oil- rich countries in the Middle East are considering their futures in a possible post-petroleum environment. Each says that governments in Dubai, Saudi Arabia, and elsewhere are positioning their regions as tourist destinations, and are building the infrastructures—first class hotels and restaurants, for instance—to prepare for this day. "They realise oil money won't last forever," Ellis says. Herrmannsen agrees. "Fifty years from now, there will be less support economically from oil," he says. "That's why you see countries like Dubai and the other emirates developing financial services, tourism, and leisure industries. In Abu Dhabi (the UAE's capital and second largest city) such sectors as high-tech and IT engineering also are beginning to emerge." As these more modern industries mature and prosper, they, too, will become eager buyers of HRO and RPO services, observers contend. "I just don't see a pullback from where we are today," says Leach. "Certainly, in countries like Dubai, Jordan, Oman, Saudi Arabia, and Iraq, their economies, although still developing, are doing so pretty quickly. Both indigenous businesses in these regions, and almost all the national or royal family-owned enterprises, are investing in how to do business on a more modern, global scale now. We're already talking to them about how their staffs should operate in the petroleum sector. The rest will follow." Dubai, in many cases, is at the forefront of this business-oriented Arab Spring. "The emirates have deep pockets to invest, and they have an inherent desire to be the best then can be," Leach says. "They're putting on a show for the rest of the world to see. If you roll that into a professional setting, we will see a significant migration forward toward HRO." In fact, says Herrmannsen, the Arab states are exhibiting the same HRO hallmarks as many other developing regions, such as Asia Pacific and Latin America. "I would say that the countries in the Middle East we've been talking about, Dubai, in particular, are where many European countries were five or six years ago—in the early stages of RPO adoption," he adds. "Right now we're seeing the first wave of experts coming through the door from abroad, and there is a strong imperative to replace these foreigners with locally trained people. In many respects, this is why we bought TAHEED, which is a second- generation RPO provider just below the CXO level." Five years from today, Ellis projects that many countries in the region will be much closer to Western standards of business. "Part of this will be the HRO providers going into joint ventures to help educate the local nationals—not so much telling them how to do things but getting them to understand the basics of recruitment process and talent management," he says. "These will be true partnerships that foster next-generation RPO providers." Leach has a similar perspective. "By the end of the decade, HRO and RPO will be more commonplace, for sure," he says. "That's pretty amazing when you think that just 15 or 16 years ago when we started talking about this concept of RPO, few companies anywhere had heard of it. Now everyone knows what it is, and even the Arab nations are catching on to its promise." He adds, "In a way, all this is developing at breakneck speed—pretty much globally." SUMMER 2012 | www.hroglobal.com [27]