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Let's Make a Deal
26 November 2008:
Human resource managers looking to outsource some or most of their department’s functions may be wanting—or even expecting—the current economic climate to help them land better deals. Some will find them, and others will not.
“It depends on what part of [the outsourcing] market you’re talking about,” says Robert Brown, a research vice president at Gartner Inc., an IT consulting firm based in Stamford, Conn. “The substantial market for payroll or the headline-grabbing comprehensive deals that IBM and Accenture announce?
“The HR outsourcing market is not monolithic. The parts can differ.”
And differ they do.
In the outsourcing market for individual HR processes such as payroll, benefits, recruiting and training, buyers may find they have increased negotiating power over providers, who are thankful for any new business. Analysts, sellers and buyers confirm that competitively priced offerings have become available for individual HR functions, especially for small and medium-sized companies.
The same isn’t true for HR business process outsourcing (BPO), in which one supplier provides end-to-end outsourcing for multiple HR business processes under one contract. Buoyed by a number of mega-deals in recent years, HR BPO providers have stopped taking new business at any cost simply to gain market share. Instead, they’re consolidating, striving for profitable business models and being highly selective in choosing customers. As a result, demand outstrips supply.
HR BPO “is definitely not a buyers’ market,” says Jason Geller, a principal in the human capital practice at Deloitte Consulting LLP in New York. “There was a time when every provider would run to your door. Now, it is more of a sellers’ market because the providers are selective about what they bid on.”
HR professionals need to understand the climate and complexities of the outsourcing market before they attempt to secure the best deals.
Where the Deals Are
HR managers interested in outsourcing individual HR functions—such as employee assistance programs, background checking, benefits administration, relocation services, training, payroll or even strategic HR—are finding favorable conditions.
In payroll, for example, outsourcing providers prove, “by and large, very price-competitive. That market is nearing maturity,” Brown says.
And, given the economic climate, the recruiting market “is going to be struggling through next year,” predicts Brown. As a result, companies that are still recruiting and prepared to outsource the function could find bargains.
Similarly, companies still investing in training—many cut those budgets during economic downturns—will likely find good deals for that function, too, says Tom Kelley, SPHR, senior vice president for HR consulting services in the Portland, Ore., office of AmeriBen/IEC Group, with headquarters in Meridian, Idaho. “There’s a lot more negotiating going on now than in the past, and you can get a deal that is really good for both parties,” he says.
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Source: shrm
