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DALLAS ─ The multi-process Human Resources Outsourcing (HRO) market is expected to regain traction in 2010, moving towards US$3-3.1 billion in annual contract value (ACV), driven by contract extensions and the re-emergence of new deal signings, according to the Human Resources Outsourcing Annual Report 2010 by Everest, a global consulting and research firm.
In 2009, the HRO market reached US$2.9 billion in ACV on marginal growth mostly driven by deal extensions. Last year marks the only year in which total contract value (TCV), signed through deal extensions, exceeded TCV realized through newly signed deals.
As the economy climbs out of the recession, market growth will be greatly impacted by end-of-term decisions over the next three years for engagements valued at US$5 billion. Additionally, Everest expects market growth will be influenced by projections that include:
“While the economic slowdown had a negative impact on the outsourcing market last year, the impact on multi-process HRO was more severe due to its longer payback period of HRO as compared to other outsourcing engagements,” said Katrina Menzigian, Vice President, Research. “With an improving economy, we expect new deal signings to gradually increase this year as the buyers’ decision-making cycles improve and budgets become available to fund the upfront investment required for multi-process HRO initiatives.”
The 2009 HRO market witnessed some fundamental shifts in the market including:
While ADP led deal signings in 2009, Hewitt, IBM, Accenture, and Convergys account for a little over half of the overall HRO market share in terms of ACV. Other suppliers in the report analysis include: ACS-Xerox, Caliber Point, Capita, Ceridian, HCL, Logica, Lockheed Martin, Neeyamo, NorthgateArinso, TCS, Wipro and Xchanging.
In this year’s report, Everest highlighted five suppliers as “2009 HRO Market Star Performers”: ADP, IBM, NorthgateArinso, TCS and Wipro. These suppliers demonstrated the strongest movement forward across the following two dimensions in 2009:
The Star Performers designation relates to year-on-year performance for a given supplier and does not reflect on overall market leadership positions. Those identified as the 2009 Star Performers include both leading suppliers and major contenders.
“The supplier landscape in 2009 was impacted by three key developments: the exit of ExcellerateHRO and Fidelity, acquisition of ACS and profitability improvements of Hewitt and Convergys,” said Rajesh Ranjan, Research Director. “The market also saw new suppliers making their mark. This year, we expect to see one or two suppliers exit the MPHRO market to be replaced by suppliers discreetly and successfully delivering SPHRO. Suppliers will also aggressively pursue new deals, driven by stabilization of existing deals and the need to add new clients after the two-year lull period of 2008 and 2009.
To read an extract of the Human Resources Outsourcing Annual Report 2010, purchase the report, or inquire about other research services, please visit research.everestgrp.com, email email@example.com or call +1-214-451-3110.