Tag: global services

Is the Arbitrage of Your Offshore Locations Sustainable? | Webinar

Tuesday, October 18, 2011 | 9:00 AM CDT

Global sourcing is a well established phenomenon. The industry has witnessed rapid growth over the past decade, and has now exceeded US$110 billion in annual revenues. The key growth drivers have predominantly been the opportunity for labor arbitrage and the availability of skilled talent pools in offshore locations.

However, given increasing cost pressures in leading offshore markets, such as India and the Philippines, companies are questioning the sustainability of the offshore proposition. In addition, fluctuating currencies are posing challenges to the predictability of arbitrage in many locations, such as Poland and Brazil.

With these dramatic changes in market dynamics, global organizations must take an integrated, multi-location portfolio view in assessing the sustainability of their global services programs.

Everest Group invites you to join us for an insightful, one-hour webinar that will answer the following questions:

  • How should companies assess the sustainability of offshore locations?
  • How sustainable are the major offshore locations? Are there real risks of arbitrage eroding?
  • What implications are companies facing in setting their global services strategies?
Presenters:
  • Eric Simonson, Managing Partner – Research, Everest Group
  • H. Karthik, Vice President, Everest Group

Webinar attendees will receive a complimentary arbitrage sustainability diagnostic assessment for three countries from an extensive list including Brazil, China, India, the Philippines, South Africa and more.  Please select your preferred countries during the registration process. An Everest Group analyst will supply you with your individualized assessment within two weeks of the webinar. You must attend the event to receive the complimentary assessment.

Eyes Wide Open – What Are the Risks of Global Services? | Sherpas in Blue Shirts

Over the last decade, we have been witness to a world that is logically shrinking in size and expanding in its ability to provide options in global services. The phenomenon is being driven by the increased integration of technology and the sudden emergence of service delivery capabilities in new geographies, thus allowing organizations to tap into global resources at a rapidly increasing rate.

The utilization of a global services delivery model is allowing organizations, regardless of their size, to:

  • Realize cost savings through labour arbitrage
  • Access skill sets and capabilities on a more dynamic level
  • Manage a continuous 24-hour service and support model
  • Adapt cost structures to facilitate focus on core businesses

Sounds great, so what’s the catch?

The catch is that organizations with global and diverse service delivery models face new and ever changing risks. Some of the triggers of global risk include socio-geo political tension, pandemic crisis, financial events, terrorist events, natural disasters, civil turbulence, and infrastructure disruptions.

When risks manifest into reality for an organization that is using a global delivery model, they can occur at significant speeds and at magnitudes of impact that have not been seen before. This is because most global delivery models are heavily intertwined and have interdependencies that are often overlooked. The ripple effect of a risk event and the complexities of demand on resources for recovery are often not realized until it is too late.

Organizations with a global delivery model require a disciplined approach to successfully manage global risk triggers. To do so, they can implement a comprehensive risk framework to proactively monitor and mitigate perils in their global environment. Two key components of the risk framework are:

Risk monitoring by location

  • Develop a baseline risk profile for all targeted cities/countries as part of the decision-making process on delivery centre locations
  • Monitor all selected locations on an ongoing basis to assess the change in risk levels
  • Develop risk profiles for each city/country that contain location dashboards of key risk indicators to allow for a quick assessment of the change in risk levels from the baseline risk profile against the current risk profile
  • Examples of location risk indicators include:
    • Strategic risks that assess the city/country risk, including the likelihood of political, social, and economic inefficiencies and stability, inadequate legal system or regulatory pressures, and natural disasters, etc.
    • Tactical risks that reflect market-related changes and dynamics, cost of inflation, flexibility of the labour market, availability and quality of the infrastructure, and medical/health events

City-Down and Country-Down analyses

  • Identify and understand the impact to the organization and its network of services as a result of a city-wide or country-wide service disruption
  • Understand the changing requirements of the organization’s recovery plans by continually monitoring and assessing the impact and the conflict in recovery activities, e.g., competition for infrastructure and labour resources among the organization and all of its service providers that impacts the organization’s service recovery capabilities

The nature of the risk events that are monitored, managed, and prepared for vary greatly. Most naturally occurring events have very little, if any, lead-time. However, there are planned risk events that provide a much greater window into the timing of their occurrence. When an organization is properly monitoring and managing its risks, it should not only have the necessary processes in place to address all types of risk events but also to minimize the impact of each. A few recent examples of risk events are listed in the table below:

Risk Events

 

As we embrace global service delivery models with open arms, how well prepared is your organization to manage and mitigate the risks in this new and highly integrated world?

Procure-to-Pay: Measuring Outcome Beyond Efficiency Gains | Sherpas in Blue Shirts

More and more companies are recognizing the value of end-to-end business process management as it breaks down functional and organizational silos to enable a more holistic approach to enterprise performance management.

Of the common sets of end-to-end processes – which include Source-to-Contract (S2C), Procure-to-Pay (P2P), Order-to-Cash (O2C), Record-to-Report (R2R), and Hire-to-Retire (H2R) – P2P is most often identified as the priority for optimization. There are two key drivers of this trend. First, compared to other end-to-end processes, P2P activities are typically more common across the enterprise, making them easier to standardize. Second, the business case for P2P is frequently the most compelling. Through process standardization, workflow automation, system integration, and rigorous compliance enforcement, companies have been able to achieve rapid and significant spend and operating cost savings while simultaneously gaining the ability to better manage risk.

A case in point: a global software and products company achieved an initial operating cost reduction of 35 percent. It subsequently realized spend savings of US$700 million (~9 percent on a spend base of US$8 billion) and captured more than US$10M in Early Payment Discounts (EPD). The savings and benefits accrued generated a break-even on the business case in less than six months.

Based on Everest Group’s experience, one of the most critical success factors of P2P transformation is the institutionalization of a common set of well-defined performance metrics across the entire organization, including both internal and third party delivery partners. The performance metrics should be closely linked to desired business outcomes, and applicable across segments and geographies. Moreover, both P2P efficiency and effectiveness should be easily quantified, measured, and benchmarked.

The table below presents a P2P metrics framework that starts with clearly defined business objectives that are measured by a small set of outcome-based metrics to reflect the overall efficiency and effectiveness of the P2P process. The diagnostic measures are designed to identify specific process breakdowns and improvement opportunities, and are tracked and reported at the operational level.

P2P Metrics Framework

 

We strongly recommend companies follow a structured approach to develop a holistic P2P performance management framework:

  1. Define common metrics, and clearly delineate objectives, descriptions, and interdependencies with other performance measures
  2. Establish a standard methodology and systems to track and report performance; key components include:
    • Measurement scope, parameters, method, data source, and frequency
    • Benchmarking methodology and data source
    • Reporting dashboards, frequency, and forum
  3. Assign accountability for:
    • Measuring and tracking performance metrics
    • Benchmarking and reporting overall P2P performance
    • Identifying and prioritizing continuous improvement (CI) opportunities
    • Reviewing and approving CI projects
    • Implementing and monitoring CI initiatives
    • Calibrating performance metrics based on evolving business objectives

There’s no question that the old management adage “You can’t manage what you don’t measure” holds true in the case of end-to-end process management. Having a common set of appropriately-designed performance metrics is both an enabler for and indicator of successful P2P transformation.

Is End to End Really the End All? | Sherpas in Blue Shirts

It’s all the rage. Global organizations are starting to take a more “user” centric view of process workflows and operations. As opposed to organizing their delivery capabilities around discrete functions like procurement, finance and accounting (F&A), and HR, the world’s leading firms are organizing around end to end (E2E) processes like Procure to Pay, Hire to Retire, and Record to Report. But is E2E simply a “Hail Mary” pass, a wishful attempt to find value beyond labor arbitrage? Or, as evidence suggests, are the benefits – e.g., better EBITDA, tighter compliance, and greater financial control – real and proven?

A comprehensive CFO survey IBM conducted last year clearly demonstrated that organizations that consistently outperform their peers in EBITDA do, in fact, organize and deliver their global services around principals consistent with an E2E approach. Additionally, these companies all have standardized finance processes, common data definitions and governance, a standard chart of accounts, and globally mandated, strictly enforced standards supporting these E2E processes.

Everest Group’s experience supports IBM’s survey results. And while it seems clear that every large, complex global organization should be chasing E2E in order to improve results and reduce risk, it’s important to note that doing so is neither easy nor without challenges.

To realize the benefits of E2E, Everest Group typically recommends a developing a three- to five-year roadmap with a heavy focus on building the business case, defining the target operating model, and managing stakeholder expectations and change.

Roadmap

Yet even the best game plan will have to address key challenges, including:

  • Fragmentation – The core of many E2E processes, F&A, is often fragmented in large companies. Finance processes are commonly distributed not only by business unit, but also often by geography. A global rationalization of F&A to understand the base case (current state) is a critical first step.
  • Vision – It is essential to document and agree on a common target operating model definition for each E2E process which details:
    • activities, standards, and data definitions
    • a common set of E2E process metrics used to measure performance, provide transparency on delivery performance, and underpin dashboard reporting
    • a framework for controls, oversight, and balance sheet integrity
    • a compelling and thorough business case that clearly defines the current state, investments, and future benefits
  • Technology – Even under the best of technology frameworks, a single, global instance of an ERP system like SAP, a further “thin” layer enabling technologies and tools, may be needed to drive standardized processes.

No, E2E is not a Hail Mary pass, but rather a sustained and balanced drive down the field for a game winning touchdown. Success will require strong leadership, talented personnel, technology, a sound game plan, and solid coaching staff to pull it all together, building momentum and confidence along the way.


Related Blog: Building a Robust Global Services Organization

Sneak “PEAK” into the Banking Applications Outsourcing Service Provider Landscape | Sherpas in Blue Shirts

Per our observations of the evolution of the service provider landscape before and after the recession, the single most important factor we have seen for creating differentiation in the IT applications outsourcing (AO) market is significant strengthening of vertical/domain expertise. And recognizing the need for “vertical-specificity” in the AO market, earlier this year we launched an annual research initiative focused on assessing market trends and service provider capabilities for AO in the banking, financial services, and insurance (BFSI) vertical.

One of the first results that emerged from this research initiative was the Everest Group PEAK Matrix for large banking AO contracts. In a research study released earlier this week, we analyzed the landscape of AO service providers specific to the banking sub-vertical. In a world in which everyone and their uncle delivers AO services to financial services clients, this report examines 22 service providers and establishes the Leaders, Major Contenders, and Emerging Players in the banking AO market.

PEAK Matrix

As we congratulate the five Leaders (Accenture, Cognizant, IBM, Infosys, and TCS), and acknowledge the capabilities and achievements of the Major Contenders and Emerging Players, we also want to highlight three inter-related market themes that suggest the PEAK Matrix in 2012 for large banking AO relationships may look significantly different:

Buyer-driven portfolio consolidation: Most banks currently use a complex collection of service providers for their applications portfolio. Decentralized decision-making, global expansion, and large-scale M&A introduced further complexity into their portfolios. Rationalizing the portfolio creates a less complex sourcing environment, enables strategic partnerships with service providers, and also delivers meaningful financial benefit (our analysis indicates that the financial benefits of utilizing fewer service providers can be as much as 22-28 percent on an annualized basis). As more buyers join the portfolio consolidation bandwagon, the larger/more established service providers are winning at the expense of their smaller competitors.

The Matthew effect: Buyer-driven portfolio consolidation is giving rise to the Matthew effect which (in sociology) states that, “the rich get richer and the poor get poorer.” In the context of the banking AO landscape, the Matthew effect translates to “the big get bigger.” Banking AO buyers are placing disproportionate emphasis on domain expertise as a key decision-making criteria for selecting their service providers. Scale influences a company’s appetite to invest in developing vertical/micro-vertical-specific domain expertise, which in turn determines market success, which ultimately impacts growth and scale. This vicious circle of scale fueling scale is increasing the polarization in the marketplace, and could further widen the gap between the Leaders and the Major Contenders and Emerging Players.

Accelerating M&A: In response to the Matthew effect, as the Major Contenders and Emerging Players seek to achieve the next level of growth, mergers, acquisitions, and alliances will accelerate. M&A will play a significant role in service providers looking to achieve quantum leaps in capability and performance. The M&A activity is likely to significantly alter the landscape in the coming months to create a new set of Leaders and Major Contenders, In fact, since we finalized the Banking PEAK, Emerging Player  Ness Technologies  has already changed ownership.

Given the above three market forces, how much will the landscape of service providers you bank on (pun intended) change in the months to come? Only time and we can tell. Keep watching this space for more!

Related Reports:

Are You Ready to Renew Your Vows With Your Provider? | Sherpas in Blue Shirts

The unfortunately all too frequent seven-year itch – “the spice is gone…should we stay together?” – doesn’t happen just in personal relationships, it also happens in outsourcing relationships. Past the mid-point of a 10-year outsourcing relationship (or whatever the length of the agreement) buyers and service providers often struggle to identify how to maintain the health and happiness of their contractual relationship. Buyers are interested in increasing the level of commitment from the provider, in the form of increased productivity or continuous improvement initiatives. However, the provider is often challenged with supplying service improvements and decreasing the cost of service delivery at narrowing profit margins. With the remaining years in the outsourcing relationship, what relationship modifications are required to ensure mutual benefits for both parties?

Organizations should review their changing landscape, organization, and business requirements to identify their long-term strategic objectives so they can decide on the model that is most appropriate for delivering their services and the supporting sourcing option(s) to help achieve their goals. For example, the fact that an organization is currently in an outsourced relationship does not require that it stay in one. If the organization has the internal capabilities, access to the necessary resources, and time to implement the strategic initiatives, engaging in a sourcing relationship may not be strategically (nor potentially financially) beneficial. However, an organization that is potentially looking for greater flexibility and scalability, access to new skills and resources that are not locally available, or to capitalize on new technological trends may consider partnering with one or more suppliers who have the ability to support the organization’s objectives due to lack of in-house capabilities.

An organization that chooses to engage in a relationship with a third-party service provider should ensure alignment for the long-term: strategic objectives (i.e., business and organizational objectives), cultural fit (i.e., mission and values), and solution requirements (i.e., feasibility and adaptability of the service delivery model to meet the organization’s needs.) An understanding of all three factors is imperative in determining the future strategy of the functional organization and shaping the future direction of the current outsourcing relationship.

What is the right change for your relationship?

There are several options you can consider:

1. Don’t rock the boat (i.e., Renew): 

  • After an honest look at your relationship, you realize that the ”same old, same old” is actually working for you
  • This is akin to renewing the sourcing relationship where you and your incumbent provider agree to continue with the existing contract with minimal changes  

2. Face lift (i.e., Renegotiate): 

  • Following discussions on trade-offs and compromises, you and your partner decide that some tweaking to your old routine is required in order for your relationship to continue
  • Similarly, you and your incumbent provider agree to modify one or a number of limited elements of the outsourcing contract, e.g., price and service levels

3. Overhaul (i.e., Restructure):

  • Small changes are not going to cut it. In order to make this relationship work going forward there must be some fundamental changes
  • In a strategic sourcing relationship, you may realize that while you’ve had a provider that has offered value over time and will continue to do so, it must be under a new set of circumstances. In this case, you and your provider can undergo a strategy exercise to restructure the services being you’re receiving to ensure that they align with your long-term objectives

4. Out with the old and in with the new (i.e., Re-compete):

  • You’ve talked it through with your partner and realize the relationship is not going anywhere. You need someone more supportive and responsive to your needs, and decide it’s time to see other people
  • The decision to re-compete your delivered services is driven not only by cost, but also by your organization’s long-term strategy. If you assess that your current provider is not capable of supporting your cost and strategic goals, it’s time to start seeing other service providers

5. It’s not you, it’s me (i.e., Repatriate):

  • You’ve assessed your relationship, and discovered that you are happiest being on your own.
  • Over time, as your organization evolves, you may find yourself in a position where your long-term goals are best met by bringing services back in-house. This can be the result of M&A activities, a fundamental shift in business strategies, etc.

All kidding aside, buyers must go through a complex exercise when approaching the end of their strategic sourcing relationship. The initial step is to understand their organization’s 10-year strategies and objectives, then begin assessing the current relationship for fit. We typically find there is no single correct answer and, instead, the resulting engagement strategy is a hybrid of the above options. As the marketplace embraces new technologies, the multi-vendor answer is becoming increasingly common. Unlike in personal relationships, it may be beneficial for an organization to have more than one sourcing partner to maintain competitive tension and to optimize the fit with the buyer’s strategies. Organizations can choose their flavor of service providers, a Tier 1, niche, or offshore provider, depending on their objectives and requirements. However, they need to balance the complexity of managing a multi-vendor environment against the benefits provided by each vendor. We strongly encourage full disclosure and consistent communication in a multi-partner model to ensure smooth day-to-day operations and successful service delivery from both/all providers. After all, a little competition never hurt anyone.

Building a Robust Global Services Management Organization | Sherpas in Blue Shirts

Today’s large, global companies face an ever-growing need for talented resources to manage their increasingly complex global services delivery organizations. The requirements extend far beyond traditional models that often found firms simply assigning the “folks who have performed the service for the past 20 years” into various leadership roles. While that was never a best practice, in today’s world, it can be catastrophic.

Global services delivery leaders of today must navigate a complicated mix of internal and external delivery engines while forecasting supply versus demand and keeping clients happy across diverse regions and cultures. To meet these demands, leading global services organizations are increasingly adopting highly integrated cross-business leadership teams sponsored at the most senior levels of the corporation.

The graphic below illustrates this concept in a hypothetical global organization.

Global services management organization

Organizations seeking to build a robust team to deliver their services globally into the next generation should consider the following best practices as observed by Everest Group in working with many of the world’s leading organizations:

  • Global governance structures should be aligned with corporate strategy and chaired by a senior leader at the appropriate level in the organization
  • The governance structure should include an Executive Steering Committee and have formal dedicated roles for key global functions
  • The structure should have responsibility for global strategy, planning, design authority, reporting, delivery, talent development, and innovation
  • The structure should have global process leaders who are responsible for the design, implementation, and compliance of standardized processes across the enterprise, with appropriate representation and input from all lines of business
  • Increasingly, business services are maturing from a legacy functional approach (Finance, Procurement, Tax, Human Resources, etc.) to an end-to-end approach (e.g., Purchase-to-Pay, Record-to-Report-to-File, Order-to-Cash, Hire-to-Retire, etc.).  Appropriate transition and transformation teams must be deployed to manage this migration
  • The structure should also ensure the effective management and integration of all delivery centers

Above all, Everest Group’s experience suggests that companies must treat global services management as a vital business unit with appropriate priority given to recruiting and retaining the talent necessary to execute with excellence and deliver the next generation of value from global services.

Captivated by India Shining | Sherpas in Blue Shirts

The land of lush green plains and abundant forests, formidable high mountains and long rivers, and an ethnic cultural diversity unparalleled globally — this is how many of us Indians would describe the uniqueness that is our country.

However, when a client asked us the other day, “What is unique about India as an offshore location for captives?” – we knew he was looking for domain-specific answers.

India has always had the reputation of being a cost-effective offshore location. Further, per NASSCOM, the annual tertiary graduate pool in India is expected to hit 4 million this year, almost one-fifths the population of Australia.

However, cost and talent form only one part of this large and growing story. Large scale, specialized (or “exotic”) talent, mature positioning in the global services landscape, and a large and growing domestic market add to India’s aura.

With almost 700,000 technically qualified people graduating annually, India is the ideal location for any company looking to establish its design and engineering captive centers. In fact, global aerospace majors Boeing and Airbus are in process of setting up units in India focused on simulation, analysis and virtual manufacturing. While Airbus intends to make India a hub of unique offerings not provided elsewhere within the global organization, Boeing plans to develop critical technologies through collaborations with top tier research institutes including the Indian Institute of Science.

Additionally, given that India is one of the largest and most mature locations in the global services space, it is only logical that the country is considered a strategic destination to locate offshore Centers of Excellence (CoE) for global sourcing. In fact, many financial services firms are scaling up their captive presence in India to leverage the advantages of locating their sourcing CoEs in close proximity to service providers.

Interestingly, computer maker Lenovo has emerged as a pioneer in offshoring its global marketing and communication activities – which are generally considered country- and culture-specific, non-offshorable activities – by leveraging India for:

  • Talent availability — a creative and experienced marketing team with a drive to running operations from the India hub
  • Third-party vendor willingness — an advertising partner prepared to synthesize its team in India

Finally, and most importantly, India is in the midst of an economic boom and a resultant consumer revolution. It is a period in which low-cost mobile technology in rural areas is as popular and far reaching as iPads and iPhones in the metro cities. It should thus come as little surprise that the same companies that looked at India as a services delivery destination a decade ago are now making every effort to develop customized products and solutions for this “demand hub.” Take, for instance, GE Healthcare, which launched a revolutionary $1,000 portable ECG device for rural India designed, developed and assembled in GE’s R&D center in Bangalore.

Given these domain-specific advantages that India offers, not to mention the beautiful surroundings and rich cultural heritage (a source of continuous attraction), we are left with little doubt about India as a unique and highly compelling offshore location.

The Evolution to Next Generation Operating Models in the Energy Industry | Sherpas in Blue Shirts

As pioneers of global sourcing, leading organizations in the energy industry such as ExxonMobil, Shell, Chevron, and BP have been able to extract significant value from offshoring while maintaining a manageable risk profile. However, the growing complexity of their global sourcing portfolios in terms of internal and external supply options (see Table 1 below), service delivery locations, governance models, and systems/tools has led to a set of challenging issues around design and ongoing optimization.

Comparison of sourcing model for leading energy companies

From a design standpoint, energy companies are rethinking their operating models to address a wide range of issues and concerns including:

The next wave of scope expansion opportunities

  • How can I systematically identify new sourcing areas balancing value and risk?
  • How can I predicate and manage short- and long-term demand?

Building an integrated supply mode and global delivery footprint

  • How can I maintain an optimal, complementary mix of internal and outsourcing supply alternatives reflecting requirements for capacity, competencies, and cost?
  • How can I build a consistent framework to place incremental scope into the right supply model?
  • How can I create an integrated, flexible global delivery model that meets current and future demand while minimizing exposure to risks?

Energy companies also face challenges in building a holistic management approach to enable ongoing value capture and expansion, such as:

How to build a holistic, enterprise-level governance model

  • How can I appropriately assess performance across outsourcing service providers, captives, locations, and service lines?
  • What is the optimal governance approach to enable best practice sharing, risk mitigation, and economies of scale?

How to improve end-to-end process effectiveness and control

  • What are the value and constraints to standardize and simplify end-to-end processes across my enterprise?
  • What are the right effectiveness metrics and process efficiency measures?
  • How can I enhance process control to minimize operational risk?

Many of the top energy organizations are experimenting with next generation operating models to address these issues. For example, a global energy major that utilizes both outsourcing service providers and internal shared services recently embarked on a multi-year journey to integrate services design, delivery, and governance across business units, functions, and geographies. The objectives are to enhance end-to-end process effectiveness and control, reduce complexity and risk at the enterprise-level, and improve service performance and cost efficiency.

Our experience in the energy industry clearly indicates that unlocking the next wave of value requires more deliberate design of an integrated global delivery model, a consistent framework to better align supply with demand, and a holistic approach to govern and optimize services. In addition, corporate culture impacts cannot be overlooked. In global energy companies’ large, complex environments full of competing interest and priorities, strong executive leadership and commitment are vital to success.

The “Waking Giant” Sequel: How Mid-Market HRO is Emerging as a True Growth Platform | Sherpas in Blue Shirts

Is it wrong to plagiarize yourself? In 2008, Everest Group published a report entitled “Understanding the Waking Giant: The Mid-Market and FAO” highlighting how mid-market companies had turned the corner from point solutions in finance and accounting outsourcing (FAO) to adoption of more robust and integrated multi-process FAO solutions. In turning to HR outsourcing (HRO), the mid-market has traditionally been a big consumer of various point solutions including payroll, 401K administration, contingent labor, etc. But today we see clear evidence that mid-market companies have brought the same approach to their HR function, noticeably increasing their adoption of robust and integrated multi-process HR outsourcing (MPHRO) and Benefits Administration Outsourcing (BAO.) In fact, this client segment is quickly becoming the growth platform for many of the market leading HR service providers.

In our ongoing research into both the HRO and BAO spaces, the share of new contracts signed by mid-market companies (3,000-15,000 employees) continues to grow. In fact, mid-market MPHRO deals represented roughly 61 percent of all the deals inked in 2010. We saw the same upward tick in the BAO market, with 71 percent of all BAO deals involving mid-market clients. As a result, service providers are really taking notice and making moves specifically to target this growing opportunity.

What’s driving the mid-market in this direction? Take your pick of factors:

  1. By consolidating with fewer service providers, companies can reduce the cost of managing their HR processes and gain benefits from increased integration and analytics
  2. Regulatory changes affecting health and welfare (H&W) benefits are driving many companies to seek support in figuring out what needs to be done and how to do it
  3. HR technology isn’t a strategic investment area for most firms. Leveraging technology owned or developed by service providers is seen as a plus for both short- and long-term cost savings and business impact
  4. The choice of mid-market MPHRO and BAO solutions are more attractive now than ever before

Two important delivery model changes have also increased the appeal of MPHRO and BAO for mid-market companies. In both areas, use of global sourcing has gained traction. First, and not surprisingly, this has come at a time when mid-market companies continue to be under immense pressures to further reduce operating costs while simultaneously optimizing the overall effectiveness of their HR operations. Centralization and integration through offshore delivery centers align with such drivers.

Second, many service providers’ increasing focus around building leveraged and repeatable technology-driven components to their HR offerings, be it SaaS, Cloud, or platforms, is proving to be a justifiable investment. In 2010, about 70 percent of all new MPHRO deals signed involved some type of platform solution, and 71 percent of those involved mid-market buyers.

The strategy to focus on mid-market clients is paying off for some service providers. Three of Everest Group’s five MPHRO 2011 Star Performers – ADP, NorthgateArinso, and Infosys – drive significant portions of their MPHRO business from mid-market clients. Further, each of these providers grew their share of the overall MPHRO market in 2009-2010.

Both ADP and Mercer, major players in the MPHRO and BAO markets respectively, have successfully deployed mid-market strategies, although they are very different in nature. In fact, each firm, as we heard during their recent annual analyst events, continue to invest in sales programs, service offerings, and relationship models specifically targeting this growth opportunity. Mercer leveraged its acquisition of IPA to open doors with mid-market clients, and to align its delivery model with the specific needs of this segment. ADP, which has always had significant payroll offering success in the mid-market, has successfully expanded its footprint with some of these clients into the MPHRO space.

To successfully tap into this segment, HR service providers will need to be on top of the rapidly changing mid-market competitive landscape, delivery requirements, technology solutions, and sales engagement models. With all this going on, dare I say the mid-market will prove to be the “Waking Giant” for the evolving MPHRO and BAO markets?

How can we engage?

Please let us know how we can help you on your journey.

Contact Us

"*" indicates required fields

Please review our Privacy Notice and check the box below to consent to the use of Personal Data that you provide.