We’re all doomed! – a response

September 13, 2009

Following my missive about the TPI results, Les Potton, one of my contacts and owner of Target HR, wrote:

The irony is that the potential savings from outsourcing could be a key route through the recession, but its the reluctance to commit funds up front or sign long term deals, that is likely to be contributing to the reduced number of contracts.

With purse strings tight, there will be the inevitable reluctance to spend anything, particularly if there is a perceived risk. Even if the potential solution could save a lot of cash, the process and implementation costs of getting there are often huge with the bigger outsource providers.

In my area of HR outsourcing the temptation for the big players is to go only for high value, long contracts, which may scare off some excellent prospects, who might want to start small but expand their outsourcing, as their business grows and once they feel confident it works. It is a big leap of faith for those used to having control at their fingertips.

Overall as a product, outsourcing is still a great opportunity for organisations to get quality service, best practice, specialist experience across multiple sectors and save money. However, I believe the sellers need to use a more creative sales approach and invest time understanding the prospect and helping them gain confidence in the concept (perhaps using pilot schemes etc), rather than putting a long term contract on the table early in discussions.

Whilst I agree with Les’ analysis generally, I think that the HR market is even more prone to delays in spending.

With the HRO World Europe event coming up in November, I’ll be very interested to see the mood of the HRO providers and advisors. Anecdotal evidence suggests that the market is flat/declining… watch this space.

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One Response to “We’re all doomed! – a response”

  1. James Doyle Says:

    I’m always skeptical about definitions of all encompasisng outsource markets. Particularly HRO.

    As far as I can see a number of large global organisations (BT and BP in the UK and P&G in the US for example) took strategic decisions to outsource non-core – and HR was just one of these non-core functions. These types of decisions do not a market make.

    Just speak to the HRO practice of Accenture in the UK (one contract with BT) and the HRO practice of EDS in the UK (one contract with the Armed Forces and now their partner Towers Perrin merging with Watson Wyatt – so Accelerate HRO probably dead now.)

    In my experience most HR outsourcing is limited to sub-sets – most commonly time and expenses processing, share scheme adminstration, flex benefits adminstration, payrol, pensions and pensions payroll. We did a lot of this stuff in my time at Xansa and ended up doing a lot iof it India.

    I have a current interest in the pensions side of things and outsourcing is booming as people want to get shot of an expensive liability (especially final salry schemes where outsource or buy-out is prevalent – with buy-outs slow until the markets recover).

    So I’m not sure HRO was ever “booming” but outsourcing of sub-processes still seems to be fairly active to me.

    James


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