ABSTRACT
THE MARKET Orion Partners estimate that the global size of the full service HRO market covers more than 128 deals with a combined value in excess of US$23 billion. The global leaders are Hewitt with 33 deals worth US$7.8 billion, Accenture with 21 deals worth US$4.9 billion and ACS with 8 deals worth US$2.5 billion. The majority of these deals have a North American focus. The European market for full-scope HR transactional outsourcing, covering all parts of the employee life-cycle, is still relatively immature compared to North America but is showing signs of acceleration, particularly in mainland Europe. At present, the market is still focused mainly on first generation deals to organisations of over 25 000 employees; this market accounts for 70% of European deals. The public sector market is steadily growing with 19% of European deals coming from this sector, as well as an increasing number of single service line deals in the UK, which may lead to full HRO if proven successful. Historically, the complexity of HRO deals has led to long negotiation and transition timescales (18 months to 3 years were not untypical) but signs are that outsourcers are becoming more efficient at the process of transition and this timescale is rapidly coming down. Overall the HRO market is maturing quickly with a significant increase in signed deals in 2005 and 2006 versus the previous period 1998-2004. Some high-profile first generation deals (for example, BP and BT) have been renewed once the initial deal term expired (although in BP’s case not with the same supplier). There is abundance evidence that HRO deals have delivered
European Market – Key Facts
25 000 employees
years
Deals have typically taken 18 month
years but are speeding up
Average contract terms ar
breakpoints at 3-5 years
on their promised cost savings (typically a reduction of at least 20%) but have not realized the ambitions of transforming the strategic value of HR’s service delivery or enabled the retained HR function to increase its profile and perceived value as a business partner. HRO suppliers are split between those with specific expertise in the HR domain and those who provide HRO as part of a broader spectrum of outsourced/managed services. Although there has been some consolidation of key players, the supplier market appears relatively stable at present. Eleven of the main HRO providers are profiled in this report.
