Global HRO Management Forum

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Business & Mgmt

Published on July 31, 2009

Author: gcardenasv

Source: slideshare.net

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Lessons learned from the early days of HRO...and where the industry is headed.

Global HRO Forum Global HR Outsourcing: Trends Post Financial Crisis May 2009 Greg Cardenas

Speaker Introduction Gregorio Cardenas, CIR/CDR Bachelors, Business Administration Masters, Human Resources Global HR Outsourcing Pioneer ($1B+tier) Global HR Professional (GPHR) Six Sigma Black Belt Project Management Certified First to Implement Taleo Globally HR Process Patent Owner Nearly 20 Years Progressive HR Experience

Gregorio Cardenas, CIR/CDR

Bachelors, Business Administration

Masters, Human Resources

Global HR Outsourcing Pioneer ($1B+tier)

Global HR Professional (GPHR)

Six Sigma Black Belt

Project Management Certified

First to Implement Taleo Globally

HR Process Patent Owner

Nearly 20 Years Progressive HR Experience

AGENDA Where did GHRO really begin? What were the lessons learned from the first failed attempts by early HRO service providers? How is the market now? What are the trends post the recent economic slowdown throughout the world? How can future GHRO implementations better succeed? Who will be the future leader in this market?

Where did GHRO really begin?

What were the lessons learned from the first failed attempts by early HRO service providers?

How is the market now?

What are the trends post the recent economic slowdown throughout the world?

How can future GHRO implementations better succeed?

Who will be the future leader in this market?

In the beginning… GHRO is the evolutionary product of local and regional HR Outsourcing; payroll, recruiting, benefits administration, compensation analysis. In 2005 Convergys landed the first “real” GHRO contract with DuPont. This deal was worth approximately $1.3 Billion. Other service providers entered the GHRO market including IBM, Accenture, Excellerate HRO (HP), and Alexander Mann to name a few. As of today the largest GHRO deal remains to be Johnson & Johnson which was also landed by Convergys. Value of this deal is approximately $1.7 Billion.

GHRO is the evolutionary product of local and regional HR Outsourcing; payroll, recruiting, benefits administration, compensation analysis.

In 2005 Convergys landed the first “real” GHRO contract with DuPont. This deal was worth approximately $1.3 Billion.

Other service providers entered the GHRO market including IBM, Accenture, Excellerate HRO (HP), and Alexander Mann to name a few.

As of today the largest GHRO deal remains to be Johnson & Johnson which was also landed by Convergys. Value of this deal is approximately $1.7 Billion.

Failed attempts… From the very beginning there were no global benchmarks to base a service delivery model, costing model, sales model, implementation plan, etc. No global company had ever outsourced their entire HR function. In a few cases the operations leadership teams hired to deliver the solution were not at the sales table. The solutions sold by non-SME’s were often not practical. Many of the industries first clients were simply acquired for jumpstarting client portfolios. This was a very costly mistake as in some cases the deals were won at a loss. Several of the leading GHRO providers nearly went bankrupt and some completely got out of the market once the press started to challenge weather GHRO could even be a successful proposition and provide effective cost savings without too many unforeseen sacrifices.

From the very beginning there were no global benchmarks to base a service delivery model, costing model, sales model, implementation plan, etc. No global company had ever outsourced their entire HR function.

In a few cases the operations leadership teams hired to deliver the solution were not at the sales table. The solutions sold by non-SME’s were often not practical.

Many of the industries first clients were simply acquired for jumpstarting client portfolios. This was a very costly mistake as in some cases the deals were won at a loss.

Several of the leading GHRO providers nearly went bankrupt and some completely got out of the market once the press started to challenge weather GHRO could even be a successful proposition and provide effective cost savings without too many unforeseen sacrifices.

How are things now… The financial melt down has significantly slowed down the growth of GHRO – this however has not eliminated the need for a good HRO solution. Many companies are saving costs simply by reducing headcount and increasing productivity. With the eventual increase in the market, GHRO will return stronger than ever before. Strong financial management and cost controls will help motivate the market on the buy-side. The leader in the GHRO space has yet to emerge as many of the previous initial service providers have failed to show a sizeable profit and in many cases have failed to simply deliver.

The financial melt down has significantly slowed down the growth of GHRO – this however has not eliminated the need for a good HRO solution.

Many companies are saving costs simply by reducing headcount and increasing productivity.

With the eventual increase in the market, GHRO will return stronger than ever before. Strong financial management and cost controls will help motivate the market on the buy-side.

The leader in the GHRO space has yet to emerge as many of the previous initial service providers have failed to show a sizeable profit and in many cases have failed to simply deliver.

Future trends… More than ever, GHRO service providers need to show they can bring value to the table early into the engagement. The profit margins in GHRO exist but require unconventional operational models to reduce labor costs. Clients must understand that radical transformation of service is necessary with the help of change management. Ukraine, Moldova, Russia, China are poised to see increased development. Brazil can be balanced in Latin America with the help of countries like Mexico for Spanish support. Hungary and Poland are no longer low cost labor markets within the EU. Romania is a new country within the EU that stands to gain. Ukraine and Moldova are good nearshore choices for lower labor rates to support EU member States. The Tier 1 GHRO service providers need global implementation partners to succeed. This will create M&A/consolidation opportunities.

More than ever, GHRO service providers need to show they can bring value to the table early into the engagement.

The profit margins in GHRO exist but require unconventional operational models to reduce labor costs. Clients must understand that radical transformation of service is necessary with the help of change management.

Ukraine, Moldova, Russia, China are poised to see increased development.

Brazil can be balanced in Latin America with the help of countries like Mexico for Spanish support.

Hungary and Poland are no longer low cost labor markets within the EU. Romania is a new country within the EU that stands to gain. Ukraine and Moldova are good nearshore choices for lower labor rates to support EU member States.

The Tier 1 GHRO service providers need global implementation partners to succeed. This will create M&A/consolidation opportunities.

Opportunity for improvement… Selling GHRO has been proven to be much easier than delivery. Emphasis on back office operations that are offshore or nearshore will be extremely important. Close and transparent partnerships between service providers and clients will be very important to better manage expectations and change. India is great for supporting English based clients but this does not always suffice for multi-nationals in Europe. Near-shore is a better option such as neighboring pro-western countries or those seeking EU membership. GHRO service provider cost models should account for pre and post systems implementation services. If it takes 1-2 years to implement global HR technology, real cost savings will come only then. Clients must understand this to avoid false expectations. A phased in approach will prevent future credibility problems. Technology partnerships with SAP, PeopleSoft, Taleo, etc are key to success. Integrated multi-client GHRO service provider systems are lacking in this industry. There is an opportunity to create an online based system which can connect clients, supplier support personnel, contractors, 3 rd party service providers, etc. Since the start of the global financial crisis there has been a increased level of “protectionism” throughout the world. In the US, the outsourcing industry can expect to be challenged by the new Obama Administration seeking to preserve jobs domestically. Without tax incentives, increased cost savings will pressure GHRO service providers to find more creative ways to support the business model.

Selling GHRO has been proven to be much easier than delivery. Emphasis on back office operations that are offshore or nearshore will be extremely important.

Close and transparent partnerships between service providers and clients will be very important to better manage expectations and change.

India is great for supporting English based clients but this does not always suffice for multi-nationals in Europe. Near-shore is a better option such as neighboring pro-western countries or those seeking EU membership.

GHRO service provider cost models should account for pre and post systems implementation services. If it takes 1-2 years to implement global HR technology, real cost savings will come only then. Clients must understand this to avoid false expectations. A phased in approach will prevent future credibility problems.

Technology partnerships with SAP, PeopleSoft, Taleo, etc are key to success.

Integrated multi-client GHRO service provider systems are lacking in this industry. There is an opportunity to create an online based system which can connect clients, supplier support personnel, contractors, 3 rd party service providers, etc.

Since the start of the global financial crisis there has been a increased level of “protectionism” throughout the world. In the US, the outsourcing industry can expect to be challenged by the new Obama Administration seeking to preserve jobs domestically. Without tax incentives, increased cost savings will pressure GHRO service providers to find more creative ways to support the business model.

Future industry leader… Prior to the global economic slowdown there were many large GHRO deals won by the 1 st Tier service providers. No one leader has emerged given many failed attempts by those that entered the market first. Service providers with strong operational capabilities in lower cost labor markets (even if outside BRIC) will dominate. Globalization and capitalism ideals will constantly challenge conventional beliefs. Globalization is driving competition from all countries that see outsourcing as a means for providing domestic prosperity. To this regard, I expect the market to get hot throughout the world – the location will matter less with time. The challenge is there. If you have a better SDM and fair price…you may end up being the leader of a huge industry.

Prior to the global economic slowdown there were many large GHRO deals won by the 1 st Tier service providers.

No one leader has emerged given many failed attempts by those that entered the market first.

Service providers with strong operational capabilities in lower cost labor markets (even if outside BRIC) will dominate. Globalization and capitalism ideals will constantly challenge conventional beliefs.

Globalization is driving competition from all countries that see outsourcing as a means for providing domestic prosperity. To this regard, I expect the market to get hot throughout the world – the location will matter less with time.

The challenge is there. If you have a better SDM and fair price…you may end up being the leader of a huge industry.

247HR Service provider to the GHRO industry… Headquarters: Kiev, Ukraine - Europe Offices: Cancun, Mexico – Latin America Chicago, USA – North America Volgograd, Russia - Eurasia Recruiting, Payroll, Compensation, Benefits Administration, Document Management, HR Systems & Technology, Data Entry, Help Desk, Voice/Non-Voice Customer Service Support

Service provider to the GHRO industry…

Headquarters:

Kiev, Ukraine - Europe

Offices:

Cancun, Mexico – Latin America

Chicago, USA – North America

Volgograd, Russia - Eurasia

Recruiting, Payroll, Compensation, Benefits Administration, Document Management, HR Systems & Technology, Data Entry, Help Desk, Voice/Non-Voice Customer Service Support

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