Smaller HRO Deals Driving Transformation

Small, Shorter Term Human Resources Sourcing Strategies, Trends,
Deals in HRO Pg 20 Transformation Pg 28 and Observations Pg 32

www.globalservicesmedia.com

July 2011

The gateway to the global sourcing of IT and BPO services
Special Report

So Old,
HRO

Yet So New

Software Paradise, 后Hangzhou Sourcing

Demonstration City of Chinasourcing
Hangzhou
Hangzhou was defined as the “China Service Outsourcing Demonstration City” in February 2009. Hangzhou is also the
one of eleven software industry base cities in mainland China. It has currently formed the several industries including
telecommunication, software, integrated circuit, digital TV, animation games and E-commerce.

The revenue of software business in Hangzhou was achieved at 47 billion RMB in 2009, the software export revenue reached at
460million USD. There were total 112 enterprises passed CMMCMI, ISO27001 certification. There were 20 IT software enterprises
have list on public market, two companies ranked at Top 10 of self-brand software products, total 15 enterprises have list at the
key software enterprises name list of the national strategic planning.

In order to accelerate the development of outsourcing industry, Hangzhou Municipal Government set up the leading team
to draw up the development plan, issue the supporting policy to make the rapid development of outsourcing industry in
Hangzhou. The total delivered amount of offshore outsourcing business reached at 919mllion US Dollars, risen to 352%
compared to the same period of last year (2008).

Hangzhou government has put more focus on the financial service outsourcing that is considered as the medium and high end
outsourcing industry, Hangzhou now is creating to become the financial delivery center.

International Financial Outsourcing Center

Promotion & Undertaker: Great-Idea International Outsourcing Consulting Center

Hangzhou, China
A City of Financial Delivery Center

To Combine the Global Resources and Facilitate the
Integration & Upgrade of the Global Service Capability

Please Attention October Trip in Hangzhou
China Sourcing Summit
& Delegation to China

Sponsors:
Ministry of Commerce of the People’s Republic of China
Ministry of Industry and Information Technology of the People’s Republic of China
Ministry of Education of the People’s Republic of China

Host City :
Hangzhou People’s Government

Official Promotion:
Hangzhou Municipal Foreign Trade & Economic Cooperation Bureau

International Financial Outsourcing Center

Contact: Tel-8610 85863613 Fax-8610 59081093 Email-salida-liu@great-idea.com.cn

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April 2011
features

16 HRO: SO OLD, yET SO NEW
[COVER STORy]

by Prerna Tandon
Outsourcing and offshoring of HR presents many opportunities
and challenges, what is needed is for more HR professionals to have
outsourcing business skills (namely process, operations, project man-
agement) and for more outsourcing professionals to have a greater
understanding of HR issues and its impacts.

20 SMALL, SHORTER TERM IN HRO
[HRO]
DEALS
SETTING NEW TRENDS
by Smita Vasudevan
HRO providers are not seeing too many opportunities for multi process
deals, but there lies a clear opportunity in transforming small, short-
term deals into longer strategic outsourcing relationships.

xperts
8 DESTINATION EuROPE –
[SPECIAL REPORT]

NEARSHORING CONTINuES TO
DRIVE DEMAND
by Smita Vasudevan
28 HuMAN RESOuRCES
TRANSFORMATION – IS OuTSOuRC-
Emerging markets within Europe will be seeing significant ING A SOLuTION?
nearshore activities this year, with niche IT capabilities and by Kumar Parakala, KPMG
multilingual skills offering new opportunities.

32 THE FRENCH BANkING SECTOR:
SOuRCING STRATEGIES, TRENDS,
AND OBSERVATIONS
By Nigel Hughes, Global Services Director, Compass
Management Consulting

GlObal SeRvIceS DIGITal MaGazINe

Next Issue:

software develoPment

Editor’s NotE
Ticking Again
t his year is seeing a resurgence of interest in BPO, based on the level
of contract activity and contract values. The BPO market had a
sluggish trend through the entire period of recession and the time there-
after. In the GS100 survey we found that there was a y-o-y growth of 8.3
% in terms of number of BPO customers signed on during 2010 despite
a fall in total contract value (TCV). This clearly points at a fall in contract
sizes for BPO contracts, accompanied by fall in contract periods also.

HRO seemed to be sunset segment in BPO. Large end-to-end deals in
comprehensive HR BPO services have slowed for the past 12 to 18 months.
A revival will surely be marked by disruption and then a reinvention would
happen.

Ed Nair The good news is that HRO is regaining its lost momentum. Demand
Editor
for global expertise in HR, integrated HR services, and technology innova-
ed@cybermedia.co.in
tions in HR service delivery are the drivers. There has been a rise in single
service HRO contracts. A recent IDC report states that HR BPO market
A revival will surely would grow at a CAGR of 4.4% through 2015. Specific segments like
be marked by RPO, employee data management, talent management, and learning have
disruption and then robust demand profiles. HR technology itself is on the rise and with the
a reinvention would availability of subscription-based models for software the adoption is going
to increase. Increasingly, many of these sub-segments in HR would be
happen.
driven and delivered using technology.

The cover story this month encapsulates these trends very well.

The other main story focuses on Europe as an outsourcing destination,
despite all the economic woes faced by the region. In fact, the services
industry can be an instrument for overall economic development for a lot
of countries in Europe.

Enjoy the summer !!! GS

YOUR STRATEGIC
TECHNOLOGY
PARTNER
Building solutions for
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MICHAEL MINKEVICH ROMAN TRAKHTENBERG
VP Technology Services Managing Director, Luxoft USA
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Tel: +7 (495) 967-8030 x4427 Tel: +1 (212) 964 9900x 240
www.luxoft.com Mobile: +7 (495) 364-9137 Mobile: +1 (917) 930-205

Special Report

destination Europe –
Nearshoring Continues to
drive demand

Emerging markets within Europe will be seeing significant nearshore
activities this year, with niche it capabilities and multilingual skills
offering new opportunities.

Smita Vasudevan

I
n the post recession phase, when low cost countries the biggest trend for Europe in 2011. With a huge IT tal-
like India, China and Philippines remain the most ent pool, multiple language skills and favorable time zones,
attractive destinations on the global outsourcing Eastern European markets can be seen as the destination
map, Europe, at the other end of the spectrum, is of choice for nearby countries and for the uS. Alexander
also capturing good amount of attention. Although cost- Semenov, Head of Sales Department, Reksoft, says, “Europe
lier, numerous other factors are driving demand to Europe. still retains its strong position for outsourcing high-end solu-
Experts are of the opinion that nearshoring activities in tions development.” Lots of new IT trends and developments
both IT and BPO space will have a significant impact are reshaping the European ITO space. Cloud is influencing
on the market this year. Ian Marriott, Research Vice the market in a big way. According to Forrester Report
President, Gartner Research, says, “We see lots of oppor- “Market Overview: European IT infrastructure Outsourcing
tunities in Europe for services to move within the region (2011)”, cloud services remain the most discussed service
and much of the work is going nearshore from uk or uS.” in the infrastructure outsourcing market. Resistance to the
An increasing number of companies are choosing to keep cloud will change as enterprises realize the flexibilities that
work closer to home and nearshoring is thus being seen as cloud offers.

8 Globalservices www.globalservicesmedia.com July 2011

destinations

2011
compendium
a one stop resource on outsourcing destinations

Destinations compendium brings together the
myriad dynamics of the outsourcing locations. It
covers research report on top 100 outsourcing
cities, countries-in-focus, regional dynamics, city
profiles, experts opinion on location assessment.

http://microsites.globalservicesmedia.com/destinations

Don't miss this opportunity!
Book your space now! Contact Niketa at niketac@cybermedia.co.in

Special Report

BPO activities, especially voice operations continue to see Nearshoring to Europe is thus on a high and will be driv-
significant momentum. This is fairly justified, as there is hardly
ing demand significantly in the future. Marriott points out,
any other location currently that can support six to eight lan- “Offshoring looks at a balance of low cost and low risk. When
guages within a single city. Emerging markets like Serbia and enterprises try to drive down costs, the risks tend to go up.”
fairly established ones like Poland and ukraine are offering Offshoring to countries like India, China and Philippines can
regional Dynamics
huge potential for growth due to the availability of multilin- be a low cost alternative to nearshoring, but there are other
gual skills and good quality resources. factors that balance out or overshadow the cost benefits. When
companies start outsourcing, they prefer keeping it closer to
What Makes Europe Attractive?
countries becoming members are: home and work with companies that speak the same language
Shortage of resources in one region can drive demand to and have a cultural compatibility. “This is reason why more
• Political stability and greater integration
other regions where resources are available in plenty. This is percentage of work is going nearshore than offshore” adds
• Increased trade
where Eastern Europe scores big. As per studies and surveys Marriot. This holds true especially in case of mid-market com-
• Increased inward investment
conducted by ‘IT Sourcing Europe’ there is a huge gap in panies that are new to outsourcing.
• Social policies and subsidies
IT talent and resources in the Western Europe. Interestingly, Another factor adding to its global appeal is a mature
 Eastern Europe has attracted a lot of investments from service providers and cli-
Eastern Europe has seen a significant surge in its IT resources legal framework.“Benefits from privacy legislation and align-
ents (captive operations) in the last 3-5 years making it a strong “offshore cluster”
over the last couple of years, which justifies the large number ment with legal systems offer high confidence to enterprises
and a “skills cluster”
of Western European enterprises outsourcing to countries within the European union” says
queuing up to this region. Dmitry Marriot. These regions come out as safer alternatives, especially
Global Clientèle Loschinin, President & CEO, when data protection and security laws may not be that strong
 With 63 percentage of all developed countries in Western other parts of the world.
Luxoft, says, “Eastern European in Europe, it is the largest
cluster of buyers across the world. This attracts large business firms from across
countries have shown a signifi-
the world to have centers risetheeducatedto cater to the domestic markets in these
cant in in region and qualified The Opportunities Within
developed economies.IT talent. Romania, for exam- Poland, ukraine, Czech Republic and Romania are some
 Eastern Europe henceple, has seen global clientele12 of the this has countries in the European outsourcing space.
caters to the more than a indirectly, leading successfully
built a strong brand for “Nearshore to Eastern Europe”, offering cost differential Serbia, Slovakia etc are also
percent growth in the number Emerging ones like Bulgaria,
of 15-20 percentage compared to Western Europe.
of experienced IT professionals capturing lots of attention. Semenov says, “Customer inter-
 Clients say productivity per employee higherproviding Europe than offshore development centers continue to move
employed at companies in Eastern est and the providers’ loca-
tions like India, Philippines and China.
Dmitry Loschinin, IT outsourcing services. In addi- eastwards. This interest is closely connected with the level of
President & CEO, Luxoft
 High skill sets available for ukraine islike Product Development (Turkey, Ukraine,
tion, processes another Eastern technical education and resources availability in these coun-
Russia), Regional has witnessed similar growth,5–6 locations of There are many new locations coming to the fore. ‘The
European country that Multilingual Skills (top a nearly tries.” previous list), and
10 percent (Russia sinceacross the region).
R&D increase and 2008.” Central & Eastern Europe IT Outsourcing Review 2010’
Europe: Centers of Excellence

Region/ Country/ City Core Specialization Companies Established
Figure 1 Europe: Centers
of Excellence.
• Specializes in R&D, Infrastructure SAP, Quest Software, IBM, Microsoft,
Western Europe

Ireland Dublin Accenture, Marino Software, PMI
Services and Custom Development
Application Software, Infosys, Deloitte, Amazon

• High value processes in Financial Barclays, Accenture, InfoTech, HCL,
U.K. Belfast Analytics, R&D and Applications Capgemini, HP-EDS, KPMG, Xerox,
Development Management ECOM, First Data

• Business Analytics, Finance and Google, IBM, Motorola, Fujitsu, HCL,
Poland Kraków Accounting Outsourcing, multilingual Capgemini, ACS, Hewitt, Quantum,
Contact Support, HR Outsourcing Sabre

• Focused on HR Outsourcing, R&D Sun Microsystems, Accenture, GE,
Czech
Eastern Europe

Prague processes and emerging destination for SAP, Google, Intel, Capgemini,
Republic
Engineering design services Mahindra Satyam, IBM

• Focused on HR Outsourcing, R&D in SAP, Microsoft, Sun Microsystems,
Hungary Budapest Software Development and Testing TCS, Genpact, Cognizant, Canon,
Mahindra Satyam, SCA

• Specializes in Engineering Design and Intel, Motorola, Sun Microsystems,
Russia St. Petersburg R&D services. Boeing, HP, Auriga, Google, Luxoft,
EPAM, Arcadia

Page 10
Source: Global Shore 2010 webinar ‘Europe: Showcasing the Challenges and Opportunities’

PRIMARY VALUE PROPOSITION
It is a viable nearshore destination for Western European clients for several reasons:

Europe: Showcasing the Challenges
Destination Europe

and Opportunities
identified Croatia, Moldova, Latvia, Slovenia and Albania as
the newly established markets.
The Emerging Nearshore
Marriot points out, “If we take a broad look at locations
within Europe, there are application services, remote infra-
structure and business processes being outsourced. MNC
service providers are moving to Poland and Czech Republic
for infrastructure services and there are also significant BPO
Western Europe has done a significant amount of nearshoring to Eastern Europe.
centers being set up in Poland.”
Over the years, the gap in GDP between Western Europe and Eastern Europe has
Numerous service providers are rushing into the scene
widened instead of declining, which has helped in attracting clients from the former
to capture the untapped
to the latter. This has helped in making nearshoring to Eastern Europe an attractive
Prominent nearshore options: opportunities and to
opportunity.
Eastern Europe expand their footprint
It has been a destination of choice for Western Europe for more than a decade and
6 poland: kraków, Warsaw, within Europe. Sitel has
this attractiveness has become stronger over the years.
Gdansk, Wroclaw extended its European
operations with its new
6 Czech Republic: Prague, Brno CHALLENGES
call center location in
6 hungary: Budapest  Clients face dilemma- No single country can take care of all languages. But
Serbia. The company sees
6 Russia: St. Petersburg, Estonia can take care of the 5 major languages.
lots of opportunities in
Moscow, Nizhniy Novgorod,  Most smaller countries do not offer scale
the region and considers
Rostov-on-Don, Novosibirsk it as a major step in its
6 Romania: Bucharest, ADVANTAGES
strategy to double opera-
Cluj-Napoca  Europeans are conservative businessmen compared to their American counterparts
tions in Eastern Europe in
6 Ukraine: kyiv, Lviv
and are more comfortable keeping work closer to home. Thus nearshoring is a
the next three years. But
favored option.
6 Belarus: Minsk why Serbia ? Tim Schuh,
 Considering a cut off population of 10 million, only Russia, Ukraine, Poland,
6 slovakia: Bratislava General Manager, North
Romania, Belarus, Czech Republic, and Hungary have the advantage of a sizable
EMEA, Sitel, says, “We
Bulgaria: Sofia talent pool
have always tried to be
6 slovenia: Ljubljana  Multiple factors enable to be perfect nearshore options for Western Europe like:
early adopters in the mar-
1. Financial Attractiveness 3. Trade laws (European Union)
6 serbia: Belgrade ket. Sitel has significantly
2. Cultural compatibility 4. Excellent Education
6 estonia: Tallinn expanded its operations
6 Croatia: Zagreb in Nicaragua and Poland.
Major clients nations in the region are:
We wanted to be the first
6 Latvia: Riga  United kingdom  Denmark
global outsourcer in the
6 Lithuania: Vilnius  Spain  Finland
Serbia market.” Its deci-
6 Malta: Valletta  France  Germany
sion to expand into Serbia
 Italy  Norway
Source: Global Shore 2010 webinar was based on lots of fac-
‘europe: Global Shorethe challenges and
Source: Showcasing 2010 webinar  Sweden
Opportunities’
‘Europe: Showcasing the Challenges and tors like language abilities,
Opportunities’ good quality labor, work
REGIONAL DYNAMICS
ethics, infrastructure and so on. Hungary, Romania and
 European Union member countries in Eastern Europe have significant advantages,
Slovakia are the leading locations for voice operations. Poland
providing them the edge to become “nearshore locations of choice”
is the popular location for Non-voice BPO work like FAO and
transaction processing. “we are predicting
 A recent trend is of clients preferring to send work onshore or to nearshore loca-
tions. This is true for US itself. This is not necessarily because of a language pref-
Indian service providers are also waking up to the
that more and more
erence. This is being preferred even at a higher cost than offshore locations. This
realization that having a nearshore presence in Europe
trend is favoring Eastern Europe.
is increasingly important, both in the ITO and in BPO enterprises will consider
 Being a part of the EU makes the smaller countries offering cost arbitrage very
space. Mphasis is the recent one to join the bandwagon.
attractive nearshore destinations, some other benefits for Eastern European
Gopinathan Padmanabhan, Head Global delivery unit, eastern europe as a
Mphasis, commented in one of its recent press releases,
32 GS Destinations Compendium 2010
“Poland offers ability to service clients in most conti- strategic outsourcing
www.globalservicesmedia.com

nental European languages and is well connected with
other Western European business centers. The availabil- destination.”


COUNTRY-IN-FOCUS
Ensuring Global Visibility
A special feature for countries to showcase their uniqueness
There are numerous outsourcing destinations that exist as
great alternatives to India and China.

Inviting Countries to showcase
capabilities that accentuate
their uniqueness.

Examples of Country-in-focus feature
Egypt Philippines Jordan

JORDAN

For more information write to satishg@cybermedia.co.in

Destination Europe

ity of talent, language skills and an established business For service providers, scaling up can also be an issue in
infrastructure in Poland made it a natural choice for us.” the long run. General Manager, Andrei Pronin, Auriga, com-
What benefits do these locations offer to service provid- ments, “The providers tend to be of a smaller scale, and can
ers? Luxoft that has operations in the Eastern European put together large teams slower than competitors from other
countries like Romania and ukraine believes that there are locations. However, for traditional R&D projects that’s not a
many advantages. Loschinin says, “Because Luxoft maintains problem, as big teams are rarely needed.”
operations in both countries, we are able to tap into the Service providers would invest more in the near future,
abundance of IT talent available, and as a result, our Eastern especially in the Tier 2 cities. Different regions will have
European business is booming. For our global customers, their own specific requirements and service providers will
the deep expertise of our engineers and software developers have to adopt a combination of strategies to make use of the
results in higher-quality products and services, and an overall opportunities.
competitive advantage.” Pointing to future prospects, Schuh says, “It is little bit of
a mixed bag. The countries are in different phases in terms
Will it be a Future Destination of Choice? of their recovery from the recession. There is very positive
When it comes to low cost alternatives, Europe has a long momentum in the Eastern Europe. But it’s a little tougher in
way to go, but it will surely be a major contender in selec- countries like France and Spain.”
tive areas that require better language skills and good qual- Although experts have mixed reactions about the
ity. Salil Dani, Research Director, Global Sourcing, Everest potential that Europe holds, service providers seem to be
Group, sums up “In the next couple of years demand is likely very positive. Loschinin reveals, “We are predicting that
to increase with countries coming out of debt crisis. Easter more and more enterprises will consider Eastern Europe
Europe will continue to see demand for high order IT skills as a strategic outsourcing destination and we are expect-
and niche capabilities, though the overall scale of operations ing significant business growth for our operations within
would be lower than that in India and Philippines.” Eastern Europe.” GS


HRO
So Old,
Yet So New

Prerna Tandon
Prerna has been one of the pioneers in the HRO space
in India. She led the HRO practice in Infosys BPO as VP
and SBU Head for over two years growing the business
profitably. Later, she joined ANZ Bank as the Global
Head of Payroll & HR Operations, responsible for global
strategy and execution in this area.

Cover Story

Hro: so old, Yet so New

outsourcing and offshoring of Hr presents many opportunities and
challenges, what is needed is for more Hr professionals to have out-
sourcing business skills (namely process, operations, project man-
agement) and for more outsourcing professionals to have a greater
understanding of Hr issues and its impacts.

Prerna Tandon

H
uman Resource Outsourcing (HRO) or itself because each of the hire to retire processes is unique
Human Resource Services (HRS) is one of and has a unique set of characteristics that need a different
the oldest areas to have been outsourced in strategy both from a buyer/providers viewpoint. Some of
varied and different models, in bits and parts, the differentiating characteristics are:
especially areas such as recruitment, payroll and benefits Recruitment: There are sourcing and search functions
and learning/training. This has resulted in large and very within recruitment, especially at junior and middle levels
successful specialized and localized outsourcing firms in that lend themselves to being operated out of a shared
the HRO space. The advent of offshoring has lent a differ- services environment which is location agnostic. Needless
ent flavor and new opportunities, but there are numerous to say that technology enablement is a critical factor for
challenges that buyers and providers are still struggling this to be successful. This has only been possible in the
with. recent past, with internet becoming an important medium
for job seekers. However, there are still aspects of recruit-
The Sum of the Parts ment that are better performed on shore, especially that
Most are still searching for the magic formula of suc- require face to face interaction and allow really experienced
cess. In fact, to club all Hire to Retire (H2R) or Search to recruiters to add value based on their experience of the sec-
Separation (S2S) processes under one roof is a mistake in tor and the geography (including networks and contacts).


HRO: So Old, Yet So New

Payroll/benefits: These func-
tions, especially transactional
aspects are most easily done in an
outsourced and offshore environ-
ment. Once again a robust and
country compliant technology is
the key enabler. However, there is
a very thin layer of knowledge that
is required which best resides with
on shore staff. This mostly per-
tains to regal regulatory filings and
compliance related activities. The
question about does this fall into
the finance or HR function is still
being discussed. I have seen sev-
eral organizations where payroll is
part of finance function and equal
number where it is part of the HR
function. Wherever this might lie,
but what is certain is that its important to recognize the with the HR function, closely linked with Learning and
finance and HR components of this sub function and Recruitment and other than administrative tasks do not
address them appropriately with the right owners. have high scale.
International mobility: This HR function impacts a
very few number of employees of any organization, but Importance & Complexity of HR Processes
most of these employees are prized high profile talent, HR processes and activities in any firm, though frag-
hence most firms endeavor for this service to be best pro- mented and small as far as number of staff performing a
vided by specialist organizations, for instance immigration single process is concerned, are mostly the most sensitive
services firms, moving companies etc. However, internal processes and have the opportunity to impact each and
staff provide coordination and administrative type services, every employee of the company at some point of time
which, though small in numbers are suited for offshoring. during the hire to retire lifecycle, as compared to any of
learning: Training and Development as this function the other shared services or functional areas. Additionally,
was previously called, now has signification components experience with HR processes is crucial to maintain
that can be outsourced and can be better performed by employee engagement and morale and one bad experi-
specialist firms (offshore or on shore), especially if online ence has the ability of becoming the topic of coffee corner
learning or e learning is a significant part of a company’s conversation and experience sharing, thus disrupting the
strategy. Learning, again is being increasingly used as a dif- agenda of HR managers. Often, I have found that toler-
ferentiator by companies. Administrative tasks, e learning ance for errors in HR processes is extremely low.
related components such as content design, development, Additionally, from a providers standpoint, HR Processes
instructional design, project management, conversion, have a degree of unparalleled complexity, primarily because
administration, testing and tracking are activities that are of zero tolerance from buyers end, the relative importance
increasingly being outsourced and even offshored. as described above, coupled with diversity of processes in a
Employee Data Management and Queries: These limited scale that require varied levels of skills and knowl-
functions are mostly the ones that can be completely out- edge ie both voice and transactions, simple data entry to
sourced and are location agnostic. Employee Self Service judgment based, local/geography specific knowledge as
and Manager Self Service, ESS or MSS enablement, very well as knowledge of company specific rules and policies.
widely being adopted, restrict the scale at which these
functions need to be performed. However, query handling, The Organization’s Viewpoint: Enablers for
again mostly pertaining to compensation and benefits still Offshoring
remains a significant proportion of activities that can be The three tiered model, implemented well and consist-
outsourced/offshored. ently, is the key for designing the HR function in a cost
talent & Performance Management: These activities efficient manner that not only enables a global organiza-
are very niche, mostly periodic in nature, usually centralized tion to grow and operate in different countries, but also


Cover Story

ensures that through transition to shared services (global, factors such as competence in delivery, offshore capability,
cost effective and scalable), provides consistent employee knowledge management, SLAs etc.
experience. Also, most buyer organizations and HR managers,
Briefly, the three tiered model consists of HR Strategy, when asked would normally state that they intend buying
policy and design components at the top, business partner superior service, and not lowest cost. Service performance
HR as HR support to business and conduits for change even if it’s at a wee bit higher cost is more important in the
management and implementation of HR strategy in the buying decision.
business and shared services at the base, almost as the
strong foundation on which the HR function resides. Service Providers- Key Success Factors
This model is being increasingly adopted as HR functions Bundled HR technology in the solution set is the
transform themselves in an effort to support increasing single largest enabler for success in not just delivery but
demands and complexities of businesses in a cost efficient also in winning more and new business. Cost and time
manner. involved in an in house HR ERP implementation can act
HR technology is the next fundamental pillar which as deterrent and can work hugely in favor of the provider
enables the creation of HR shared services which can then who can provide a BPaaS (Business Process as a service)
be outsourced/offshored, with adequate change manage- model. Most large outsourcing providers who have added
ment and knowledge transfer routines. HRO in their basket of services have now realized this and
Mostly, in the case of HRO, buyers are HR managers have partnered large ERP like Peoplesoft/SAP and provide
and not sourcing departments. Often, I have found that HRO service using the underlying technology platform.
this translates into greater importance on factors such as Traditional HRO firms have their own home grown,
competence and experience in HR, home grown HR tech- highly customized technology platforms that has resulted
nology and its functionalities and lower consideration on in client stickiness.


HRO: So Old, Yet So New

Provider organizations have to realize that business Change management, the discipline that HR profes-
process management techniques and disciplines, if sionals are entrusted with for all major transformation
used well can enable them to be successful in this space. projects in any business is just as important for HR
A recognition of how HRO comprises several smallish Outsourcing projects. This area, since it happens in HR
processes, and treating each one, however small in scale it functions’ own backyard, is also, most easily ignored and
might be, as a process that requires strict process discipline overlooked. But due to the nature of HR Outsourcing as it
of mapping (SIPOC), training process staff, escalation has the potential of impacting every employee several times
matrix, ‘what if ’ scenarios, knowledge transfer/manage- during their employment with the company needs to be
ment are all very critical. adequately addressed through various change management
Competent and skilled staff, like in most other areas is techniques and communication.
just as important. Service attitude, higher skilled staff capa-
ble of performing multiple processes are more important Emerging Trends & New Model
in the HRO space. Anyone who has viewed and been a part of this indus-
For complete end to end outsourcing, mix of onsite try has witnessed trends where HRO has moved from
and offshore in the solution mix can be a differentiator processwise specialist in country outsourced mode to
and important. Specific geography compliance. legal/ complete function deal based list and shift to now general-
regulatory knowledge can be additional advantage in the ist offshored. Newer trends in this space (both technology
overall delivery capability. ie Workday and process) are now looking at closer inte-
gration of all shared services functions that creates scale,
Enablers for both Buyers and Providers which was the drawback with HR shared services alone.
Just as in any outsourcing, both buyer and provider Creation of scale then enables investment justification
need to invest in setting the foundation of this relationship both at providers and buyers end. If one has to adopt
that can enable the future delivery of superior service to the customer centric view then this trend makes eminent
the employees of the business. sense to have all internal shared services processes that
One key area is to invest in process standardization impact employee lifecycle (not just HR, but even finance,
along with policy streamlining. A complete analysis ie employee reimbursements, travel and expenses etc) all
of process and policy anomalies and standardizing them reside under a single shared services umbrella. From an
prior to outsourcing can assist a seamless transition and on operations and delivery standpoint, these processes can
going delivery. It is broken processes, too many exceptions then be classified by skills required to perform them i.e.
in smallish scale of operations, backed by several policy voice, numeric ability, end user service etc. While from a
variations that pose delivery and knowledge management purist standpoint, this makes a good model that addresses
constraints from a providers standpoint. Also, process and the strains that exist in the current model and combines
policy variations that may have crept in over time, are also ease of delivery and greater end user satisfaction, the chal-
in the interest of HR organizations as they attempt to lenge that this poses is that of functional territory and
build scalable, consistent employee policies and practices. operational control within the structure of any organiza-
Hence addressing this aspect is of mutual interest. tion. GS
Often, this aspect is over looked, and technology is
awarded greater importance. However, the point to note Prerna has been one of the pioneers in the HRO space in India. She led
is that policy, process standardization can enable cleaner the HRO practice in Infosys BPO as VP and SBU Head for over two
smoother technology implementation with fewer customi- years growing the business profitably. Later, she joined ANZ Bank as
zations that can be a boon for any technology/application the Global Head of Payroll & HR Operations, responsible for global
implementation and maintenance professionals. strategy and execution in this area.]


HRO

small, shorter term deals
setting New trends in Hro
Hro providers are not seeing
too many opportunities for
multi process deals, but there
lies a clear opportunity in trans-
forming small, short-term deals
into longer strategic outsourc-
ing relationships.
Smita Vasudevan

A
s the economy is reviving, the HRO market to look forward this year. GIA’s ‘Human Resource
is regaining its lost momentum. The number Outsourcing: A Global Strategic Business Report
of deals has gone up over the last few quarters (2011)’ expects united States and Europe to continue
and adoption rates are improving. According dominating the global HRO market.
to krishna Baidya, Industry Manager, Frost & Sullivan,
“The HRO market has received a great boost as increased Going Strong
number of multi-process outsourcing deals, involving HR “In 2010, the Multi Process HRO (MPHRO) mar-
services such payroll, recruitment, training and develop- ket grew by six per cent to reach an ACV of $ 3.07
ment etc have started pouring in.” Exhibit 2: After dipping sharply in 2008, new-deal
A major chunk of the demand is After dipping sharply in 2008, new-deal activitymarket the MPHRO market
activity is back in the MPHRO is back in
coming from public sectors across Number of new Number of employees
regions, as pressures to cut costs are deals signed added each year

mounting. Sectors like financial New deals
Number of deals
Number of employees added each year
Number of employees (‘000)
services, pharmaceutical and man- 70 57 2,000
61
ufacturing are some areas that are 60 1,750
currently high on HRO adoption. 50
50
43
46 1,500

Everest Group’s ‘Human 40
1,250
28 1,000
Resources Outsourcing Annual 30
750
Report 2011’ points out few notice- 20
500

able trends for this year. Demand 10 250

for global expertise by buyers, 0
2005 2006 2007 2008 2009 2010
0

integrated HR services, technology Growth curve of MPHRO new-deal activity
innovations and preference for sin- Number of deals
80
gle service contracts will be major 60
factors driving the HRO market 40
in 2011. Increased buyer prefer- 20

ence for offshore service providers 0
2005 2006 2007 2008 2009 2010
as a low cost HRO partner will Sample size: 285 deals signed between 2005 and November 2010
most likely be an important trend Source: Everest Research Institute (2011)
2
Copyright © 2011, Everest Global, Inc.
ERI-2011-X-X-XXXX


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HRO

B. More than 40 new deals were The influence of software-as-a-service
signed during this time and there (SaaS) will be fairly visible on the
were also significant number of global HRO industry. The rise
extensions to the existing of SaaS is likely to popularize
ones,” says Rajesh Ranjan, Hybrid HR models. According
Research Director, Everest to Custers “Hybrid HR allows
Group. This coupled enterprises to leverage their
with reduction in the in-house infrastructure for
number of contract workforce administration,
terminations indicate seamlessly integrate it with
improved buyer satis- an outsourced multi-country
faction. As enterprises payroll solution (HRO), and
are becoming more careful deploy your talent manage-
in their outsourcing strategies ment processes in a SaaS/
and are reevaluating partner- OnDemand model.”
ships, there are some notable
changes in the types of HRO RPO is Hot
contracts being signed. The Recr uitment Process
visible trend is that the size of Outsourcing (RPO) is relatively
contracts is reducing and the new as compared to most other
contract period is going down. areas in HRO, but it has matured
Enterprises are also includ- fast. The segment is growing,
ing lesser number of proc- though certain areas are still
esses in the MPHRO deals. not developed fully. In terms of
Commenting on this, Michael global RPO, there hasn’t been
Custers, VP Marketing, much of development as there
Northgate Arinso, says,“We are not many service provid-
are seeing fewer ‘big bang’ out- ers capable of delivering a
sourcing contracts combining comprehensive global offering. This
finance, HR, and procurement outsourcing, in favor of apparently is the reason why buyers have been depend-
a more controlled and smarter approach focused on a ing on multiple service providers for their global RPO
select number of HR processes and rapid financial and needs. Employment branding is an RPO area that is
quality returns.” The idea behind this is to start slowly increasingly gaining focus. Enterprises are looking for
and later move to bigger deals if the deal appears to service providers for their employment marketing and
be paying off. “Such change in customers’ mentality is communication initiatives as they find it cost effec-
keeping vendors on their toes in the increasingly com- tive to outsource these rather than doing it in house.
petitive market. Through such outsourcing, buyers are Technology for recruitment processes are evolving and
seeking to scale up quickly or gain access to contingent enterprises are looking for providers who are able to
workforce with the required skills, gain cost advantage offer sophisticated technology solutions. These tech-
at various geographical presences they may have and nologies include mobile platforms, and employment
deliver consistent experience,” says Baidya. marketing and recruitment CRMs. Integrated tech-
Payroll has traditionally been the most outsourced nology offerings is most likely to be one of the major
function in HRO, considering its complexity and spe- service provider innovations to be witnessed in 2011.
cialized knowledge required in the domain. Typically, In terms of the geographical demand, North America
enterprises are initially starting with outsourcing trans- accounts for more than 50 per cent of the global RPO
action intensive functions like payroll and over time, deals.
they move to other areas like learning and recruitment.
The opportunity service providers have here is to trans- Service Provider Strategies
form short term agreements into long-term strategic The Everest Report had classified ADP, Aon Hewitt,
relationships by offering competitive services combined Northgate Arinso (Convergys), IBM and Accenture as
with innovative technologies that suit specific enter- the leaders, while Genpact, Xchanging and Neeyamo
prise needs. are categorized as the emerging players.


Small, Shorter Term Deals Setting New Trends

Service provider strategies are also ACS, says, “As the first wave of
changing in line with the chang-
ing demands of the industry. Many
“Services need to “mega-deals” come up for renewal,
we expect organizations to look for a
providers are trying to strengthen be scalable for any best of breed solution, rather than a
their offshore presence and add sin- comprehensive solution.”
gle process offerings to their line of size employer with
services. Growth is most likely to be The Power of the Mid
achieved by way of inorganic routes the ability to grow Market
like mergers and acquisitions. The
recent spate of M&A deals amongst
as mid-market The mid market segment is
expanding the growth opportunities
HRO service providers clearly high- organizations grow for global HRO service providers.
lights this. One prominent one is Today a large chunk of the business
the aqcuistion of Convergys’ HRO and their needs is coming from these enterprises and
business by Northgate Arinso. providers are developing special-
Commenting on how this has con- expand. we are ized strategies to tap this explod-
tributed to their business, custers
says, “NGA and Convergys’ HRM
prepared to meet ing potential. A research paper by
katrina Menzigian, VP, Research
business have been fully integrated
now. We have invested a lot in build-
their needs in all Relations, Everest Institute ‘How
Mid-market HRO is Emerging as a
ing strong ties with our customers service lines and True Growth Platform, 2011’ states
and exceeding quality standards. We that the mid-market companies have
believe that both our customers and grow with them increased their adoption of inte-
our employees have benefited signifi- grated MPHRO and this segment is
cantly from this transaction.” NGA as the economy becoming the growth platform for
believes that the need for higher
employee engagement, continuing
recovers.” many of the leading HRO service
providers. Of all the MPHRO deals
globalization, openness to process signed in 2010, 61 per cent came
standardization, automation of transactions, and focus from the mid market. Cost saving objectives, access to
on core strategy to be the most important elements of advanced HR technology and improvements in overall
a successful HRO strategy. business efficiency are the major factors driving these
companies towards outsourcing.
Emerging Models Commenting on their mid-market strategies, Vezina
Typically, the pricing models are based on head- says, “Services need to be scalable for any size employer
count utilization by enterprises. This is usually the with the ability to grow as mid-market organizations
same for both single-process and multi-process HRO. grow and their needs expand. We are prepared to meet
But as cloud-based and SaaS offerings are becom- their needs in all service lines and grow with them as
ing more popular, utility the economy recovers.”
based pricing models are
likely to be seen more. Drivers
Mid-market enterprises “Cost reduction remains a top driver of MPHRO.
will be more open to Other important drivers include managing compli-
such kind of a model as ance risk, greater alignment between HR and business
it offers them access to strategy and access to better technology,” says Ranjan.
technology applications Enterprises are depending a lot on service providers
without having to pay in areas other than cost saving and are looking for
a high initial cost for partnerships that bring a little extra in the form of
deployment. Pointing innovation and guidance. Experts believe that providers
to the growing demand have a big opportunity here. They may not be seeing
for smaller deals, Ann too many opportunities for multi process deals but
Vezina, Executive Vice Ann Vezina, Executive Vice there lies a clear opportunity in transforming small,
President and Group President and Group President short-term deals into longer strategic outsourcing rela-
President of HR Services, of HR Services, ACS tionships. A multiple location strategy can play a vital


Small, Shorter Term Deals Setting New Trends

role for service providers. Custers says, “Multi-country What Lies Ahead?
process is a great entry point into multi-process “Outsourcing led HR transformation presents
HRO, and we consider it a major driver for growth in several challenges that enterprises must overcome
the overall HRO industry.” Enterprises are targeting to achieve desired results. Everest’s research indi-
improvements in different strategic business areas, and cates that service provider selection, managing
providers that are able to offer this will have a visible the outsourcing partnership, stakeholder engage-
advantage in the long run. New deals continue to be smaller in size
Exhibit 3: ment and alignment, cultural integration, overall
and duration
New deals continue to be smaller in size and duration
TCV of deals over time
Average TCV (US$ million)

101
64 59 52 Average TCV = US$66 million
27
14

Upto 2005 2006 2007 2008 2009 Nov-10

Term of deal over time
Average number of years

8
7 Average term = 6.1 years
6
5
4
3
Upto 2007 2008 2009 2010

Custers says, “we believe that together with multi- change management, and transition-related issues
country payroll and learning, recruitment represents an are that have a TCV of more than challenges faced in such
Note: Analysis does not include contracts some of the major US$1 billion
important area of expansion for381 deals signed between 2005undertakings. Service providers and buyers both
Sample size: HRO. However, we and November 2010
Source: Everest Research Institute (2011)
strongly believe in process integration for HR.RPO can be need to be cognizant of these challenges and take
3
deployed as a stand-alone process, to deal more efficiently appropriate measures to overcome these.” says
Copyright © 2011, Everest Global, Inc.
ERI-2011-X-X-XXXX
with the transactional part of recruitment.” Ranjan GS


Case Studies
That Define Global Sourcing

one STop reSourCe

http://microsites.globalservicesmedia.com/live

Lanit-TERCOM Creates Comapping for
A Joint Venture Between Area9 &
Lanit-Tercom
The Client: “I can see the service being of real use at a GlaNCE
Founded in 2006 as a joint venture for those looking to tap into the valuable
between Area9 and Lanit-Tercom: resource of other points of view while Client
• Area9 (Denmark) is a provider of
putting together projects, proposals and A Joint Venture Between Area9
educational software solutions, and
presentations.” and Lanit-TERCOM
(Collaborative Online Presentation
an expert in educational computer Planning - Michael Pick )
simulators Service Provider
• LANIT-TERCOM (a member of
Lanit-Tercom Ltd
“Comapping has been a cost effective
LANIT group) is one of the lead- solution and has provided us the structure
Service Provided
ing Russian outsourcing providers and overview that we need to run a
of software development services. successful organization” Comapping
(300+ employees and >uSD 10M (CopenFysioterai)
in turnover).
“I was so pleased to find a Company • The smart collaborative tool
Situation Analysis: dedicated to thinking outside of the box • Intelligent Autofocus
for project management (…) For the
The idea behind the project was to • From left to right organized mind
first time, my team can think together!
create an online collaborative tool map
Comapping will be on my list of needs for
for mind mapping. This tool allows any project I run without a doubt. • No need of installation
people to organize their ideas, notes (SERMONSPICE.com) • Intended for multiple users
and documents as a mind maps and
then share them with other users
and work on them together. The SucceSS MetricS
primary features of the applications In first 2 years the service has gained more than 10000 users. The users
include online use, live collabora- can access theirs maps from any computer connected to the Internet.
tion, and support for large maps. users can also work with theirs maps offline by using a desktop client
for the service. The solution can be utilized as a standalone server and
Solution: integrated into a company network allowing for corporate usage.
• Focus corporate knowledge in one place and transform it into usable
RIA is a common trend nowadays.
business intelligence
Lanit-Tercom Inc. has been devel-
• Stimulate collaborative thinking by increasing individual and group
oping Rich Internet Applications
focus
since early 2005, since the earliest
• Increase communication effectiveness through a logical and clear
stage of the concept. Lanit-Tercom
structure for any content
team delivered the unique web
• Increase effectiveness of brainstorming sessions through Comapping´s
application named Comapping
unique collaboration feature
• Fully Internet-based

FOR MORE iNFORMATiON ON COMAPPiNg CONTACT TO MiCHAEL PLiskiN, TECHNiCAL DiRECTOR
michael.pliskin@lanit-tercom.com

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xperts by kumar Parakala, kPMg

Human resources
transformation – is
outsourcing a solution?
NassCoM estimates the global BPo industry spend to
grow at a CaGr of 6.1 percent between 2009 to 2014

Introduction The current scenario a shared services center or outsourcing
The concept of human resources Today, as the global economy con- to a third-party service provider or a
(HR) transformation or the exten- tinues to gain further stability, a large combination of these models. Most
sive restructuring of corporate human number of organizations worldwide of the organizations trying to trans-
resources departments (HRD) took are expecting HR transformation by form HR have chosen outsourcing
hold in the last decade or so. Prior to reducing their total cost of ownership as a major portion of their Human
that HRD staff was seen as adminis- (TCO) for human resources. With Resource transformation strategy.
trators managing the mundane and a focus on achieving this, strategic
not involved or responsible for stra- HR seems to have taken a back seat. Organizations will continue
tegic decisions. However, as compe- Several HR surveys done so far have to invest heavily in HR
tition increased so did the demand indicated that ‘Cost’ remains a top Outsourcing (HRO)
for human assets and a need for priority that an enterprise seeks to NASSCOM estimates the global
attracting, retaining and growing the reduce in case of HR “too”. This could BPO industry spend to grow at a
best talent. This required a change be achieved either through in-house CAGR of 6.1 percent between 2009
in the mindset of the HRD and tak- cost reduction initiatives or setting-up to 2014, while the HRO spend which
ing on more strategic role
bearing in mind the larger Figure 1: Worldwide HRO and Total BPO spend
business goals and objec-
tives. Soon organizations
began to relook their HR
departments and its func-
tions. HR transformation
took root and HRDs started
getting influenced by ideas
on modern HR practices of
HR specialists and gurus of
the time like Dave ulrich.
Shared services center (SSC)
for HR, outsourcing HR,
and HR business partners/
leaders and other similar
concepts and models started
getting implemented. The P = Projected
key idea of HR transforma- Note: HRO spend includes spend on routine HR services and services delivered during the initial
tion was to set HRD free design and implementation of the HR solution as well as on an ongoing basis. This includes serv-
from the administrative tasks ices consulting, system integration, training and education, application outsourcing, etc.
and focus on the strategic. Source: NASSCOM Strategic Review 2011


HRO

is 43 percent of total BPO spend, will grow at a slightly lower CAGR of 4.8 percent during the same period to reach
around uSD 83.6 billion by 2014 and still contribute nearly the same percent to the total BPO spend pie.
These numbers reaffirm the fact that organizations worldwide will continue to spend a significant portion of their
revenues on managing their human resources. This also indicates the continuous commitment of enterprises worldwide
to their HR outsourcing plans and the strategic intent behind it.

Scope for Outsourcing Human Resource Services
While human resource outsourcing continues to grow, it is still a very long way from full-scope HR outsourcing in
comparison to what we have witnessed in IT outsourcing space.

Figure 2: Potential scope of HR services outsourcing (illustrative list)

Source: KPMG Research and Analysis

What started more than a dec- Figure 3: Transactional vs. strategic HRO services
ade ago still continues today. Most
of the HRO contracts have
transactional HR work
getting outsourced,
for example; payroll
processing, employ-
ee background
check, staffing,
training, benefits
administration,
etc. Organizations
choose to retain
more strategic
HR initiatives like
organization develop-
ment, change manage-
ment, etc. in-house. A few
organizations hire external
consultants to offer such services,
but typically it’s a one-off case in the Source: KPMG Research and Analysis


Experts

large extent, most of the met-
rics chosen do not indicate any Global ServiceS
HR transformation happening MaGazine
in reality. This only indicates
that purely outsourcing or set- Past Issues
ting-up an HR SSC or hav- 2011 May The
ing “n” number of HR busi-
issue Promise of
ness partners will not ensure HR
transformation.
iaaS
New
The ‘how-to’ of HR Opportu-
Transformation – A nities in
perspective Global
It is quite evident that out- Sourcing:
history of that organization rather than sourcing an organizations HR IaaS and
a cyclical or regular activity. functions will certainly do the ground Analytics
At a high level, today’s HR is work for focusing on strategic issues
seen as a more strategic department as the routine, low-end and trans- click Here
To read
seeking answers to issues relating to actional tasks will no longer eat-up
multi-cultural complexities, leader- HRDs time and energy. At the same
ship development or change manage- time certain processes or systems must 2011 april The new
ment which are core to the organ- be paid attention or be in place to issue rules in
ization and hence the reasons for expect real HR transformation. Some bPo
keeping them in-house. Probably pointers in this direction are men- Learn
they will always remain in-house and tioned below: about what
only more mundane and transac- will drive
tional processes will continue to be n Partner with the “right” service
the BPO
outsourced. However, that’s not a provider - The degree of buyer
concern when it comes to using out- satisfaction in a HRO engagement
sector in
sourcing for HR transformation. varies according to certain key this special
attributes while evaluating ven- report.
The Big Question: Are dors. These are-
click Here
organizations transforming l Per-employee costs To read
their HR by outsourcing? l Staff Quality of service provider
To my mind the top few reasons and their expertise
why organizations outsource HR are; l Technology capabilities
2011 March contact
they get the opportunity to reduce Those companies which under- issue center
costs, get access to external HR exper- estimate these key attributes and industry:
tise, ability to focus on strategic HR focus more on the overall cost savings where
priorities, relieved of possible labor remain typically less than satisfied do You
regulatory issues, and a possibility of or dissatisfied with their HRO ven- Go From
improving service quality. However, dor, leading to spending time and Here?
the following parameters are typi- energy in managing vendor relation- Contact
cally measured by these organizations ship and service related issues. Service
Centers
to determine the HRO engagement providers’ offering a combination of
success; operational efficiency, operat- competitive pricing and strong key
and the
ing costs, service quality, employee attributes typically create long-term Challenge
satisfaction, HR staff reduction or customer satisfaction. of Social
changes, etc. It might sound clichéd but part- Media
While a vast majority of business nering is the key. The idea is that if
click Here
leaders will quote of having achieved the parties involved in the deal work To read
their HR outsourcing objectives to a closely together as partners they both


HRO

can learn in the process and forge a n top Management role crucial for 2011 February next
win-win relationship, instead of the successful HR transformation issue & best
iterative negotiations thought to char- - ultimately the success of HR Practices
acterize a typical transactional HRO transformation lies with the top
in Global
engagement. management’s involvement and
Sourcing
drive. They need to believe and
n Establish HR transformation propagate the notion within their Thought-
metrics - As the saying goes “what organization that talent leads to leading
cannot be measured cannot be superior corporate performance. Practi-
improved”. While this is true, it is At the same time understand that tioners’
virtually impossible to list out how HR is not the only one account- Viewpoint
to measure HR transformation, able for employee and employee
the ultimate metric being “how processes but it is every business Client
much value is being created”? leader’s responsibility. priorities
In the context of HR this could are shifting
mean- establishing HR metrics based Conclusion and there
on input, efficiency, effectiveness and Outsourcing to a third-party ven-
is no
outcome based metrics, establishing dor or setting-up an HR SSC or any
consistent
the correlation between HR and busi- other model will not guarantee suc-
ness scorecards. Examples of such cessful HR transformation. It’s only correlation
metrics could be; ‘on-boarding vs. the beginning and demonstrates a of the
attrition’, which could help in pri- change in the delivery mechanism benefits
oritizing HR resources to make maxi- while possibly allowing the HR to of out-
mum business impact. Others like focus on strategic issues that will add sourcing
revenue per employee or profits per business value. What happens later to business
employee could give a financial per- will be the crucial part to determine impact.
spective to HR value creation. success. Management has to realize click Here
its role in empowering the human To read
n Redefine new HR roles with- resources department in taking itself
in the retained HRD based on to a new level to realize transforma- 2011 January Utility
business initiatives to serve - tion in the true sense. HR business issue compu-
Due to off-loading of administra- partners should redefine their staff ting: The
tive work, HR roles need to be roles to enable them to think and act
reality
redefined within the organization. in a more strategic sense in line with
check
But instead of doing that first, the business units’ top priorities. HR
what is essential is to identify the transformation should be measured
critical business needs and ini- with appropriate metrics so that effec- In the dec-
tiatives of the business units and tiveness of the process is tracked and ade that
then realign the HRD with suit- suitable and timely measures are taken went by,
able roles and responsibilities that to make the process more robust. the out-
will add maximum value to the HR transformation will change the sourcing
unit and deliver business results. way organizations behave and deliver. industry
HRD also needs to probably re- Success lies not in ‘in-sourcing’ or had many
skill its retained staff or employ ‘outsourcing’ but in the synergies momen-
new staff to suit the new and more between the transformation objective, tous shifts
strategic roles. implementation and the key stake-
click Here
A failure to redefine HR roles will holders drive to achieve it. GS To read
only mean that the HR spends more
time on keeping a check on the out- Kumar Parakala is Head of IT Advisory,
sourced service provider which will KPMG EMA & India and Chief Operating 2010 archives
ultimately lead to the failure of the Officer, Advisory in KPMG in India. He is www.globalservicesmedia.
transformation initiative. also a global head for Sourcing advisory. com/e-magazine


xperts By Nigel Hughes, global services Director, Compass Management Consulting

the French Banking sector:
sourcing strategies, trends,
and observations
French banks outsource about 20 percent of their it costs.
approximately 80 percent of French banks now outsource
facilities management, though not as part of a comprehen-
sive it services agreement.

F
rench financial serv- management, though not as part of a In terms of metrics and perform-
ices organization have in comprehensive IT services agreement. ance improvement strategies, the con-
recent years undertaken BPO with the European banking cept of activity-based invoicing in
some new and noteworthy sector has traditionally been limited internally-managed operations is gain-
approaches to sourcing strategies, to HR and accounting. However, this ing increasing attention. By allowing
including a focus on consolidat- is changing as close to 70 percent of each discrete activity to be assessed as
ing operations through captives, French banks now outsource check it would be with an external provider,
and forming partnerships this trend suggests
both within and outside the growing interest in
banking sector to manage outsourcing.
growth Customer sup-
My Paris-based Compass port activities
colleague Guillaume (including call cent-
Almeras recently compiled ers) are generally nei-
a series of observations of ther outsourced nor
sourcing strategies among relocated, and dur-
French banks. ing the past few years
First off, from the French some banks have
perspective, outsourcing does undergone a wave of
not necessarily mean a reloca- re-inshoring. Credit
tion of activities. When relo- handling is still high-
cation does occur, it is often ly centralized, even
through a captive model. In within the major
addition, sourcing strategies banking groups.
tend to encompass a compre- In recent years
hensive range of objectives, large-scale partner-
and don’t focus narrowly on ships have been used
cost reduction. to help French banks
Overall, French banks outsource processing, with other functions such manage expansion. Four specific
about 20 percent of their IT costs. as securities and electronic banking examples stand out:
Approximately 80 percent of French following suit, as evidenced by a joint In 2010, Crédit Agricole SA took
banks now outsource facilities BNP Paribas and Natixis platform. over asset management activities from


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