Tuesday, October 11, 2005

2005 HRO Trends and Insights

Disclaimer: yeah... Hewitt could be considered a competitor of the firm I work for. If you read the rest of my blog, I generally consider them to be a vendor though.

Hewitt's 2005 HRO trends and Insights published in June (2005) caught my eye for some interesting analysis if you read between the lines.

  • The survey was conducted with 129 employers with about 2/3 of them below 10K employees. While the average size of the respondents had 15K employees, this tells me that there are some very large HRO clients out there, but the majority of the prospect base for new sales will be in the mid market arena. (see my previous post where I say the mid market is where the action will be).
  • Hewitt may be misdefining HRO. Any vendor will do this to inflate their numbers and mislead the prospect base regarding the number of clients they serve. While Hewitt has been in the benefits and DB/DC industry for a long time, I would not consider a 401(k) client a HRO client. Their stats that the respondents averaged from $1M to $45B in annual revenues leads me to believe that the $1M respondents are pure benefit or only 401(k) clients. A $1M client can't afford real HRO.
  • Hewitt surveyed current and the potential outsourcing picture in 3 years. DB and DC outsourcing is obviously high at the 70-85% rate.
  • Surprising to me was that the current payroll outsourcing rate is only 30% and they project it to increast to 50%. Considering that ADP pays about 25-30% of the U.S. workforce, and Ceridian and Paychex probably pay another 20%, I'm wondering where Hewitt got their current numbers. I do agree that PR outsourcing will grow as it becomes more acceptable to the large employer market.
  • Also surprising to me was that they did not measure HRMS outsourcing since an HRO vendor that gets control of the HR systems infrastructure for an organization really can dicatate what's important for their clients to focus on. New offerings in technology (the aquisition of a talent management suite) can easily be rolled to their client base.
  • I was really dissappointed in the "lessons learned" section. I presonally think my list of lessons learned is much better. Their lesson that more due diligence and reference checking in the vendor aquisition process is clearly a vendor issue. From the 3rd party view, the major problem in HRO relationships is clearly the lack of measurable and comparable processes for a before and after standpoint.

Anyway, read the survey for yourself.