HRO or PEO?

HR.com seems to have shown their considerable lack of understanding regarding HRO. While they are actually a very good source of information, I see them as similar to SHRM. Both of these organizations cater to mid-sized organizations and are rather unsophisticated from that standpoint. Article Here.

Although the jury is still out on the real benefits of staff function outsourcing, preliminary research suggests it is working reasonably well for some clients. In fact, there are reports that HR cost savings have reached a whopping 10-20 percent in some organizations! Pardon my sarcasm, but that amounts to a paltry $50,000-$100,000 saved for every $500,000 of HR budget.

If you have been in the market for HRO, you'll have noticed that nobody wants to talk to you unless you have 5-10K employees. All the real HRO deals we've seen involve 20K employees and up. When was the last time you saw an organization with 20K employees and a $500K budget? OK, when was the last time you saw an organization with 5K employees and a $500K budget? Right... NEVER!!

The facts are that HRO can't even be implemented for under $1M these days and even that's a stretch. Most real deals are implementing for $3M and up... 6 times our HR.com guy's budget. Accenture (et. al.) are just now trying to get into the mid market for HRO. They don't have a client yet, but the target market will be under 10K employees. This mid-market offering will implement for around $2-3M and will probably cost $1M/year. (costs are a guess - As far as I know - they haven't even sold a deal yet)

This HR.com guy is talking about HRO savings for an organization that does not exist because they are not a client any HRO vendor would take!!! 10-20% of your budget? Yeah... any smart company would take that because the real budget for a real potential HRO client is NOT $500K.
In fact, the HR.com guy might be confusing what we call PEO's (Professional Employer Organizations) in the U.S. for HRO. PEO's are quite similar, except for the fact that they are aimed at very small to to small organizations. I'd be surprised if there's a company with over 1000 employees using a PEO. Getting back to HR.com's numbers, it would not be unlikely for an organization smaller than 1000 employees to have an annual budget of $500K.

OK - I'm done with my rant.

Post Update:

Steven Levy from the Electronic Recruiting Blog e-mailed me this comment:

You realize that HR.com has a penchant for making broad brush statements that are not supported by facts? One might wonder if they believe that HRO is a viable alternative for any org. Hmmm - could it be that their strategic focus is on orgs that are maintaining in-house capabilities versus outsourcing???

Nice blog.

Steve

I've resorted to posting comments mannually? There has to be another way. Perhaps Michael Specht can help me. His HR Blogs community seems like the way to go. Perhaps that's my next step.