Multi-Process Services to Rule the BPO Roost

July 26, 2004 ( - The hottest part of the HR Business Process Outsourcing (BPO) market is expected to be its multi-process component, a market research firm said.

The report by NelsonHall said the worldwide multi-process HR BPO will grow at a good clip – 21% annually – and should reach reaching $7 billion by 2008, according to a news release. The entire BPO market is expected to expand by only 11% annually to $33 billion by 2008.

“To date, the great majority of HR outsourcing deals have been transaction-focused, single-process engagements, such as localized payroll services, pensions and benefit administration, and recruitment,”said John Willmott, founder of NelsonHall. “However, we are now seeing the emergence of the multi-process market, as vendors partner with and acquire other firms to broaden their service delivery capabilities, across these and other areas including organizational and people development, employee data management, workforce planning and deployment, and human capital services.”

As have numerous other surveys, NelsonHall’s study found that a drive for lower costs is a key motivator for outsourcing HR processes, which can be achieved through a combination of business process re-engineering, self-service technology, the adoption of shared services environments, and the management of certain processes in nearshore or offshore locations.

However, organizations adopting multi-process HR outsourcing are also driven by the desire to improve their HR processes, researchers found.

The NelsonHall study found that the manufacturing and financial services industries – which have historically presented key opportunities for HR outsourcing vendors – are likely to continue doing so. Both are predicted to continue seeking a mix of cost efficiencies and process improvement, allied to a requirement for complex benefits and pensions services for professional staff. The study also identified the retail and government sectors as potentially hot future HRO markets.

The global HR outsourcing market remains fragmented. ADP is the leading global HR outsourcing player, with its payroll and employee administration services commanding a 17% share of the global market. According to NelsonHall, Hewitt Associates has the next largest market share, with 9%, as a result of its strength in benefits administration services and its recent acquisition of Exult, the market leader in multi-process HR BPO, where the company has an estimated 18% market share.

North America is the dominant geographic market for multi-process HR BPO, where Exult leads the way, with Accenture HR Services and ACS gaining ground. Currently, North America accounts for three-quarters of the global multi-process HR BPO market, NelsonHall said..