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Renewal Time
"They said it would be forever when we started on this road together." Such is the sentiment I heard one HR leader express about his relationship with a major HR outsourcing provider. His company signed one of the earliest full-spectrum HRO contracts, and that contract is coming up for renewal or extension by the end of this year. Some of you will recall that the contract between Exult and BP Amoco created the full-spectrum HRO industry in December 1999. As with so many contracts signed shortly thereafter, the initial contract term is just about up. What have service providers and "maturity level one companies" learned as the industry has come through its first maturity level? Has there been a general recognition that some processes are simply too complex to outsource? One question that bears little debate is whether there will be a wholesale trend to re-insource HR services as these contracts come up for renewal. Few companies with which we are talking are dissatisfied with their provider or service levels to the extent that they would bring the services back in-house. Moreover, companies have a general understanding of the tremendous cost and management time and energy it would take to re-insource some of these HR functions. Thus, most maturity level one companies will not try to build a sophisticated business case around recapturing these HR services. In most cases, once a process is outsourced, it will stay outsourced. The renewals coming up this year are unlikely to change that pattern. On the other hand, as the industry has matured, there has been recognition of a few areas in which outsourcing has been very difficult and service levels fairly poor. The processes in question involve high levels of complexity, numerous iterations to find the right answer, a demanding user or customer population and several data or fact elements that are preconditions to deciding the question. Expatriation services is one area that has required a great number of complex data iterations to determine the correct result; expatriation services often involve very demanding senior-management employees as well. Consequently, this is an area where we've seen a number of service-level problems and some recapture of services by companies. Disability and integration with general absence management is a second area that is prone to great complexity, lengthy turnaround times and multiple data iterations. In addition, the level of complex problem-solving skills required to do this work is very high, and many providers have tried to staff these service areas with poorly trained people. Disability processing has also evidenced some fairly high levels of dissatisfaction in an outsourced setting. Still another area of concern has been executive and incentive-compensation plans where the level of complexity is very high. With the exception of these three areas of concern, we are not seeing any pattern of recaptured services, nor any wholesale desire to insource services presently in the hands of the major HR service providers as we come up to the first wave of renewals. Lowell Williams > is human resources practice leader for EquaTerra, a leading BPO consulting firm located in Houston. He can be reached via e-mail at < Lowell.Williams@EquaTerra.com. July 1, 2005 Copyright 2005© LRP Publications |
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© Copyright 2012 LRP Publications. All rights reserved.
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