Global HRO ForumGlobal HRO Forum

Global HR Outsourcing:Global HR Outsourcing:

Trends Post Financial CrisisTrends Post Financial CrisisMay 2009May 2009

Greg CardenasGreg Cardenas

Speaker IntroductionSpeaker Introduction Gregorio Cardenas, CIR/CDRGregorio Cardenas, CIR/CDR

– Bachelors, Business AdministrationBachelors, Business Administration– Masters, Human ResourcesMasters, Human Resources– Global HR Outsourcing Pioneer ($1B+tier)Global HR Outsourcing Pioneer ($1B+tier)– Global HR Professional (GPHR)Global HR Professional (GPHR)– Six Sigma Black BeltSix Sigma Black Belt– Project Management CertifiedProject Management Certified– First to Implement Taleo GloballyFirst to Implement Taleo Globally– HR Process Patent OwnerHR Process Patent Owner– Nearly 20 Years Progressive HR ExperienceNearly 20 Years Progressive HR Experience

AGENDAAGENDA

Where did GHRO really begin?Where did GHRO really begin? What were the lessons learned from the first What were the lessons learned from the first

failed attempts by early HRO service failed attempts by early HRO service providers?providers?

How is the market now?How is the market now? What are the trends post the recent economic What are the trends post the recent economic

slowdown throughout the world?slowdown throughout the world? How can future GHRO implementations better How can future GHRO implementations better

succeed?succeed? Who will be the future leader in this market?Who will be the future leader in this market?

In the beginning…In the beginning… GHRO is the evolutionary product of local and GHRO is the evolutionary product of local and

regional HR Outsourcing; payroll, recruiting, regional HR Outsourcing; payroll, recruiting, benefits administration, compensation benefits administration, compensation analysis.analysis.

In 2005 Convergys landed the first “real” In 2005 Convergys landed the first “real” GHRO contract with DuPont. This deal was GHRO contract with DuPont. This deal was worth approximately $1.3 Billion.worth approximately $1.3 Billion.

Other service providers entered the GHRO Other service providers entered the GHRO market including IBM, Accenture, Excellerate market including IBM, Accenture, Excellerate HRO (HP), and Alexander Mann to name a few.HRO (HP), and Alexander Mann to name a few.

As of today the largest GHRO deal remains to As of today the largest GHRO deal remains to be Johnson & Johnson which was also landed be Johnson & Johnson which was also landed by Convergys. Value of this deal is by Convergys. Value of this deal is approximately $1.7 Billion.approximately $1.7 Billion.

Failed attempts…Failed attempts… From the very beginning there were no global From the very beginning there were no global

benchmarks to base a service delivery model, costing benchmarks to base a service delivery model, costing model, sales model, implementation plan, etc. No global model, sales model, implementation plan, etc. No global company had ever outsourced their entire HR function.company had ever outsourced their entire HR function.

In a few cases the operations leadership teams hired to In a few cases the operations leadership teams hired to deliver the solution were not at the sales table. The deliver the solution were not at the sales table. The solutions sold by non-SME’s were often not practical. solutions sold by non-SME’s were often not practical.

Many of the industries first clients were simply acquired Many of the industries first clients were simply acquired for jumpstarting client portfolios. This was a very costly for jumpstarting client portfolios. This was a very costly mistake as in some cases the deals were won at a loss.mistake as in some cases the deals were won at a loss.

Several of the leading GHRO providers nearly went Several of the leading GHRO providers nearly went bankrupt and some completely got out of the market bankrupt and some completely got out of the market once the press started to challenge weather GHRO could once the press started to challenge weather GHRO could even be a successful proposition and provide effective even be a successful proposition and provide effective cost savings without too many unforeseen sacrifices.cost savings without too many unforeseen sacrifices.

How are things now…How are things now… The financial melt down has significantly slowed The financial melt down has significantly slowed

down the growth of GHRO – this however has not down the growth of GHRO – this however has not eliminated the need for a good HRO solution.eliminated the need for a good HRO solution.

Many companies are saving costs simply by Many companies are saving costs simply by reducing headcount and increasing productivity.reducing headcount and increasing productivity.

With the eventual increase in the market, GHRO With the eventual increase in the market, GHRO will return stronger than ever before. Strong will return stronger than ever before. Strong financial management and cost controls will help financial management and cost controls will help motivate the market on the buy-side.motivate the market on the buy-side.

The leader in the GHRO space has yet to emerge The leader in the GHRO space has yet to emerge as many of the previous initial service providers as many of the previous initial service providers have failed to show a sizeable profit and in many have failed to show a sizeable profit and in many cases have failed to simply deliver.cases have failed to simply deliver.

Future trends…Future trends… More than ever, GHRO service providers need to show they More than ever, GHRO service providers need to show they

can bring value to the table early into the engagement.can bring value to the table early into the engagement. The profit margins in GHRO exist but require The profit margins in GHRO exist but require

unconventional operational models to reduce labor costs. unconventional operational models to reduce labor costs. Clients must understand that radical transformation of Clients must understand that radical transformation of service is necessary with the help of change management.service is necessary with the help of change management.

Ukraine, Moldova, Russia, China are poised to see Ukraine, Moldova, Russia, China are poised to see increased development.increased development.

Brazil can be balanced in Latin America with the help of Brazil can be balanced in Latin America with the help of countries like Mexico for Spanish support.countries like Mexico for Spanish support.

Hungary and Poland are no longer low cost labor markets Hungary and Poland are no longer low cost labor markets within the EU. Romania is a new country within the EU that within the EU. Romania is a new country within the EU that stands to gain. Ukraine and Moldova are good nearshore stands to gain. Ukraine and Moldova are good nearshore choices for lower labor rates to support EU member States.choices for lower labor rates to support EU member States.

The Tier 1 GHRO service providers need global The Tier 1 GHRO service providers need global implementation partners to succeed. This will create implementation partners to succeed. This will create M&A/consolidation opportunities.M&A/consolidation opportunities.

Opportunity for Opportunity for improvement…improvement…

Selling GHRO has been proven to be much easier than delivery. Emphasis on back Selling GHRO has been proven to be much easier than delivery. Emphasis on back office operations that are offshore or nearshore will be extremely important.office operations that are offshore or nearshore will be extremely important.

Close and transparent partnerships between service providers and clients will be Close and transparent partnerships between service providers and clients will be very important to better manage expectations and change.very important to better manage expectations and change.

India is great for supporting English based clients but this does not always suffice India is great for supporting English based clients but this does not always suffice for multi-nationals in Europe. Near-shore is a better option such as neighboring for multi-nationals in Europe. Near-shore is a better option such as neighboring pro-western countries or those seeking EU membership.pro-western countries or those seeking EU membership.

GHRO service provider cost models should account for pre and post systems GHRO service provider cost models should account for pre and post systems implementation services. If it takes 1-2 years to implement global HR technology, implementation services. If it takes 1-2 years to implement global HR technology, real cost savings will come only then. Clients must understand this to avoid false real cost savings will come only then. Clients must understand this to avoid false expectations. A phased in approach will prevent future credibility problems.expectations. A phased in approach will prevent future credibility problems.

Technology partnerships with SAP, PeopleSoft, Taleo, etc are key to success.Technology partnerships with SAP, PeopleSoft, Taleo, etc are key to success. Integrated multi-client GHRO service provider systems are lacking in this industry. Integrated multi-client GHRO service provider systems are lacking in this industry.

There is an opportunity to create an online based system which can connect There is an opportunity to create an online based system which can connect clients, supplier support personnel, contractors, 3clients, supplier support personnel, contractors, 3rdrd party service providers, etc. party service providers, etc.

Since the start of the global financial crisis there has been a increased level of Since the start of the global financial crisis there has been a increased level of “protectionism” throughout the world. In the US, the outsourcing industry can “protectionism” throughout the world. In the US, the outsourcing industry can expect to be challenged by the new Obama Administration seeking to preserve expect to be challenged by the new Obama Administration seeking to preserve jobs domestically. Without tax incentives, increased cost savings will pressure jobs domestically. Without tax incentives, increased cost savings will pressure GHRO service providers to find more creative ways to support the business model.GHRO service providers to find more creative ways to support the business model.

Future industry leader…Future industry leader… Prior to the global economic slowdown there were many Prior to the global economic slowdown there were many

large GHRO deals won by the 1large GHRO deals won by the 1stst Tier service providers. Tier service providers. No one leader has emerged given many failed attempts by No one leader has emerged given many failed attempts by

those that entered the market first. those that entered the market first. Service providers with strong operational capabilities in Service providers with strong operational capabilities in

lower cost labor markets (even if outside BRIC) will lower cost labor markets (even if outside BRIC) will dominate. Globalization and capitalism ideals will dominate. Globalization and capitalism ideals will constantly challenge conventional beliefs. constantly challenge conventional beliefs.

Globalization is driving competition from all countries that Globalization is driving competition from all countries that see outsourcing as a means for providing domestic see outsourcing as a means for providing domestic prosperity. To this regard, I expect the market to get hot prosperity. To this regard, I expect the market to get hot throughout the world – the location will matter less with throughout the world – the location will matter less with time.time.

The challenge is there. If you have a better SDM and fair The challenge is there. If you have a better SDM and fair price…you may end up being the leader of a huge industry.price…you may end up being the leader of a huge industry.

247HR247HR Service provider to the GHRO industry…Service provider to the GHRO industry…

– Headquarters:Headquarters: Kiev, Ukraine - EuropeKiev, Ukraine - Europe

– Offices:Offices: Cancun, Mexico – Latin AmericaCancun, Mexico – Latin America Chicago, USA – North AmericaChicago, USA – North America Volgograd, Russia - EurasiaVolgograd, Russia - Eurasia

Recruiting, Payroll, Compensation, Benefits Recruiting, Payroll, Compensation, Benefits Administration, Document Management, HR Administration, Document Management, HR Systems & Technology, Data Entry, Help Desk, Systems & Technology, Data Entry, Help Desk, Voice/Non-Voice Customer Service SupportVoice/Non-Voice Customer Service Support