State of the MidMarket HRO Industry
For decades, companies have been quick to outsource payroll and benefits administration to individual vendors. They have been reticent, however, to sign over all their HR processes to a single provider. According to a November 2005 study by Everest Research Institute, the multi-process HRO market constituted only 6 percent of the overall HR services market, which includes many single-process outsourcing deals.
Yet, there were predictions last year that for 2006, multi-process HRO would increase by 20 percent, generating $4.3 billion worldwide. Helping contribute to this growth is the steady emergence of the midmarket HRO segment, defined as contracts that cover companies with fewer than 15,000 employees. Big-name providers are starting to look downward toward smaller companies, while smaller niche providers, including professional employer organizations, are looking up, interested in breaking into this relatively untapped segment.
Smaller firms, however, often don’t have the resources and financial capabilities to make a sudden transformation into comprehensive HRO. So it appears that for the short term, the large players will also dominate the midmarket end-to-end HRO list. Note: Workforce Management’s definition of end-to-end HRO requires that vendors provide most or all HR functions for their client companies.
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