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ADP Deal Highlights Rising Importance of Recruitment in HRO

October 13, 2006
ADP's recent acquisition of VirtualEdge reflects the growing interest among employers to include recpruiting in their HRO deals.

On October 10, ADP Employer Services announced its acquisition of the Newton, Pennsylvania-based recruitment process outsourcer. Terms of the deal were not disclosed.

Roseland, New Jersey-based ADP already had tools to help its clients recruit hourly workers. Through this acquisition, the company will now be able to offer similar tools to recruit professional and contingent workers, says Jerry Thurber, general manager and division vice president at ADP.

"We got a lot of feedback from our clients that this was a missing element for us," he says. "We felt VirtualEdge's offering played to our sweet spot, which is those companies with 500 to 5,000 employees."

ADP spent the past 18 months evaluating an acquisition, Thurber says. He declined to reveal any other companies that may have been considered.

More HRO providers will follow in ADP's footsteps as a growing number of buyers are considering outsourcing some of their recruiting functionality, says Stan Lepeak, managing director of research for EquaTerra, an outsourcing consulting firm based in Houston.

"In the past, HRO contracts were more about payroll and benefits," he says. "But now buyers want to add more strategic pieces to these deals."

Traditionally, buyers did recruiting in-house or used temporary staffing firms for contract positions. But now, they are clearly looking to HRO providers to offer this service. "And they don't want to go with just a point solution, they want recruiting to be part of a bigger HRO package," he says.

While the VirtualEdge acquisition arms ADP with the capabilities to run the back-office elements of recruiting contingent and professional workers, ADP partners with recruitment process outsourcers to do the front-office work, Thurber says.

"We provide tools and some services behind the scenes, but we partner with RPO companies to physically locate candidates," he says.

ADP has no immediate plans to purchase an RPO provider, Thurber says. But Lepeak doesn't think companies like ADP will stick to the partnership relationship with RPO providers—particularly as more buyers look for full-service offerings.

"I think you will see partnerships more as a courtship to test out the offerings," he says. "But in the longer term, I think the HRO providers will go for acquisitions."

Jessica Marquez