HRO Buyers Lament That Tables Have Turned
It was just a year ago that HRO providers were tripping over themselves for buyers’ business. But today they are being much pickier about whom they do business with, says Sunita Malhotra, human resources director, Europe at Electrolux Home Products. The Belgian appliance manufacturer, which has 57,000 employees globally, has had informal discussions with vendors and advisors about HRO.
"It’s a sellers’ market," Malhotra says. "They choose us."
Especially now that some of the major HRO providers are busy absorbing global deals, it seems that they don’t have time to have just informal discussions with prospective buyers, says Claire Daly, HR project manager in Ireland for Intel.
Intel is considering outsourcing some of its HR processes for Europe and has just heard about the trend through advisors and from reading the papers, she says.
"You can even tell just by hearing some of the vendors at the conference [that] they really only want to go for the very big deals," she says.
Just a few months ago Hewitt Associates announced that it was going to be more selective about choosing clients, but analysts predict that other major providers will be similarly cautious.
The shift marks a huge reversal from just a year ago, when the big providers were calling all of the shots, says Rudy Van Den Berghe, executive director at Arinso, a Brussels-based HRO provider for midmarket buyers.
"One or two years ago, the clients with the king," he says. "They dictated how the provider was going to operate, where the service centers were going to be and how much staff was going to be transferred."
But today, those same providers have become much more "arrogant," Van Den Berghe says.
"They now say, ‘It has to be our way because we need to be able to make money.’ They tell buyers, ‘Use this solution or go somewhere else.’ "
This means that prospective HRO buyers actually have to woo the provider of their choice, says David Parry, a consultant at Deloitte.
"A lot of organizations tend to procure in an adversarial fashion," he says. "Instead, they need to be open to vendors and see it as a partnership."
When it comes down to it, there are only three or four providers who can do global HRO deals, and those companies are either about to or already have signed large contracts. And it’s a huge amount of work for vendors to take on one of these deals, Parry says.
"So buyers need to demonstrate to vendors that theirs is a business that they want," Parry says.