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HR Outsourcing Market on the Rebound as Enterprises Seek to ‘Future Proof’ Operations—Everest Group

  • Buyers of MPHRO now list ‘access to better technology’, ‘employee experience,’ and ‘better insights and analytics’ among the most important drivers of their outsourcing decisions.

Despite short-term disruptions in 2020 due to COVID-19, the Multi-Process Human Resources Outsourcing (MPHRO) market is expected to grow at a steady rate of 5-7% over 2020-22, primarily driven by organizations attempting to future-proof their HR operations. According to Everest Group, enterprises need to focus on speed, agility, resiliency and digital enablement in their HR processes in order to achieve a future-ready state and safeguard the HR function against crises in the future.

The top digital levers used to enhance the HR function include:

  • Automation and AI solutions, which reduce dependency on manual interventions, increasing agility and resiliency.
  • Data and analytics technologies, which bring greater visibility and transparency into organizational data and strengthen decision making
  • Employee experience components, which enable faster remote working and improved efficiency.

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“Digital will have a vital role to play in helping enterprise HR functions prepare for the ‘next normal,’” said Anil Vijayan, vice president at Everest Group. “As we have seen during the COVID-19 pandemic, a good digital infrastructure enables organizations to reduce dependency on manual interventions and more quickly transition to new working modes, when necessary. As evidenced by the rise in digital adoption seen in recent outsourcing deals, enterprises are taking this lesson from the pandemic to heart, and we expect digital adoption to accelerate even further.”

The infusion of technology in the HR function has been increasing over several years, but it is expected to become a necessity rather than an option for all stakeholders in the future. Buyers of MPHRO now list “access to better technology”, “employee experience,” and “better insights and analytics” among the most important drivers of their outsourcing decisions. For this reason, Everest Group projects that the role of HR service providers will evolve even further toward that of strategic partner, as service providers respond to the demand for technology solutions.

These findings and more are shared in Everest Group’s Multi-process Human Resources Outsourcing (MPHRO) State of the Market Report. This report provides comprehensive coverage of the 2020 MPHRO services market and analyzes it across various dimensions such as market overview, buyer adoption trends, solution trends, and service provider landscape.

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***Download a complimentary abstract of the report here.***

MPHRO Market Highlights:

  • North America is the most mature geography by MPHRO adoption, followed by Europe-UK and Asia Pacific. APAC is expected to become a hotbed for HR transformation due to COVID-19 impact.
  • Financial services and manufacturing constitute a major share of the MPHRO market; healthcare and life sciences underwent significant growth and are expected to grow further despite COVID-19 impact.
  • There has been a marked increase in the inclusion of talent management processes as buyers look toward taking an end-to-end approach to their MPHRO deals.
  • Output-based pricing continues to be the most popular pricing model; Input-based pricing is also being used in some emerging markets and in first-generation contracts.
  • The top four providers (Alight, Accenture, ADP, and IBM) contributed more than 40% of the market share in terms of annual contract value (ACV).
  • Leading providers experienced strong traction from the more mature markets; in emerging markets, local players featured more prominently.
  • ADP has significant presence across the top four industry segments for MPHRO; TCS has the highest number of deals in the retail industry segment.

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