The Top Global HRO Deals

A slowdown in the number of global enterprise deals may have recently gripped the hro industry, but the past year still produced some notable contracts, including the $1 billion whopper convergys landed when it signed Johnson & Johnson.

By HROE Staff

You may have heard: growth in the global enterprise HRO market has slowed during the past year. Ever since 2005, when the number of large engagements reached an all-time high, deal-making has been on the decline. As a result, the frenzy we witnessed just two years ago has settled to a simmer, with buyers and providers cautious about the contracts they take on.

In fact, the market has turned around completely. In the earlier years of HRO, providers raced to sign new clients, regardless of whether the deal made money or not. It was all about market share and not profitability. Today, the end-to-end market is supplier-constrained, with the major providers being very selective in their choice of customers.

Buyers at the same time have grown more sophisticated in their sourcing approach, learning from the mistakes that early pioneers made and leveraging the knowledge of seasoned sourcing advisors. Some have moved away from the everything-but-the-kitchen-sink approach to outsourcing, instead focusing on specific pain points hampering their HR operations. Some have even elected to go the best-of-breed route to supplement their internal HR processes.

Despite these shifts in buying trends, enterprise, end-to-end HRO is still alive and well. This is evidenced by a number of large, recent signings, including a $1 billion deal struck between Convergys and Johnson & Johnson, the healthcare giant. Other new practitioners joining the global enterprise group include American Airlines, Centrica, Nestle, GlaxoSmithKline, Kimberly Clark, and other global brands. While we probably won't see the level of activity witnessed in 2005, be assured that more buyers will be getting on the enterprise HRO bandwagon.

One positive aspect of the market changes: while mega deals are on the decline, the mid-market is helping to pick up the slack. The growth potential for the 3,000- to 15,000-employee segment seems limitless, and a number of providers are now shifting their focus this way.

In putting together this list, we'd like to acknowledge the help of Everest Research, one of the leading sourcing advisory groups helping to put large buyers and providers together in these deals.