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Recruitment process outsourcing (RPO) has been through a rather interesting year. With an anemic GDP growth rate of about two percent or less, the hiring landscape across the board hasn’t been great. While hiring ebbed and flowed from month to month, the RPO industry did not stand still. Consolidation through mergers and acquisitions (M&As) has led to a greater segmentation of available offerings for would-be RPO customers. Even with continued sluggish growth, the year ahead promises to be significant for the RPO industry.
Here are four significant RPO trends we can expect to see in 2013.
1. Consolidation Slowdown
From 2011 through most of 2012, there was a fair degree of consolidation of both technology and services in the RPO marketplace. For the most part, consolidation in the tech industry can be regarded as standard fare: Big ERP organizations fill what is typically referred to as functional whitespace with a buy, rather than developing their own application.
Beyond tech, RPO providers have been consistently acquired but for very inconsistent reasons. Consider these recent RPO M&As and the possible reason behind each:
The only thing in common among these deals is that there is nothing in common. Each acquisition was an individual event that was not motivated or affected by any of the other deals. Consolidation happened in the RPO space but it didn’t have a consolidating impact on delivery to the marketplace. In 2013 we’ll see this activity slow down, but the real result of M&A -- service segmentation -- will make itself evident.
2. Service Segmentation
Consolidation of the RPO industry, and the fact that it was not motivated by a specific driving factor, has resulted in greater segmentation of service offerings. Taking on capital or being acquired by even bigger service or technology providers typically demands a fair degree of focus. This focus in turn limits the flexibility of these providers to offer targeted offerings for customer-requested solutions. This demand drives the need for providers that have not been acquired to satisfy these existing needs. In 2013, RPO service segmentation will become more defined into five types:
3. Co-Sourcing
In 2013 the term co-sourcing will likely go mainstream. Co-sourcing describes an approach that clients are taking to invite more than one RPO provider into the organization to work collaboratively to satisfy end-to-end needs. In typical co-sourcing arrangements, one or more RPO providers handle high-volume and high-transaction recruiting, while another RPO provider is focused on more strategic, hard-to-fill positions. Clients expect that the RPO providers will work together to collectively improve the overall workforce strategy of the organization.
4. Pipelining
Sourcing is ultimately the key to a successful RPO program, especially when highly skilled, degreed, or certified professionals are required to fill open positions. When this is the case, most firms realize that they can’t depend on a soft economy to create an environment where the employer has all the power. With hard-to-find skills, this is simply never the case -- no matter what the economy looks like. As such, in 2013 the markets will demand more aggressive talent community development and a greater focus on sourcing and pipelining. This will possibly become a breakout market segment that exists on its own but intersects with RPO.
The RPO industry will continue to see changes, and these 2013 projected trends should drive much of that change. It will be important for clients and potential clients of RPO firms to ensure that they take time to intimately and decisively understand their requirements before engaging a provider. On the other hand, RPO providers must remain nimble enough to respond to the rapidly evolving landscape.
Here are four significant RPO trends we can expect to see in 2013.
1. Consolidation Slowdown
From 2011 through most of 2012, there was a fair degree of consolidation of both technology and services in the RPO marketplace. For the most part, consolidation in the tech industry can be regarded as standard fare: Big ERP organizations fill what is typically referred to as functional whitespace with a buy, rather than developing their own application.
Beyond tech, RPO providers have been consistently acquired but for very inconsistent reasons. Consider these recent RPO M&As and the possible reason behind each:
- Pinstripe: Re-capitalized with private equity firm Accel-KKR. While the outcome of the move remains to be seen, private equity firms are typically not involved simply to help a business grow. They expect to earn a decent return on their investment. Pinstripe could be headed for sale in the near future.
- Kenexa: In August 2012 IBM purchased Kenexa for $1.3 billion. The motivation here seems to be access to Kenexa’s global data and sourcing infrastructure, as well as its technology. This is not a pure play functionality event, but it is certainly more focused on and motivated by technology.
- The RightThing: ADP acquired RPO provider The RightThing toward the end of 2011. With this purchase, ADP gained the ability to offer high-volume transaction recruitment (think seasonal staff, for instance) as a value-added service for payroll customers.
- SourceRight: Randstad’s acquisition of SourceRight, another 2011 deal, helped broaden the Dutch-based staffing firm’s North American presence and, at the same time, expanded its service offerings.
The only thing in common among these deals is that there is nothing in common. Each acquisition was an individual event that was not motivated or affected by any of the other deals. Consolidation happened in the RPO space but it didn’t have a consolidating impact on delivery to the marketplace. In 2013 we’ll see this activity slow down, but the real result of M&A -- service segmentation -- will make itself evident.
2. Service Segmentation
Consolidation of the RPO industry, and the fact that it was not motivated by a specific driving factor, has resulted in greater segmentation of service offerings. Taking on capital or being acquired by even bigger service or technology providers typically demands a fair degree of focus. This focus in turn limits the flexibility of these providers to offer targeted offerings for customer-requested solutions. This demand drives the need for providers that have not been acquired to satisfy these existing needs. In 2013, RPO service segmentation will become more defined into five types:
- Full Lifecycle RPO: Traditional RPO of the entire recruitment and hiring process.
- Project RPO: RPO that is concentrated on a targeted, outsourced effort over a specific time frame or number of hires, typically aligned with a specific time-based project or event.
- Point of Service RPO: Represented by the procurement of a single element of the sourcing/recruiting/hiring process, such as reference checks or candidate sourcing.
- On Demand RPO: RPO engagement that delivers a specified amount of recruiting hours per period.
- White Label RPO: Insourced program of embedded recruiters working on both permanent and temporary positions, while maintaining the brand and identity of the client. It is frequently integrated with managed staffing programs.
3. Co-Sourcing
In 2013 the term co-sourcing will likely go mainstream. Co-sourcing describes an approach that clients are taking to invite more than one RPO provider into the organization to work collaboratively to satisfy end-to-end needs. In typical co-sourcing arrangements, one or more RPO providers handle high-volume and high-transaction recruiting, while another RPO provider is focused on more strategic, hard-to-fill positions. Clients expect that the RPO providers will work together to collectively improve the overall workforce strategy of the organization.
4. Pipelining
Sourcing is ultimately the key to a successful RPO program, especially when highly skilled, degreed, or certified professionals are required to fill open positions. When this is the case, most firms realize that they can’t depend on a soft economy to create an environment where the employer has all the power. With hard-to-find skills, this is simply never the case -- no matter what the economy looks like. As such, in 2013 the markets will demand more aggressive talent community development and a greater focus on sourcing and pipelining. This will possibly become a breakout market segment that exists on its own but intersects with RPO.
The RPO industry will continue to see changes, and these 2013 projected trends should drive much of that change. It will be important for clients and potential clients of RPO firms to ensure that they take time to intimately and decisively understand their requirements before engaging a provider. On the other hand, RPO providers must remain nimble enough to respond to the rapidly evolving landscape.
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