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BPO Booms in HR Sector

Service providers targeting business process outsourcing can expect ample growth in the human resources sector. That's the analysis of industry experts, who expect plenty of deals to surface in the coming months. A report released Monday by the Yankee Group predicted that the global HR BPO market will grow 27 percent this year to more than $4.6 billion. The company predicted that over the next four years, the market will grow at a compound annual growth rate in excess of 30 percent. In 2009, the market will hit $14 billion, the report projected. Meanwhile, EquaTerra, a New York-based consulting firm, reports that the scope of deals may be broadening. An EquaTerra survey of executives and HR decision markers indicates that new HR deals may include items such as training as well as traditional features such as payroll. Survey results will be published in the May issue of "Human Resource Executive" magazine. Anecdotal evidence supports the rosy market predictions. Hewitt Associates LLC announced last month that it has closed nine HR BPO (business process outsourcing) deals since its October 2004 acquisition of Exult Inc., an HR BPO specialist. Yankee Group identifies Hewitt as the market leader in HR BPO, but other providers also are plying that market, including Accenture, ACS (Affiliated Computer Services), Computer Sciences Corp., Electronic Data Systems Corp. and IBM, the report noted. Yankee Group says it now tracks more than 90 Fortune 2000 companies that are analyzing, negotiating or requesting proposals on multipurpose HR BPO contracts. More than 200 midsized to large organizations are reviewing managed HR services offerings, the market researcher reported. Robin Rasmussen, managing director of HR research at EquaTerra, said Yankee Group's growth outlook is consistent with the company's market observations. "We certainly see continued growth," she said. EquaTerra provides outsourcing and insourcing advisory services to corporate customers. Earlier this year, the company advised Delta Air Lines on its $120 million HR BPO contract with ACS. Feedback from EquaTerra's advisers in the field indicates that the scope of individual HR BPO projects is growing. "More processes in HR are being put into the deals," Rasmussen said. To wit: HR projects that were once focused chiefly on processes such as payroll and benefits administration now may include training, development and recruitment. EquaTerra's corporate survey backs this observation. Respondents expressed dissatisfaction with internal training, development and recruitment programs, a result that suggests those areas are ripe for outsourcing. Rasmussen also sees evidence of more "bundled" outsourcing deals. Those deals involve not only HR BPO, but financial/accounting and IT outsourcing. HR BPO opportunities just entering the sales pipeline will take, on average, about nine to 12 months to come to fruition, Rasmussen said. She measures the sales cycle from the customer's release of a request for proposals to the signing of the contract. Yankee Group, for its part, said the decision-making process can take as little as six months to as much as five years. Veritas Pushes Enterprise Vault Training Veritas Software Corp. is rolling out a reseller education program to back its Enterprise Vault e-mail archiving solution. Enterprise Vault, which Veritas obtained in its 2004 acquisition of KVS, provides a broad feature set geared toward larger organizations that need to preserve e-mail to meet regulatory requirements. The product's sophistication is a mixed blessing, according to Julie Parrish, vice president of field and channel marketing for Veritas' operations in the Americas. On the one hand, the technology gives resellers an opportunity to boost margins via implementation and other services. On the other, the products' relative complexity requires a higher level of commitment on a reseller's part. Enterprise Vault, Parrish said, "is not a product that we can easily put out there in the channel and put a part number on it and say have at it." Against that backdrop, Veritas in March launched a sales and technical training program in seven cities. The three-day training sessions will cater to about 30 large channel partners in each location. At the conclusion of the training program, participating partners will be able to team with Veritas sales and engineering personnel on customer implementations. Parrish said this shadowing program will guide partners though a couple of implementations, "so they can see where the nuances are. Every customer situation is going to be a little bit different. It is not plug-and-play." Veritas intends to offer Enterprise Vault education to a broader set of resellers. Beginning this month, Veritas Virtual Academy will offer Enterprise Vault training. The training will comprise three-hour, live Webcasts and two days of lab training via remote systems covering the essentials of Enterprise Vault installation and configuration.