Thinking inside the box

HRM caught up with Synco Jonkeren, Director of HCM BPO at SAP to get the inside story on HR outsourcing.

HRM. Why do companies need a HRO provider? Is it purely for profitability or are there other factors?
SJ. While cost is often a major driver for outsourcing certain HR processes, there are other considerations as well. Outsourcing administrative processes allows organizations to focus the retained organization more on strategic tasks, an ambition the HR function has fostered for a long time. Rather than being occupied with payroll or benefits administration, it is better to have your staff working on the compensation strategy for next year, or on a talent management plan that helps the organization to achieve its business objectives. An associated reason is that HR systems have gotten quite complex and many organizations are having a hard time to fully reap the benefits of it. Engaging specialised service providers whose core competence it is to deliver these benefits creates a valuable cooperation while freeing up staff for making HR more strategic. And let’s not forget that a number of these service providers help mitigate risks for customers, ensure they’re compliant, take away the burden of regular upgrade cycles and enable high quality processes.

HRM. In the competitive world of modern business, how does a company identify the processes of its business it needs to outsource in order to keep ahead in the marketplace?
SJ. Typically, the initial focus is on transactional processes, like Payroll and core HR. These administrative tasks are most easily outsourced, as organizations realise that simple administration does not belong to their core competences while at the same time they’re confronted with increased pressure to reduce costs. At the same time companies are concerned about the quality of the processes. The fact that you outsource your payroll or HR application doesn’t mean you cannot be held accountable for it. Often though, organizations already have already gained some experience through first of all standardization of HR processes and secondly through centralization of these processes in a shared services environment. This has then already created a service and delivery mentality within the organization, which makes selecting processes for outsourcing an easier step. We’re at a stage now where a lot of companies have positive experiences with this single-process outsourcing and are seeing the value of a bigger HR outsourcing footprint to include area’s like Recruitment and Learning Management, preferably from the same technology platform.

HRM. Choosing a HRO is major decision and contracts may last many years. What factors should a company take into consideration when selecting a HR partner?
SJ. Obviously the service provider’s offering need to match the needs of the organization in terms of service excellence, global and industry coverage, HR domain expertise and chosen solution platform. A proven service track record from the HRO provider is important as is proven ability to deploy standardized technology. In our BPO program we certify our providers so that organizations can rest assured that their service provider has a thorough understanding of the underlying solution platform. When selecting an HRO partner organizations need to realise they’re in this for a long term. They don’t select a solution they’re select a long-term partnership where the relationship with the provider and the underlying solution platform are critical factors. The solution platform should be a standardized, innovative, proven and functionally rich platform that, combined with the service delivery capabilities of the service provider, delivers true, long-term value and doesn’t lock them in any way. We have seen and will see in the future on-going consolidation of service providers in the market. In that light it is all the more important that the solution platform offers the flexibility that, when needed, it could be switched from one provider to the other or even be re-insourced. What you don’t want to happen is that you have to stick with your provider, regardless of the level of service, because there is no alternative. You wouldn’t buy a car if there’s only one shop that can maintain it. This is why some of the largest outsourcing deals, like Dupont, like P&G, are based on SAP technology

HRM. Explain how technology plays its role in successful HRO and how has this developed over the past five years?
SJ. As the HRO market is maturing we’re seeing increasing awareness of the importance of technology. The recent trends into growing globalisation and broadening HR outsourcing footprint into multi-process HRO have definitely helped that awareness. You don’t want to have to worry about integrating your talent management with your base employee records. And similarly, you want to be able to rely on your HCM solution to cater for the necessary rules and regulations in multiple countries, languages and industries. The solution platform enables all that. HRO is seen as largely a services business, but organizations are increasingly aware that the chosen platform impacts their processes by enabling best practices, process optimisation and control and governance. It also impacts the operating cost of the provider, which the customer ultimately pays. Furthermore, it impacts the productivity of your managers and employees and the way they perceive their work. Organizations that are looking into HRO must also realise that even though today they may be thinking of outsourcing only a few selective processes, they may want to extend the scope in the future. Can you do that? And do you have an innovative solution that takes advantage of the rapidly changing technology?
Finally, the selection of the solution platform determines the amount of control organizations have over their own destiny. Since organizations don’t want to be locked in by proprietary technology, we have developed our BPO program that brings together a number of world-class service providers who are all certified on our technology. That gives customers real control over the future deployment options of the software – whether in-house or with another service provider. That’s why it is important in the BPO world to think inside the box for a change and make a conscious platform decision.

HRM. What challenges does a HRO provider face when integrating their software platforms with the client’s systems?
SJ. The main challenge for the provider is making sure that it works seamlessly for the end customer at low cost. Today we can make virtually every system talk to another system, but the cost varies enormously. Ultimately customers pick up the bill for that, so having integrative capabilities, like SAP’s Netweaver technology, is very much in the customers’ interests. Integration has a direct effect on the user satisfaction with the solution. Your payroll results should be in your GL system, without a worry in the world. Absent employees should be known in your production planning system. Your HR users need to be able to link education plans to the relevant financial information. If this process integration is slow, cumbersome, expensive or non-existent then you have a problem and the wrong solution. Clearly platforms shouldn’t disrupt the customer’s business – they should make it easier. Although integration in this sense may be a challenge, providers do need to make sure that the business’ processes at the customer’s site are well organised. You cannot outsource a mess and expect it to work seamlessly from day one.

HRM. Can intelligent strategies be acquired for a broad spectrum of industries or does the work that SAP provides have to be tailored to a business’ individual needs?
SJ. There will always be a need for a certain amount of desired customisation, but given the thousands of customers and world brands that we serve, we have a lot of best practices embedded in our software. On top of that, customisations can be done with our own toolset thus minimising the impact. It starts with having broad capabilities. Our HCM application supports around 70 countries, around 30 languages and some 25 industries. That, combined with the best practices of our 9,000 HCM customers worldwide, drastically reduces the need for much customisation. Our systems are flexible and can be adapted to individual business needs, which based on the broad functionality base that can be leveraged doesn’t always have to be a customisation.

Finally, out ongoing investments in area’s like Talent Management, improved UI and self-service, and Recruitment secures that we’re also in shape for future demands.

HRM. What are your predictions for the HRO market in next twelve months in terms of technology development, multi-process budget spend and the broadening of the HRO footprint?
SJ. This is a maturing market. While mergers and acquisitions will continue we’re also happy to see that customers have become more knowledgeable on outsourcing and outsourcing relationships. They are most definitely helped by the growing community of outsourcing advisors that have a thorough understanding of the HRO market. Technology is going to become a more important factor in outsourcing decisions and with comes a growing awareness of the value potential of organization technology. More global and more multi-process deals will be indicators of the maturing HRO market. With the advance of more value-adding HR processes, like for instance Talent Management, as part of the outsourced process portfolio, an increased need for integrated systems and integrated information delivery will emerge. Having data doesn’t yet mean that you have information. Being able to provide analytical decision support information will become more and more important. Whether outsourced or not, organizations need to be able to understand their workforce characteristics and costs and tie that information to the performance.

HRM. What do you feel are SAP’s strengths within the industry and are there any areas that you are excited about for the future?
SJ. We have set up a unique program that aligns solutions and services. By working with world-class service providers, including ACS, ADP, Convergys, EDS and Arinso, the “BPO Powered by SAP” program addresses three key outsourcing benefits for the customer. One is to address the cost reduction that customers want to achieve by enabling lower process costs, lower integration costs, less errors, etc. The next area is mitigating risk in a number of ways. You are able to forecast the costs, accuracy, consistency and timeliness of output, while compliance and governance are under control. The provider certification that is part of the program ensures that organizations work with partners that truly understand the technology and how to optimally deploy it. The third element deals with value. Through our program organizations can improve the quality of their HR processes and run them more effectively and more efficiently. Through lower error levels, experiences serviced delivery and leveraging best practices in HR processes HR departments can rest assured that their operation will run smooth and a high quality level.

I am excited about this industry and about the direction the market has taken. Multi-process HRO will continue to add value to organizations. With the ongoing globalisation and the upcoming importance of the European HRO market, multinational capabilities of the system are becoming increasingly important. And since payroll outsourcing will remain a key element we feel that with our global payroll product and global HCM functionality we’re best positioned to support this trend.