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Renewals are the big news in human resources outsourcing. Mohammed Haque, Vice President & Head of Enterprise Solutions Service practice at Genpact, estimates about $40 billion in contracts will come up for renewal from 2010-2012. How buyers go about renewals is about to change. Buyers are becoming much more aggressive in going out and getting a look at whats going on in the landscape, says Rohail Khan, Executive Managing Director for ACS Total Benefits Outsourcing. He predicts the automatic solesource renewal without a market check is going the way of the dodo bird because organizations want more visibility to the bottom line. They want to know the value of the suppliers contribution. In the past, he says renewals were typically sole source. Buyers are also hiring more third-party advisors to help them out with their renewals, he adds. Buyers are no longer willing to assume their suppliers are providing value. The current economy accelerated this trend, he reports. Buyers want to know if they are getting the right value for their money, he explains. Then the question becomes: Are we with a partner thats investing and innovative? Because today its not just about cost effectiveness. Buyers, he says, want to be sure their suppliers will be able to serve them as they move forward.
Several factors are driving this tighter focus, including the desire to match up-front investment with pay-back benefits, the need to feel confident in supplier capabilities, and the realities of a shifting supplier landscape. In the near future, its conceivable that some clients will have to balance a mix of suppliers until more suppliers are able to demonstrate a broader set of compelling capabilities, she says.
Process convergence
Process convergence is another trend. In the past, HR organizations viewed employee retirement and health/welfare selection decisions as separate transactions. There werent a lot of connect points, Khan points out. Today he says progressive HR managers are asking how they can make health and welfare decisions converge. He says both buyers and suppliers are trying to figure out how this will impact HR decisions going forward.