A tale of 2G HRO.

by Harry Feinberg, Jay Whitehead

MY, HOW TIME FLIES WHEN YOURE HAVING FUN. WHO WOULD HAVE THOUGHT THAT HRO IS ALREADY INTO ITS SECOND GENERATION?

With this issues cover story, the landmark second- generation HRO contract between British Telecom and Accenture HR Services, we enter a new phase. Call it 2G HRO, an acronym that harkens back to 2GL, which was the software industrys second generation of computer languages. In the case of 2GL, it was big news in the global computer trade press for nearly three years. In this case, BT serves as the poster child for the many HRO contracts that are heading for renewal. And so, for the next three years in HRO, and probably more, this publication will bring you more 2G HRO stories.

We know of at least 10 1G HRO contracts that come up for renewal in the next year. As we read the BT story, we thought two data points were most interesting to us and to those of you reading the magazine. First, the domain scope of the contract increased significantly. This corroborates a trend we see worldwide with HRO and other outsourcing customers. Once a customer gets a taste of the quality, low cost, and speed of a fine outsourcing relationship, they want to give the outsourcing provider more to do. Trust builds the partnership. And second, the geographic scope of the deal was also expanded. With multinational companies such as BT, HRO in one country is obviously not enough. Increasingly, clients will be demanding that providers are able to do the world, or nothing.

NEWS FROM THE HRO WORLD CONFERENCE

At the 3rd Annual HRO World Conference in New York City April 12 and 13, there were some parallel second generation stories as well. The most headline-grabbing of these stories was the Keynote speech of Andy Stern, the President of Americas largest union, the 1,800,000-member Service Employees International Union (SEIU). Stern, who was also the subject of the April 2005 cover story in our sister magazine, HRO Today, is a second-generation union leader. His vision is to create a new value proposition for employees and employers. Rather than sticking with the time-honored labor-versus-management story line, Stern has innovated. He has even gone so far as to advocate that unions become the largest second-generation HRO providers. He used the example of how his union is now a major HR support, pension administration, retraining, recruiting, and outplacement provider for member employers and employees. The mainstream mediaTV, newspapers, news magazines, and radiowent wild in covering Sterns message, because it included an acknowledgement that globalization and outsourcing are developments as inevitable as the weather. Never before has a North American union leader admitted such a thing. What made the iconoclastic Sterns words even more headline-grabbing were his ambitions for the union to become an outsourcer itself. For Stern and the SEIU, catching the twin waves of globalization and outsourcing is a global mission. Stern has traveled to the United Kingdom, China, and plans to be in Australia in late April and early May, with alliances on his mind. His goal is to create a global network that will allow the union to put pressure on multinational companies to employ common work standards worldwide. The unionized workforces of a French company, for example, can be non-union in the United States, United Kingdom, and Australia because the unions in the three latter companies are unallied. And companies that outsource work to China or India impose no requirements on their outsourcers to uphold certain work standards.

Another media darling at the conference was Sue Oliver, SVP HR of Wal-Mart, the 1.5 million-employee retailing giant. Olivers speech included her thought that Wal-Mart has such enormous scale in its HR services needs that it is better off not outsourcing HR functions. Wal-Mart, which has revolutionized retailing in North America in the manner of Frances hypermarche companies such as Continent, may not be a big believer in HRO, but has offered many HR innovations. The most fascinating of the companys novel approaches have to do with how it deals with the basic care and feeding of a 1.5 million-person workforce. Former Pepsi and Apple Computer CEO, John Sculley, also attracted a lot of attention. His speech covered the second generation of employee screening and security services, his new focus. Welcome to the second generation of HRO.