While most of the Payroll and HR software industry has been focusing on cloud deployments and integrated talent management suites, mega-vendor ADP (Automatic Data Processing) has been quietly and strategically building up its BPO (Business Process Outsourcing) bench strength. That’s not to say that the company has neglected its broader human capital management offerings (after all the innovation-heavy Vantage suite has certainly been turning more than a few heads), but the efforts that ADP has focused on lately proves that this vendor is bent on worldwide domination in the BPO market.
Take for example, the company’s last few acquisitions; like Workscape (benefits and talent management provider); PhyLogic Healthcare (medical billing outsourcing); Asparity Solutions (employee benefits decision support vendor); SHPS Human Resources Solutions (benefits administration outsourcing expert); and RightThing RPO (recruitment process outsourcing)—each of these purchases signifies a doubling-down for the software giant in the outsourcing arena. Of course ADP is no stranger to acquisitions, and in fact growth at least within the last few years has been largely driven by gradual purchases such as these (roughly accounting for approximately $776M in spending during 2011). However, it’s one of ADP’s latest under-the-radar purchases that is most intriguing—Randstad’s Ma Foi Consulting Solutions (a Payroll business that focuses on outsourced payroll services and social benefits administration to clients across India).
For those in the know, this is not ADP’s first dance with Ma Foi. In actuality, the two have been partnering since 2009 for the marketing and operation of ADP’s Streamline offering. So why is this news so important? Well, aside from the fully customized (and localized) payroll engine that ADP gets from the acquisition, the company also garners a platform that currently serves 350+ brand-name multinational and domestic clients. But more than that, this acquisition essentially buys ADP credibility with Ma Foi’s existing client base—a key catalyst for creating a bigger footprint within the region.
The Timeliness and Genius of ADP’s Outsourcing Strategy
Therein lies the true message of this January 2012 acquisition; that ADP is cognizant of the potential gains that this side of the world economy can net; and is working to get all its puzzle pieces in place to take advantage of the region’s sizeable and sustained growth. In fact, according to Gartner research, the Indian market grew by 27.9% in 2010. And IDC figures point to a staggering year-over-year growth pattern of just over 33% for the time period of 2008-2013—numbers that could wind up reaching nearly $7B when all is said and done. This growth is what ADP is fully tapping into with the Ma Foi deal; fully expressing its interest in a geography that until very recently was extremely fragmented and even more so, insular.
See, domination (if you could call it that) of the domestic BPO market within India as recently as only a few years ago was shared by a slew of small, local service providers (e.g. Infovision, Andromeda, etc.); and larger (i.e. multinational) firms from Europe and North America had little hope of truly developing within the region and even smaller interest in doing so. Yet changes in global economic conditions, domestic Indian growth, and a shifting sentiment towards Western service providers over the past 3 years have altered the BPO and payroll landscape in the Asia Pacific region. As Gartner’s TJ Singh, Jim Longwood, and Freddie Ng report, “BPO services providers that in the past were focusing primarily on the international or offshore market have started focusing on the Indian domestic market…[and]…large and midsize players have now stepped up their activities”.
Such is the case for ADP, whose BPO strategy for the region should be lauded if analyses are correct. Specifically, IDC India is beginning to see the stirrings of evolution within Indian BPO—with the market morphing into what the intelligence firm deems “transformational outsourcing”. Apparently as conditions continue to ripen for BPO within the region, so too does the opportunity for companies to expand their outsourcing strategies; eventually moving from “running isolated processes” to more deeply engaging to “transform core business programs” says IDC. This is where ADP has the chance to truly shine given its diversified and comprehensive BPO cadre of offerings. While the mega-outsourcing deals ADP penned during the 1990s might not be on the docket for the Indian market, there can be no doubt that substantial gains will be made now that ADP has a local foot in the door with Ma Foi. And while they’re not exactly broadcasting it loudly, ADP knows this. Indeed, according to managing director Don McGuire, in another four short years, ADP looks to triple its current business in the region; and at least for now is on pace. In fact, as of now the company is adding 10-20 new clients every month—accounts that according to McGuire are coming from “segments such as IT, ITeS, manufacturing and services such as banking hospitality and retail”.
Now the question is whether ADP’s direct competitors have caught on to the strategy and what their plans are for the Indian market. One thing is for certain though; ADP just took out a major player and a major stake in the Indian domestic BPO world.
As with other HR and business software, the deployment of software-as-a-service (SaaS) payroll
has become an increasingly viable and flexible competitor to traditional on-premises systems when
it comes to cost, flexibility, smaller in-country employee populations, and reduced implementation