Experts agree that the two leading suppliers in midmarket HR outsourcing today are ADP, which has 43 clients with an average of 9,200 employees each, and Ceridian, with 25 clients that have an average of 4,000 employees each. But the competition is increasing. On one hand, professional employer organizations, which typically target companies with fewer than 500 employees, are moving up-market.
Providers are offering more standardized solutions to meet the needs and budgets of these clients. While large companies can afford complete customized platforms, 62 percent of midsized organizations said in a recent survey that they are willing to adopt the providers’ standardized process as their own. Even if companies start with outsourcing just one or two processes, they are going to grow and want to outsource more back-office work. Particularly high-growth companies will see a need to do this.
Unlike larger companies that are jumping into full-blown HRO deals with a single vendor, the midsized organizations are taking a more cautious approach. In the midmarket, they’re just dipping their toes in and outsourcing only one or two processes at a time.
This is partly due to the fact that many midsized companies don’t have the systems in place to mesh with an HRO provider and its service offerings. For example, while a large employer may want to outsource its recruiting and screening process, the midmarket client may not yet have an automated process in place. The other reason is that relatively few vendors offer total HR outsourcing services to midsized employers. But that’s starting to change as experts predict that the $1.2 billion midmarket HRO business will double by 2010.
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