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Surprise: As unemployment grows, so does recruitment process outsourcing (RPO)

January 6, 2010

With the USA unemployment rate having reached 10.0% in December and predicted to remain “stubbornly high” until at least the end of next year, it may come as a surprise that recruitment process outsourcing (RPO) continues to grow at a healthy rate of growth.

In fact, that was the findings of a new study entitled “Recruitment Process Outsourcing (RPO): Moving Beyond the Pioneer Stage” by the Everest Research Institute. Moreover and although RPO itself is still relatively new compared with HRO, Everest says its increasingly moving beyond the pioneer stage of the curve. According to the results of their study:

  • Manufacturing and healthcare firms are the leading adopters of RPO in North America while globally, manufacturing, high-tech and telecom firms lead the way.
  • More than half of all RPO deals involve clients in North America by the adoption of RPO is on the rise in the France, Germany, and United Kingdom.
  • Nearly 75% of deals cover just one country but US and UK based MNCs are increasingly adopting RPO for their North American and EMEA operations.
  • North American based MNCs are adopting RPO for both for their European and Asia-Pacific operations.
  • RPO is said to have the most significant potential in China and India; however, their RPO markets are still relatively undeveloped as MNCs with operations in these markets are the primary adopters of RPO.
  • Unlike in HRO though, global sourcing and offshoring in RPO has remained limited to a small number of mature RPO relationships.
  • The RPO vendor landscape remains geographically fragmented with most vendors offering only limited geographic coverage.

rpo Grows with unemployment
However, the Everest study also found that while there was a marginal increase in deal signings this year compared to last year, hiring volume was lower and this has resulted in smaller and more selected RPO deals. Moreover, the RPO market is becoming increasingly competitive and this has led to increased M&A activity as new vendors attempt to enter the market while existing vendors seek to strengthen their capability and gain better access to new technologies. In other words, RPO is experiencing the same growing pains that other outsourcing sectors experienced in their early years.

Moreover, the nature of employment, recruiting and the staffing industry in particular is changing dramatically and this will impact how RPO firms operate. As the Wall Street Journal reported back in October, revenue and earnings continue to fall sharply at major international staffing firms such as Manpower and Robert Half (in fact, third-quarter profits at Robert Half fell 86% on a 37% fall in revenue from a year earlier). Moreover and once unemployment does finally bottom out, a much greater portion of the jobs that do return will likely come in the form of contingent positions rather than full time positions. Hence, and in much the same manner that the staffing industry is undergoing a shakeout right now and will need to reposition itself for the future of employment, RPO firms will soon face the same tests. How the RPO industry positions itself for the future will be interesting watch.

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Related posts:

  1. The endangered Western IT professional: Will there ever be a significant hiring uptick?
  2. The RPO Baker’s Dozen 2009 results
  3. The growth potential for outsourcing: Just a mirage?
  4. RPO gaining in traction
  5. Bad employers, toxic bosses and RPO vendors take note: The downturn is easing


Written by JohnU · Filed Under HRO Blogs 

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