During the current year, HRO Providers are leaving us with few surprises in terms of closing large size comprehensive HRO contracts like the recent Convergys one billion Dollars contract with Johnson & Johnson and the last year billion dollar deal of Accenture with Unilever. With EquaTerra, A leading Research company predicting the BPO market does not look poised for any major increase in market growth in the 2H07, the outlook for a large and complex HRO deal packs might be lower during the rest of this year.

The industry described to experience growing pains is learning from its initial implementation challenges and settled in a process of transformation. Buyers have been asking for more value than before, while the Providers continuing to upgrade their technology capabilities, working on process improvements. It’s also a good sign to see that Providers are learning lessons from the challenges and opportunities in their initial deals and exercising enough care to see those challenges doesn’t recur again in the fresh contracts.

Though it is unlikely to see large size contracts in the short term, Mid-size market demand is showing signs of continued growth and is just expected to grow much in future years.

HRO Providers catering to Mid-market outsourcing segment could look forward to the rising prospects through integrating their different technologies into one single customized platform, improvise their process capabilities by enhancing the competencies of their employees through continuous training programs, find ways to increase the productivity and efficiency in operations in order to deliver most cost-effective solutions to their buyers.

The primary driving factors for most successful HRO implementations are the cost efficiency, enhanced technology capabilities and process efficiencies. The rising Health care costs are forcing employers to cut back their health care benefits budgets in some cases, which again is an opportunity for the providers to plan and design highly cost-effective health care plans into their portfolio, giving the cost advantage to the buyers.

As far as the offshore HRO model is concerned, the best way to leverage their capabilities is bringing an optimum utilization to their capacity and capabilities by penetrating on Outsourcing-to-Outsourcing model (O2O), offering their services to PEOs and other HRO Providers besides getting transformed to full-fledged and direct providers of HRO. More importantly is the need for the Providers to devise strategies and build up capabilities in a way to become End-to-End Providers and not just restrict themselves to some part of HRO processes.

According to a recent research published by Global Industry Analysts Inc, “HRO industry is likely to witness growth in the business from mid-market companies. It is expected that HRO suppliers would receive more number of outsourcing deals that are of smaller value from mid-market clients in the near future. Though few mid-sized companies can spend substantial amounts of over US$25 million per year on HRO, the number is on the rise.” But with the overall growth for large and complex HRO contracts appearing to be flat, the scope of an intense competition in mid-market contracts segment might just look imminent with many large HRO Providers shifting their focus to Mid-size contracts.

Another important development in the industry is the expected surge in M&A activity. Providers catering to mid-size companies offering selective processes outsourcing could look towards acquisition route as a way to fast becoming comprehensive providers offering full range of HRO services. This is evident from the research of Global Industry Analysts which states that the industry is anticipated to witness an increase in M&A activity and HRO suppliers are likely to be very selective in entering into M&A deals. For instance, a supplier involved in training services may take over a company specialized in payroll and benefits administration, or a HRO supplier with operations in Europe may acquire a supplier with Asian and US operations.

To conclude we could say while the prospects for Mid-market outsourcing look highly positive, it is a wait and watch for the industry observers on how and which providers could capitalize well the so called mid-market HRO growth.