Last updated on October 30th, 2023 at 04:31 pm
Use of Recruitment Process Outsourcing (RPO) solutions continues to rise with record deals providing significant growth for the market. For many buyers with more than 5,000 employees, appetite to transfer ownership of all or part of the recruitment process is growing as the RPO market matures, the benefits of outsourcing are accepted, and successful implementations increase in number.
Staffing firms have been quick to offer RPO solutions with an estimated 36 percent offering RPO as opposed to only 25 percent for manages services. Further, staffing firms and specialist RPO service providers have identified an increased demand for talent sourcing and recruiting solutions globally. This has fuelled mergers and acquisitions and a talent war for RPO professionals with successful delivery track records.
The overall RPO marketplace, however, remains fragmented with large service providers co-existing with significant numbers of much smaller, specialized vendors. Low barriers to entry and relatively low-cost models compared with contingent hiring has created fierce competition and, as a result, an opportunity for buyers to reap further business benefits.
Business drivers for RPO are hardly innovative: reducing costs, mitigating legal risks and conforming to compliance standards, improving recruitment processes, scalable solutions, improved technology, and improved workforce data and analytics. But other, more strategic, imperatives have emerged as important considerations for buyers: employer reputation and brand enhancement, the need for generational and cultural diversity, the challenge of attracting top talent with compelling value propositions, the adoption of workforce segmentation models to identify critical roles, and the use of sophisticated metrics to measure workforce impact and quality.
While the rise of social media and online staffing platforms has powered the freelance economy and made it relatively easy for employers to find almost everybody on platforms such as LinkedIn, RPO solution providers are rising to the challenge of filtering through hundreds of profiles and finding the right candidate for the job, at the right price, at the right time.
Staffing Industry Analysts recently published the Global RPO Directory, which lists more than 60 major and 100 smaller RPO service providers worldwide. The numbers reflect a crowded and fragmented marketplace. While it’s not quite the wild west, buyers do need to beware when assessing RPO solution value propositions: there is much more at stake here than merely paying someone to post vacancies on LinkedIn, Facebook or Twitter.
So how do RPO service providers differentiate themselves and grab client attention? Reading through the Global RPO Directory, we see a trend in phrases RPO providers use when describing their service offerings, such as promising to work closely with clients, more personalized solutions, scalable solutions, and progressive partnerships. RPO service providers have identified deep and tight alignment with buyer goals and objectives as a critical measurement of their own RPO value proposition. In other words, the strength of the relationship matters.
Understanding buyer talent acquisition objectives is one thing, but successful delivery of RPO services requires much more, including a strong technology capability, excellent scale and scope of services, and an ability to execute in all geographic regions. Specialization in business lines and economy sectors also helps to position and differentiate an RPO service provider as first among equals with vendors delivering specialized sourcing models for the financial services, manufacturing and healthcare.
There is evidence that increasing specialization in the service offerings and sectors managed by RPO service providers is enabling growth in the marketplace. After all, why would a buyer hand over ownership of the talent acquisition process to an RPO service provider if it did not demonstrate specialization in the buyers’ market? Further, vendors see specialization as a way of consolidating their place in the RPO market and creating a loyal client base that is comfortable with placing larger multi-year, multi-regional RPO programs.
Predictions for the growing RPO marketplace reflect the recent journey from a pioneering market out into an emerging marketplace that’s thinking about consolidating in specialized sectors: The vendor landscape will continue to change, with mergers and acquisitions being announced; private equity will invest in RPO on an increasing scale; clients will demand more customizations and sophistication from RPO solution providers; and clients will continue to push for lower base fees and aligning cost of recruitment with recruitment volumes.
RPO is here to stay and is a very exciting market for outsourcing. Staffing firms and specialized service providers are identifying gaps in their offerings and in client awareness of its potential. For now, focus seems to be on global capabilities, market specialization, workforce planning, managing the client brand, and innovative and creative sourcing processes and models with talent groups.
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