As the titans of HR BPO duel for supremacy among the ranks of the Global 2000, there looms a market of great opportunity – the often maligned and misunderstood middle-market. Companies with roughly 2,500 to 15,000 employees represent a huge opportunity for HRO. Globally, the number of companies who fit into this category dwarfs the big company market. There are a number of factors that make HRO an attractive alternative for mid-market companies:

• The economics make sense; just crunch the numbers. These organizations are spending an amount of money significant enough to justify undergoing the disruption an HR outsourcing effort in order to achieve a 15% to 20% reduction in operating expenses.
• Their business processes are often just as complex as much larger companies; and many, if not most, have international components.
• They are often in direct competition with larger companies that have more sophisticated systems and the capital to hire top-flight talent. However, their customers expect the same quality of products and services they receive from the Global 2000.
• Sarbanes-Oxley and other regulations cause a more significant burden for mid-market companies than for their larger competitors.
• Mid-sized companies are typically focusing on rapid growth and generating revenues. Consequently, they have neither the time nor resources to focus on back office issues and administrative HR functions.

Bottom line - mid-market companies must ensure that their people and systems stay competitive. There is no "hall pass" for being a NASDAQ company.

From the HRO providers' viewpoint, mid-market business should be easier and less costly to sell, implement and transition. Because of their size, mid-market companies have less imbedded infrastructure to unravel and less investment made. Additionally, there will be less bureaucracy to plow through in both the sales process and during the implementation and transition. In short, it should be much easier for providers to demonstrate substantial improvement and bring value to a mid-market company's HR function. Their ability to offer "best in class" technology and services make their offerings compelling to the mid-market CEO and CFO.

Given the appropriate platform and cost structure, providers can book significant revenue and make money in the mid-market. They can find contracts of $5M to $20M annually, or total contact values of $25M to more than $100M. Not the huge multi-billion dollar deals from the Global 2000, but profitable business with greater diversification and less risk exposure.

Whether the HR BPO giants adapt to the changing market or new vendors emerge, the HRO needs of the mid-market companies will be met. The Law of Supply and Demand is simply too compelling in this instance to be ignored.

For more information contact Ben Trowbridge ben.trowbridge@alsbridge.com