Up North! HR Services in the Northern European market.
Reading the blog from my colleague Inna Wahlberg on the HR services market in the APJ region, inspired me to write a short piece on the HR services market in our Northern European region, which is covering the Netherlands, Denmark, Sweden, Norway and Finland.
A region with similarities between countries but also some very clear differences.
It is tempting to view the 4 Nordic countries as 1, and a common history and some similarities in languages and culture certainly give some arguments for this.
I have however learnt in the past 8 years being active in this market, that each country has its very distinct own language and culture, which makes a different approach needed, also when it comes to HR services.
The local legislation in each country might have similarities, but is in effect different in each country, and requires any HR software to cover local needs.
HR service providers on the Nordic market can be local players, but there are some providers that give services on a Nordic scale.
Multinational companies with head offices in the Nordic countries are likely to go with providers that can cover their global presence.
Besides a number of big multinational companies founded in the Nordics, the Nordic countries are also host to a high number of subsidiaries of global companies with head-offices elsewhere in the world. Running payroll for these subsidiaries requires a relatively high complex payroll for a relatively small population of employees. This so-called ‘Big head, long tail-scenario’ demands a service provider and platform that can combine a single global solution and service model with a cost efficient local payroll solution.
Outsourcing HR processes can be considered business as usual in all Nordic countries: research by NGA back in 2011 already showed that 64 percent of all large Nordic companies had outsourced at least 1 HR process, with the Payroll process leading the way.
Some Nordic companies have embarked on near-shoring services to 1 of the Baltic countries: Estonia, Latvia or Lithuania.
The Nordic countries are fond of innovation and new technologies: adoption of mobile devices is very high, which you will even notice when travelling by public transport in 1 of the big cities.
In 2012, Norway and Sweden were amongst the first European countries to reach more than 50% penetration rate of smartphone usage.
Trade unions traditionally have a very strong position, and it is important to consider their role early in the process when changing HR services, especially if also a transfer of staff is planned.
Compared to the individual Nordic countries, the Dutch are covering a much larger market with only 1 set of country-specific legislation. The role of the trade unions is a lot smaller compared to countries like Sweden in the Nordics, and is declining further over the years with unions struggling to get new members.
HR outsourcing has matured over the years and has passed its childhood stages. Demand is stable and is expected to rise over the coming years, partly due to the economic climate.
Several researches show that not only HR outsourcing in general, but also services like RPO (Recruitment Process Outsourcing) are on the rise.
Multinationals with head offices in the Netherlands are increasingly looking for providers that can cover global presence, but are also able to be flexible to support growth in emerging markets like Russia, India and China.
Future of HR BPO in Northern Europe
Generic in the region we can state that second generation BPO deals (with a focus on global delivery using near- and offshore services) and third generation BPO deals (with a focus on industrialization and process efficiency) have been common for a while already. Before moving to 4th and 5th generation, using analytics and on demand services, large companies are now first evaluating their current platforms, to see how they can fit new Cloud solutions to their existing ERP investments. Hybrid models, both in platforms and in services, will offer global companies with head offices in Northern Europe a way into the future.
However, early tech adopters in Europe tended to cluster in the UK and the Scandinavian countries. The cell phone take up is an example where the Finss led the pack. But that migration trend is not necessarily holding true in cloud. Someone from IDC explained that normally the path leads from the UK to the Nordic countries and then goes south to the Mediterranean countries. It’s not clear if this trend is also applicable for cloud. Southern Europe is struggling economically but cloud might be a good solution to catch up.
The innovative climate in the Nordics is expected to offer lots of potential for new technologies and ways of working: after all, Successfactors was founded by a Dane...