Abstract
This IDC study outlines IDCs predictions and assumptions relating to market forces affecting the
Western European HR management services market, and the impact they will have on market forecasts,
the size of the opportunity for providing HR services in Western Europe in 2005 and over the next
four years, and the key recommendations from IDC for maintaining and growing HR services revenues in
the coming years.
The performance of service providers in 2004 suggests that confidence is returning to this
market, with evidence of a growing project and contract pipeline.
IDC has made the following key forecasts for the period 2004 to 2009:
- The Western European HR Services market will grow from $24 billion in 2004 to $34.3 billion by
2009 with a CAGR of 7.4%.
- The HR BPO market will continue to represent the fastest growing spending segment, with growth
projected at a CAGR of 16.5% over the forecast period, 2004-2009. This translates as an absolute
market growth of $2.2 billion in five years.
- The HR consulting services market, which represented 34.9% of Western European HR services
spending in 2004, is expected to grow at a CAGR of 7.5% over the forecast period.
- The HR processing services market, in which payroll services represent nearly 70% of spending,
is forecast to grow with a CAGR of 5.6% for the 2004-2009 period. This low CAGR disguises much
higher growth rates for fully managed payroll services. The take-up of benefits administration
services, continues to lag behind the U.S. market, however.
"Corporate governance, pension reform, compliance, productivity, process efficiency, and HR
costs have all helped stimulate demand for HR services in 2004. However, in established markets such
as payroll and HR consulting, market growth has been slowed by competition among service providers
and the downward pressure on service fees this has exerted," said Mike Friend, research manager
for IDCs European Business Services research.
"The real action lies with HR business process outsourcing," said Friend. "The
continuing rapid growth of the HR business process outsourcing market has buoyed up the market and
reflects a dynamic shift in customer buyer behavior. It has also demonstrated that a market for HR
BPO services exists outside of the U.K., Benelux, and Nordic markets."
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