The global benefits administration outsourcing market is growing at a rate of 12.5 percent in 2011 and has reached the $5 billion mark, according to an Everest Group market report.
The report reveals that buyers are outsourcing both health and welfare services at four times the level they are outsourcing pension services. Everest Group believes the global BAO market is approximately $5.4 billion in annual contract value, with the untapped BAO market hitting at $20-22 billion.
"While cost reduction, compliance and improving employee engagement continue to be drivers of BAO adoption, the theme for 2010-2011 was health care reform in the United States, which brought increased enrollment, introduction of insurance exchanges along with increased regulation of insured and self-insured insurance plans," says Rajesh Ranjan, research director. "Although these reforms will take a number of years to come into effect, there are several provisions impacting employer benefit plans this year.
Recommended For You
"Consequently, we're seeing buyers looking at outsourcing as an option to understand the reforms, navigate the complexities and identify new savings potential."
Along with new deal signings, several second- and third-generation deals are affecting the overall BAO market, the study finds.
"Instead of auto-renewals, several existing buyers are more deliberate in their end-of-term strategy decisions and often evaluate their next generation option by going out in the market," Ranjan says.
The study also finds that North America remains the dominant market for BAO; however, BAO adoption is growing in Europe, especially in the United Kingdom and Germany. Single-country contracts account for more than 97 percent of the total because of buyers pursuing quicker cost reductions, and more large enterprise buyers adopted BAO in 2010-2011, which amounts to 78 percent of the participants managed.
Global sourcing leverage grew, as well, along with more complex work from low-cost locations. Manufacturing is still the top BAO adoption sector, though adoption in underpenetrated sectors, including government and services industries, is growing.
"We've seen the highly competitive BAO service provider landscape evolve as the result of mergers and acquisitions," Ranjan says. "The BAO market also saw significant activity by some service providers that built up additional capabilities across technology, processes and delivery models. Additionally, many service providers are differentiating themselves through specialization by focusing on geography or process scope."
A one-hour webinar will take place Oct. 11, at 9 a.m. CST, to present study findings and insights.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
