WHEELING & DEALING
All Is Not Quiet On The Labor Front
By Jean-Marc Levy

First published in HRO Today (January-February 2004)
 

In the War For Talent, the cease-fire is over.
 

My April 2003 column about the upcoming U.S. labor shortage drew out many passionate comments and responses from readers last year. How could I be talking about a labor shortage during a stubbornly jobless recovery? How could I be oblivious to the impact of U.S. jobs being outsourced offshore? How could I not accept the reality that the War For Talent, after peaking in the late 90s, had fizzled for good, along with the Internet bubble?

Fortunately, three related reports coming out within days of each other at the end of 2003, signaled a turning point in support of my claims:

• In its report for the week ending November 22, the Labor Department reported that initial jobless claims for the week had dropped to their lowest level since January 2001 (before the 2001 recession began) marking what many observers coined as a turning point for the labor market.

• The highly watched report on U.S. economic outlook released by the University of Michigan's Research Seminar in Quantitative Economics predicted a sharp decline in U.S. unemployment and the creation of 5.2 million jobs by 2005, about twice as many jobs as were lost in the 2001 recession.

• Recruitmax, a leading global provider of workforce management solutions announced that it had received almost $20 million in funding from investors QuestMark Partners and Tudor Ventures, and that it would use the funds to add new products to its suite of strategic workforce management software and services that allow companies to attract, hire, retain and manage their workforces more efficiently. In its press release, Recruitmax argued that "with changing economic conditions on the horizon, its customers would be positioned to quickly adapt to competitive labor markets and gain market share on their competitors," a claim that sounded awfully familiar to veterans of the last talent wars.

At the time that this column goes to press, in January 2004, some remain skeptical and wonder whether we are witnessing a small uptick in the labor market or a full blast resumption of the War For Talent. As far as I am concerned, I am firmly in QuestMark's and Tudor's camp.

From where I stand, the cease-fire is over.

NOTABLE INVESTMENTS

In other notable investment news, the end of 2003 saw several large funds going back to "bread-and-butter" IT and accounting BPO investments:

• Multi-billion dollar fund Austin Ventures, acquired a majority interest in Colonial Tax Compliance, the outsourcer of sales and use tax compliance services, and installed John McAteer as CEO of the company. McAteer, former COO of SHPS, the leading benefits outsourcer, and a veteran of CorPay Solutions, the provider of accounts payable processing services, is representative of a new breed of outsourcing executives who have transferred their BPO experience across multiple industry sectors and are building successful careers predicated on the emergence of outsourcing as an industry.

• Ephinay, a provider of financial process outsourcing solutions to Fortune 2000 companies received a $10 million capital investment from Trinity Ventures to facilitate further growth of its outsourcing business.

• Outsource Partners International, the outsourcer of finance and accounting functions completed a $20 million round of financing led by Trident Capital. Outsource Partners plans to use the funds to expand operations in India and pay down some of the debt incurred in connection with its acquisition of the BPO division of KPMG in 2002.

• mindSHIFT Technologies, a leading provider of IT infrastructure services for small- and medium-sized businesses, raised additional capital from Columbia Capital and added Fidelity Ventures to a list of blue-chip investors that already includes JP Morgan Capital and Bessemer Venture Partners.