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aturday, February 20, 2010

HR Outsourcing - Emerging HR Trends - Part I

I would like to kickstart the series on Emerging Trends in Human Resources by touchingupon the area which has got a renewed focus now i.e. HR Outsourcing.

HROutsourcing is not a very new concept to Indian outsourcing market. It essentiallymeans managing the human resource department of companies that are hard-pressedfor time and expertise when it comes to taking care of their HR spectrum. Researchindicates that an HR department spends 80% of their time in managing tactical andtransaction oriented HR operations. If these processes are outsourced then thetrained HR staff could be re-deployed in the core process which will add substantialvalue to the organization.

Riding on the success of the BPO and IT industries, India has always been well

positioned to be a leader in the HRO space. After a decade, the HRO industry continuesto evolve in a rather mixed waywhile many well known IT companies have joined thefray to give the necessary fillip and visibility to the sector, there are a few factors thatcontinue to hold back.

Many large global HRO service providers have a presence in India and see the countryas a key delivery location. In recent times, offshoring of HR outsourcing has beengaining ground. The HR directors in countries like US and UK are questioned bytheir CEOs and CFOs why their HR cost is high. That is why offshoring to a locationlike India makes sound business sense. These apart, presence of a few big Indian ITcompanies having entered the market have added to the success story.

Most of human resources outsourcing (HRO) contracts coming up for renewal are likelyto witness a significant restructuring. This shift is likely to see more such work beingoffshored to India. Everest Group-global research firm, in a study Human ResourcesOutsourcing (HRO): End-of-Term Market in HRO said the areas of restructuringrange from modifying the number and type of in-scope processes, to enhancing deliverymodels through global sourcing, to introducing alternative pricing models.

According to the research firm, about 75-85 % of engagements will likely be extendedwhile 15-25 % will be repatriated or transferred to new suppliers. More than 111 HROcontracts, with a combined total contract value of about $6 billion, are nearing

their term end in 2010-12 . Everest analysts foresee scope for reduction with largemarket buyers, whereas mid market buyers will likely expand narrow scopes andleverage expanded supplier offerings that include talent management services.

While the global spend on BPO is estimated to be $234 billion, being a comparativelynew phenomenon HRO is expected to reach $67 billion. As a matter of fact, HRO isprojected as the fastest growing segment over the next three years. This projectioncan be further substantiated by the fact that large-scale HR off-shoring has already

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taken place and giant names such as Tata Consultancy Services, Wipro, Caliber Point(a subsidiary of Hexaware Technologies), and Infosys are some big Indian HROsuppliers. Hewitt, Mercer, Manpower, Adecco, Fidelity Investments, Convergys,

Accenture, IBM, Exult Inc and Automatic Data Processing Inc. are global players.

HRO industry in India is still evolving. While the ability to deliver at a large global levelwith the offshore component has attracted buyers, the growth has been in selectprocesses like payroll (few countries), benefits administration, recruitment,workforce administration etc., but not in other parts of HRO. The Indian serviceproviders capable of delivering the end-to-end HRO services are just a handful at themoment while there is a large number of single/stand alone service providers. Thedomestic HRO is more established and growing with some players beginning tostandout. With some exceptions, the captives in general do a lot more comprehensiveHRO work than the typical third party BPO player. Over the years, the big change hasbeen that the large multi process, multi country HRO deals are no longer beingpursued by the large companies alone. Mid sized market has also opened up.

Typically, HR outsourcing can be classified into two broad categories such astransaction and administration outsourcing and HR consultancy. While transactionand administration outsourcing deals with the day-to-day and month-to-month activitieslike payroll management, employees benefits management, and pension management,HR consultancy is a much more complex process that constitutes management ofstrategy and policy functions of the organization. Transaction and administrationoutsourcing form the low-end of the value chain of an organization.

Payroll Benefits Recruitment Process Outsourcing HR helpdesk Workforce administration Pension administration Learning and training Expatriation managementInmynextpost, Ishalltouch upon on the drift in HR in the shifting business landscape.