HRIS and SaaS are driving the HRO industry

May 13, 2009

An AMR research tabled in 2009 indicates that the multi-process HRO market grew by 24% in 2007 and almost by the same rates in 2008 and 2009, respectively despite the market slowdown. Interestingly, a big chunk of these contracts came to India.

So while earlier, most tier-1 Indian companies where skeptical of entering what they perceived was a low-value HRO game, this mindset is now changing and they are bidding aggressively for hybrid IT-BPO contracts.

As expected, a bulk of the HR transformation is happening at the mid-market segment at companies with employees less than 5k. Obviously, these companies cannot afford to develop a full suit of global HR services in-house. The way out then is to outsource their payroll and pension and benefits administration to PEO companies with multi-country capabilities, as almost 50% of these companies have employees based overseas. Outsourcing these services to a global vendor ensures that the services get standardized and benchmarked against the best practice.

This is not to say that big multinationals don’t outsource these services —- because they do and AMR research lists several such players, GM, Dupont, American Airlines, Johnson & Johnson, Kraft, to name a few — the trend makes more sense for smaller entities, mainly for the reason of economies of scale. Association with a global vendor gives them immediate access to better models, such as 90% of HRO engagements have involved enhancements to the Human Resource Information Systems, HRIS platforms. There is also an increasing deployment of Software as a Service, SaaS for Human Capital applications that can successfully be replicated on a BPO model. This effectively takes care of the quality concern associated with HRO practices.


Comments

3 Responses to “HRIS and SaaS are driving the HRO industry”

  1. The growth potential for outsourcing: Just a mirage? | Outsource Portfolio on May 18th, 2009 6:03 pm

    […] profit center, corporate HR departments should be, in theory, a tremendous source of business for Human Resources Outsourcing (HRO) and Recruitment Process Outsourcing (RPO) providers and a big source for corporate cost […]

  2. outsource human resource? on May 21st, 2009 5:09 pm

    Why would some one wants to outsource the human resource functions. HR is the life blood for a company. It is is both the entry and exit point for all the employees. So you outsource the core of your company to some vendor in India and hope that your employees will get their services delivered over the phone???, doesn’t make sense to me.

  3. Radhika on May 24th, 2009 9:32 pm

    It’s a mistaken belief that outsourcing dilutes intimacy. On the contrary, if by outsourcing certain cmponents of a routine service, such as payroll management, the service becomes more timely and regulated, the employee-employer relationship will undoubtedly improve. Afterall, who doesn’t want to be paid on time and in a professional manner?

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