Emerging Trends
A majority (around 60%) of business organizations use the centralized shared-services model for HR services, while about 40% use a model that combines some sort of outsourcing which internally provides HR services, according to a study by BenchmarkReports.com. The research findings indicate that not a single company among the 40 companies studied by the firm has completely outsourced its HR functions.
Outsourcing will heavily increase in the next few years, but reliance on shared service centers will also continue to increase, and is expected to remain the preferred sourcing alternative for HRO. Over the next few years, businesses will see significantly more HRO work being executed by offshore shared services centers, as opposed to having it delivered through outsourcing.
As the HRO industry matures, vendors will seek contracts to handle end-to-end work. This will directly benefit the customers, and will expand the scope for ongoing process improvement within the industry itself, hopefully leading to wider business benefits such as improved cash flow and improved access to financial information in addition to further cost reduction.
Such improvement is derived from identifying bottlenecks between processes and gradually eliminating manual intervention within HRO. Technology will increasingly become a leverage to deliver scalability, productivity and quality. Access to better technology and systems is becoming a key driver for HRO.
The demand for HRO will continue to rise significantly. Sole-sourced and multisourced outsourcing contracts will become increasingly common in a global marketplace that is more knowledgeable and experienced about sourcing. Private-equity investments will energize the mid market, making this segment a significant player in HRO. There will be almost double the number of HRO contracts signed in 2007 compared to the last year.
Avinash Vashistha is the Chairman and CEO of Tholons, an investment, advisory and management firm for IT, business and knowledge services globalization.