Human Resource Outsourcing – The scope and its role.

In the background of India’s ever gaining importance of becoming the back office of many things (read manpower, outsourcing, software etc, etc.,) there has been an advent of work which one could never think would be of such value and command as it is today. India today is a proven center for software development activities and IT services are about to witness substantial growth. India is also likely to emerge as a key center for processing of information for global corporations. Such is the growing prowess of Indian IT industry where in quick time it has a contribution of 3% of India’s GDP. The Harvard Business Review identifies outsourcing as one of the most important management idea and practices of the past 100 years.

The area of Human Resources has evolved itself from just being a part of an organization to becoming a whole business by itself. It is heartening to know that HR is a domain expertise with many unique facets to it. There are firms in the world working on specific HR areas like salary research (payroll), employee benefit, survey research, HR software products etc. Other than these there are companies in the field of HR BPO called by different names as Human Resources Outsourcing (HRO) or Recruitment Process Outsourcing (RPO) or Employee Process Outsourcing (EPO) firms. Other than these mentioned above there are staffing companies into temporary/ permanent staffing and of course HR software product companies. End of the day competition is intense and the market to fight for is large enough to accommodate more players – both globally and in India. Basically India has seen Human Resources functions only restricted to Recruitment Consultants, Performance Management systems, basic administrative works.

Today India may have an abundance of manpower talent pool, but the biggest challenge facing companies would be to hiring and employing the right/best talent. In most organizations recruitment or HR functions per se is either assigned to the various employees, who are part of the HR department or assigned to a dedicated group involved with strategizing the future manpower requirements depending on the various dynamics of the market, the brand value the organization commands and various other miscellaneous factors.
Human Resources is such a key function especially in growing economies like India, China as the requirement for fresh manpower is ever increasing but even more crucial is to find the right kind of experienced manpower for the right job, within the given available constraints and to retain and motivate them. In India NASSCOM has recently projected one million software jobs by end 2005 and here lies the latent market for an HRO with immense business opportunities to lay its hands on.
Now HRO today is such a critical function involving activities such as sourcing, assessment tests/ interviews, new hire training, orientation and administrative practices. An effective Human Resource outsourcing initiative would involve a heady mix of hands on recruitment coupled with robust products, processes, procedures and mechanisms.
According to Argus Search, the worldwide Human Resource Outsourcing market is set to become an $ 80 billion market by 2008. At present the HRO market is valued at about $25 billion and the expected compounded annual growth rate for this industry is 12%.Gartner Research says in 2004 itself HRO or HR BPO is said to garner 39% of all BPO revenues worldwide with turnover of $ 51 billion. There has been a huge interest in HR BPO space worldwide with some big ticket mergers, contracts being signed and amounting to immense sense as the resulting huge revenue /expenditure savings for the firms over a consistent timeperiod.
The benefits of having a HRO are many like it would give greater emphasis for the organization to concentrate on its core competencies, cutting the cost/time of hiring, would definitely have a bearing on the quality of the delivery of the end produce, would lead to better utilization of the existent manpower, give a greater thrust and purpose to the hiring process and of course the delivery would be done to the expectation and demand of the client. The HRO would also deliver the right fit candidate for the client utilizing a mix of technology and knowledge. Thus this would lead to better man management for the client giving greater leverage/clarity to prepare manpower planning saving a chain of after current effects.
The key query , I believe in the outsourcing industry is whether the firms are willing enough to outsource their key processes and Human Resources in today’s fast changing and vastly competitive market is being considered as a very key component by many corporations especially multi and trans nationals.
Why Human Resource is considered such a key process? Because it is just difficult to retain employees, as attrition rates have crossed double digit figures across industries and this is the common phenomenon across the world. The growing economies having this ever increasing demand for quality manpower are facing this heat. Everyone in India knows the very future of BPO industry is at stake due to this attrition menace, which could on an average be ( and I would safely take a guess of attrition) in high 40 percentages. The pinch of attrition is always faced by the sunrise industry, be it the case of software (IT and IT related fields), Biotech, pharmaceuticals industry in India if one were to speak about a growing economy. The aftereffects of such a phenomena are drastic as many multinationals also take attrition as a very important component in their decision making process for an investment in such an economy.
Thus the role of HRO becoming ever critical to be utilized for better bottom line and top line results for the firms.
The 3R’s of HRO - Unfortunate the positive signals of a growing economy compounds and brings its own set of problems like finding the right fit which is nothing but to find the right candidate for the right job at the right time. This is the core competency of an HR outsourcer.

As far as India is concerned there is a lot of scope and promising future for Human Resource Outsourcer’s as many firms would soon realize the benefits having one instead of trying to practice HR core and non core practices in house. HRO is a very complex business with long term perspective. This industry needs a lot of patience and experience before any firm would diversify and the advantages later on would be immense.