Tough economic climate can’t stop the trend for outsourcing


first_img Comments are closed. Previous Article Next Article Related posts:No related photos. Tough economic climate can’t stop the trend for outsourcingOn 9 Oct 2001 in Personnel Today The outsourcing market looks set to rise to £50bn this yearas more organisations enlist outside bodies to take on HR functions. Butexperts warn contracts must not be seen as a panacea. Ben Willmott reportsThe HR outsourcing market in both the private and public sector is set to gofrom strength to strength, despite the increasing threat of a major recessionsince the US terrorist attacks. It has been estimated that the value of the outsourced services market hasincreased to £50bn this year and this is set to expand further following theGovernment’s pledge to increase the private sector’s involvement in thedelivery of public services. Over the past 12 months, major HR outsourcing deals in the public sectorhave included a £205m deal between Blackburn and Darwen Council and Capita anda £300m public-private partnership between Liverpool City Council and BT. HR outsourcing deals in the private sector include a £50m contract betweenNortel Networks and Pricewaterhouse Coopers and £100m agreements between BAESystems and Xchanging and BT and Accenture. Andrew Buggy, business development manager for HR partnerships solutions atCapita, believes outsourcing will become increasingly attractive asorganisations seek to cut administration costs. “Increasingly HR directors are looking to service partners to providecomplete solutions for a genuinely fully integrated HR/payroll system allowingthem to focus on delivering their business plans,” he said. “Capita is seeing a much higher level of activity in the HR outsourcingmarket across both the public and private sectors. “This activity is certainly set to continue, with new HR managedservice models continuing to emerge and organisations increasingly looking toadopt service strategies supported by e-HR technology.” Buggy thinks that companies that are looking to introduce the latesttechnology to carry out the more basic HR functions are increasingly likely tochoose an outsource provider. He said, “Many organisations are rightly questioning whether they wantto go through a lengthy system procurement, take on the risk around systemimplementation and use a lot of resources to concentrate on the transactionalactivities such as recruitment administration and payroll when they wouldrather concentrate on organisational strategy.” Jane Hawkins, of outsourcing specialists PricewaterhouseCoopers, agrees thatthe recession will encourage more companies to contract out part of their HRfunction. She said, “I think it is likely because of the cost of trying to doeverything in-house. It is about economies of scale, it allows organisations toinvest in state-of-the-art technology, which probably could not be justified bya single organisation. “It also gives HR people more of an opportunity to develop some sort ofcareer path. It helps them make a difference rather spending their time on themore mundane aspects of personnel.” But Hawkins stresses that outsourcing should not be seen as a panacea andpartnerships must be thought through carefully or they could end up beingcounter-productive. “Many organisations are considering outsourcing, notonly the public sector. “In our opinion, however, it is one of a range of options that might beconsidered, for example the introduction of a new HR technology platform or amove to a shared service centre. “The decision to move to outsourcing is a journey requiringconsiderable deliberation and careful planning, rather than a knee-jerkreaction. “Any outsourcing of a function requires careful planning, and if donewell it delivers the anticipated benefits. If done badly it is of no benefit toanyone. This applies to any organisation, public or private. Brett Walsh, partner at Andersen and head of the UK human capital practice,told Personnel Today that he believes the outsourcing market will continue toexpand as economic conditions become tougher. “Despite a 40 per cent increase in technology spending since 1998, HRcosts for the average company have risen by 16 per cent. With the currenteconomic downturn, organisations are looking keenly at the potential for costsavings of 20 to 40 per cent of cost base from outsourcing,” he said. The CIPD does not oppose the growth of HR outsourcing, but it urgesorganisations to be very clear about what they want to achieve and to choosetheir partner carefully. Karen Giles, adviser on organisational development for the CIPD, said,”There is no doubt that it is a growing activity, but it is still only asmall proportion of organisations that have outsourced their HR. “The key thing about outsourcing the function is that you must be clearwhy you are doing it and what your business objectives are. You must have theresources to do it effectively and you must find the right partner. “Outsourcing can be a positive thing. There is increasing pressure toshow what value the HR function is adding to the business. “Outsourcing tends to take care of more routine HR activities such aspayroll and so can help HR departments to become more strategic.” Francesca Okosi, vice-president of Socpo, believes outsourcing has a role toplay providing it is restricted to providing the more basic HR transactions anddoes not interfere with forming an organisation’s HR strategy. She said, “I don’t have a problem with HR outsourcing on principle.Some HR administration can be better served through an outsourcing partnership.It can provide economies of scale and efficiency improvements. “But I don’t think that you can outsource HR’s other function in termsof organisational development and its strategic role. “HR needs to be at the heart of an organisation, and I don’t think youcan do that on an ad hoc or consultancy basis.” last_img

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