Conference Board Study Shows HR Outsourcing Is on the Rise
In a study released last week, The Conference Board Inc. found that human resources outsourcing is big and growing.
Possibly the next big wave of business process outsourcing, HR outsourcing activities are carried out at two-thirds of the large companies that took part in the survey.
Although the motivation cited for outsourcing HR functions included cost savings, improving service levels and maximizing resource availability, an underlying driver is the availability of common technology platforms for HR applications.
"We believe that the availability of common technology platforms makes outsourcing more possible," said David Dell, research director at The Conference Board, in New York. "Once youve gone to PeopleSoft [Inc.], you have the same things that other people have. HR restructuring has been partially enabled by technology, which frees up resources to do more strategic things."
The Conference Board, a nonprofit, member organization that conducts research and educational activities on management issues, surveyed 125 executives at the CEO, chief financial officer and HR vice president levels. The study was sponsored by Accenture Ltd.s HR Services, formerly a joint venture of British Telecom and Accenture that was called ePeopleServe.
Another key driver in outsourcing HR functions not cited in the survey is avoiding investment in new technology, said David Clinton, managing partner at Accenture HR Services, in London.
"There is a desire to tap into a repository of best practices and technology assets when they strike deals with outsourcers of HR services," Clinton said.
In fact, one respondent in follow-up interviews found that a side benefit to outsourcing certain HR functions was getting access to better technology and systems by outsourcing.
At the same time, however, CIOs wary of security issues that come up when a third party needs access through the company firewalls can impede such outsourcing deals.
Most HR functions already outsourced by respondents focus on transactional or administrative functions. Eighty percent outsource 401(k) programs, 70 percent outsource pension benefits management and 69 percent outsource health benefits management.
As more companies move to a self-service mode of providing benefits information to employees through a portal, the ability of IT to interface to externally run systems becomes a more complex exercise. With most companies outsourcing different HR functions to multiple service providers, the job of interfacing to each system in a consistent way becomes even more complex, Dell said.