In a study released today, The Conference Board Inc. found that the practice of human resources outsourcing is big and growing.
Possibly the next big wave of business process outsourcing, human resources outsourcing activities are carried out at two-thirds of the large firms that took part in the survey.
The HR Outsourcing Trends study examined the prevalence of HR outsourcing among large US and European companies and looked at the challenges, benefits and lessons learned in the process.
Although the motivations cited for outsourcing certain HR functions included cost savings, improving service levels and maximizing resource availability, an underlying driver for it 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 Inc. in New York. “Once youve gone to PeopleSoft, 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 non-profit member organization that conducts research and education activities on a variety of management issues, surveyed 125 executives at the CEO, CFO or HR Vice President level. 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 specifically cited in the survey is the avoiding investment in new technology, according to 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,” he 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 serve to block such outsourcing deals.
Most HR functions already outsourced by respondents focus on transactional or administrative functions. Eighty percent outsource 401K 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 information to employees on their individual benefits through a portal, the ability for IT to interface to externally run systems is 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 pointed out.
At the same time, “the company is responsible for keeping all the vendors [up to date on] who is an employee and making sure the security is there,” he said.
The survey found that only 12 percent of the executives said their companies use a single outsourcing provider, while nine percent said they plan to do so over the next three years.