Human Resources Outsourcing (HRO) To India – An Overview

Published: 21st July 2008
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What is HR Outsourcing?

Human Resources Outsourcing of HR Outsourcing is not a very new concept to Indian outsourcing market. It basically means managing the human resource department of offshore companies that are hard-pressed for time and expertise when it comes to taking care of their employees. Research indicates that an HR department spends 80% of their time in managing tactical and transaction oriented HR operations. If these processes are outsourced then the trained HR staff could be re-deployed in the core process which will add substantial values to the organization.

What Does HRO Consist of?

Typically, HR outsourcing can be classified into two broad categories such as transaction and administration outsourcing and HR consultancy. While transaction and administration outsourcing deals with the day-to-day and month-to-month activities like payroll management, employees benefits management, and pension management, HR consultancy is a much more complex process that constitutes management of strategy and policy functions of the organization. Transaction and administration outsourcing form the low-end of the value chain of an organization. HR Outsourcing is an off-shoot of offshore companies located primarily in the US. Due to the complexity involved in hiring and managing an entire HR department, most companies in the US look for prospective HR consultancy firms that can mange their HR activities.

Growth Prospect of HR Outsourcing in India

HR Outsourcing is one of the fastest growing segments in the Indian as well as global outsourcing market. While the global spend on BPO is estimated to be $234 billion, being a comparatively new phenomenon HRO is expected to reach $67 billion which will account for 29% of the global BOP share. As a matter of fact, HRO is projected as the fastest growing segment over the next three years. This projection can be further substantiated by the fact that large-scale HR off-shoring has already taken place and giant names such as Fidelity, Exult and Hewitt are slated to set up their workshop in India for their HR operations. According to a combined survey conducted by Nasscom-McKinsey the revenues in the HR outsourcing will go up to $3.5 billion by 2008. Going by this report, if 10% of the HR outsourcing is offshored in the next five years, the offshore opportunity in Indian could be in the region of $1.4 billion.

The Stumbling-block of HRO Growth in India

The reasons why HRO in India has not been prevalent is the reluctance displayed by many offshore companies. Among all the issues they have, the major causes for their inhibitions are confidentiality and cost-factor. While many nurture the fear of losing jobs and control over their confidential data, others cast doubts over the quality and ethics of the outsourcing vendors in India. There are a few companies as well that are not aware of the cost-benefit equation and the Indian companies need to convince them to benefits of outsourcing selective HR activities. Besides, the cultural and psychological mindset also prevents the growth of HR outsourcing in India. Many offshore companies are of the opinion that an HR outsourcing agency will not be able to tackle the critical issues like employee incentive programs, resolving work-related problems, and so forth.

Maneet Puri is an acclaimed web developer and is the director of LeXolution IT Services, a web development company based in India. His experience in the industry and expertise of various applications and technologies are what fuels the services of his company which include web design & development and other website maintenance services.

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