HR set to harness BPO

by 29 May 2007

DEMAND FOR business process outsourcing (BPO) services in Australia is set to grow by more than 60 per cent by 2010, a recent IDC study has revealed.

In addition to this, the market for more sophisticated HR services is expected to grow in Australia by 9 per cent to US$1.6 ($1.9) billion by 2010. This is largely being driven by organisational perceptions that HR is a cost centre.

HR BPO agreements are also becoming increasingly sophisticated, encompassing employee self-service and higher value offerings such as recruitment, workforce management and learning.

Pressures to reduce costs, manage risks and increase differentiation within the market are driving the transformational agenda in the back office of many organisations, said Andrew Friars, a partner at Accenture, which sponsored the IDC study.

According to Aprajita Sharma, research manager of outsourcing and BPO at IDC Australia, sophisticated buyers of BPO services are going a step further and identifying BPO as a mechanism used to deal with risks at the financial, technical and organisational levels.

“BPO is perceived as a strategic business dynamic that will help companies focus on their core activities, while leveraging external expertise to manage non-core activities,” she said.

While there is significant growth forecasted for HR outsourcing services, Sharma said areas such as payroll processing, benefits and administration, or HRIS support services would potentially be outsourced in the medium-term.

“Areas like HR planning, policy and strategy, and performance and development – which are core strategic functions – will still be retained in-house,” she said.

“What’s left is usually something that’s very niche-orientated, or a centre of expertise, and more closely aligned to the business so people spend their time in areas that add value to the business, rather than spend their time managing transactional activities,” Friars said.

Sharma said Australia still lags behind more sophisticated markets such as the US and Europe, where BPO is relatively mature.

“Most Australian organisations do not have formal, structured internal due-diligence teams, resulting in a lack of consensus on common goals. What we are seeing is more companies are taking the time and allocating appropriate resources to conduct thorough, internal evaluations for BPO rather than seeking help from BPO service providers, management consultants or sourcing advisory firms, which delays the decision-making process.”

In effect, HR should be treating this trend as their friend, Friars said. “One of the best ways to do that is to drive towards specialisation or move into line management-type roles where your HR expertise can be used to help support the business.”


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