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What is Human Resources Outsourcing? Human Resources Outsourcing (HRO) is the contracting, to a third party, of various HR administrative functions to an outside firm. HRO removes the burden of having to manage these back-office functions, so enterprises can focus on core business processes and strategic initiatives. What does HR Outsourcing encompass?
How big is the HR market? Research firm Gartner Inc. predicts that the worldwide HRO market will increase from a $25.5 billion industry in 2003 to a $37.2 billion industry in 2008. By 2005, Gartner says, 85 percent of U.S. enterprises will outsource at least one component of their human resources functions. What are the strategic benefits of HRO? Beyond the potential cost savings and added efficiencies, HRO delivers benefits that transform HR departments from cost centers into strategic resources. Outsourcing frees HR executives and departments from the time-consuming tasks of administering HR functions so they can focus on allocating the workforce more efficiently to achieve business objectives. They can also develop HR programs that are better aligned with the strategic goals of the business. How does an enterprise determine which functions to outsource? Enterprises must do an internal assessment of their current HR functions to determine if they are well suited to be outsourced and if there is value to be gained from turning these functions over to a service provider. This includes calculating the potential time/cost savings of turning over particular functions, and assessing whether they are "non-strategic" functions that don't need to be managed internally. |
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