by John Conley

One day you’re working for a Global 2000 corporation, the next day—Poof!—you’re working for an outsourcing service provider.

Beyond the different name on the pay stub, not much else seems different. The work is similar, you have the same colleagues and you’re sitting at the same desk. Welcome to the “liftout” employment model followed by many large outsourcing arrangements.

In the last three years, several stunning outsourcing agreements between very large corporations and outsourcing service providers have included a provision for transferring most of the outsourcer’s administrative staff to the ranks of the service provider. In the blink of an eye, hundreds of employees switch employers, though the work they do arguably remains the same.

But there are subtle professional ramifications to the lift-out model that affect career prospects, income and job satisfaction, experts contend.

The career reverberations also extend to the employees who are not, as it were, lifted out. As more companies engage outsourcing service providers to handle transactional and administrative functions formerly performed by in-house staff in human relations, information technology and finance & accounting, the higher level staff left behind is expected to provide more strategic value to senior management. But educators argue many in this position may not have the skills necessary to offer this value.

One thing is certain–the lift-out model poses the likelihood of fewer corporate jobs involved in the functions now outsourced, given the one-to-many service concepts at the heart of outsourcing. “There is little question, at least in an HR context, that the majority of HR jobs in the future will go into an outsourced environment,” says Judy Coffee, national practice leader for HR effectiveness at outsourcing service provider Mellon HR Services in Chicago. “As time progresses, however, fewer people will be needed, given the economies of scale involved in the one-to-many promise of outsourcing. A single person who handled functions for one organization now handles several.”

Coffee says it would not be a long shot to imagine 50% fewer jobs in HR in the next five to 10 years because of the benefits of HR outsourcing.“ Over time, outsourcing service providers will be staffed appropriately and they will no longer need to hire additional people as additional clients are added to the roster,” she explains. “I was speaking at a conference a few weeks ago and said to the attendees, ‘ five years from now half of you won’t be here.’“

Lift-out Left-over

Major outsourcing agreements in which the employee-lift out model is practiced may have reached the saturation point. Once a large outsourcing provider like Aon Consulting takes on a large portion of the HR staff from its initial HR outsourcing client–AT&T–there is less need to continue to lift out the staffs of future clients. More than 400 people in HR at AT&T made the switch to Aon last year.

The AT&T-Aon pact is one of about a dozen similar outsourcing agreements that followed the employee lift-out model. In February, outsourcing service provider Accenture announced a joint venture with BC Hydro, a British Columbia-based utility, involving the lift-out of some 1,500 BC Hydro employees. BC Hydro is the first customer of Accenture Business Services of British Columbia, outsourcing customer services, IT and HR services, financial systems, purchasing, and building and office services to the new service provider.

Accenture earlier cut an outsourcing deal with BT PLC, the giant London–based telecommunications company, calling for 1,100 BT employees to become employees of Accenture HR Services. At one time BT’s HR staff spanned some 14,500 employees. Today, roughly 500 are left.

Much of the same occurred at technology company Motorola Inc. More than 650 HR employees moved over to service provider ACS to populate the latter’s new ACS Global HR Solutions organization. Ditto Bank of America, which sent some 600 employees over to outsourcing service provider Exult, Inc., in its $1.7 billion contract for HR outsourcing services.

These massive shifts of employees have their pros and cons. When employees transition from the traditional corporate world to the service world, the workload typically gets tougher, says Christine Ferrusi Ross, senior analyst at Cambridge, Ma.-based research firm Forrester Research. “Outsourcing presupposes that functions were being performed less efficiently by the corporation, and with efficiency comes more workload.”

Whether the job is more or less interesting at an outsourcing service provider depends on the individual. “Some people just want to do what they did before, running the mainframe or processing payroll checks,” Ferrusi Ross says. “They may not be interested in going beyond that. For other people, however, the servicing of multiple clients as opposed to a single corporate master has great appeal.”

Most who have made the switch would agree, according to surveys undertaken by Stamford, Ct.-based research firm Meta Group. “About 50% to 60% of individuals who move over to the vendor side say they are happier,” says Dean Davison, Meta Group vice president. “Typically, they find that working for an IT outsourcing company or an HR outsourcing company when they are technologists or HR professionals enhances their career opportunities.”

He explains: “If I’m a tech guy working at DuPont or J.P. Morgan, I’m pretty limited in my career choices. The chances of moving from IT to another area are slim. But if I go to IBM or EDS, now I can be an IT person and maybe a marketing person or sales person or even a division leader, moving around to different parts of the company relatively unimpeded by my particular career specialty.”

Outsourcing service providers “by and large have learned how to make these new employees happy, acclimating them to the new culture, giving them various career paths and not sticking them into grunt roles,” Davison adds. “The employee satisfaction surveys we’ve done indicate fairly high satisfaction levels. For those who learn technical skills, whether it’s IT functions or HR functions, working in a company whose whole mission is to provide that particular function, they find they have a more robust career than they would have had otherwise.”

Ferrusi Ross concurs. “If I were an HR person, I’d want to get acquired by a Hewitt or a Towers Perrin, where HR is their thing, their reason for being,” she says. “You are now closer to the core of what it is that generates revenue for that business. Not to mention you’ve got a lot more colleagues to talk to.”

In many respects, the burgeoning outsourcing service industry offers career potential that heretofore did not exist, says Prof. Ed Lawler, distinguished professor of business at the Marshall School at the University of Southern California in Los Angeles. “The technical jobs available in the outsourcing industry may be quite attractive, in the sense that you are now part of a function that is a profit center for the organization and not, as in the traditional corporate model, a cost center,” he explains. “When you are part of the engine driving revenue as opposed to incurring cost, the career potential frequently is higher.”

Diminishing Returns

The individuals who obtain lift-out opportunities benefit by their early mover status. Unfortunately, many lower level employees of late mover outsourcers are more likely to lose their jobs altogether. Even the higher level employees who hang on and are asked to provide more strategic value are vulnerable. “HR people aren’t typically the people in an organization that senior management thinks of as providing strategic service,” says Ferrusi Ross.“They’re either invisible or you’re complaining about them.”

“In HR, the traditional upward career path has been rising through the ranks to run the HR department, starting from a position where they largely did traditional administrative and transactional tasks,“ says Prof. Lawler.

“However, these same individuals may be ill-equipped educationally to provide the strategic value companies seek. You’d need a pretty good MBA to understand a business, and HR professionals typically don’t follow that track. Even if they did seek graduate work in HR, there would be few institutions offering it. Sadly, the business schools are responding late to the outsourcing phenomenon.”

Coffee seems to concur. “Ultimately those who remain (post-outsourcing) may not be the right people,” she says. “The right people will be those coming out of business schools who have done a stint in operations. These individuals will understand that HR is an investment and not a cost. However, those who typically stay behind after functions are outsourced don’t have that view. They don’t have this competency because they grew up in an environment where HR was a cost center involving transactional and administrative functions. Suffice it to say – there is a huge transformation going on in this marketplace.”