HR Outsourcing: not just for the giants

Following the outsourcing wave of software and other technological work in recent years, Western nations have now begun "offshoring" more peculiar business processes to faraway countries. Finance & accounting, human resources, procurement and the rest can be regarded as 'old hat' by some pioneering Westerners who identified some very innovative ways of optimizing their processes. Read on.

Prayers?

With Roman Catholic clergy in short supply in the United States, Indian priests are picking up some of their work, saying Mass for special intentions, in a sacred if unusual version of outsourcing? The New York Times reported.
Joining Americans in sending Mass intentions, requests for services such as those to remember deceased relatives and thanksgiving prayers, to clergy in India, are Canadians and Europeans.

No other Indian state receives more intentions from overseas than Kerala, where the Masses are conducted in Malayalam. The intention, often a prayer for the repose of the soul of a deceased relative, or for a sick family member, thanksgiving for a favor received, or a prayer offering for a newborn, is announced at Mass.

Generally individuals don't receive overseas requests, which are mostly routed to churches in Kerala through the Vatican, the bishops or through religious bodies. Such requests are increasingly arriving via e-mail, though the regular mail and the word of mouth of traveling clergymen constitute a majority.

The NY Times, quoting priests, said memorial and thanksgiving prayers for locals are said for a donation of Rs 40 (approximately EUR 0.7), whereas a prayer request from America costs USD 5 (EUR 4).

Gaming??

These days, American and European gamers are outsourcing drudge work to China, Russia and elsewhere. Multiplayer online gamers have long cut corners by paying real cash for in-game goods that would take them hours of playing to earn, while others have padded their offline budgets by selling excess game goods or even their characters when they stop playing. But now, the reality of exchange rates and international income gaps has spawned a virtual version of the real-world relationship between rich and poor countries. While players in wealthier countries casually drop hundreds of dollars to buy their way into better positions in the games - or out of tedious parts of the games - some workers in poorer countries are playing around the clock to produce virtual goods that earn them real money.

Homework???

But this is not the end: if you have a teenage student in your family, be aware that from now on he or she may be tempted to cut short on homework time and prefer to go out with friends, while waiting for homework to be done by some unknown scribe in a remote country. Banwan, from South Africa, posted his BBA course assignment on the English Civil War (1642-49) on the Net for the BPOs. He wanted his homework done for ?60. The money wasn?t such a big deal. Going through the books and crunching the material into 2000 words was. Mohit Gupta, who works for a BPO firm, saved him the bother. A Kareem from West Asia wanted a 20-page, 10,000-word critical essay on the ?Positive effects of War?. He got a BPO firm to do it for $200.

If the above examples illustrate some very peculiar form of outsourcing, it is definitely true that small and medium businesses are more and more interested by some form of HR outsourcing impacting the small and medium business market? Here are just two of the ways:

Small and medium HR providers are finding it harder to compete for a share of lucrative large-employer business. Historically, a high percentage of HR providers have been smaller enterprises. That's because the barriers to entry into fields such as recruiting, temporary services, training, and similar HR areas were low. It didn't require a huge investment in plant, equipment or technology to get started in these fields. As a result, each local market had its own local (small and midsize) providers. However, as the large HR players become more global, with the resources to set up offshore operations, smaller HR providers are finding it harder to compete at the same level. Industry consolidation and competition from larger providers are expected to intensify, taking a toll on smaller players.

More HR outsourcing solutions are coming on the market tailored specifically for the SMB market. As the employment landscape becomes more complex, smaller employers have more reason than ever to outsource HR functions. In the past it was hard for a small business to justify outsourcing. In many cases HR was a luxury smaller employers could not afford, except for "essential" functions like payroll. But today, employers are faced with so many regulations that skilled HR expertise is becoming a necessity in order to stay out of hot water. In turn, this has led to the birth of a whole segment of outsourced providers with solutions tailored for smaller employers, at price points they can afford. Many of those providers are themselves SMBs who are carving out a niche serving other small and midsize businesses.

The latest market trends

So, no wonder if the global market for HR business process outsourcing (BPO) is set to grow at an annual rate of 21 per cent, reaching $7bn (?3.89bn) by 2008, according to business analysts NelsonHall.

NelsonHall's Targeting HR Outsourcing study predicts a growth rate of 11 per cent for the total global HR outsourcing market ? signifying that the multi-process component of the market is the most robust in terms of growth.

John Willmott, founder of NelsonHall, commented: "Until now, most global HR outsourcing deals have been single-process engagements, such as localised payroll services; pensions and benefit administration; and recruitment.

"Now we are seeing the emergence of the multi-process market. Vendors are partnering with or acquiring other firms to broaden their HR service delivery capabilities to include: organisational and people development; employee data management; workforce planning and deployment; and human capital services."

The NelsonHall study confirms that cost reduction is a key driver for outsourcing HR processes. The transformation and enhancement of HR processes is also a key driver for organisations adopting multi-process HR outsourcing.

"Organisations outsourcing multiple HR processes expect a reduction in HR operating costs of between 20 and 40 per cent, but they are also looking for improvements in their HR service quality, the introduction of e-HR service models, and access to improved management information and performance metrics," said Willmott.

The conclusion is: we will assist to a large spread of HR outsourcing deals involving SMEs and service providers and consultants are already preparing to this new wave of clients. Not sure they are considering taking on prayers or homework though....