HR outsourcing picking up steam

Companies have outsourced payroll and benefits administration for many years, but the move to outsource virtually all HR activities business processes and IT is still new.

One out of 10 companies has done some HR outsourcing, but only about half of those companies have outsourced everything, estimated Michael Cornetto, a consultant at Watson Wyatt & Co. in Arlington, Va. But he said the market for total HR outsourcing is growing 30% per year.

Late last month, Whirlpool Corp. signed a 10-year deal to outsource HR business processes for 68,000 employees to Convergys Corp. in Cincinnati. A major reason was the need to improve HR technology, said Abby Luersman, vice president for HR solutions at Benton Harbor, Mich.-based Whirlpool.

Whirlpool was underinvesting in IT and needed "better decision-making with better data," Luersman said.

So far, Whirlpool is using Convergys to integrate its self-service model with its SAP system and take over some of the transaction processing, she said. But over time, some HR IT systems could move to the outsourcer's data center, Luersman said. "This is a 10-year agreement with Convergys, and clearly we're doing it in bite-size pieces," she said.

But it's not a path for all companies. David Rudzinksy, CIO at Bedford, Mass.-based medical instruments maker Hologic Inc., said he uses the payroll services of Automatic Data Processing Inc., whose system is integrated with the human resources module in his Oracle eBusiness Suite 11i ERP system.

"This was a major improvement in the process and makes the payroll/human resources people more efficient," he said, adding that he doesn't want to use any external providers of other HR functions.

According to Peter Allen, managing director and partner at TPI, "We think the long-term trend is an erosion of the adoption of ERP as an infrastructure in the corporate enterprise and moving away from licensing software to buying services,"