Page 5 - why-outsource-why-now

Process –
Standardization and
Companies that have strong internal processes are
more flexible and can take advantage of competitive
opportunities more easily. Current market conditions
may both present opportunities as well as force
companies to change their business models to adapt.
Companies that are forced to react in the short term to
economic conditions often reduce or reallocate
headcount responsible for managing internal
employment related processes. This can have an
enormous impact on engagement, productivity, and
expose the company to greater risks.
Partnering with external providers can therefore offer
automated processes and higher levels of specialist
knowledge and expertise that organizations may not
have or choose to maintain internally. Again, this is an
aspect of outsourcing that is especially likely to appeal
to SMEs. While they may lack know-how in relation
to HR activities that they carry out only occasionally,
for an outsourcing company this know-how is a core
keep organizational processes ahead of such changes
rather than reacting, which can be costly. Outsourcing
transfers risk from the purchasing organization to
the vendor – an important consideration in times of
The current BPO market
According to the research firm Global Industry
Analysts, the HR Outsourcing market will reach $162
billion by 2015. This includes both large enterprises
looking at BPO for multinational operations, and small
to medium-sized businesses increasingly attracted by
the advances in outsourcing technology and decreased
prices. According to IDC, a global research firm,
outsourcing Human Resources functions has grown
by close to 70% over the past six years.
In Western Europe, where the outsourcing business
model has existed for years, research firm Gartner
in their 18th June 2012 report ‘Magic Quadrant:
Payroll BPO Services’ estimates that at least 50%
of companies already outsource payroll. However,
continues the report, “we believe the general global
recession and the acute Eurozone crisis are leading
many more companies to adopt outsourcing as a way
to cut costs than they did when the recession began
in 2008. The emerging business markets of China and
India have produced environments in which companies
have become outsourcing consumers rather than only
providers, as they have traditionally been viewed. Also,
Latin America, the Middle East, Southeast Asia and (to
a lesser extent) Africa show similar signs of growing
adoption of payroll outsourcing.”
The outsourcing industry research firm Everest
recently reported that the global multi-process HR
outsourcing market would grow to an estimated
annual contract value of $3.3 billion during 2012,
with emerging markets, particularly in Asia Pacific
and Latin America driving this growth. The practice
of contracting out activities in such areas as HR,
IT, finance and marketing to external providers is
widespread in developed economies and, increasingly,
in the BRIC countries and other emerging markets.
In France alone, there were 58
payroll related legislative reforms
from July 2011 to July 2012 that
businesses had to implement.
Regardless whether an organization is growing,
decreasing, ormaintainingstability, business continuity
has never been more important. Changes in key HR
personnel can plunge an organization into crisis.
Outsourcing some or all HR activities goes a long
way towards mitigating this risk by shifting the onus
of hiring and training to the service provider, and so
ensuring service continuity.
A hidden danger is that these same economic
conditions that offer opportunities, also often trigger
greater employment compliance requirements and
legislative changes which companies find difficult to
keep up with. In France alone, there were 58 payroll
related legislative reforms from July 2011 to July 2012
that businesses had to implement. Outsourcing helps