Introduction

Offshoring has become a critical factor in most of the sourcing decisions. In terms of offshore maturity, Human Resource Outsourcing (HRO) lags behind ADM, R&D, call centers, and FAO. However, the offshore adoption is expected to experience rapid growth within HRO. This research report examines adoption, value proposition, key locations, and risks associated with offshoring in HRO. This research will help both buyers as well as suppliers of HRO in deciding their global sourcing strategy. 

Scope

• 71 HRO contracts as of February, 2006 with a minimum of three HR functions and servicing more than 3,000 employees
• Global focus with particular emphasis on India, South East Asia, Eastern Europe, and Central & South America as offshore locations
• All industries 
  

Contents

This report analyzes the adoption of offshoring within HRO by evaluating the current extent of offshoring in HRO transactions in terms of overall market adoption, buyer segments, and suppliers' investment in creating offshore capabilities. Further, it examines the value proposition of offshoring in the HRO context, identifies key offshore locations, and highlights the risk mitigation strategies. Some of the insights are as follows:

• Overall market adoption
  • 44% of HRO transactions have an offshore component
  • Within HRO, offshored components include primarily back office activities in benefits, payroll, and employee data management
• Buyer segments
  • The larger employee segment (>15K employees) have higher offshore adoption
• Supplier landscape
  • Suppliers are aggressively investing in offshore capabilities; the majority of HRO suppliers already have a moderate to significant presence in offshore locations