I decided to review this article because we know the topic to be of interest to many of our clients in HR functions. Another reason is that MTP has, over the last few years, been increasingly interacting with outsourcing operations on behalf of our clients, with – it has to be admitted – mixed results.
The article starts by quoting evidence that, during the recession, HR has not been one of the main priorities for outsourcing; IT and procurement have led the way. It suggests that this is because there is widespread scepticism about the ability of the outsourcing suppliers to deliver their promises around HR services. The ‘first generation’ failed to deliver the promised savings through economies of scale.
The author does however quote evidence that there will be an increase in HR outsourcing as the recovery takes place and quotes a CIPD survey as saying that, compared to two years ago, there has been an increase of about a third in companies thinking of taking this step. And a US survey predicts a doubling of activity, though this refers to payroll outsourcing only.
It is significant that the higher growth is in the area of payroll and this is backed up by a comment from a senior person in Hewitt, one of the major exponents; he suggests that the broad HR ‘mega-deal’ offerings of the early days of outsourcing have not worked out; the growth areas are data storing, payroll, workforce and benefits admin where it is easier to produce economies from scale and benefit from specialised systems.
The Director of Shared Services at the BBC is quoted as backing up this trend, making the point that strategic services need to stay in-house, particularly when the organisation is undergoing rapid change. Assuming that training – or at least the ‘non-commodity’ side of it – is part of strategic services, this ties in with our own experiences. Some outsourcing providers we have come across have been unable to relate to highly tailored learning solutions and, after varied attempts to replicate them, tend to come back to specialist providers like us.
A representative of Capita, one of the biggest outsourcing providers, mentions that the growth of outsourcing in the public sector is hampered by ‘long-winded tendering processes’. The words ‘pot’ and ‘kettle’ came to mind as I read that, as we have found long-winded tendering to be a feature of working with some outsourcers who provide training services for our clients.
The article raises one further issue which had not occurred to me before; how the outsourcing of certain parts of HR makes it difficult for new employees to experience the total function as part of their development. Capita argues that this makes the outsourcing companies the only place where the full HR function can be experienced; I would see it as one of the many arguments for keeping such a key function in-house.
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