Human Resource Outsourcing in IT Industry

in
Indian Context

INTRODUCTION
A Working What
Definition
is Outsourcing?(
of Outsourcing
Introduction)
OUTSOURCING
The strategic use of outside resources to perform
activities traditionally handled by internal staff and
resources Dave Griffiths

INTRODUCTION
A Working Definition of Outsourcing
HRO in Indian context
India is second largest exporter of software products and
services in the world so there is potential market for outsourcing
especially HRO
HRO is completely new field in Indian context
Multinational companies, public sector and government are
taking interest in this area.
Underlying size of HRO in India is about $2 billion with a current
market of $27 million and it is growing at a rate of about 50 per
cent.
In India, mostly HR outsourcing is used for payroll, employee
benefits, recruitment, training and development.

INTRODUCTION
A Working Definition of Outsourcing
Literature Review
LITERATURE REVIEW WAS DONE :

to understand how todays HR firms offer a wide variety of

services to companies

how companies focus on their core business activities and

still establish and maintain good HR policies

INFERENCES FROM LITERATURE REVIEW:

HR outsourcing is contingent upon factors like flexibility,

availability of adequate resources, affordability, and
acceptability (openness to information-sharing) etc.

HR outsourcing is a double-edged sword and should be

viewed in totality keeping in mind the pros and cons it has

HR outsourcing provides companies with the ability to gain

access to experienced and knowledgeable professionals.

Literature Review(Contd..)

HR outsourcing provides state-of-the-art

solutions to improve customer service

HR outsourcing enable HR to deliver greater overall value

to the organization.

Roughly nine out of ten large companies and eight out of

ten midsized companies found value in outsourcing certain
HR benefits administration functions.

Human
Resources
Technology
Outsourcing
Allows
Businesses to Manage Expenses, Reduce Risks and Focus
on Their People Goals to Drive Results

Macro Issues and Uncertainties Are Not

Businesses from Investing in HR Outsourcing

Employee and Manager Use of HR Technology Is Expanding,

Allowing for Improved Accuracy, Growth and Effectiveness

technological

Deterring

INTRODUCTION
A Working Definition of Outsourcing
Why outsource?
Cost-effective
Business need to focus on core competencies, growth and
talent management.
Reducing staffs administrative burden.
The expertise provided by their external partners.
effective way to bypass organizational politics

INTRODUCTION
A Working Definition ofModels
Outsourcing
of outsourcing
ASO: An ASO is third party provider of common human
resource activities. In this companies can choose, which
services to outsource and which to manage in house. It
provides flexibility.
ASO does not make co-employer relationship.
PEO: It takes care of all the human resource activities. A
PEO also assumes all associated liabilities and legal
responsibilities of its clients. A hired PEO becomes coemployer with a client company i.e. PEO will have some
control over clients employees.

INTRODUCTION
A Working Definition
Process
of Outsourcing
for HR outsourcing:

INTRODUCTION
A Working Definition of Outsourcing
METHODOLOGY
Sample size : we have approached some working professionals of
IT industry and some BPOs, mainly the HRs of the company. We
forwarded our survey to 120 professionals out of which we got 30
responses.
First of all, we read the research paper, journals and articles
related to our topic in order to understand our topic and get
some relevant data if possible.
Then, we made a questionnaire, which we forwarded online to
120 working professionals of different companies like Genpact,
Infosys, HCL BPO, Wipro and we got 30 responses, on which we
did our analysis.
Further in order to gain deep insight we took telephonic and
email interview of 4 HRs of companies like Genpact, Satyam
Mahindra, IBM and I-Gate.

INTRODUCTION
A Working Definition of Outsourcing
Results & Analysis
1) What HR processes is your company currently outsourcing?
16
14
12
10
8
6
4
2
0

Count

Currently most of the IT or BPO firms are outsourcing there

payroll, recruitment, talent management, performance
management etc.
As companies want to focus more on strategy formation, they
are outsourcing these functions in order save cost as well as

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
2) Which business process do you think is most important to be outsourced?
30
25
20
15
10
5
0

Count

It is evident from the graph, that human resource

outsourcing is becoming a growing trend.
Apart from HR, other functions which company prefers to
outsource are logistics, finance and accounting, customer
service etc.

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
3) In HR what processes do you like to outsource other than the currently Outsourced processes?
10
9
8
7
6
5
4
3
2
1
0

Count

As per the previous response, companies are willing to

outsource their HR activities, so some other functions which
companies want to outsource are Talent Management,
Investigation compliance, performance management and so
on.

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
4) What do you think are the main reasons for a company to outsource HR?
30
25
20
15
10
5
0

Count

According to the working professionals the main reason

behind outsourcing is to have the ability to focus on
business/strategy, so that they can focus on their growth
and expansion.
Other reasons can be cost saving, to improve performance,
to gain access to the new HR technology/expertise and so
on.

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
5) What are the Advantages of HRO?
35
30
25
20
15
10
5
0

Count

As we can see that the professionals undoubtedly believe

that the main advantage of HRO is that helps in reducing
cost, which in turn increases the profit margin.
They also believed that outsourcing helped them in focusing
on the strategies, planning which is necessary for the growth
of their business in this competitive age.

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
6) Has the Revenues Increased after implementation of HRO?
3

Yes
No
We are not Outsourcing

7
20

As HRO helps in cost saving/ reduction of cost, which in turn

helped the companies in increasing their revenue/ profit
margin.

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
7) Rate on the Scale of 1 to 5 (1-Strongly Disagree, 5-Strongly Agree), that there is improvement in the quality of workforce after Outsourcing.
We don't Outsource
Strongly Agree
Agree

Count

Neutral
Disagree
Strongly Disagree
0

10

12

The company which outsources their talent management or

recruitment process strongly agrees that workforce quality is
positively affected after outsourcing.

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
8) Are you facing any difficulties/Challenges in HRO process?
2

5
18

20
5

Giving Up Control
Employee Leasing Risk
Impersonal to work
Non-disclosure
Others
No

19

We have also asked in the questionnaire about the kind of

difficulties parent company is facing while outsourcing is the
non-disclosure, as company has to share some confidential
data with the partner firm, which is very critical for both.
Impersonal to work and giving up control are some other
limitations of HRO.

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
9) Your Outsourcing intentions over the next year
2
9

15

No Change
Likely to decrease
Likely to increase
Will start Outsourcing

As we can see 15 out of 30 respondents says that their

companies are interested in increasing their outsourcing
activities in the upcoming future which is a positive signal for
this developing field.

INTRODUCTION
A Working Definition
Results
of Outsourcing
& Analysis(Contd)
10) Will you recommend HRO to others?
3

17

Absolutely Yes
Reluctantly Yes
Probably No
Absolutely No

Due to its positive results, 17 out of 30 respondents agreed

that they will recommend it to others also.

INTRODUCTION
A Working
HRO company
Definition
perspective
of Outsourcing
( Peoplestrong)
According to them the major causes of HRO are as
follows:
Focus on core Activities
Cost and efficiency saving: Reduced overhead:
Operational control:
Staffing Flexibility:.
Continuity and risk-management
Developmentof
ofoutsourcing:
internal staff
Disadvantages
Risk of exposing confidential data
Hidden costs
Lack of customer focus

INTRODUCTION
A Working
HRO company
Definition
perspective
of Outsourcing
( Peoplestrong)
Keys to successful outsourcing:
Customer satisfaction
Definability and measurability
Share the risk
Delivery and quality.
Scalability
Stability and variability
Predictability
Velocity (reaction to change) and staffing

INTRODUCTION
A Working Definition of Outsourcing FINDINGS
Currently, payroll is the most outsourced HR function,
50%.Recuirement process, talent management (training) etc.
are some other prominent areas.
It is clearly evident from the results of responses that HRO
helps companies to focus on their core business and it saves
cost as well (cost reduction).
According to research paper, larger organization tends to
outsource higher.

INTRODUCTION
A Working Definition of OutsourcingLimitations
Fewer amounts of data available.
Problem in data collection.
As it is completely new area, it is yet to be
explored
9) Your Outsourcing intentions over the next year

INTRODUCTION
A Working Definition of Outsourcing
RECOMMENDATION
According to Black Book Model ,we recommend
outsourcing HR operational functions to it
industries as : Provide advice on employment law changes and
amendments
Manage employment disagreements,
disciplinary actions and/or personal objection
cases
Provide advice
Manage change
Manage recruitment processes
remuneration & salary reviews
Job evaluations
Job descriptions
24/7 HR helpline 17

INTRODUCTION
A Working Definition of Outsourcing
CONCLUSION
There is growing trend of Human Resource Outsourcing in
Indian IT industries and BPOs.
Companies are currently paying more attention on outsourcing
payroll, recruitment, and administrative work.
But in future they want to have a long term and stable relation
with outsourcing firms and they want outsource the
recruitment process (RPO) which is booming now, talent
management and so on.
Outsourcing depends on the size of the organization.

INTRODUCTION
A Working Definition of Outsourcing