HR goes outside

An emerging variation on the outsourcing theme is making public sector inroads.

In a new report, Yankee Group predicts that human resources business process outsourcing will grow 27 percent this year, with the global market exceeding $4.6 billion. In this outsourcing flavor, organizations off load such functions as payroll, benefits administration, and recruitment.

To date, many of the attention-grabbing customers have been commercial concerns such as Marriott and Delta Air Lines. But public sector entities are actively pursuing ways to contract out HR processes, said Phil Fersht, who leads Yankee Group’s Multi-Discipline BPO Practice.

Texas state government last October outsourced human resources and payroll services to Convergys, which has a similar deal with Florida. The trend has also taken off in Europe. The City of Copenhagen last year cut over to an outsourced HR system provided by Accenture. Fersht said that Italy and Germany are in negotiations around HR outsourcing.

Yankee Group's report, released April 4, indicates that the surge will continue. The company predicts that expenditures on the service will increase at a compound annual growth rate in excess of 30 percent over the next four years. In 2009, Yankee Group believes that the global market will reach $14 billion.

Moore is a freelance writer based in Syracuse, N.Y.

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