Human resources business process outsourcing to account for 30 percent of HR outsourcing by 2008, Yankee predicts
Boston — April 14, 2004 — Human resources business process outsourcing, a new concept of transitioning HR management responsibility to a single supplier, is driving much of the growth for the whole human resources outsourcing market, according to an upcoming report from technology consultancy Yankee Group.
The worldwide human resources outsourcing (HRO) market will reach $80 billion by 2008, with the U.S. HRO market accounting for more than $42 billion of that total, writes Yankee in the report "Human Resources BPO: Market Analysis, Forecast & Competitive Landscape 2003-2008." The consultancy adds that the trend toward HR business process outsourcing (BPO) is at the heart of the growth projected for this market.
Where BPO services currently make up only 17 percent of the total Americas HRO market, Yankee predicts that this share to increase to almost 30 percent by 2008 and that short- to medium-term spending in this sector will center on organizations shifting their existing expenditures on external HR activities to consolidated offerings from a single provider.
"The ability to source the majority, or all, of the HR function to a vendor as part of a BPO arrangement is a major shift in the way organizations operate today, and [this] is paving the way for full-service HR BPO offerings," says Phil Fersht, Yankee Group business services and outsourcing analyst. "Many organizations now trust a services company to handle some of their most intimate business. This shift will dramatically reduce any remaining reluctance by organizations about outsourcing more of their core business in the future."
Traditional HRO vendors such as Hewitt, Ceridian, ADP, Aon and Fidelity are expanding their HR and technology services to compete for full-service HR contracts, Yankee reports. Meanwhile, major IT services organizations such as IBM, ACS, Accenture and EDS have been developing their HR services capabilities to compete for projects on a global scale.