Outsourcing HR out of favour as firms look to cut costs

Large-scale outsourcing of HR functions is falling out of favour, according to research.

Outsourcing advisory firm EquaTerra found the annual growth in the value of HR outsourcing deals fell from around 50% in 2007 to around 15% in 2008.

Interviews with the top-five outsourcing providers and 200 consultants showed that the demand for multinational deals had fallen, in favour of smaller deals aimed at reducing short-term costs.

Stan Lepeak, EquaTerra’s managing director of global research, told Personnel Today: “There is a big interest in return on investment in the short term. Companies are looking at their peers that went before them [into global HR outsourcing], to find that progress has not been as easy as they thought, and that the early adopters were too aggressive.

“The idea of a five-year plan to turn around HR is going out of favour. Now there is less interest in transformation, and more in reducing costs.”

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However, Lepeak said that as the economic climate improved over the next few years, businesses would try to learn the lessons of global HR outsourcing and look again at the idea.

“There is still a lot of room for improvement [in HR], and the idea of global outsourcing will come back in a more sophisticated form with clearer, easier to measure goals.”