Human Resource Outsourcing: Scope for India

 | June 01,2010 03:46 pm IST

One very important trend in the recent times has been the growth of human resource outsourcing. HR outsourcing is the outsourcing of peripheral but necessary administrative tasks such as payroll, benefits, education/training, recruiting personnel, administration, to realize economies of scale and achieve standardization of services.


Rapidly changing market dynamics and global competitive pressures have caused organizations to spend more time focusing on their core business. Organizations are fast realizing that they can't be all things to all people. So companies now, be it a software company, a service provider or a manufacturing firm, decide what they are good at and outsource everything else, i.e., focus on their core competency, and let someone else do the rest in a more efficient and cost-effective manner.


As a result, human resources outsourcing is becoming increasingly prevalent. The number of companies outsourcing HR activities continues to rise, and the scope of outsourced HR activities continues to expand. HR outsourcing can happen in HR functions, like payroll administration (producing checks, handling taxes, dealing with sick-time and vacations), employee benefits (Health, Medical, Life insurance, Cafeteria, etc), human resource management (hiring and firing, background interviews, exit interviews and wage reviews), risk management, etc. Outsourcing has become a common response to manage people and technology resources strategically, enhance services, and manage costs more effectively.


Outsourcing noncore activities allows HR professionals to move away from routine administration to a more strategic role. The organization can focus on higher value-added activities while the outsourcing provider takes care of the day-to-day administration. Critical internal resources, such as technology and talent, can be devoted to company's core business. Outsourcing reduces the need for large capital expenditures in noncore functions. Thus, outsourcing becomes a strategy for reducing the capital intensity of the business. This strategy has gained popularity as companies aim to become more nimble and gain the speed and flexibility necessary to compete in today's business environment. A growing number of executives understand the benefits it can bring in terms of not only cost savings, but also heightened strategic focus. Many recognize outsourcing relationships as long-term partnerships created to further the strategic goals of the organization.


The HR outsourcing business opportunity is large and India is likely to garner a larger and larger piece of this pie in the future. India, with its intrinsic advantages such as low cost, ready pool of English speaking manpower and geographic positioning, is emerging as a viable destination for HR outsourcing companies to set up their businesses.


But still here people are not very clear about what exactly is manpower outsourcing all about, and issues like quality and trust needs to be addressed properly. Experts say the basic reasons hampering the growth of HR outsourcing in India are confidentiality and cost factors. Moreover, the fear of losing jobs, losing control over confidential data, ethics and quality of outsourcing vendors, security breaches and overall confidence in the vendors deters many organizations. The biggest problem - and this is why the HR outsourcing industry in India is on the back foot - is the government and the industry's failure to tackle issues like data security and data privacy. This is where Indian HR outsourcing companies face a major handicap. The Indian government is still grappling with drafting a data protection law designed to quell growing privacy concerns from their offshore clients.


However, the future seems to be very promising. It's set to become a $ 51 billion market worldwide in 2005, representing 39 per cent of the total business process outsourcing revenue. Estimates show that the latent size of HR outsourcing in India is about $ 2 billion with a current market of $ 27 million and it is growing at an alarming rate of about 50 per cent. India has immense potential as more than 80% of fortune 1,000 companies are discussing HR outsourcing as a way to cut costs and increase productivity.


Right now, India is barely skimming the surface of the HR outsourcing market potential. Indian life Hewitt (ILH), FIDELITY, EXULT and MAFOI are some of the prominent HR outsourcing services providers in India and the clients include giants of manufacturing, software and service industries like GE Capital, Ford Motors, Hyundai Motors, Satyam Group, Infosys, Enron, Haldia Petrochemicals and HSBC, to name a few, but many more needs to be added to that list.


HR outsourcing has a huge potential for employment also. Nasscom numbers are a million software jobs by 2005; HRO would be about a 25 per cent of that. Experts believe that in present times HR outsourcing is undergoing a transition phase, it would still be sometime before we see increased levels of HR activities being outsourced to India as lack of domain knowledge and quality are some of the critical issues.

Till that time, HR outsourcing in India remains to be a gold mine waiting to be unearthed...





Post new comment

The content of this field is kept private and will not be shown publicly.
This question is for testing whether you are a human visitor and to prevent automated spam submissions. is not responsible for the views and opinions of the posters.
3 + 0 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.


vanisingh on 07/22/10 at 05:26 pm

hello sir/madam,

as you know that hr resource firm is best share their part in market, but one of the fraud company is available in market and the name is orientation hrplus does not deserve any market value its a fraud company in hr field and the company owner is ravi padmanabhan
fraud company website is

Sandeep Mukherjee on 10/27/10 at 01:31 pm

Nice post.Now a days the importance of HR outsourcing grows rapidetly.HR outsourcing including personal outsourcing case studies have indicated that managing human resources involves specialized activities such as training, payroll administration, employee database management, employee retention, employee benefits and a lot more that many companies either don't have the proper resources or time to manage on their on 01/21/11 at 08:19 pm

I have an immense interest in HR MBA. would like to have entire detail list of colleges with the fee structure which assures placement of the candidates with good pay.

anil lalikumar on 05/03/11 at 11:32 pm

i hav inetrest in doing mba(hr)..
could you help me out with its scope ,placements and the promotion levels it can go upto in an organisation.