A Turning Point for HR BPO
HR business-process outsourcing is clearly no longer a fad, but a trend. Whether it will succeed is still unknown -- and one issue hindering progress is the need for increased financial transparency.
By Bill Kutik
The last three years have been filled with hype for HR business-process outsourcing, like any new industry. But clearly, it's now moved beyond being a fad to become a genuine trend. Whether it will be ultimately successful and represent a historic remaking of the HR department (much as the large company outsourcing of benefits administration did years ago), still remains to be seen.
The fourth annual HRO World conference two weeks ago represented something of a turning point for that still immature industry.
As you may recall, it all started in 1998 with the founding of Exult. The two principals, both from IT outsourcer SHL Systemhouse, almost ruined it for themselves and the vendors who followed by selling like, well, IT outsourcing -- which meant ignoring the department head most directly involved (the CIO in their old field, the HR executive in their new one) and selling directly to the CEO or CFO.
The earliest deals got made, and the HR head was told to implement the deal or (sometimes) move on or retire. And the effects even on early customers' HR departments were dramatic.
Sharon Taylor, senior vice president of HR at Prudential Financial, which signed in 2001, told her conference audience that her staff went from 541 to 185 in the transition, with few hired by Exult.
Not the best way to become loved by HR. In fact, "fear and loathing" (to quote the late Hunter Thompson) might be more apt.
Things started changing when Hewitt purchased Exult and applied its decades of serving and understanding HR to explain and position HR BPO as something that could be more beneficial to the department than simply saving the standard promised 20 percent of costs.
When HRO World was founded three years ago, it was simply a celebration of the industry, rather than a critical look -- largely a gathering of the vendors who did really need to meet one another, create partnerships and sometimes share resources to get a client's work done.
Now in its fourth year, the vendors care a lot more about meeting prospects than each other, and luckily for them, the event (and its two sisters) have been purchased by LRP Publications, the owner of this Web site, Human Resource Executive
®
and the HR Technology Conference
®
, among many other properties. LRP knows how to attract HR executives to conferences.
But the biggest issue remaining for the HR BPO industry is the need for more financial transparency.
Bad enough that little public proof was ever offered of making good on those promised 20 percent cost savings. Sure, if you were a prospect, they'd open the books, but rarely before.
Now the issue is: Are the vendors making money doing this? "That's the great big ugly question," says HR BPO expert Naomi Lee Bloom. Because just like buying from a software vendor, who wants to do business with a company that can't afford to stay in that business?
She points to some early hopeful signs. Convergys breaking out its financial results by line of business, one of which (Employee Care) is HR BPO and is still not profitable. Hewitt also provides information but with less clarity because its huge stand-alone benefits-administration business is lumped together with HR BPO.
The other vendors need to follow (and better) their lead on financial disclosure or this Gold Rush will end like all the others before it: with most people going bust, except the guys selling jeans and shovels.
HR Technology Columnist Bill Kutik is also co-chairman of the 9
th
Annual HR Technology Conference & Exposition
®
in Chicago, Oct. 4 through 6. The full program is available at
www.HRTechnologyConference.com
. He can be reached at
bkutik@earthlink.net
.
May 8, 2006 Copyright 2006© LRP Publications
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