HRO has seemed dead for at least a couple of years now. A couple years ago it was almost all I was writing about, and there were mega deals to be had every other month. All consultants were talking about to their clients was deciding if they should outsource or not. At the time, HRO was really the domain of the Fortune 100, maybe the Fortune 250, those who had the financial ability to spend that type of money on mega HRO. Unfortunately for the HRO industry, outsourcing HR was not necessarily as easy as ITO or FAO. The people factor sitting in the background was actually a factor that should have been sitting in the foreground, and large outsourcers who were used to technology or financial transactions were not as able to translate their business into HR.
We’ve lost track of HRO, but it’s really not that dead. The fact is that while the mega HRO deals were going on, we figured out what works and what doesn’t. What works are the things that always did. Outsourcing technology, payroll and benefits. But we’ve always outsourced that stuff. I think the one new area that is starting to get outsourced is RPO. We’re seeing more outsourcing in the sourcing area of recruiting. As usual though, we’ve learned that it’s the transactional areas that are perhaps less strategic. For payroll, wage and hour policy is still usually held internally, although the outsourcers are really the experts on compliance. Benefits design is pretty much in-house, and the transactions are easily outsourced, and for recruiting, sourcing can be removed but the decision making is left for the hiring managers.
In the last wave of HRO, we started to see organizations start to outsource stuff like talent. I’m not quite sure how this worked beyond technology, but apparently people were doing it. As the economy comes back in 2010, I think I’m expecting transaction outsourcing to come back in a major way. Organizations will be coming out of cost containment and looking to spend on implementations that allow them to capture more cost savings that they could not spend the money implementing in 2009.
For more on BPO and a couple comments reflecting my own here, see Phil Fersht’s blog here.