OUTSOURCING

Outsourcing, with a literal translation of outside resource in English, is a kind of practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally. Its management pattern, which could help enterprises to reduce cost, raise efficiency, focus on core competencies and commit their internal resources to more strategic-added functions by integrating and utilizing the excellent and professional resources outside. E.g. A manufacturing company outsourcing would be like of Dell, buying some of its computer components from another manufacturer in order to save on production costs. Alternatively, businesses may decide to outsource book-keeping duties to independent accounting firms, as it may be cheaper than retaining an in-house accountant.

HUMAN RESOURCE

Human resources are the set of individuals who make up the workforce of an organization, business sector or an economy . It is an essential partner in developing and executing organizational strategy .As is evident HR is something that is really critical to an organizations functioning. Human Resources (HR) responsibilities includes all the related functions that work towards employee well-being in the organization including payroll, benefits, hiring, firing, and keeping up to date with state and federal tax laws.

HUMAN RESOURCE OUTSOURCING HR outsourcing is the delegation of a human resources process or processes to an external HR provider that specializes in this service. This provider takes charge of managing and administering the outsourced services for its client i.e. Human resource outsourcing is done if a company outsources their certain HR management or HR functions to other enterprises and organizations, so as to realize its human cost reduction and efficiency maximization. E.g. IBM, EDS, CSC, HP, ACS, Accenture, etc are some of the leading outsourcing service providers in the Information Technology Outsourcing.

Human Resources Outsourcing helps in boosting organizational performance with many strategic benefits like eliminating the redundant non-core HR functions, increasing cost competitiveness effectiveness and helps in maintaining strategic HR focus. There are three basic financial drivers behind HR outsourcing: Save money (ongoing expenditures) Avoid capital outlay (often a more important consideration than direct cost savings) Turn a fixed cost into a variable one (Thus, if the workforce shrinks, HR costs can be reduced accordingly.) Thus, HR outsourcing can

Help in structural reduction of the Human Resource Management (HRM) cost base, by identifying the non-value adding activities and eliminate the hidden HR operations costs. Help in identifying the inefficient Human Resources (HR) Administration processes and HR practices. Helps organization to focus on human resource performance. Help organizations to serve their employees better.

MODELS

1. Staff AugmentationThis is the most basic of all outsourcing models. You add contractors to increase your output as demanded by the organization. You still control all resources but this setup allows add-on services which are presently deficient in your company (i.e. support services for market expansion). In addition to being the most basic setup, this has the least risk among all the outsourcing models. You may use this to expand current capacity to serve short-term immediate business needs. Model in Action: iBeam Solutions used staff augmentation as a solution to their client Inoveris by providing the space and personnel requirement for business requirements. Instead of hiring new people and expanding space, Innoveris used outsourcing as an opportunity to cut down costs, which allowed them to save US$ 10,000 per month and focus on their core competencies.

2. Out-TaskingIf you can identify certain skill gaps that can easily be disaggregated in your companys processes, you may consider out-tasking. This setup provides further responsibility to the vendor where certain aspects of projects that you usually do in-house is outsourced. Examples of tasks include software deployment and integration, system testing, and desktop management. Model in Action: Rutgers, an educational institution in New Jersey, wanted to streamline its operations byacting like a Fortune 500 company while maintaining the depth of its academic and research programs. They employed Verizon to provide a cost-effective structure for a flexible web application for their 60,000-plusstudent registration. With added tasking needed only for periods of enrollment, out-tasking perfectly fits for making this institution more business-like. This enabled Rutgers to keep up with demand for information access and enable it to attract top-level faculty and students.

3. Project-Based OutsourcingThere are cases, though, that you cannot thoroughly define or compartmentalize a task or tasks within project. As such, the best solution for your company is to outsource the whole project. In this setup, your vendor acts as your partner where necessary competencies in completing a project are handled by your vendor. You will not be focusing on the daily operations but rather towards the final results or desired outcomes. Examples of this type of outsourcing include research, desktop upgrade, and quality assurance. This can be as short as a one-time engagement. Model in Action: Orbys acted as the consultant for Allied Irish Bank when it went into Poland by buying two Polish banks, merging them and deploying a new branch banking system. Projects included information gathering, creating a framework, drafting work packages, building a detailed commercial model, and leading negotiations over 9 weeks. Working with this model provided a smooth transition for the bank upon entering new country while focusing on post-rollout strategies. As such, they were not bogged down by policy matters, which are considered to be a non-core competency of the bank.

4. Managed ServicesIt is sometimes better to have a long-term engagement of services with your vendors. For growth, profit, or expansion, you need concrete indicators of improvements in your business. For this, you may use the managed services outsourcing model where vendors would act as consultants. In this case, projects are treated as part of a system where a competency of the clients business is managed. Examples include offshore research facilities and multilingual systems and technology for emerging markets. This setup is based upon mutual trust of the client and vendor. Model in Action: Clifford Chance, one of the largest law firms in the world, asked Integreon to support its administrative functions. Here, the whole process is implemented by the vendor and is done over multiple cycles. For the two years that these two companies worked together, quality assurance of the administrative work, where physical and data security is of importance, has been met. This outsourcing model has cut costs (US$18 million annual savings) for Clifford Chance while retaining the same high standards. Moreover, Integreon acts not only as a consultant but also as a strategic business partner.

5. Build-Operate-TransferFinally, you may opt to contract an offshore partner to start your own subsidiary through the build-operate-transfer (BOT) model. In this setup, the offshore partner face the obstacles - taxes, legal, hiring, and management - from start to finish. Your offshore partner will operate your business for a definite period of time. The outsourcing contract generally includes a clause allowing you to buy the entire operation after affixed period. The idea behind this setup is that your offshore partner can initiate operations and reach stability a lot faster than you can with your in-house effort. Model in Action: J.D. Edwards, an application enterprise software maker, signed a BOT contract with Covansys in 2003. J.D. Edwards bet that full-time Covansys developers focusing on quality assurance, testing, and maintenance of J.D. Edwards products would significantly increase its efficiency and decrease the time it took for the company to deliver new products. In addition to this, J.D. Edwards own testing and maintenance teams will be freed up to deal with new and strategic software development efforts. If this setup(which will expire in 2009) will work out well, J.D. Edwards, now owned by PeopleSoft, can opt to take over the Covansys operations in Chennai. J.D. Edwards was able to maximize the potential gain of having full-blown operations but minimize the cost and risk of establishing new offshore operations.

CHALLENGES

1. One of the foremost possible disadvantages that can be brought about by HR outsourcing is that it can reduce the efficiency of a given division, at least for a while until the newly outsourced employees have successfully adapted to the work environment. This isnt to say that the only way to deal with this disadvantage by letting time pass by until the new employees have finally adapted. The management can provide support teams through the old employees of the company or by providing written instruction about the work environment in order to hasten the adaptation period of the employees. 2. HR outsourcing also requires the maintenance of a good standing between the business and the agency that provides the human resources. Although highly damaging conflicts between the businesses and providers seldom happen in reality, this isnt really the issue. 3. HR outsourcing also requires additional tasks in maintaining external relations with other companies in order to get more favorable trades between the two entities. 4. HR outsourcing can also affect the aggregate learning curve of the employees; that is the sum of all the respective learning curves of each employee in a given sector of the business. Since, as it has been stated on the first disadvantage, that newly employed human resources arent familiar yet with how things work in the given business, more learning are still required, thus, the progress of efficiently improving each tasks has been held back. 5. The previous disadvantage also leads to another, which is the possibility of impairing the formation of a highly integrated and efficient working process. Since learning and practice come hand in hand in businesses, when the aggregate learning curve of the employees are being held back, the creation of an efficient integrated process will also be held back. There are two possible ways to deal with this disadvantage. The entity may either provide additional training for the new employees through mentorship or written instruction, as provided earlier, or the business may also require the /HR outsourcing/ agency that they provide a set of sufficiently experienced employees. 6. Lastly, because of the easy process of adjusting the level of employment through HR outsourcing, the morale of the employees is definitely impaired. This impairment in the morale will be manifested in the work performance of the employees, because humans undeniable require a morale booster in order to bring them at an optimal level of performance. However, because of the insecurity in their jobs caused by the easy process of lay-off provided by HR outsourcing, the chances of damaging the employees morale are very high. This, so far, can only be dealt generally by the employee himself.

TRENDS

1. PartnershipsStrategic partnership is the term, and thats what these companies are doing now, take Fortify and Keypair Technologies, Liquent and TAKE Solutions , Hexaware and EBaoTech, or the most well known of the bunch, Wipro and Main Street America Group, who all announced new strategic partnerships. These companies forged their strategic partnerships to help them broaden their reach and improve their offerings. 2. Theyre keeping Their Ear to the GroundWhat about us you ask? Well, strategy is that we keep the ear to the ground. Information is essential and keeping up to date on your competitors and prospective clients is a must. Of course its not always easy to do so when there are a million things to do, and another million things are happening in the world, not just in outsourcing 3. RecruitmentSpecialized recruiters extensively carry out labor market research. A careful analysis of society's demographic development is required to more efficiently use human resources of older age and define the bottleneck for the younger generation. Services rendered by a professional provider of recruitment process outsourcing allow avoiding extra time and cashing expenses required to support the process and to focus on image building both in the external labor market and within a company. It is the image that is considered to be the major factor of a company's attractiveness that ensures chances to acquire new human resources. 4. Development of PersonnelThe goal of development is to ensure the best match of employees' capabilities and requirements to his/her performance. Assessment of personnel qualification requirements became more complicated due to frequent organizational changes. The labor market of global companies is expanding, but it is not becoming more transparent. The same situation is observed in the education market, which currently cannot be fully studied even by the largest companies. Specialized providers of personnel assessment services help HR specialists reveal employees' talents and correlate development of employees and a company as a whole. 5. HR Record Management and Payroll ProcessingThe current labor legislation requires managing HR records and processing a large number of documents that record employer-employee relationships. A considerable staff of internal HR record-keeping specialists and record-keeping automation software are required to support this function. Payroll requires specialists to be involved and nonproduction costs for acquisition and maintenance of special equipment and software. Outsourcing of these functions has

a considerable economic effect and provides extra time for HR specialists to develop a general organizational management system. Many HR management issues should be reviewed taking into consideration that companies are expected to be more client-oriented. The issue of which HR management functions are to be outsourced should be resolved. Generally, expenses and production costs for companies will be more transparent, internal demand issues will be more flexible, and a base will be developed that will comprise efficient solutions for outsourcing certain functions from HR management. KEY PLAYERS Single Vs Multiple Vendors: When companies do HR outsourcing it is recommended that they link outsourced services to specific definable objectives. They may want to improve their technology and efficiency so might include metrics to evaluate actual results. By doing this they can know if their processes are actually more efficient, if they are they saving money, and if their technology is really better than it was before. The HR services should be linked to recognizable measurable outcomes. "Based on whatever reasons you decide to outsource, you should mutually develop measures and metrics with your vendor to ensure that those objectives are being met and achieved on a regular basis. The type of data companies can look for include service levels, cost per person, timeliness, accuracy of work, and customer satisfaction. They can also look for the correlation between recruitment sources and recent-hire performance results, or performance rankings to training investments. Another example might be to tie in employee exit data with total rewards programs.

OPPORTUNITIES

1.. Turn your fixed cost into a lower variable cost: Instead of keeping lots of fixed assets or other costs on your books, consider turning to an experienced, professional outsourcing partner. In a difficult economy, this makes even more sense. Focus on what you do best -- your core competencies -- and we will handle the rest.

2. Reduce time-to-market: Time is money. The more time you spend wading through paperwork and trying to understand the ins and outs of global regulations, the less time you spend actually marketing and selling your product. Achieve faster time to market through access to Expert Services' range of expert capabilities. 3. Realize cost savings by Structure Activity Modeling: Cut costs without cutting corners. This allows our experts to identify problems early on, saving you valuable time and money. 4.Protect revenues by using Expert Services' patent infringement services: In this challenging economy it is imperative that you extract the full value of what is legally yours -- your idea, your process, your chemistry, your product. At every turn, the competition is seeking to supplant your market position -- sometimes at the expense of your patent(s). 5. Avoid costly fines for EHS and Regulatory non-compliance issues: Expert Service consultants help clients avoid unnecessary and costly fines which can eat away at profits. They offers a comprehensive portfolio of services to improve sustainability, reduce overall environmental impact, and improve your bottom line Strategies Decisions For Outsourcing

Growing demand for human resource outsourcing has shaped how outsourcing services are delivered today. HR outsourcing providers offer a range of service models to help companies optimize the human resource system, making the most of both external and internal resource. Human resource outsourcing has come of age as a crucial factor in efficient business administration. HR providers are increasingly willing to partner with clients to develop customized solutions. For some clients, this means an end-to-end solution. For others, the HR outsourcing team functions as an extension of in-house HR resources. Customization allows companies to implement outsourcing strategically, cutting costs and boosting efficiency while leveraging in-house core competencies.

E.g. of HCL BPO -

Human Resource Outsourcing AT HCL

HCL HRO, the next generation of comprehensive and integrated HRO services is a one-stopshop that can help you transform your HR into a strategic one. Our HRO offering blends the perfect mix of HR domain expertise, best practices & processes, best-in-class IT infrastructure and HR ERP platforms. Our suite of integrated HRO services can help you streamline & enhance your HR processes and improve the quality of service to your employees. We partner with our clients to bring about business transformation through continuous improvements to enhance the process efficiency. The HCL HRO Difference

Integrated HRO offering to help you with your HR needs Reduce HR operating costs Better compliance and risk management Transactions are processed on robust ERP platforms, supplemented by state-of the-art technology and domain expertise for accurate and efficient services Flexibility to accommodate the customers business rules Scalability to adjust to the customers dynamic business needs and support strategic decisions like mergers & acquisitions and divestitures Reduced cycle time for various HR transactions Data Security and Business Continuity measures for secure, uninterrupted services Focus on Business Transformation and Continuous Process improvements to enhance the process efficiency Helps you focus on strategic objectives like managing talent, developing your workforce and more