American companies are increasingly outsourcing Human Resource (HR) functions. This article focuses on the reasons behind such a move and also studies the possible impact on the profession of Human Resource Management (HRM) due to such outsourcing practices. And it also focuses on the opportunities available for India in the emerging scenario.

British Telecom (BT), a Fortune 500 company has outsourced the functional parts of its Human Resource (HR) practices to Accenture, a global consultancy and outsourcing company. The deal which was finalized in 2005 enables the two firms to enter into a ten-year contract worth $575 mn. The motive behind outsourcing these practices is simple yet important. To throw light on such similar big deals, PricewaterhouseCoopers (PwC) conducted a survey in April 2005 which reveals that 83% of the fastest growing US companies are outsourcing their HR functions and this trend is likely to continue. Further on, a survey by Hewitt Associates, one of the leading international firms providing consultancy and HR outsourcing services, based in Illinois, US, points out that outsourcing of HR functions would capture a global market worth $44 bn by 2008. While the international market is picking up in outsourcing HR functions, statistics also reveal that India has joined the league and would hold at least 10% share by 2008.

The practice of outsourcing was initially started by the manufacturing industry, especially automobile manufacturing. The 1980s and the 1990s witnessed the progress in outsourcing of IT and Software Development. Knowledge Process Outsourcing (KPO) came as a natural follower of Business Process Outsourcing (BPO). The transition from BPOs to KPOs has also covered the HR functions as an important element in outsourcing.

The outsourcing of HR functions can be broadly classified into Transactional/Administrative activities and HR consultancy. It is a known fact that outsourcing of HR functions is not a very novel phenomenon. For instance, Automatic Data Processing (ADP), a US based company, has been preparing payslips for other companies for more than five decades. Irrespective of the size of an organization, functions such as recruitment, payroll processing, employee-benefit administration, leave-administration, etc., have been traditionally outsourced by many companies.

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