Every time my father-in-law hears a song on the radio that has even the hint of a melody, he says wistfully: “I wonder if ballads are making a comeback?” The HR outsourcing industry is the same: eternally optimistic that its time has come and, so far at least, doomed to be disappointed.
HR outsourcing broke on to the scene at the end of the 1990s, when a number of headline-grabbing deals were signed by major corporate clients such as BP, BT and British Aerospace.
To break up the monopoly of the Bs, Cable and Wireless followed suit shortly after, suggesting we were going to run through the alphabet. Food came next, although in bits and pieces, rather than wholesale.
As with any outsourcing relationship, the theory was straightforward: the routine administration of personnel and training work - telling people how many holidays they had left, booking them on courses, processing their sickness records and so on - wasn’t a core, value-adding activity for big organisations.
Far better to outsource it to specialist firms who would go on to offer a similar service to other clients, achieve economies of scale, and have an incentive to invest in bespoke software systems that would result in further efficiency savings. Once the first major deals were signed five years ago, a domino effect was expected to follow.
In the case of HR outsourcing, there was an ideological element behind the movement. A few years before, US management guru Dave Ulrich had outlined an exciting future for HR, in which enlightened companies would split their personnel and development staff into two teams - the admin-handling majority would move into centralised service centres, largely interacting with their customers over the telephone or through computerised systems, while the more strategically minded minority would become HR business partners, acting as internal consultants.
The vast majority of large private-sector organisations have, in fact, gone down the road of setting up HR service centres over the past few years.
But very few have taken what was once seen as the logical next step: outsourcing this administrative work in its entirety. Instead, most large employers have preferred to contract out different parts of the workload to a range of niche providers - payroll to one supplier, recruitment to a second and employee development to someone else again.
And it appears that most blue-chip companies are content to keep it that way. A recent survey by US-based analyst The Conference Board found that 11% of companies were seriously thinking about giving all their outsourced HR services to one supplier.
But a whopping 77% of firms said they were happy with their existing set-up of multiple suppliers and didn’t plan to change it.
Most of the big players in the HR outsourcing market have learned to live with that situation: Accenture HR Services, Xchanging and IBM will bid alongside relative minnows for specialist, but still lucrative contracts.
After all, according to McKinsey, the UK human resources outsourcing market could be worth as much as $2.1bn next year, amounting to one-third of the total European HR market. There are still those who yearn for the return of the massive deal, though, and they are now looking hungrily at the public sector and all those efficiency savings that both Labour and the Conservatives have promised once the general election is out of the way.
Who knows - maybe ballads will be making a comeback after all.
n Steve Crabb is editor of People Management
HR outsourcing broke on to the scene at the end of the 1990s, when a number of headline-grabbing deals were signed by major corporate clients such as BP, BT and British Aerospace.
To break up the monopoly of the Bs, Cable and Wireless followed suit shortly after, suggesting we were going to run through the alphabet. Food came next, although in bits and pieces, rather than wholesale.
As with any outsourcing relationship, the theory was straightforward: the routine administration of personnel and training work - telling people how many holidays they had left, booking them on courses, processing their sickness records and so on - wasn’t a core, value-adding activity for big organisations.
Far better to outsource it to specialist firms who would go on to offer a similar service to other clients, achieve economies of scale, and have an incentive to invest in bespoke software systems that would result in further efficiency savings. Once the first major deals were signed five years ago, a domino effect was expected to follow.
In the case of HR outsourcing, there was an ideological element behind the movement. A few years before, US management guru Dave Ulrich had outlined an exciting future for HR, in which enlightened companies would split their personnel and development staff into two teams - the admin-handling majority would move into centralised service centres, largely interacting with their customers over the telephone or through computerised systems, while the more strategically minded minority would become HR business partners, acting as internal consultants.
The vast majority of large private-sector organisations have, in fact, gone down the road of setting up HR service centres over the past few years.
But very few have taken what was once seen as the logical next step: outsourcing this administrative work in its entirety. Instead, most large employers have preferred to contract out different parts of the workload to a range of niche providers - payroll to one supplier, recruitment to a second and employee development to someone else again.
And it appears that most blue-chip companies are content to keep it that way. A recent survey by US-based analyst The Conference Board found that 11% of companies were seriously thinking about giving all their outsourced HR services to one supplier.
But a whopping 77% of firms said they were happy with their existing set-up of multiple suppliers and didn’t plan to change it.
Most of the big players in the HR outsourcing market have learned to live with that situation: Accenture HR Services, Xchanging and IBM will bid alongside relative minnows for specialist, but still lucrative contracts.
After all, according to McKinsey, the UK human resources outsourcing market could be worth as much as $2.1bn next year, amounting to one-third of the total European HR market. There are still those who yearn for the return of the massive deal, though, and they are now looking hungrily at the public sector and all those efficiency savings that both Labour and the Conservatives have promised once the general election is out of the way.
Who knows - maybe ballads will be making a comeback after all.
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