Many organizations are reassessing their vendor and technology options and especially what activities to outsource.
Technology is playing an increasingly critical role in how business processes are managed and delivered. In an effort to reduce spending on administration to improve their bottom line, companies are exploring how to automate much of their information and process management, especially in areas such as human resources. As a result, many organizations are reexamining their current strategy for HR administration in order to determine the best method for supporting their HR and business goals. Along with this, they are reassessing their vendor and technology options and especially what activities to outsource versus keeping in house.
For more than a decade, HR has sought to escape from being perceived as a back-office administrative function and become a more strategic contributor to the organization.
One leading strategy has been the use of outsourcing to drive down the costs of administration. These cost savings are achieved in large part through the automation of the administrative tasks within HR and the implementation of best practices in process management and administration. Task automation can then free HR staff to become more consultative in aiding the development and execution of business goals and strategies. The effort to automate payroll, benefits, staffing, and other processes has gained strong support recently due to its potential to significantly reduce the costs and maintain a lean organization while still maintaining high levels of service and support. Outsourcing also tends to generate results more quickly, as it can avoid some of the internal political challenges that can accompany change driven from within the organization. As a result, there has been strong recent growth in HR outsourcing and the projections are for it to nearly quadruple in the coming five years (see Figure 1).
A critical enabler for the cost-effective automation of business processes is the presence of a flexible platform upon which to access and manage the content, applications, and processes. As employee and manager self-service are important to the realization of cost savings in many HR processes, this platform needs to be accessible not only within HR departments but across much of the organization as well. Leveraging the Internet and company intranets is an attractive means of doing this due to the ease of administration, the flexibility of Web-native technologies, and to the accessibility of the Web within organizations. Many leading HR outsourcing service providers have invested heavily in their HR portal.
From IDC's Survey of Human Resource Executives 2002, it is clear that organizations are seeking to automate administration as a key driver of outsourcing. At the same time, companies do not want to sacrifice quality in the interest of saving out-of-pocket costs. This creates an interesting dilemma as there is a perceived trade-off between the automation of a large number of processes and the level of quality that can be maintained over the management of these processes.
Recent advances are challenging this perception, however, and forcing companies to rethink their approach to vendor selection. HR technology and service providers have gained broader expertise in managing and automating processes across the HR value chain through direct experience and through alliances and partnerships. Also, greater adoption of standards for HR technologies, such as HR XML, have lead to greater effectiveness of applications in supporting HR processes.