Human resource outsourcing (HRO) is seen as the next big thing for Indian BPO firms that are looking to expand the scope of their service and reach.
Under such deals, companies can outsource various HR functions such as payroll, recruitment, employee data management etc. A typical deal is of six -seven year duration.
"Of the 39 global enterprise (end-to-end) HRO deals announced last year, Indian vendors won four orders at a cumulative deal size of $350-400 million. This number is impressive, since this was the first year when Indian vendors have won enterprise HRO deals," Rajesh Ranjan, director, Everest Research, an off shoring advisory firm said.
The four firms are Tata Consultancy, Wipro, Caliber Point (a subsidiary of Hexaware Technologies), and Infosys.
The HRO market can be broadly classified into discreet HRO and enterprise HRO, with the former involving outsourcing of a single process and the latter being end-to-end.
HRO as a concept took life only about a decade ago and is already a $3 billion opportunity, growing at 13-14% annually. Hewitt, Convergys, Accenture and IBM. The discreet HRO market, although several times the enterprise market, is highly fragmented.
Ranjan said many Indian and India-based companies were looking at a partnership model to tap this opportunity. "Ceridian, a US-based HRO firm, has tied up with Gurgaon-based Genpact to have an offshore presence. This is route more and more Indian companies could take," he said.
Ranjan said an encouraging thing about Indian companies winning HRO deals was that, most of these were in Europe.
"Three of the four deals were signed in Europe. By value, it is 80% of the total contract value. This signifies the kind of risk diversification Indian companies are undertaking. The Indian vendors are not just leveraging India for such deals but are also using their delivery centre in Eastern European countries to service the accounts," he said.