A Study of Human Resource Outsourcing in Indian IT Companies
Alliance Business School (ABS)
August 12, 2009
The human resource outsourcing (HRO) industry in India is at a crucial juncture in its short history. Organizations are increasingly taking up HRO as an opportunity to streamline processes, reduce costs, get access to the latest technology and tools, consistently achieve better quality, and align human resources with the overall business as quickly as possible. On the other hand, providers are seeking to optimize the quality of services to their clients at a cost that still allows for a profit. Reshaping the business model in a way that benefits both buyers and suppliers is critical to the survival of the industry.
Most executives view outsourcing merely as a source of cost reducing. The greatest savings are expected to come from lower labor cost and reduced project timelines. However, outsourcing also creates new challenges and expenses for the organization involved. Those may include vendor selection costs, legal costs, costs of transition and many others. That is why despite the evidence of possible major up-front cost savings many outsourcing vendors have yet to prove that they are able to provide positive ROI in a complex project. The study analyzes the different criteria for outsourcing, highlighting dimensions other than simply cost reduction.
Outsourcing is rapidly changing the shape of the modern industry. It is important for companies not to underestimate the speed of this process and seize the opportunities and benefits it offers. This study also analyses the driving factors that encourage companies to make a decision to outsource its human resource function.
Keywords: Human resource outsourcing, opportunities and challenges, criteria for outsourcing
JEL Classification: M55working papers series
Date posted: June 2, 2010
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