Sharhabeel, a SAKS Consulting Partner and visiting Fellow in Entrepreneurship and Business Leadership at the University of London, will be speaking at the free Softworld HR & Payroll seminar on outsourcing ROI based HR processes. In a preview to the seminar, Sharhabeel shares his views on the latest trends in outsourcing.

HR Zone: Does HR generally fully understand the pros and cons of outsourcing?

Sharhabeel: HR are no better or worse than any other business area personnel from our experience.

We tend to find that there is a general hype about outsourcing as a magical cost cutting solution for senior management and an endemic horror from employees at the first hint that an outsourcing strategy is being considered. That on its own makes HR’s situation more critical, particularly if operationally they have to deal with employees of a SBU of the company about to go through outsourcing in the knowledge that they might be next or – in many instances – first.

HR Zone: How has the outsourcing market changed in the last 12 months?

Sharhabeel: The UK has seen a huge rise in companies outsourcing their business processes. The public sector has launched massive outsourcing programs, such as the recent NHS IT contract awards and private companies seem to have adopted it as part of their top tier cost cutting strategies.

In the US, we see CEOs and CIOs who have earmarked whole budgets in their strategy papers under a header that says ‘Outsourcing’.

What does concern us, are outsourcing strategies based on decisions that have not had a sufficient business impact analysis. We have seen some of the earlier ‘bleeding edge’ outsourcing projects come back in house. Though there is undoubtedly an increase in outsourcing, the need to carefully navigate through the fog of hype is an essential element to gaining shareholder value.

HR Zone: How can HR know whether it’s right for their organisation?

Sharhabeel: The HR Director needs to see whether their HR strategy is aligned to the current corporate strategy.

The need to get an outsourcing strategy right is predicated on an understanding of the limitations of outsourcing vendors and their realistic ability to deliver on tightly negotiated SLAs.

An HR outsourcing strategy is right if an organisation is able to focus on core competency without being adversely impacted in terms of competitive differentiation as a result of the outsourcing.

It not only needs to enable a value alignment that positively hits the corporate bottom line but the outsourcing provider should provide further business benefits by bringing in best practice and best practice enabling technologies that are typically cost and knowledge capital prohibitive given the current HR strategy and budget allocations.

HR Zone: How can an organisation ensure that it gets the right ROI?

Sharhabeel: ROI is directly proportional to how well planned, managed, communicated and implemented the project is across the organisation and not just in the outsourced area.

People should go through the implications and have the attitude that this is still a part of my organisation that has to be supported, albeit in a different way.

The use of ROI tools such as balanced scorecards is essential in measuring ROI against KPIs and ensuring that there is a strict regiment of consistent monitoring. The need for getting contracts and SLAs right first time is essential to delivering on an outsourcing strategy that delivers both qualitative and quantitative ROI.

HR Zone: What are companies outsourcing these days – benefits? payroll? What’s next?

Sharhabeel: Gartner recently quoted that it estimates the market for HR outsourcing to be in the region of $46 billion this year reaching $51 billion next year, which is the largest single business process being outsourced today.

We find the most commonly outsourced HR functions tend to be Benefits and Payroll. Both activities can consume significantly more time to administer than you might expect, yet are fairly straightforward to process. Moreover, you may be able to obtain a better benefits package by working with a third-party HR firm.

But we’re seeing organisations focussing on other HR areas where outsourcing vendors are increasingly becoming more proficient and trusted by organisations such as recruitment and training.

Meta group recently said that it expects 16% of global 2000 firms to strike a BPO deal that covers at least one area of their business by 2005.

We predict that the current focus of organisations to reduce costs and focus on core competency will continue to see HR business processes high on the outsourcing agenda. However, over the next 12-18 months we predict higher value HR processes increasingly exposed to outsourcing and a strong need for HR practitioners to familiarise themselves with all the inevitable ramifications and associated business touch points.

Sharhabeel’s free seminar, ‘Outsourcing ROI based HR processes. Is there more than just benefits and payroll?’ will take place on 3 March at 13.00. Take a look at the free Softworld HR & Payroll seminar programme