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It is better
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John Sumser

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Out Sourcing
(December 13, 2002) - 
We stumbled across an important new web publication the other day. HRO Today, in spite of its completely pathetic traffic figures, represents a trend that you will ignore at your own peril. Focused on the HR Outsourcing (hence, HRO) industry, the dense website offers a solid view of the inner workings of the outsourcing aspect of our industry. With any luck, our pointer will result in increased traffic and an increased chance of success for the new periodical.

With a board of advisors that spans everything from Job Boards to Baird's luminary analysts, the terrain marked by HRO Today includes 21 identifiable sub-functions of HR.  According to Dataquest, "The U.S. Human Resource Outsourcing Market is expected to grow from a $21.7 billion industry in 2000 to a $58.5 billion industry in 2005." Admittedly, the sweet spot in outsourcing is transactional and thus somewhat distant from Recruiting, but the clear trend to solve the mind-numbing "HR Problem" is to ship it to a third party.

No company really needs to develop expertise in the various subsets of benefits, payroll, timekeeping and so on. These tasks (which are remnants of HR's origins as the scutwork the accountant refused to do) are more easily and productively executed by a seasoned third party. Even the management of a contingent workforce makes sense as a total subcontract. Increasingly, we expect to see an alignment of traditional staffing firms around the large customers who provide outsourced services.

Strategic services are a different matter, though they may well end up as additional workload on the operational manager's desk. While sourcing, as a reactive sport, should be outsourced (and if you use job boards, you are already outsourcing the function), the development of talent pools under an Employment Branding strategy is not likely to be an intelligent function to shift out of the organization. The actual determination of fit in the courtship process ( a decision shared by HR and the hiring manager) might not be shipped offsite, but there is no reason that the ATS system shouldn't be provided and maintained by a third party. (Many of those relationships are so bad that concentrating buying power in the hands of intermediaries would greatly benefit the industry).

We've quietly expressed our deep interest in seeing one of Exult's contracts. Figuring out how to gauge the effectiveness of Recruiting endeavors (which they've been contracted to handle for a couple of clients) is one of the toughest contracting challenges we can imagine. From here, it looks like some of the transactional aspects of recruiting might well be disaggregated but the responsibility for making strategic decisions seems like an odd bet.

At any rate, HROToday is a remarkable addition to the world of web resources and deserves a place on your book mark list.


- John Sumser

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