The Yankee Group, a US research and consulting firm, estimates HR Outsourcing Services (HRO) worldwide market will grow to $80-billion by 2008, at a compounded annual growth of 12%, with non-core transactional duties, such as, payroll and benefits administration, being increasingly outsourced (particularly in the US), rather than conducted in-house.

Kelly HRfirst, the staffing alternatives business unit of employment services firm Kelly Services, reckons about 85% of all US businesses outsource at least, a portion of their HR functions.

In its report, Kelly HRfirst points out cost savings and efficiency gains reaped through HRO services have paved the way for businesses to increase their use of recruitment process outsourcing (RPO), a ‘rapidly emerging and high-demand sub-set of HRO.’

Elixir Web Solutions, a recruitment consultancy estimates, the RPO sub-set comprising of the entire recruitment cycle, from needs assessment to sourcing, screening, and interviewing candidates, including hiring will account for $30-billion of the HRO market by 2008.

At this point, the question India should ask of itself is: “How much of this business has come the sub-continental way, and how much of it can India expect to win in the years ahead, given the scale on which off-shoring is taking place?"

Gautam Sinha, CEO of the Bangalore-based IT recruiting firm TVA Infotech, points out that within the Indian market, the total annual spending on recruitment is Rs. 700 - 800 crore, so this then, can theoretically be considered the potential size of the RPO business (and RPO is only a sub-set of HRO) that can be generated from locally-based companies.

Then, there is off-shoring. Of the $3.6 billion in revenues that Indian companies earned from IT-enabled services in 2004, only 2% or some $70-million were from HRO services.

But, the potential is indicated by several factors. Large global players, such as Fidelity, Exult and Hewitt have set up operations in India (including others, such as Hyderabad-based Kenexa India, Bangalore-based TVA Infotech, and Chennai-based Secova eServices). And, a Nasscom-McKinsey report projects the revenue of Indian firms from HRO will increase to $3.5-billion by 2008, while Gartner believes India can expect to win 10-15% of the American HRO services market; and finally, only 6% of USA’s HR spending is off-shored, but changes are in the offing and that figure is almost certain to rise.

Raghuvir Sakuru, Managing Director of the US-owned Kenexa India, a provider of outsourced HR services, says 20-30% of non-customer interface functions segment of the HRO pie can be off-shored, and India can hope to win a substantial share of this. Kenexa India, he says, accounts for 10-15% of the RPO business done by its US parent company.

Sinha notes that HR outsourcing has certainly begun in India, with payroll and benefits administration that has been outsourced for some time, as has training. Except for modest chunks, recruitment has not yet been outsourced on any significant scale, the risk involved (arising from the need for confidentiality) prevents companies from doing more recruitment outsourcing.

HR aspects, the most amenable to outsourcing according to Sinha, are payroll and benefits administration; help lines and the answering of queries relating to HR policies; recruitment by large hirers; training; and performance appraisal. He believes the core HR processes, such as, career development, for example “will and should be retained in-house."

Further, Sinha says, some large software companies hiring tens of thousands each year, still debate on, whether recruiting is a strategic function or it can be outsourced. While, Sakuru adds: “Three or four years back, companies never realised the need for automated processes. Now they do, since they are recruiting in the thousands. And, there are also companies that offer automated solutions." Five years from now, he says, ‘it will be a completely different landscape.’

However, Sinha lists two problems associated with HR outsourcing, which act as obstacles to the trend gathering momentum: “First, outsourcing is associated with layoffs, which Indian society is not yet ready for, because of the stigma associated with being laid off. Second, people who are in the system should be comfortable with the idea of not having direct control over the HR process. This is not yet happening in India, because individuals tend to measure their professional prowess by the number of people who report to them."

Of all overseas markets, according to the Kelly report, India holds the greatest promise, because it is experiencing rapid growth in the job market across many industries. It needs R&D talent in the automotive industry, middle and senior-level managers, engineers, MBAs, workers in niche industries (such as bio-tech and IT product development), and English-speaking employees for retail and call centre jobs. Indeed, the employment boom just may create a talent shortage, if the government and educational institutions do not do something about the crunch.

However, in reality, Indian firms, says Kelly, generally feel it is more economical to manage HR functions internally. There is, also distrust caused by sub-standard deliverables by vendors in the past. Finally, there is also concern about maintaining the confidentiality of data and corporate security.

To date, HRO and RPO are growing faster in the United States than in any other global market. This, says Kelly Services, is explained by changes in labour supply and demand that today’s HR departments are ill-equipped to keep up with. Workers have reduced company loyalty, greater expectations from their jobs, and want to manage their own careers. Significantly, these very changes are rapidly taking place in India too.

Can India handle HRO and RPO on top of BPO, ITeS, KPO, ESO and a whole slew of other process outsourcing services? Of course, it can! If, the Indian government and educational institutions take adequate steps, then what was termed as India’s disadvantage i.e. its population explosion, that same disadvantage, will turn into its advantage with requisite training and education. The Indian masses need to be trained and educated, as the process outsourcing sector promise employment for all. Without losing its hold as an agriculture-based society, India is set to become an all rounder, a multi-tasker. Along with green revolutions, the sub-continent has started to lead the revolt to eradicate illiteracy, and once that is removed, it will automatically put an end to poverty.

India should not miss out on this golden opportunity to regain the glory that was India. Let all Indians pledge that they will make this century India’s century. The Wheel of Fortune has come full circle. Pushed to the bottom of the heap by a rapacious, avaricious West, India has climbed and clawed its way (in a wholesome, ethical manner, unlike the West) nearly to the top. A few more years, and it will be an established leader of the world, once again, an economic power to reckon with.

There is no country like India, and there never will be. Unique, colourful, exotic, wonderfully diverse, it is a country that is all spirit and soul. You can love it or hate, but you can’t ignore it. In the face, India, go show them, girl!