Human resource is one business that is probably outsourced the most. Worldwide HR outsourcing (HRO) revenues, according to a Gartner projection, are expected to reach $46 billion in 2003, an 18% increase from 2002 revenues of $39 billion. Also, HRO is estimated to reach $51 billion by 2004 and represent 39% of all BPO revenue.

However, despite India being in the middle of an outsourcing boom, Indian BPO companies did not seem to be enamored by the opportunity until now. Among the top ten Indian BPO companies, only one offers HR outsourcing services. Transaction processing, insurance claims processing and receivable management remain among the most preferred BPO works being done by Indian companies. Those doing HR business processes such as CrossDomain and India-Life Hewitt are predominantly domestic Indian-market focused. And except for Chennai-based Secova eServices, there is no independent Indian BPO company focusing on providing offshore HR BPO services. Secova was founded as recently as July 2003.

A major reason for the absence of HR BPO companies could be a lack of domain expertise (remember most of the successful India BPO companies have been founded or driven by people with domain expertise in their respective areas). Unlike in BPO set-ups associated with banking, finance, insurance or customer care, there were not many HR domain experts setting up BPO operations in the country. As such, the biggest challenge faced by an offshore HR BPO company today is the lack of track record and credibility, which comes by having successfully supported clients, who can act as reference for winning new businesses. Besides, lack of in-depth domain knowledge, coupled with lack of knowledge about specific legal, regulatory and compliance structures in the HR space in the US/UK, makes it difficult for potential Indian HRO service providers to move into the space and become credible players. So the HRO space has largely been untapped by offshore companies.  

However, things seem to be changing now even if it’s just at a small level. Companies like India-Life Hewitt and CrossDomain Solutions, who have built up expertise by servicing the domestic HR process outsourcing market, are now looking at the offshore market as well. On the other hand, large HR consultants and staffing solutions companies like Ma Foi Management Consultants too are planning to tap the HR BPO segment. Mumbai-based Infowavz is also actively exploring the possibility of getting into HR outsourcing.

Perhaps they have been inspired by the fact that a number of global companies have shown interest in outsourcing their HR work to offshore service providers in countries like India. In fact, a lot of work has already come to India, though only through third-party MNC BPO companies like Exult and Accenture. Among others, ADP is planning to start HR outsourcing operations in India soon.

However, domestic market-focused companies could face the challenge of replicating their model in international context, which is quite challenging because HR processes in the West are very different than the ones being practiced in India. "Being a horizontal offering the complexity index of HR operations is high and would stand at 6.5 on a scale of 1 to 10, while CRM/claims processing would rank 2–3," observes Sateesh Kurugod, head (sales, marketing and transition), CrossDomain Solutions, which is looking forward to a revenue of $4.5 million from the North American market in 2004.

India Life Hewitt is actively scouting for business in the Asia-Pacific region too. In fact, in April this year the company acquired majority stake in Singapore-based Embrace 2002 with the objective of building capabilities to offer a pan-Asia-Pacific solution to large corporations besides expanding to 12 other countries in Asia-Pacific, including Thailand and Philippines. The acquisition added customers like Singapore Technologies Group, BenQ, and Nokia from three key countries—Singapore, Hong Kong and Malaysia to India Life’s kitty.

RAVI SHEKHAR PANDEY in New Delhi