The New Gold Mine

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