Upfront: HR Outsourcing Poised for Breakthrough

Despite some rocky moments in 2005, the HR outsourcing (HRO) industry is heading for a boom year in 2006, according to research from NelsonHall.

"2006 will be a watershed year for HRO," says Phil Fersht, executive vice president, BPO research, at the Boston-based BPO analyst firm and author of the report. "In 2005, we saw the customer, the supplier and the consultant all battle with complexity, compliance, security and cost issues. That's because HRO has proven to be more complex than ever imagined. However, 2006 will represent the culmination of hard work, evaluation and investments with a succession of groundbreaking multinational contracts."

Between 1999 and 2004, HRO service providers focused on adopting their clients' shared services, according to the report. Fersht says 2006 will see "second-generation" HRO deals in which providers will offer their own shared services platforms for use by multiple clients. Major industry players will strive to offer global HRO services, such as regional service-center hubs that support HR operations worldwide.

"The HRO market remains relatively untapped, which constitutes enormous opportunities for second-generation HRO providers," Fersht adds. "We're anticipating that multiprocess HRO expenditures will increase by 20 percent in 2006."

alt="" border="0" />