HR Outsourcing Picking Up Steam

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Computerworld Author(s): Thibodeau, Patrick; Songini, Marc L

When PepsiAmericas Inc. wanted to automate some human resources processes, it could have expanded its own PeopleSoft ERP (Enterprise Resource Planning) system, but that would have required buying more software, hiring consultants and stressing an already tapped-out IT staff.

Instead, Dana Sacks, vice president of compensation, benefits and human resources information systems, said she turned to managed service provider Authoria Inc. in Waltham, Mass., to automate performance management processes, bonus calculations and succession planning.

Sacks said her Minneapolis-based, 11,000-employee company will evaluate managed services for more applications, and she wouldn't rule out replacing ERP systems with service providers.

PepsiAmericas isn't alone. Technology Partners International Inc. (TPI), an outsourcing consultancy in The Woodlands, Texas, reported that so far this year, 14 companies with more than 10,000 employees have outsourced workforce administration.

"We think the long-term trend is an erosion of the adoption of ERP as an infrastructure in the corporate enterprise and moving away from licensing software to buying services," said Peter Allen, managing director and partner at TPI.

Outsourcing HR

Companies have outsourced payroll and benefits administration for many years, but the move to outsource virtually all HR activities - business processes and IT - is still new. One out of 10 companies has done some HR outsourcing, but only about half of those companies have outsourced everything, estimated Michael Cornetto, a consultant at Watson Wyatt & Co. in Arlington, Va. But he said the market for total HR outsourcing is growing 30% per year.

Leader Board

Late last month, Whirlpool Corp. signed a 10-year deal to outsource HR business processes for 68,000 employees to Convergys Corp. in Cincinnati. A major reason was the need to improve HR technology, said Abby Luersman, vice president for HR solutions at Benton Harbor, Mich.-based Whirlpool.

Whirlpool was underinvesting in IT and needed "better decision- making with better data," Luersman said.

'Bite-Size Pieces'

So far, Whirlpool is using Convergys to integrate its self- service model with its SAP system and take over some of the transaction processing, she said. But over time, some HR IT systems could move to the outsourcer's data center, Luersman said. "This is a 10-year agreement with Convergys, and clearly we're doing it in bite-size pieces," she said.

Memorial Health Services Corp. in Long Beach, Calif., is a PeopleSoft ERP shop that already had an HR application license but decided it would be cheaper to outsource benefits and other functions, said Patti Ossen, senior vice president of human resources at the hospital group.

Deploying PeopleSoft's benefits software would have required an external consultant, cost about $350,000 and taken about 5,000 hours, she said. So Ossen turned to hosted providers, including Employease Inc. in Norcross, Ga.

But it's not a path for all companies. David Rudzinksy, CIO at Bedford, Mass.-based medical instruments maker Hologic Inc., said he uses the payroll services of Automatic Data Processing Inc., whose system is integrated with the human resources module in his Oracle eBusiness Suite Hi ERP system.

"This was a major improvement in the process and makes the payroll/human resources people more efficient," he said, adding that he doesn't want to use any external providers of other HR functions."

Copyright Computerworld Inc. Aug 8, 2005
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