Survey: HRO is Alive and Well

January 24, 2006 ( - The HR outsourcing business (HRO) continues to grow with executives as keen as ever about wringing cost savings out of the move, a new survey found.

According to a recentAberdeen research report, The HRO Benchmark Report: 2006, 11% of those surveyed added new outsourced services in the last year. The key drivers behind HRO are cost reduction (69%) and the corporate ability to focus on its core business objectives (63%), an Aberdeen news release said.

The announcement reported that outsourcing some or all of HR services today has a market penetration of:

  • 39% in companies under $50 million in annual revenue,
  • 40% in mid-size companies ranging from $450 million to $999 million, and
  • 66% in companies over $1 billion in annual revenue.

The report reveals growth from 2004 in use of third-party outside services in the transaction-heavy areas of human capital management, and in services related to both employee lifecycle management and RPO – recruiting process outsourcing.

“Heads of human resource divisions today seek to be strategic in their positions, addressing real issues such as long term corporate talent acquisition and management. The key issue for these executives in considering a move to total HRO is the point where the day-to-day administration prevents time devoted to strategy development,” said Katherine Jones,Aberdeen’s HCM research director and author of the report, in the news release. “Escalating in-house support costs also prompt consideration of an outsourcing strategy.”

This study, which covered 107 companies with an online survey, found that 96% of those companies with $50 million per year and above in annual revenue outsource some portion of their human capital-related activities.

A copy of the report is here .