project on hr outsourcing on various functions in it industrya

A Study on

“THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS

WITH REFERENCE TO IT INDUSTRY”

Submitted In Partial Fulfillment of the Academic Requirements

For the Award of the Degree

Of

MASTER OF BUSINESS ADMINISTRATION

BANGALORE UNIVERSITY

Submitted By

NIRVAN

REG NO: 09SKCMA044

Under the Guidance of

Dr. KAVITHA DESAI

ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES

1st. Cross, 1st. Stage, Peenya Industrial Area,

Bangalore-560058

2009 – 2011

1

DECLARATION

I, NIRVAN, hereby declare that this dissertation titled, “THE IMPACT OF HR

OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO

IT INDUSTRY”, is based on original project study conducted by me under the

guidance of Dr. KAVITHA DESAI.

This has not been submitted earlier for the award of any other Degree / Diploma by

Bangalore University or any other University.

Place: Bangalore (NIRVAN)

Date: 4th May 2011 REG NO: 09SKCMA044

2



Bangalore-560058

CERTIFICATE FROM THE GUIDE

Certified that this dissertation titled “THE IMPACT OF HR OUTSOURCING

ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY”

is based on an original project study conducted by NIRVAN, of 4th Semester MBA

under my guidance.

This dissertation has not formed the basis for the award of any other

Degree/Diploma by Bangalore University or any other University.

Place: Bangalore

Date: 4th May 2011 (Dr. KAVITHA DESAI)

3



Bangalore-560058

CERTIFICATE FROM THE COLLEGE

Certified that this dissertation titled “THE IMPACT OF HR OUTSOURCING

ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY”

is based on the study conducted by NIRVAN of 4th Semester MBA under the

guidance of Dr. KAVITHA DESAI.

This dissertation is based on the original project study undergone and has not

formed the basis for the award of any other degree/diploma by Bangalore

University or any other University.

Dr. Kavitha Desai Dr.Kerron G. Reddy

PROFESSOR MBA, RESIGTRAR AIMS PRINCIPAL, AIMS

Place: Bangalore Place: Bangalore

Date: 4th May 2011 Date: 4th May 2011

4

CERTIFICATE OF APPROVAL

This dissertation report of NIRVAN titled “THE IMPACT OF HR

OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO

IT INDUSTRY” is approved in quality and form and has been found to be fit for

the Partial Fulfilment of the Requirements of Bangalore University for the Award

of Degree of Master of Business Administration.

INTERNAL GUIDE EXTERNAL EXAMINERS

Name: Dr. KAVITHA DESAI 1.Name:

Signature: Signature:

Date: 4th May 2011 Date:

2. Name:

Signature:

Date:

5

ACKNOWLEDGEMENT

First of all, I bow my head with full devotion, dedication, faith & gratitude to the omnipotent,

omnipresent, omniscient and Almighty God for showering his unconditional blessings upon me

as a result of which I am able to complete this project well in time.

I would like to convey my deep and profound sense of gratitude, thankfulness and obligation to

my learned and self-esteemed guide Dr.Kavitha Desai, Prof. MBA Dept. and Registrar,

AIMS, for her untiring help, constant encouragement and learned suggestions. Vocabulary fails

to express my feelings, emotions and thoughts towards her greatness & kindness which she

expressed towards me. Instead of her extremely busy and exhaustive schedule, she always spared

her valuable time and guided me accordingly. She stood like a beacon’s light to sail in the

uncharted sea of my dissertation project.

I would like to express my sincere thanks & gratefulness to all my respondents who helped me

with their learned, experienced and valuable feedback by answering the questionnaire of my

research topic which worked as the foundation stone to build this project.

I am extremely thankful to Honourable Prof.Kerron G. Reddy, Principal & CEO AIMS, who

has provided me with all the required facilities to carry out the present research work according

to the norms of Bangalore University and by nurturing my skills to execute the requirements.

I express my sincere regards, respect and thankfulness to Prof. Ranganathan Krishna Rao,

Program Director, MBA Department, who always supported me with his fatherly love &

affection. I pay my sincere regards and thankfulness to all the respected teachers of MBA Dept.

& all the faculty members of AIMS particularly to Prof.Nagarajan & Dr.Bhartha K.A for their

valuable suggestions and blessings. I express my special thanks to our COO, Mr.Priyanandan

Reddy for his effective support, sympathy, love and affection throughout the course of studies at

6

AIMS. I would also like to thank our Librarian Ma’am & all the library staff for their co-

operation while collecting the relevant literature on the subject.

I bow my head in the lotus feet of my respected father Prof. (Dr.) Dharm Raj Singh (Gold

Medallist), Ex-H.O.D, P.G. Dept. of Kayachikitsa, Lucknow University, Lucknow and my

respected & loving mother Dr.Sangeeta Singh (Gold Medallist) Ex-Associate Professor, P.G.

Dept. of Kayachikitsa, Lucknow University, Lucknow who always stood with me in my difficult

times and always taught me the lesson from a famous quotation, “Arise , Awake and stop not

till the goal is achieved!” by Swami Vivekananda who had been a great saint and visionary.

Lastly I bow my head down to earth with full faith, honour & devotion in the lotus feet of my

honourable Gurudev H.H Swami Subodhananda Saraswati for his continuous spiritual

enlightment and divine blessings.

7

TABLE OF CONTENTS

Sr. No. TITLE Page No.

1 INTRODUCTION 1 – 14

1.1 INTRODUCTION TO THE RESEARCH TOPIC 1 – 2

1.2 THE THEORETICAL ASPECTS OF THE RESEARCH TOPIC 3 – 6

1.3 THE SUBJECT BACKGROUND OF THE RESEARCH TOPIC 6 – 11

1.4 OUTSOURCING 12

1.4 BE SPECIFIC ABOUT HR OUTSOURCING 12 – 14

2 RESEARCH METHODOLOGY 15 – 20

2.1 INTRODUCTION 15

2.2 STATEMENT OF THE PROBLEM 15

2.3 REVIEW OF LITERATURE 15 – 17

2.4 OBJECTIVES OF THE STUDY 18

2.5 SCOPE OF THE STUDY 18

2.6 RESEARCH DESIGN 18

2.7 SAMPLING PLAN 19

2.8 TOOLS FOR DATA COLLECTION 19

2.9 TOOLS FOR DATA ANALYSIS 19

2.10 LIMITATIONS OF THE STUDY 20

2.11 LAYOUT OF CHAPTERS 20

3 INDUSTRY PROFILE 21 – 30

3.1 HR OUTSOURCING INDUSTRY 21 – 23

3.2 THE BPO INDUSTRY 24 – 26

8

3.3 INDUSTRY PROFILE OF SOFTWARE & IT INDUSTRY 26 – 30

4 DATA ANALYSIS & INTERPRETATION 31 – 58

4.1 Department and Designation Profile of the respondents 31 – 32

4.2 Years of Work Experience of the respondents 33 – 34

4.3 Approximate HR strength in the organization 35

4.4 Response of the organizations towards HR outsourcing 36

4.5 Approximate no. of people outsourced by various organizations 37 – 38

4.6 Major HR functions outsourced by various organizations 38 – 41

4.7 Important reasons for outsourcing HR functions by various organizations 41 –43

4.8 Important factors for choosing a third party supplier for HR outsourcing 44 – 45

4.9 Opinions on different aspects of HR outsourcing in relation to various HR

functions.

46 – 47

4.10 Type of the legal service agreement standard included in HR Outsourcing

Contract

47 – 48

4.11 HR Functions Which Are Not Outsourced Or Being Outsourced Either Partially

or Completely

49 – 52

4.12 Opinion about the impact of HR Outsourcing on various HR attributes 52 – 53

4.13 Opinion about Outsourcing Options with Reference To organizational HR

Policies, Practices & Talent Needs of IT Industry

54 – 55

4.14 Opinion of HR Managers on whether HR Outsourcing may help to reduce the

Rate of Attrition in IT Organizations

56

4.15 Opinion of HR Managers on how well have your HR outsourced functions

fulfilled their objectives

57 – 58

5 SUMMARY OF FINDINGS 59 – 62

5.1 Findings about different aspects of HR outsourcing 59

9

5.2 Findings about important reasons for HR Outsourcing 60

5.3

Findings about important factors responsible towards choosing a third party

supplier for HR Outsourcing. 60

5.4

Findings about major HR functions being outsourced in the Indian industry

either completely or partially 61

5.5

Findings about the impact of HR outsourcing on various HR functions & on the

effectiveness of the HR department. 61

5.6 Findings about the co-relation between HR Outsourcing & IT industry 62

5.7 Findings about the effectiveness of HR function that is being outsourced. 62

6 SUGGESTIONS AND CONCLUSIONS 63 – 66

BIBLIOGRAPHY10

ANNEXURE 10 – 10

10

LIST OF TABLES

TABLE

NO.TITLE OF TABLES

PAGE

NO.

4.1 Department and Designation Profile of the respondents 31

4.2 Years of Work Experience of the respondents 33



4.5 Approximate no. of people outsourced by various organizations 37

4.6 Major HR functions outsourced by various organizations 38

4.7 Important reasons for outsourcing HR functions by various organizations 41

4.8 Important factors for choosing a third party supplier for HR outsourcing 44


functions.

46


Contract

47


or Completely

49

4.12 Opinion about the impact of HR Outsourcing on various HR attributes 52



54



55



57

11

LIST OF GRAPHS

GRAPH

NO.TITLE OF GRAPH

PAGE

NO.

4.1 Department and Designation Profile of the respondents 32

4.2 Years of Work Experience of the respondents 33



4.5 Approximate no. of people outsourced by various organizations 37

4.6 Major HR functions outsourced by various organizations 39

4.7 Important reasons for outsourcing HR functions by various organizations 42

4.8 Important factors for choosing a third party supplier for HR outsourcing 44


functions.

46


Contract

48


or Completely

50

4.12 Opinion about the impact of HR Outsourcing on various HR attributes 52



54



56



57

12

EXECUTIVE SUMMARY

This Dissertation titled “THE IMPACT OF HR OUTSOURCING ON VARIOUS HR

FUNCTIONS WITH REFERENCE TO IT INDUSTRY” is based on an original study

conducted by me (Nirvan) of 4th semester MBA, student of Acharya Institute of Management &

Sciences under the guidance of Dr.Kavitha Desai, Acharya Institute of Management &

Sciences Bangalore, Dept. of MBA.

HR outsourcing is an accepted managerial tool for re-structuring and re-focusing the way an

organization does business. It is proved to be the catalyst for organizations to drive

standardization of HR policies and practices. HR outsourcing is a boon for enhancing various

organizational capacities and for overall improvement of different HR Functions of different

organizations according to their various needs & requirements. It is an excellent tool for

completing the different tasks, objectives and needs for which it has been assigned.

HR Outsourcing & IT industries are inter-related and both are benefitted by mutual co-ordination

& co-operation. The problem of “Attrition” is very well managed with the help of HR

outsourcing in IT industry. Mid-market, or medium-sized, organizations find HRO very

attractive because of the economic, strategic, operational, technology and risk management

benefits.

HRO is a comprehensive solution that impacts process, technology and people. Therefore, HRO

requires more thoughtful approaches to managing change, as well as an experienced partner.

Navigating through the uncertainty leaves most HR leaders reaching out to providers for help

because, in their words, "we don't know what we don't know." Experienced providers are well-

positioned to share their proven expertise and the best practices that will ensure success.

HRO has the ability to impact the entire organization - far beyond the HR department - with a

reach that is often underestimated. From key stakeholders, such as an executive who can benefit

from better information about the workforce, to the hourly worker who will interact with HR in a

whole new way, HR's management of the HRO transition process will determine how each of its

constituencies responds to a new world of work.

Making the decision to outsource human resource processes is a major step for many

organizations. Once a company has decided to outsource one or more human resource processes

and has selected a vendor, the next major task is to implement an effective outsourcing

arrangement. Thus my study helped me to get a clear picture of HR Outsourcing in the Indian

Context along with its future and feasibility.

13

CHAPTER-1

Introduction

14

Chapter-1

INTRODUCTION

1.1 INTRODUCTION TO THE RESEARCH TOPIC

1.1.1 Overview of HR Outsourcing

HR outsourcing is a process in which a company uses the services of a third party to take care of

its HR functions. A company may outsource a few or all of its HR related activities to a single or

combination of service provides located in offshore destinations like India, China, Philippines,

etc. In this sense the HR outsourcing service providing firms or HR outsourcing company can be

divided into four categories depending on the services they offer as, PEOs (professional

employer organization), BPOs (business process organization), ASPs (application service

providers), or e-services. In these categories the PEOs are the ones that assume full responsibility

of a company's HR functions where as others such a BPOs, ASPs and e services provide web

based HR solutions like database maintenance, HR data warehousing, maintaining records,

developing and maintaining HR software's etc.1

HR outsourcing is a viable choice for small to mid-sized businesses looking to limit staffing

burdens while maintaining high-quality human resources functions. HR is a complex and

specialized field that performs necessary services for businesses with employees, but the cost of

hiring qualified HR personnel may not always make financial sense. Outsourcing HR functions

can provide the services and highly trained professionals that businesses need, often with

significant cost savings over hiring full-time HR staff.

1.1.2 Function

The primary function of human resources is to manage and provide everyday personnel services.

From employee benefits management, payroll and administration, recruiting and hiring, training

and organizational development, employment law and regulatory compliance, human resources

is a full-time job that requires specialized training and on-going education. HR outsourcing firms

provide a full range of vital services to businesses that can't afford a dedicated human resources

staff or choose not to maintain HR functions in house.

1.1.3 Benefits

1 Ref.1. “Society OF HR Management- Outsourcing Survey Report about HR Outsourcing” By Alexey Klementive

15

For business owners and managers attempting to fulfil HR roles, performing human resources

functions can take away from running the business. The allure of outsourcing non-core business

functions such as HR is that it allows the company to concentrate on its main business goals,

leaving other tasks to the specialists. HR outsourcing firms are experienced in implementing the

most efficient and cost-effective methods and practices and may be able to provide benefits,

payroll and other services at a lower cost than a company would on its own.

1.1.4 Service Levels

HR outsourcing companies generally offer different service levels--including a la carte, bundled

or all-inclusive services--depending on your particular needs and budget. You can contract

human resources outsourcing firms for a specified period of time, use then on an as-needed basis

or contract them for specific one-time or occasional projects. Authoring employee handbooks

and creating administrative systems and compensation programs are a few examples of project-

based HR outsourcing services.

1.1.5 Cost and Value

Aside from staffing, there are costs associated with the setup of an HR department. Software,

filing and information-gathering and storage systems, policy and procedure creation, and

implementing the HR program itself cost time and money. When you factor in all variables of

setting up and maintaining an in-house HR department, there is no guarantee that the department

will run effectively. When a business outsources HR services, all the systems, processes and

personnel are in place, providing a value-added element to the equation.

1.1.6 Professional Employer Organizations

Another outsourcing option that involves handing over the HR duties along with the employees

is called a PEO (professional employer organization). In a PEO, the outsourcing firm becomes

the legal employer, handling payroll, benefits, insurance and other employee relations; it leases

the employees back to the company. Employees generally enjoy better benefits because of group

rates, and the scenario allows business owners to concentrate solely on company goals rather

than personnel issues. Some companies may also enjoy tax benefits and will save on worker's

compensation and unemployment insurance because employees are the responsibility of the

PEO.

1.2 THE THEORETICAL ASPECTS OF THE RESEARCH TOPIC

16

1.2.1 Human Resource Outsourcing

The increasing focus on HR's contribution to the performance of the wider business has led to

more emphasis on cost reduction. HRO has grown out of this debate - from re-engineering and

cost reduction on the one hand to a potential transformational capacity on the other. HRO is an

evolving industry and can be defined as the purchasing by an organization of on-going HR

services from a third-party provider that it would otherwise normally provide for itself. HRO is a

strategic tool aimed primarily at chief executives. Though organisations may have different

strategies and performance models, all will relate in some way to HRO. These can involve the

following:

Capability: for any organization where there is a need to either improve or acquire HR

capability

Scale: providing for large organisations with 50,000 or more employees well-delivered

HR administration and services - and to justify the return on investment.

Technology: for most organisations where technology can be acquired and leveraged

through shared services or outsourcing2.

1.2.2 HRO providers

While HRO providers may seem to offer little that is different between them, differences do

occur in their size, culture, HRO methodology and track record. However, they offer their

services in three distinct ways.

Single-service or transactional solutions for a particular HR activity

Multiple HR services as part of a large-scale deal

Transformational deals which radically change the purpose and role of HR

Three different types of providers are active in the HRO market - pure HRO specialists, Business

/ HR transformation firms and HR process technology suppliers.

2 Ref.2. “Outsourcing the HR Function- Possibilities & Pitfalls” a report by Anthoy Hesketh on behalf of Strategic Dimensions Associate, Corporate Research Forum (CRF)

17

1.2.3 Selling points of HRO

HRO providers use these main selling points.

Increased efficiency of HR with estimated cost savings of up to 50%.

Increased effectiveness of HR through operational improvements.

Improved strategic focus from HR on business goals.

The role of HRO in transforming the performance of HR and the business.

While many HRO users can point to improvements in the first two points, evidence is lacking for

the impacts on strategic focus and business performance. This is a major problem for the HRO

industry.

1.2.4 Strategic debates around HRO

These debates are on-going in HR outsourcing among user - or prospective buyer -

organizations, providers, HRO advisers and academics.

The future purpose and contribution of HR because of the possibilities of functions being

transformed, or part-outsourced, through HRO deals.

The strategic and management complexities of HRO deals, especially so-called ‘mega-

deals’.

Deciding what is ‘core’ and ‘non-core’ in HR – the critical competencies to be retained

versus peripheral activities that might be outsourced.

The difficulty that HR has in assuming more strategic or value adding roles after

implementing HRO.

The position of offshoring as it affects HRO decisions and raises emotive issues such as

job losses and redeployment.

The challenges of trying to manage HR process delivery on a global scale and across

different cultures.

The HRO debate ultimately turns on the perceived quality of, and returns from, investments in

the HR function. Those organizations under pressure to reduce costs are more likely to consider

outsourcing at least part, if not all, of their HR administration.

18

1.2.5 The future of HR

HR itself is also locked in a debate over its future. Though some organizations have evidence

that the function is an integral part of its capability to deliver business success, many view HR as

Over-resourced

Inefficient

Vulnerable to the cost reduction possibilities of HRO.

HR outsourcing raises questions over HR’s future skills, capabilities and career paths. Its

developments are creating pressures for practitioners to shift from being reactive and

administrative problem-solvers to more proactive, value-driven ‘business partners’.

1.2.6 Shared services

Research revealed much discussion about the definitions and position of shared services. For our

purposes, it is defined as the transfer or insourcing of HR services and their resources to a

separate unit within the business - and often with a separate P&L system. Shared services is

often adopted by organizations who are against outsourcing as a matter of principle - but still

seek some of the transformational and streamlining advantages connected with outsourcing.

Alternatively, some organizations use shared services as a halfway house to prepare the specific

lines of HR they intend to outsource.

1.2.7 The HRO logic

No amount of preparation, however extensive, can safeguard outsourcing deals completely.

Leaders need to clarify what their core logic is for creating value by demonstrating the

following.

How HRO can enable the organization to meet the requirements of its stakeholders - be

they internal (employees) or external (customers).

How outsourcing will transform the way the HR function works in a radical and

sustainable way.

19

Crucially, how transforming the HR function will influence the planning, operations and

performance required by the business model.

1.2.8 Managing the transition

In some organizations, HRO is akin to changing the engine while the plane is still in the air

which is a potentially catastrophic exercise. The consequences of HRO must be thought through

- before agreeing a contract. Handing over single, multiple or all HR service processes represents

for many organizations their first experience of complex projects - project management is a

critical HR capability for HRO to work well. A successful transition minimizes employee angst -

but botched handovers could have longstanding repercussions on relationships with providers,

employees, other stakeholders and corporate image.

1.2.9 Governance of HRO performance

Managing and measuring performance after HR outsourcing is pivotal to the relationship

between HRO client and provider. Performance measurement in HRO traditionally concerns the

following.

Efficiency: mainly through cost reductions.

Effectiveness: through improved service outcomes against criteria in service level

agreements (SLAs).

Transformation: indicators of deeper change at the level of the organization, its

employees, systems - and at intangible levels.

Strategic governance: evaluating the management of performance - including the

decision rights, rules and agreed management processes defined with and before

providers are engaged.

1.3 THE SUBJECT BACKGROUND OF THE RESEARCH TOPIC

1.3.1 Impact of HR Outsourcing on Business Performance

Human resources outsourcing evolved from hiring payroll processing companies in the 1990s to

delegating tasks previously performed by human resources assistants and specialists, such as

recruiting, coordinating benefits and handling unemployment claims. Some small businesses

20

outsource entire human resources departmental functions; however, many companies outsource

singular processes.

1.3.2 Outsourcing HR Processes

Small businesses to large corporations decide for one reason or another that outsourcing human

resources functions is a way to improve efficiency and minimize staffing costs. Large

organizations that employ thousands of people may find it's simpler to outsource a process, such

as payroll, rather than employ two to three payroll clerks and purchase sophisticated technology

than engage the services of a company that focuses entirely on processing payroll. Small

companies might decide that outsourcing human resources processes is more cost-effective and

efficient than creating a human resources department while the business is focused on other

projects associated with starting a new business. "Inc." magazine contributor Priya Ganapati says

data from Everest Research Institute in Dallas suggests a significant percentage of small

businesses are finding human resources outsourcing is the answer to avoiding labor costs and

expensive technology. "HR outsourcing among small businesses has gone up considerably: Of

the 65 HR outsourcing deals between 1998 and mid-2004, that the report analyzed, 37 involved

small businesses," Ganapati writes. The growth rate of HR outsourcing is likely to increase as

more small businesses focus on their product and service offerings instead of staffing an in-

house human resources department.3

1.3.3 HRO Effect on Business Performance

Business performance is an important consideration when small business owners weigh the pros

and cons of HRO. One school of thought is that a small business can focus its energy and

expenditures on developing the product it sells. This enables a small company to allocate its

resources to areas that include engineering and research and development, instead of recruiting

staff, maintaining personnel files and other human resources tasks. The other school of thought

has more to do with human capital and talent--a small business owner may find herself without

the talent she needs to build an efficient human resources department. In this case, HRO resolves

the dilemma small business owners face during the search for an in-house human resources

3 Ref.3. “A Handbook of HR management practices, 8th edition 2002, by M. Armstrong.

21

expert. In the first scenario, a small business directing its focus on product design and sales may

determine the expense of HRO can be easily justified by more attention given to product sales. A

small business that doesn't have the requisite talent to lead a human resources department can

justify the expense of HRO by the confidence in the level of competency HRO companies offer.

1.3.4 Continued Impact on Business Performance

When small businesses initially utilize HRO services for transactional processes, the selection of

a strategic human resources leader can become a priority. The search for human resources

administrative practitioners without expertise in HR strategic management can then take a

backseat for now. An HR strategic partner should be the first hired for development of a human

resources department. OutsourcingInformationTechnology.com editor Beth Rosenthal observes,

"Small-to-medium businesses may have a hard time recruiting highly skilled staffers without the

benefits they expect. Outsourcing allows SMBs to offer benefits typically available only at

bigger companies." Upon making the decision to outsource HR functions while you build a

successful, profitable company, you can resume your search for an HR executive. Once your

company carves a position in the market with your product offering, your executive leadership

team--including your human resources executive--can then begin to work collaboratively to form

a full-service human resources department and bring in-house those previously outsourced

functions. Still, you may discover that outsourcing some human resources functions is in the best

interest of the company. As your business grows, resources committed to HRO may turn into a

wise, long-term decision that improves the services your human resources department can

provide to its internal customers, your employees.

1.3.5 Choosing HR Outsourcing Services

There are numerous HR outsourcing services that you can consider and it is sometimes very

difficult to properly know what to choose. You need to properly understand everything involved

and in order to do this it is your responsibility to be informed at all times. We basically have two

main types of HR Outsourcing Services: Core Human Resources and Talent Administration.

1.3.6 Core HR Outsourcing Services

We are using the term “Core human resources” because in this case we are talking about those

services that are crucial for most companies out there. We are dealing with 4 core HR

outsourcing services:

22

Payroll Administration – This includes everything related to payrolls from filing taxes to

managing the payroll of special projects.

Benefits Administration – This is a little more difficult to understand for some owners as

most believe there is no need for such a department. Such HR outsourcing services

include pensions, share plans and even welfare. Signing a contract is not always enough

to handle employee benefits in time

Workforce Administration – These HR outsourcing services are the foundation of a good

human resources management plan. We are talking about employee data management,

relations, disciplinary services, unemployment administration and a lot more. This is the

one core HR service that most people outsource.

Leave Administration – Your employees will take leaves of absence as they are entitled

to do so in some cases. On the other hand, there might also be leaves that are not good for

the company. A good management of leaves is needed in order to keep a close grasp on

human resources and employee satisfaction.

1.3.7 Talent Administration HR Outsourcing Services

When it comes to the talent you have on board, you want all people to feel good and always

know that they will get compensation for what they do. In this case we have 4 main talent

administration HR outsourcing services that you can choose from:

1. Relocation and Handling Assignments – HR outsourcing services can manage everything

involved from travel assistance to the entire program development.

2. Performance Management and Training – Your employees need to be monitored so that

you know their performance levels at all times. Also, you do want to know when training

is needed and want someone to do it properly. HR outsourcing services can deliver.

3. Recruiting Administration – It is usually quite hard to hire new staff. You lose a lot of time

going through CVs and handling interviews. This is the one talent administration HR

outsourcing service that can really offer benefits. These firms can handle all your hiring

needs and you will not lose a second. You can make sure that the best people are always

hired and this is something that you really want to have incorporated. Even if you do not

use HR outsourcing services for full talent administration, we recommend that you at

least consider recruiting administration.

4. Compensation Administration – This includes a lot of math. It is needless to say that a lot

of time is wasted in monitoring the compensations you would need to pay someone. A

23

good HR outsourcing service will use various methods to keep control of everything from

taking surveys to executive administration.

HR outsourcing services can bring in a lot of benefits especially when we consider management.

It is crucial that human resources are properly handled in every single company out there. A

failure to do this can lead to loss of time and money. To make it even worse, an improper

management can cause your employees to not work at their full potential. This is exactly why

you should use HR outsourcing services if you cannot properly handle this operation.

1.3.8 Benefits of HR Outsourcing

HR outsourcing has really become a worldwide phenomenon. We see more companies doing it

daily and this can only bring in benefits. The problem is that few people really know what HR

outsourcing means. We have seen a lot of company owners that thought that only talking to a

company to look for some staff for them was human resources outsourcing. Even this process is

not really HR outsourcing in some circumstances. Before you think about the benefits of HR

outsourcing you really need to understand what this concept means. Only after that can we

properly understand the benefits offered. Through the outsourcing of some or all core human

resources functions a company is almost immediately able to cut costs and minimize the time

that is needed for them to perform properly. In the last few years we saw that the common HR

tasks that are outsourced are payroll administration, attendance tracking, time tracking, tax filing

and tax payments. The tricky subject stands in the fact that human resources are now viewed at a

much larger scale than they were in the past. Internal human resources departments are bigger

and have a more important role in a company. This immediately translates in an increase of costs

in maintaining and even implementing HR functions internally. The good news stands in the fact

that companies are now available to outsource a part of their HR tasks or even all of them to a

specialized HR outsourcing provider. This practice does save both time and costs.

We can also say that besides the two benefits of HR outsourcing mentioned above, a company

will also have others that they should consider. Through HR outsourcing they can focus their

efforts on more business oriented tasks and they can get rid of a lot of activities that are difficult

to manage and consume a lot of time. Through HR outsourcing you can be sure that your

employees are always receiving the best possible in class human resources services. This

includes retirement plans, rewards programs, recognition programs and health benefits. All this

is obtained at lower costs than ever before. To make everything even better, HR outsourcing

providers also bring in a lot of support and experience when dealing with complex issues that

might appear. If a company cannot have its own HR in-house department it should definitely opt

for HR outsourcing.

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1.3.9 The HR Outsourcing Process

Any organization making a significant commitment to HRO is making a decision with far-

reaching implications-not just for HR, but for the entire organization. For this reason, it is crucial

that all stakeholders involved in the HRO process be involved from the outset and that there is

clarity in relation to the goals and objectives that the organization expects to achieve. As a

starting point, a multi-departmental steering team, consisting of representatives of all potential

users of the service provider, should be formed and convened. Ideally, HR will either lead the

decision-making process or be crucial to it. Other key members of the steering team should

include high-level managers and executives with a vested interest in all aspects of human capital

asset management and its return on investment, including operations, information systems

technology, finance, accounting and logistics. The goals and expectations of the outsourcing

process should be developed and defined in a detailed project plan.

1.3.10 Types of HR Outsourcing

In the past, HR outsourcing was thought of as hiring a vendor to provide a service. With the new

focus on outsourcing, there is more of an opportunity to partner with the vendor to provide the

service on a longer term basis rather than just a one-time vendor contract. HR outsourcing can

include:

Discrete services: In this instance, one element of a business process or a single set of high-

volume repetitive functions is outsourced to a third-party administrator. Examples of discrete

services could include the annual open enrollment process, flexible spending accounts or

employee background checks.

Multi-process services: The complete outsourcing of one or more functional human resource

processes would be an example of multi-process outsourcing (also called blended services). As

such, the outsourcing of either health and welfare benefits administration or defined retirement

plan to a third-party administrator would be an example of multi-process or blended services

outsourcing.

Total HR outsourcing: Total HR outsourcing represents the transfer of the majority of HR

services to a third party, to include recruitment, payroll, HRIS, benefits, compensation and

communications, as well as the transition of HR management and staff. However, HR executive

management would normally remain in place within the organization, along with strategic

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planning related to people management and other key HR functions at the discretion of

management.

1.4 OUTSOURCING

The performance by outside parties, on a recurring basis, of tasks that would otherwise be

performed in-house.

1.4.1 Other Definitions

1.4.2 In sourcing – This refers to when companies look at their pool of employees to find those

who may be tapped to do certain needed jobs. They may offer these employees extra training or

they may merely find the employees that already possess the skills to take on specialty work.

1.4.3 Off shoring - Off shoring simply means having the outsourced business functions done in

another country. Frequently, work is off shored in order to reduce labor expenses. Other times,

the reasons for off shoring are strategic -- to enter new markets, to tap talent currently

unavailable domestically or to overcome regulations that prevent specific activities domestically.

1.4.4 Co sourcing – Co sourcing is where a business function is performed by both internal staff

and external resources, such as consultants or outsourcing vendors, with specialized knowledge

of the business function.

1.4.5 Out placement - Outplacement is a term used to describe the efforts made by a downsizing

company to help its redundant employees through the redundancy transition and help them re-

orientate to the job market. A consultancy firm usually provides the outplacement services.

1.5 BE SPECIFIC ABOUT HR OUTSOURCING

Outsourcing contract negotiations require very specific task and service-level descriptions, and

defining the why, what, who, where, when and what if can clarify things significantly:

1.5.1 Need for Outsourcing

The decision to outsource is based on two business factors: value proposition and market-based

outsourcing. The most common value proposition is reducing cost savings. Other value

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propositions include increasing operational efficiency, improving customer service, improving

employee satisfaction, growing revenue or reducing capital expenditures. Market-based

outsourcing is a comparison between internal skills and abilities and the capabilities of providers

in the marketplace. The decision to outsource is based on whether an external provider can do

the job better, cheaper or faster.

1.5.2 Outsourced Functions

Customers can determine what to outsource by having a clear idea of the most common

performance management functions. Performance management functions can be segmented into

user-centric processes and management-centric processes. User-centric processes include

individual performance objective management, individual performance evaluation, competency

mapping, self-paced e-learning and decision support, and career planning. Management-centric

processes include organizational performance management, compensation management,

assessment management, learning management and training administration, and succession

planning. In general, all of the user-centric performance management processes lend themselves

to automation and outsourcing. Management-centric performance management functions also

can be outsourced. Learning management and assessment management, in particular, lend

themselves to outsourcing. Since vendors specialize in one or more of these functions, customers

can map the functions they intend to outsource to the capabilities of the vendor. This makes the

vendor selection process relatively straightforward.4

1.5.3 Types of Outsourcing Partners

According to a 2004 study by the Gartner Group, there are three types of outsourcing partners:

application service providers (ASPs), traditional external service providers and business process

outsourcing (BPO) companies. It is common for companies to have all three types of

relationships and several outsourcing partners. An ASP hosts the technology and the services

appear to employees like an internal function. A traditional external service provider brands the

service as its own, but the customer still controls deliverables. A BPO “owns” the entire business

process and has near-complete control, often called “end-to-end outsourcing.” It also has to be

decided that who will manage the outsourcers from the inside.

1.5.4 Work place of the Outsourcer

4 Ref.4. “Theory to design successful outsourcing relationships” by M.S. Logan (2000)

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Outsourcers are not always physically located outside your company’s facilities. Occasionally

companies prefer a representative of the outsourcing firm to be present on-site. But it is far more

likely that outsourcers will work outside the buyer’s physical facility. Many governments have

passed or are drafting laws governing the offshoring of business, so it is prudent to check

existing regulations prior to engaging an offshore outsourcer. Defining where the outsourced

personnel will work is an important legal aspect of the outsourcing agreement.

1.5.5 Duration of the Outsourced Project

Specifically defining service milestones is crucial to both the customer and the outsourcer.

Business-process cycles are always time-bound, and customers and outsourcers alike are always

constrained by time. Defining these time-bound constraints in terms of deliverables and

milestones is a strong point of outsourcing firms since milestones map directly to payment

cycles. Customers should be willing to ask themselves, “What is driving the date?” Dates are

sometimes set by internal priorities (hard dates), but often dates can be flexible. Being flexible

about time constraints allows teams to proactively deal with unanticipated challenges.

1.5.6 Precautions for Possible Future Problems

“Expect the unexpected” is a good motto to have on an outsourcing project. Experienced

outsourcers will probably want to put a change management clause in the contract. This is

because they know from experience that business needs change and it happens all the time.

Answering questions to such problems will result in development of specific goals that can be

used to develop measurable performance expectations and contractual obligations.

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CHAPTER-2

Research

Methodology

29

Chapter-2

RESEARCH METHODOLOGY

2.1 INTRODUCTION

Outsourcing is an accepted management tool for restructuring and refocusing the way an

organization does business. It challenges management to build a more flexible organization

centred on the core competencies of the business. In making the determination that a business

has more to gain by having certain "non-core" aspects of the business outsourced to a third-

party service provider, the organization transfers responsibility for one or more activities or

functions that would normally be performed in-house to a qualified vendor, for a specified

period of time and at a negotiated fee, in accordance with terms stipulated in a service level

agreement (SLA). In essence, the organization is making a decision to send certain parts of

the business out to a provider whose "core competency" is that part of the business.

2.2 STATEMENT OF THE PROBLEM

To study the impact of Human Resource Outsourcing on the effectiveness of the HR

functions in Indian industry. Transitioning to an outsourcing arrangement can pose a unique

set of risks that must be proactively managed, given the complexities associated with

transferring significant operational processes to a vendor while maintaining on-going service

to internal customers.

2.3 REVIEW OF LITERATURE

“Realizing the vision of HRO” by Nahapiet, J. and Ghoshal, S. (1998). Social capital,

intellectual capital, and the organizational advantage, Academy of Management

Abstract

"What is our vision for the company five years after HRO implementation, and how do we get

there?" The real opportunity exists for those companies that ask themselves these important

questions at the outset. Of course, each adopter's vision for the company five years from initial

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transition will differ. When HR partners with a provider that has deep HR expertise, it is better

able to move to transform and focus on strategic, high-return initiatives such as succession plan,

organization design, team effectiveness, leadership development, talent management,

performance management and development planning. The most successful change management

programs enable the HRO adopter to achieve the goals that they set out to achieve - without

running the risk of allowing fate to take over.

“HRO change management: Systematic execution of a strategic decision” by Willcocks,

L.P., and Kern T. (1997). IT Outsourcing as Strategic Partnering

Abstract

If leveraged effectively, HRO can prove to be the catalyst for organizations to Drive

standardization of HR policies and practices. It Gives HR leaders more capacity to focus on

organizational development, change management and executive coaching as underpinnings of

how HR and business leaders work together. Increase HR's value to the organization by

supporting its focus on strategic opportunities. Ideally, change management begins as early as

the presale relationship, when a vendor conducts analysis and due diligence to understand an

organization's unique requirements. An experienced vendor will help HR leaders make internal

communications around HRO exploration purposeful, productive and tailored to the employer's

culture.

“HR BPO drivers and inhibitors” by Bondarouk, T.V., Ruel, H.J.M, The International

Journal of Human Resource Management (2009).

Abstract

The belief that outsourcing can cut costs attracts enterprises to HR BPO like moths to a flame.

Like the moths, these enterprises can become enlightened, but they can also get burnt.

Enlightenment comes when the enterprise seeking to cut costs discovers other beneficial

outcomes that outsourcing can provide, such as the ability to focus on the core business and

improve service levels. Companies turn to process outsourcing for a variety of reasons. They

include high cost of transactions, too much time spent on daily operations, high cost of

upgrading applications, disintegrated processes, difficulty in hiring or retaining process staff and

lack of timely or accurate reports. Begin with the end in mind. Determine the capabilities that the

enterprise needs to align the workforce with business strategy. Then, build the portfolio of

applications to meet this vision. Keep in mind the strategy and direction of the enterprise’s core

integrated HRMS provider when making the niche solution vs. integrated solution decision.

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Trust, openness, autonomy, strategic collaboration, pro-activity, benchmarking and career

development are some other buzzwords prevalent in the field of HR. The main issue according to

me is building self-regard. Of late, driving the new economy organizations in frenzy is the

growing malaise of the ‘rate of employee turnover,’ which I felt can be correlated to low self-

esteem. It is thus worthwhile to take a deep look into this concept and its implications in both

individual and corporate contexts.

“HRO Change Management: Embrace Systematic Approaches to Transforming HR in the

Mid-Market” by McFarlan, F.W. and Nolan, R.L. (1995). How to manage an IT

outsourcing alliance.

Abstract

The adoption of end-to-end human resource outsourcing (HRO) is a strategic decision that offers

tremendous opportunity for medium-sized organizations. However, it's critical that the

organization use systematic approaches to build support for the new direction - approaches that

use communication to build momentum and excitement among employees and HR staff, and

training to ensure that the solution delivers the desired results. While many HRO adopters say

that they view this level of attention to change management as an important option, without the

right focus or dedicated resources, change management often falls by the wayside.

Thoughtful, disciplined approaches to introducing HRO into the company's existing environment

are not something that's just "nice to do." They help focus on the people-related issues of an

outsourcing decision and enable employers and their provider partners to build a stronger

relationship that helps ensure a successful rollout. As part of an on-going process, they also

enable HR to better manage its relationships and interactions with internal customers and

stakeholders, and successfully realize the organization's longer-term vision of transformation

through HRO.

“Some Measures to Raise the Motivation Levels of Employees” by Kern, T. and Blois, K.

(2002). Norm development in outsourcing relationship.

Abstract

Recognizing the contributions of outstanding achievers will induce others to try hard. Criteria for

selecting outstanding achievers should be transparent. Effective HR measures in the areas of

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training, career development etc. equip the workforce better and also increase their self-esteem

and morale. The need of the hour is not only to enable the employees to grow in the ‘learning

organizations’, the concept of which is fast attaining celebrity status in this age of knowledge

economy, but also to take care that the employee has substantial self-esteem. Without this all the

retention policies of the organizations will meet a sorry fate.

2.4 OBJECTIVES OF THE STUDY

To study the different aspects of HR outsourcing

To study the important reasons for HR Outsourcing

To study the important factors responsible towards choosing a third party supplier for

HR Outsourcing

To study the major HR functions being outsourced in the Indian industry either

completely or partially

To study the impact of HR outsourcing on various HR functions & on the

effectiveness of the HR department

To study the co-relation between HR Outsourcing & IT industry

To study the effectiveness of HR function that is being outsourced

2.5 SCOPE OF THE STUDY

The scope of study includes the following points:

To explore the different possibilities about HR outsourcing and its various aspects

To explore the impact of HR outsourcing on various HR functions

To explore the possibilities of co-relation between HR Outsourcing & IT

To explore the future possibilities of HR Outsourcing

2.6 RESEARCH DESIGN

Research design is a detailed blue print used to guide the research study towards its

objectives. Descriptive research has been used for this study. The major purpose of

descriptive research is description of the state of affairs, as it exists as present. This means

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asking questions to people who are believed to possess the desired information. It measures

the magnitude of people’s knowledge, attitudes and opinion towards the present research

study.

Research design simply means a search for facts & answers to questions and solutions to the

problems. It is a prospective investigation. Research is a systematic and logical study of an

issue or problem through scientific method.

2.7 SAMPLING PLAN

Sampling Method

Simple random sampling is used which is the simplest method of sampling for social

researches. It is used in simple experiments that require a single sample to be taken from a

given population or a representative sample frame. The people in the sample frame must all

be accessible and available. It is used when the target group is sufficiently large.

Sample universe

The sample universe is comprised of the HR managers and employees working in IT

companies in both services and manufacturing sector in India.

Sample size

The sample size is restricted to 100 respondents due to time constraint.

2.8 TOOLS FOR DATA COLLECTION

Sources Of data collection

Primary data is collected through questionnaires and secondary data is collected through

enterprise portals and websites related HR outsourcing and also through various journals,

magazines and related books.

2.9 TOOLS FOR DATA ANALYSIS

Data Analysis has been done with the use of statistical tools and results are presented through

tables, charts and graphs. Simple percentage method is used to analyze and interpret the data.

The analyzed & interpreted data is presented in the form of tables, charts & graphs.

Tables: - Presentation of data in vertical column & horizontal rows.

Graphs: - Graph is a pictorial representation of the data.

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2.10 LIMITATIONS OF THE STUDY

The sample which we took does not represent the whole population as the numbers of

respondents were very less

The limited experience was another constraint on the quality of the research

Respondents were from specific areas and did not cover the whole of India

Sample size is small because of time constraint

The primary data is based on the questionnaires which can be influenced by personal

bias and subjective for individuals

2.11 LAYOUT OF CHAPTERS

Chapter 1- INTRODUCTION

This chapter includes the theoretical aspect of the study and introduction

to the research topic. It also discusses about the subject background of the

research which has been carried out.

Chapter 2- RESEARCH METHODOLOGY

This chapter includes the brief introduction, statement of the problem,

review of literature, objectives of the study, scope of the study, research

design, sampling plan, Tools for data collection, tools for data analysis,

limitations of the study and layout of chapters.

Chapter 3- INDUSTRY PROFILE

This includes brief introduction about the outsourcing practices and their

results in HR sector.

Chapter 4- DATA ANALYSIS AND INTERPRETATION

It includes Analysis and interpretation of data. Analysis is carried on by

preparation of Tables, Graphs and Charts.

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Chapter 5- FINDINGS AND SUGGESTION

It contains the Summary of findings and Suggestion. This chapter gives

summary of findings of the study along with the suggestion.

Chapter 6- CONCLUSION

This chapter gives conclusion of the study.

CHAPTER-3

Industry Profile

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CHAPTER-3

INDUSTRY PROFILE

3.1 HR OUTSOURCING INDUSTRY

3.1.1 REASONS FOR STRONG OUTSOURCING INDUSTRY

Nowadays HR outsourcing is really something that is needed for most small to medium sized

companies. This is mainly because everybody is doing it and the benefits that are gained from

doing this cannot be achieved if it is handled internally. HR outsourcing is really strong at the

moment and there is no sign that this will change in the immediate future. The sheer benefits that

can be obtained cannot be taken lightly.

The main reason for which HR outsourcing is needed at the moment is the fact that most

companies cannot do it properly alone. It is very hard to stay up to date with all the regulations

that have to be considered and the possible employee benefits that should implemented. Through

HR outsourcing we can easily avoid any problem and we can maximize the time we have to

dedicate to those business functions that are actually generating us profit.

The HR outsourcing industry is useful because it can help to keep the HR functions in control at

all the times. If a good HR provider is hired it can basically solve all the problems related to HR.

Also, if some problems still appear it is the responsibility of the provider to deal with them. Thus

we can basically shift responsibilities to gaining time and money. So there is no reason why the

HR outsourcing industry would not continue to be strong in the years to come as long as such

benefits exist.

3.1.2SOME FACTS ABOUT HR OUTSOURCING INDUSTRY

58% of companies outsource some HR function

91% of companies with $1 billion+ annual revenues are now considering HRO

HRO grew 28% from second half of 2004 to first half of 2005

Note: SHRM Human Resource Outsourcing Survey Report:

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Almost 6 out of 10 organizations practice HR Outsourcing but 1/3 of organizations did not

outsource any function ½ of organizations partially outsource an HR function (organization

co-manages function with vendor)

HRO Market

In next 5 years, global spending on HRO will double – from $40 billion to $80 billion

From 2002 to 2004, 14% increase in large firms that would consider HRO

Consulting and Training

3.1.3 FACTORS HAMPERING HRO INDUSTRY

Cost factor & Confidentiality

The fear of losing jobs

Loss of sensitive information to public/competition

Ethics and quality of outsourcing vendors

Possibility of security breaches

Cost-benefit equation not clear

Lack of psychological acceptance

3.1.4 DOMINANT TRENDS IN MAIN HR OUTSOURCING INDUSTRY SEGMENTS:

Consultants

Administrative – service providers

Technology enablers

Customizing imported software products remains an issue: supply oriented rather than

demand based customization

3.1.5 HR OUTSOURCING COMPANY SERVICE TYPES

An HR outsourcing company can be divided basically into four categories as PEOs, BPOs,

ASPs, or e-services based on the type of service it offers.

3.1.6 PEO (PROFESSIONAL EMPLOYER ORGANIZATIONS)

A PEO or A Professional Employer Organization is the one that takes full responsibility of your

company's human resources management. Another outsourcing option that involves handing

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over the HR duties along with the employees is called a PEO (professional employer

organization). In a PEO, the outsourcing firm becomes the legal employer, handling payroll,

benefits, insurance and other employee relations; it leases the employees back to the company.

Employees generally enjoy better benefits because of group rates, and the scenario allows

business owners to concentrate solely on company goals rather than personnel issues. Some

companies may also enjoy tax benefits and will save on worker's compensation and

unemployment insurance because employees are the responsibility of the PEO.

3.1.7 BPO (BUSINESS PROCESS OUTSOURCING)

The new buzz word 'BPO' seems to be everywhere now a day! Ever wondered what is BPO? Let

us explain: BPO has expanded sounds as Business Process Outsourcing and can be aptly defined

as the act of utilizing the services of a third party by a company in order to perform its back

office operations that might be payroll administration, customer help desks/ call centres, tele-

marketing, accounting, billing; the list is endless.

To put it in simple words a BPO (business process outsourcing) is a process in which a company

delegates some of its business processes mainly back office operations to a third party by giving

the third party total control over that process. Business process outsourcing otherwise known as

BPO is the process of leveraging technology vendors in various third worlds or developing

nations for doing a job which was once the responsibility of the enterprise. Or simply put, it is

the process of shifting an internal job process to an outside/external company which might have

a completely different geographical location.

Generally the processes being outsourcing as part of BPO are backend jobs like call/help

centres, call centre outsourcing services, medical transcription, billing, payroll processing, data

entry and the like. Most of these jobs are outsourcing by first world nations like USA and UK to

third world nations like India, Philippines, China, Malaysia and some eastern European

countries. These nations have a good pool of English speaking youth who receive accent and job

related training before they are inducted at a salary which is much lesser than what their

counterparts in first world nations would demand. This allows first world organizations to get

higher profits and provide better services by lowering the prices and by recruiting more labour

than they could possibly do otherwise. In addition to benefiting the first world nations, business

process outsourcing has also benefited third world nations by generating much needed jobs.

A BPO or business process outsourcing company is different from a PEO in the sense that it

provides various facilities including HR. A BPO can help improve the HR process, provide HR

data warehousing and self-access.

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3.2 THE BPO INDUSTRY

The BPO industry has flourished at a frantic pace in the last few years and companies have

ended up with huge savings by being a part of the industry. By outsourcing their back office

business processes to cheaper nations like China, India, Philippines, Mexico, South Africa etc.

companies can cut costs, better concentrate on their core businesses and strengths, ensure better

customer satisfaction and in a way get an edge over their competitors. A report suggests that US

firms have saved nearly $8 billion through outsourcing to third world nations like India.

3.2.1 SELECTING THE BPO COMPANIES

Selecting on the right BPO vendor is probably the next most important task other than fixing up

on a BPO destination. Although there are lots of organizations and agencies dedicated to helping

buyers in making the right decision, there are some precautions that the buyer has to maintain.

3.2.2 SELECTING THE BPO VENDORS

The key factor before finalizing on a BPO vendor is to scrutinize and analyses his strength and

expertise in terms of providing similar services to clients. One good way to find this out would

be to follow up with the firm's existing clients regarding the services. The BPO vendor must

have proper quality certifications and should be in possession of skilled manpower or must be in

a position to offer training facilities. Apart from this the BPO Company should have a strong

financial background and should be willing to share risk in the outsourcing contract. It is always

good to know the kind of services that the vendor offers and his relationship with other

outsourcing suppliers.

Most companies decide to outsource their business processes to multiple BPO companies rather

than a single one. This by all means is a good practice as the vendors will compete among

themselves to provide better service and the company will always be in a position to change

vendors in case one doesn't live up to the mark.

3.2.3 BPO COMPANIES IN INDIA

As the BPO boom grows relatively unheard offshore outsourcing destinations like Pune and

Kolkata in subcontinent India are rising to fame with the state governments starting to spend

money in developing the infrastructures and formulating friendlier taxes and other legal norms.

Most BPO companies in the Indian Subcontinent are quality certified from leading quality firms

like ISO 9000, CMM etc. and have access to high tech technologies and infrastructure.

Sure enough companies like IBM, Microsoft, Oracle, Cisco, Prudential, Hewlett Packard, ATT

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Wireless, Dell and many more consider India to be their first choice as an offshore contact centre

outsourcing destination.

3.2.4 GETTING STARTED

If you are planning to take a plunge into the BPO wave, you got to formulate an effective plan by

understanding your vision along with your long term goals. Deciding on the right BPO

destination and more importantly the right BPO vendor can go a long way in ensuring smooth

operations with good returns. As of now, India with its easily available English speaking,

computer literate, low cost manpower, better infrastructure and quality certified software and

BPO venders seems to be a great destination for outsourcing. So take your pick!

3.2.5 BPO INDIA - PRESENT AND FUTURE

The BPO boom has helped developing countries like India in a major way by creating quality job

opportunities in turn benefiting the Indian economy. So what is it that makes BPO India stand

out in the crowd?

3.2.6 THE INDIAN EDGE

India in the recent years has shown huge developments in the areas of communication, power

and software developments. India exports software to 95 different countries and stands second in

the world as far as software exports are concerned. In addition India has ISO 9000, CMM quality

certified software firms that have a reputation of providing quality services. India stands out of

the rest in terms of better IT and technological infrastructure, low cost, skilled manpower that is

readily available, friendly taxation and other laws, a stable government, a fast paced economy

and quality certified software firms.

3.2.7 HRO IN INDIA

IT city Bangalore seems to be a hot destination for BPOs swiftly followed by similar

technologically advanced cities like Chennai, Hyderabad, Mumbai, Delhi, Kolkata and Pune. All

these cities in India are technologically advanced and have a good infrastructure with almost 278

quality certified BPO vendors.

3.2.8 HR BUSINESS PROCESS OUTSOURCING

HR business process outsourcing is picking up pace as more and more companies feel that back

offer HR operations take up lots of their resources. As for IT, India seems to be a major hub for

41

HR outsourcing too. Cities having a good infrastructure like Bangalore, Delhi, Pune, Bombay

and Chennai are being seen as a major offshore outsourcing destinations as of now. The Bombay

offshore outsourcing industry seems to be picking up really well at present as compared to

Chennai and Bangalore, who seem to be calling the shots right now.

3.2.9 ASP (APPLICATION SERVICE PROVIDER)

An ASP or application service provider company will host the HR service on the web and rent it

to users. EG: PeopleSoft

3.2.10 E-SERVICES (ELECTRONIC SERVICES)

E services are those human resource service companies that are web based. Both BPO and ASP's

can be referred as e-service companies. A company which has decided to outsource its human

resources has to decide as to which type of vendor to go for and which offshore destination to

choose for outsourcing its human resource functions. The major destination for outsourcing

human resources is seen as India. India has many companies that offer HR services and best of

all; most of these companies are quality certified. This makes outsourcing to them a relatively

safer option. Apart from this India also have good communications infrastructure, cheaper labour

and a stable government. In addition to India some other good sales force outsourcing, research it

outsourcing and HR outsourcing services destinations are China and Philippines. In addition the

Romania outsourcing industry is also on the bloom and is a good option for UK firms who want

to play it safe outsourcing HR function.

3.3.1 INDUSTRY PROFILE OF SOFTWARE & IT INDUSTRY

3.3.2 IT SERVICES OUTSOURCING

The IT services outsourcing sector is the fastest growing sector in the outsourcing market and

has been growing at a frantic pace with more and more companies planning to take the plunge.

According to various estimates the IT services outsourcing market will reach US $ 200 billion by

2004 and will grow even further. As for the IT service outsourcing destinations are concerned,

India stands out way ahead of the rest. This is because India has many quality certified software

firms, computer savvy workforce and relatively cheaper rates of operation. India also exports

software to 19 different countries and has a great infrastructure in terms of communication.

3.3.3 IT OUTSOURCING TO INDIA

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When it comes to singling out the most popular destination for IT outsourcing, one name very

well stands out of the rest India! In all its glory India in the past three years has become the most

popular destination for IT outsourcing with more than 230 fortune 1000 companies using its

outsourcing services. You can do IT outsourcing and work at home directory from home. So

what is it that gives India its popularity? Let's look at some major factors.

In India, the software boom started somewhere in the late 1990s. Most of the Indian software

companies at that moment offered only limited software services such as the banking and the

engineering software. The business software boom started with the emergence of Y2K problem,

when a large number of skilled personnel were required to fulfill the mammoth database-

correction demand in order to cope up with the advent of the new millennium.

The profile of the Indian IT Services has been undergoing a change in the last few years, partly

as it moves up the value chain and partly as a response to the market dynamics. Ten years ago,

most US companies would not even consider outsourcing some of their IT projects to outside

vendors. Now, ten years later, a vast majority of US companies use the professional services of

Indian Software engineers in some manner, through large, medium or small companies or

through individuals recruited directly.

The market competition is forcing organizations to cut down on costs of products. The

professional IT services on the other hand are becoming increasingly expensive. The offshore

software development model is today where onsite professional services were ten years ago.

There is a high chance (almost a mathematical certainty), that in less than ten years, the vast

majority of IT services (software development being just one of them) from developed countries,

will be, one, outsourced and two, outsourced to an offshore vendor.

Despite the global economic slowdown, the Indian IT software and services industry is

maintaining a steady pace of growth. Software development activity is not confined to a few

cities in India. Software development centers, such as Bangalore, Hyderabad, Mumbai, Pune,

Chennai, Calcutta, Delhi-Noida-Gurgaon, Vadodara, Bhubaneswar, Ahmedabad, Goa,

Chandigarh, and Trivandrum are all developing quickly. All of these places have state-of-the-art

software facilities and the presence of a large number of overseas vendors. India’s most prized

resource is its readily available technical work force. India has the second largest English-

speaking scientific professionals in the world, second only to the U.S. It is estimated that India

has over 4 million technical workers, over 1,832 educational institutions and polytechnics, which

train more than 67,785 computer software professionals every year. The enormous base of

43

skilled manpower is a major draw for global customers. India provides IT services at one-tenth

the price. No wonder more and more companies are basing their operations in India.

The industry is in an expansion mode right now, with dozens of new offshore IT services vendors

emerging everyday, the industry has a high probability of being subjected to the 80:20 rule in not

too distant a future. In perhaps another ten years, 80 percent of all outsourced offshore

development work will be done by 20 percent of all vendors, a small number of high qualities,

trusted vendors. Only a few selected countries and only the most professional companies in those

countries will emerge as winners. India is the country of choice for offshore software

development. It has the potential to become and remain the country of choice for all software

developments and IT enabled services, second only to the USA. The third choice could be far

distant.

India is among the three countries that have built supercomputers on their own. The other two

are USA and Japan. India is among six countries that launch satellites and do so even for

Germany and Belgium. India's INSAT is among the world's largest domestic satellite

communication systems. India has the third largest telecommunications network among the

emerging economies, and it is among the top ten networks of the world .To become a global

leader in the IT industry and retain that position, India needs to constantly keep moving up the

value chain, focusing on finished products and solutions, rather than purely on skill sets and

resumes. It also needs to be able to package its services as products, rather than offering them as

raw material. It needs to be able to recognize and build up on its strengths and work on

weaknesses. Another extension of the IT industry is the ITES (Information Technology Enabled

Services) which is a sector dependent on IT sector.

Information technology consulting (IT consulting or business and technology services) is a field

that focuses on advising businesses on how best to use information technology to meet their

business objectives. In addition to providing advice, IT consultancies often implement, deploy,

and administer IT systems on businesses' behalf.

3.3.4 DELL OUTSOURCING - LATEST NEWS

Dell outsourced its computer support operations to India and had set up major call center

operations in cities like Bangalore and Chennai. But the company has received many complaints

in terms of bad customer service along with rude comments and bad accents.

44

This has lead the Dell outsourcing unit to rethink its strategies regarding utility outsourcing call

center. According to a report in the local newspaper Austin-American Statesman, Dell has

decided to move back its technical support jobs from India to US. But Dell outsourcing in terms

of support for home users is still being outsourced to India in large numbers. Dell outsourcing is

a live example of how things can go wrong in an outsourcing contract if things are not planned

out properly. Though outsourcing can be beneficial to organizations there are many myths

offshore outsourcing IT that needs to be cleared? Firstly outsourcing is in no way the ultimate

answer. Many business white papers outsourcing IT have clearly stated that outsourcing can only

be beneficial to those who do so analyzing the short as well as long term goals of an

organization. Therefore first and foremost organizations should research outsourcing what is it

and in which way will it be beneficial to them. IT outsourcing advantages are many, but same is

the case with operations failing and organizations backing up.

3.3.5 IBM OUTSOURCING - LATEST DEVELOPMENTS

IBM outsourcing jobs to offshore destinations like India and China has met up with large scale

opposition by its own employees. IBM in the recent times has outsourced nearly 1000 low end as

well as high end jobs to offshore destinations resulting in huge layoffs and has plans to move

another 4000 jobs to India, China and other nations. Pools of IBM employees in the USA have

formed a union to fight the IBM outsourcing of jobs.

The labour union represents a small portion of IBM employees who have plans to take action

against the company in case of any more jobs outsourced. They have even decided not to train

any replacement workers from third world countries. Through business process outsourcing IBM

on the other hand has promised the generation of more and better paying jobs in US as compared

to 2003 is a comment seen with much speculation by the IBM employees. IN the recent times

many companies are facing similar situations like outsourcing it IBM. The organization’s come

into two fold pressure in such situations. They have to decide between growth and social

implications of their actions.

3.3.6 ATTRITION IN ITS SECTOR & HRO

The Word “A” (Attrition) Is Back In Outsourcing Companies With uncertainty easing attrition,

the biggest nightmare for HR managers in IT services and outsourcing companies, is on the

horizon while for some firms, it is already here. So just how are the big 3 IT services firms faring

on the attrition and hiring front? Consider the following attrition rates.

3.3.7 INFOSYS

45

Attrition at Infosys rose from 10.9% the last quarter to 11.6%. However, a March Wall Street

Journal article quoted a CLSA Asia-Pacific report as saying that there are unconfirmed rumors

that 4,000-4,200 employees have resigned at Infosys for the month of February alone – well

beyond the 1,200 employees who should be resigning each month (as of December 31, Infosys

had about 109,882 employees). Nevertheless, it was also noted that Infosys had the largest bench

strength in the industry at almost 20,000 free resources.

3.3.8 TATA CONSULTANCY SERVICES (TCS)

Attrition at TCS has been stable at around 11.5% – although company officials expect this rate to

rise. However, the Wall Street Journal noted in February that TCS will go on a hiring spree and

hire up to 30,000 new employees after the next fiscal year begins on April 1. This is on top of the

11,500 planned hires for the first quarter of 2010. It was also noted that 70% of new hires for the

new fiscal year will be fresh graduates and more than 2,000 employees will be recruited from

outside India.

3.3.9 WIPRO

Wipro had an attrition rate of about 13.4% – up from an average of 8.9% over the past three

quarters. Hence, the Hindu Business Line noted that they were planning a salary hike for

February along with promotions to help prevent attrition from rising further while recruitment

initiatives would happen on a demand basis and include a mix of campus hires and science

graduates along with experienced talent. Meanwhile, the Hindu Business Line quoted Girish

Paranjpe, the Joint-CEO of Wipro’s IT Services group, as saying that the company’s bench

strength was around 7,500 to 8,000 on an employee base of about 103,000 while the industry

bench strength standard is usually twice that.

However, another Hindu Business Line article noted that the brunt of any rise in attrition rates

will likely be borne by mid-size software outsourcers who could see attrition rates reach the 15%

level. Moreover and since the big players have mostly not been hiring for some time, employees

with midsize firms are more likely to consider jumping to larger companies if they are offered

the right opportunity.

Meanwhile, utilization rates (that is, the number of employees billed per hundred verses those

who are on the bench) are also increasing at the big 3 IT services firms. According to the Hindu

Business Line, utilization rates rose from 67.3% to 68.8% at Infosys, 73.6% to 77.2% at Tata

Consultancy Services (TCS) and 70.8% to 73.2% at Wipro.

46

Nevertheless, as utilization and attrition rates rise, it’s time for companies to once again think

about long-term strategies for retaining employees. As Raman Roy, the chairman and managing

director of BPO firm Quattro, noted in the Financial Express, meddling with salary and benefits

is a short-term strategy (he chooses to focus on in-house training to create an efficient group of

high achievers) while attrition is merely a symptom and not a disease. In other words, it’s the

symptom of an increasingly healthier job market and economy for outsourcing.

CHAPTER-4

Data Analysis

And

Interpretation47

CHAPTER-4

DATA ANALYSIS & INTERPRETATION

DATA COLLECTION INSTRUMENT

Based on the data collected through a well-structured questionnaire, the opinion of the

respondents is analysed. The questionnaire method of data collection is quite popular, so the

questions related to the objectives of the study were asked from the respondents. The

questionnaire was formulated on the basis of ideas related to the subject after a detailed

discussion with the guide.

ANALYSIS OF DATA & ITS INTERPRETATION

RESPONDENT PROFILE and ORGANIZATION DETAILS

Table 4.1 Department and Designation Profile of the respondents

Sr. No DesignationNo. of

RespondentsPercentage

1 Executive 15 15%

2 Manager 26 26%

48

3 Practioner 34 34%

4 Assistant Manager 25 25%

5 TOTAL 100 100%

Graph 4.1 Department and Designation Profile of the respondents

Analysis:

It is evident from table and graph no.4.1 that out of 100 respondents, 15 were HR Executives,26

were HR Managers While 34 were working as HR Practioner and other 25% respondents were

working on the post of Assistant Managers.

Interpretation:

Thus it is clear that respondents from various categories took active participation to answer the

questionnaire but the maximum no. of participants belonged to the HR Practioner Group who

49

was the youngest among all which is a point of significance as the majority of youngsters were

interested in answering the questionnaire. As far as the department is concerned, all the

respondents were from the HR Department of different organizations.

Table 4.2 Years of Work Experience of the respondents

Sr. NoYears Of Work

Experience

No. of

RespondentsPercentage

1 3 – 5 years 45 45%

2 6 – 10 years 22 22%

3 11 – 15 years 18 18%

4 16 and above years 15 15%

5 TOTAL 100 100%

Graph 4.2 Years of Work Experience of the respondents

Analysis:

From table and graph no.4.2, it is evident that the maximum no. of respondents were having 3-5

years of work experience (45%) and minimum no. of respondents (15%) were having work

50

experience of 16 years and above. (22%) respondents were having work-experience of 6 to 10

years and the rest (18) % of respondents were having a work experience of 11 - 15 years.

Interpretation:

Thus it is clear that the respondents belong to almost all the managerial levels but young

managers took a keen interest in responding the questionnaire.

NAME OF ORGANIZATION / COMPANY

The present study titled “THE IMPACT OF HR OUTSOURCING ON VARIOUS HR

FUNCTIONS WITH REFERENCE TO IT INDUSTRY” was planned for purely academic

research purpose and the data collected for this study is being analysed and interpreted. For this

purpose, a questionnaire was evolved on the basis of which different information was collected

from various organizations and companies.

The companies which participated in this research project are as follows:

1. IBM India Pvt. Ltd

2. DELL India Pvt. Ltd

3. NOKIA India

4. NOKIA SIEMENS NETWORKS

5. NVIDIA India Pvt. Ltd

6. MICROSOFT India Pvt. Ltd

7. WIPRO India Pvt. Ltd

8. ADVANCED MICRO DEVICES India

9. HEWLETT-PACKARD India Pvt. Ltd

10. INFOSYS India Pvt. Ltd

51

From the above list, it is evident that most of the MNCs now-a-days practice HRO for various

HR functions and concentrate more on the core competencies.

Table 4.3 Approximate HR strength in the organization

Sr.

No

Approximate No. Of

Employees

Percentage of

employees

1 100 to 500 5%

2 501 to 1000 9%

3 1001 to 5000 12%

4 5001 to 10000 14%

5 10001 and Above 60%

6 TOTAL 100%

Graph 4.3 Approximate HR strength in the organization

52

Analysis:

From the table and graph no.4.3 it is evident that 60% of the organizations have more than 10000

employees whereas 14% organizations have an employee range of 5001 to 10000. The 3 rd

common ranges of employees are in between 1001 to 5000(12%). The next 2 categories fall

within the range of 501 to 1000(9%) and 100 to 500(5%) respectively.

Interpretation:

Thus it is clear that most of the respondents belong to large organizations but small and medium

sized enterprises (SMEs) also have a significant representation.

Table 4.4 Response of the organizations towards HR outsourcing

Sr. No. Response Regarding HR Outsourcing Percentage

1 Yes 74%

2 No 26%

3 TOTAL 100%

Graph 4.4 Response of the organizations towards HR outsourcing

53

Analysis:

From the table and graph no.4.4 it is evident that 76% organizations practices HRO on a

regular basis while the rest 26% do not outsource HR functions.

Interpretation:

Thus it is clear that majority of HR managers feel that HR functions should be outsourced for

various important reasons; e.g. to reduce cost, to focus and improve the core competencies of the

business, still there is a significant no. of HR managers who don’t agree with HR outsourcing

because it weakens the in-house HR department.

Table 4.5 Approximate no. of people outsourced by various organizations

Sr. No.Approximate No. Of People Outsourced By Different

OrganizationsPercentage

1 100 to 500 14%

2 501 to 1000 16%

3 1001 to 5000 40%

4 5001 and Above 30%

5 TOTAL 100%

Graph 4.5 Approximate no. of people outsourced by various organizations

54

Analysis:

From the table and graph no4.5 it is evident that the maximum no. of people outsourced by

different organizations fall between the range of 1001 to 5000, i.e. 40%. The next common

range of human resource outsourced by different organizations is 5001 and above (30%).

However some organizations outsource smaller no. of people which come under the range of

501 to 1001. The minimum no. of people outsourced by various organizations range from

100 to 500 (14%).

Interpretation:

Thus is clear that major MNCs are now practicing heavy HR outsourcing and are focusing

more on their core businesses. Most of the organizations are outsourcing a significant no. of

manpower which is up to 5000 (40%) and more than 5000 (30%). Thus it is clear that 70%

organizations are outsourcing their HR requirements. Even many small and medium size

enterprises (SMEs) are also outsourcing a considerable amount of human resource which

comes under the range of 100 to 1000 (30%).

Table 4.6 Major HR functions outsourced by various organizations

Sr. No.HR Functions

Outsourced

Essentially

Outsourced

%

Frequently

Outsourced %

Sometimes

Outsourced

%

Rarely

Outsourced

%

Never

Outsource

d%

TOTAL

1Payroll

processing65% 25% 10% 0% 0% 100%

2Training and

Development57% 23% 20% 0% 0% 100%

3 Recruitment 67% 20% 13% 0% 0% 100%

4Manpower

planning50% 30% 15% 5% 0% 100%

5Employment Law

and Regulatory

Compliance

51% 20% 19% 10% 0% 100%

6 Tax Management 62% 17% 18% 3% 0% 100%

7 Performance 51% 26% 19% 4% 0% 100%

55

Management

8Conducting

Employee Survey45% 33% 15% 7% 0% 100%

9Maintenance of

Personal Records52% 24% 18% 6% 0% 100%

10Outsourcing

Entire HR

Functions

15% 15% 20% 20% 30% 100%

56

57

Analysis:

From the table and graph no.4.6 it is evident that most of the organizations outsource various HR

functions on a regular basis. The most important HR functions outsourced by them are Payroll

processing, Training and Development, Recruitment, Manpower planning, Employment Law and

Regulatory Compliance, Tax Management, Performance Management, Conducting Employee Survey,

Maintenance of Personal Records, etc. The maximum percentage of Essentially Outsourced HR

Functions was Recruitment (67%), Payroll Processing (65%) and Tax Management (62%). The

minimum incidence of essentially outsourced HR functions was outsourcing entire HR functions (15%)

and conducting employee survey (45%). However the other HR functions which were essentially

outsourced are Maintenance of Personal Records (52%), Performance Management (51%), Employment

Law and Regulatory Compliance (51%) and Manpower Planning (50%) respectively. As far as the

percentage of Frequently Outsourced HR Functions is considered, the maximum incidence was of

conducting employee survey (33%), Manpower planning (30%), Performance Management (26%),

Payroll processing (25%), Maintenance of Personal Records (24%) and training and Development (23%)

respectively. However the minimum percentages of HR functions outsourced in this category were of

outsourcing entire HR functions (15%), Tax Management (17%), Recruitment (20%) and Employment

Law and Regulatory Compliance (20%) respectively.

As far as the percentage of Sometimes Outsourced HR functions is concerned, the maximum no. of

incidences were of training and development, Outsourcing Entire HR functions (20% each), followed by

performance management and Employment Law and Regulatory Compliance (19% each) along with Tax

Management and Maintenance of Personal Records (18% each) followed by Manpower Planning and

Conducting Employee Survey (15% each) respectively. However the minimum percentage of HR

Functions outsourced in this category were of Payroll Processing (10%) and Recruitment (13%). As far as

the percentage of Rarely Outsourced HR functions is concerned, the maximum no. of incidences were

of outsourcing entire HR functions (20%), Employment Law and Regulatory Compliance (10%) followed

by conducting employee survey (7%) and Maintenance of Personal Records (6%) respectively. However

the minimum percentage of HR Functions outsourced in this category were of Tax Management (3%),

Performance Management (4%) and Manpower Planning (5%) respectively. As far as the percentage of

Never Outsourced HR functions is concerned, the maximum no. of incidence was of Outsourcing Entire

HR functions (30%) and the rest of the outsourced HR functions were nil (0%).

Interpretation:

Thus it is clear that the most commonly outsourced HR functions by most of the organizations &

companies are Recruitment (67%), Payroll Processing (65%) and Tax Management (62%). The

next most common category of outsourced HR functions is Training & Development (57%),

58

Maintenance of Personal Records (52%) and Performance Management (51%), Employment

Law & Regulatory Compliance (51each%). Thus it is clear that most of the HR functions are

outsourced regularly. Thus it is evident that HR Outsourcing is an evolving industry and HRO

functions as a strategic tool aimed primarily to assist organisations on their core businesses.

Table 4.7 Important reasons for outsourcing HR functions by various organizations

Sr.

No.

Important reasons for

outsourcing HR functions

Most

Important

Reason

Much

Important

Reason

Important

Reason

Less

Important

Reason

Least

Important

Reason

TOTAL

1 To Save Cost 77 13 10 0 0 100%

2 To Save Time 75 17 8 0 0 100%

3To Increase The Capacity

of The Organization57 31 19 3 0 100%

4 To Gain Tax Benefit 60 14 26 0 0 100%

5To Improve Levels Of

Quality & Performance45 35 15 5 0 100%

6 To Improve Efficiency 38 42 18 2 0 100%

7 To Increase Productivity 64 14 11 9 2 100%

8To Improve Quality of

Service54 27 13 6 0 100%

9 To Achieve Better ROI 58 19 11 12 0 100%

10To Gain Expertise

Support56 24 12 8 0 100%

59

60

Analysis:

From the table and graph no.4.7 it is evident that various organizations are outsourcing different

HR functions on a regular basis on account of different reasons out of which the most

important reasons are to "save cost" or to reduce costs (77%), to “save time” (75%), to gain

tax benefit (60%), to increase the capacity of organization (57%), to achieve better ROI (Return

On Investment) (58%), to increase productivity (64%), to gain expert support (56%), to

improve quality of service (54%), to improve level of quality & performance (45%) and to

improve efficiency (38%). Thus it is clear that the most important causes of HRO are:

To save cost (77%)

To save time (75%)

To increase productivity (64%)

The least important cause is to increase efficiency (38%). However among much important

reasons of HRO, “to improve efficiency” is on the top (42%) followed by “to improve level of

quality & performance (35%), “to improve Quality of service” (27%), to increase the capacity of

organization (31%) and to gain expertise support (24%) respectively whereas the least important

cause in this group is to save cost (13%), followed by tax benefit & increase in

productivity(14%each) followed by “to save time (17%) and to achieve better ROI (19%). In the

important reasons category, the maximum incident is of “to gain tax benefit (26%) and

minimum is of “to save time (8%). In less important reasons group, the maximum incident co-

relates “to achieve better ROI (12%) and the minimum incidence co-relates to “improve

efficiency (2%)”. However in least important category, only one factor is identified which co-

relates with improved productivity. Thus it is clear that increase productivity is a consistent

reason for HRO in all the categories.

Interpretation:

Thus it is clear that:

A) The most important reasons for HRO are: (B) the other important reasons for HRO are:

To save cost -77% *To achieve better ROI -58%

To save time -75% *To increase capacity of organization-57%

To increase productivity-64% *To gain expertise support-56%

To gain tax benefit-60% *To improve the quality of service-54%

61

Table 4.8 Important factors for choosing a third party supplier for HR outsourcing

Sr.

No

Important Factors For Choosing

A Third Party Supplier For HR

Outsourcing

Most

Important

Factors

Much

Important

Factors

Important

Factors

Less

Important

Factors

TOTAL

1 Lowest Cost 65 25 14 6 100%

2 Service Quality 75 19 5 1 100%

3 Existing Relationship 66 24 17 3 100%

4 Strong HR Process Expertise 65 19 15 11 100%

5 Strength In Customized Solution 32 27 33 8 100%

Analysis:

From the table and graph no.4.8, it is evident that the most important factors for choosing a

vendor or third party supplier for HRO are service quality (75%), existing relationship (66%)

& strong HR process expertise (65%). The next common causes in this category are lowest cost

(65%) and strength in customized solutions (32%).

In the category of much important factors for choosing a vendor to provide HRO services, the

reasons which have been identified are customized solutions (27%), lowest cost (25%) &

62

existing relationship (24%). However the service quality & strong HR process expertise are also

expressed as important reasons.

In important factor group strength in customized solutions is on the top (33%) & service

quality is at the bottom level (5%). The other factors in this category are existing relationship

(17%), strong HR Process Expertise (15%) & lowest cost (14%).

As far as the less important & least important reasons are concerned, the maximum incidences

are of strong HR process expertise (11%) and strength in customized solutions (8%) followed by

lowest cost (6%) & service quality (1%). In least important group, no factor was identified.

Interpretation:

Thus it is clear that in the opinion of most of the HR managers, the most important reasons to

select a vendor or third party supplier are:

Service Quality (75%)

Existing Relationship (66%)

Lowest Cost (65%)

Strong HR Process Expertise (65%)

However strength in customized solutions (32%) is also seen as an important factor to select the

vendor for different services which are being outsourced by the various organizations. In this

context, it is very relevant to explain that the factor of lowest cost is not so significant as the

quality of service & existing relationship between the two parties. So it is conclude that though

the lowest cost is an important factor in choosing the vendor or third party supplier for

Outsourcing different HR Functions but the quality of service & existing relationship with the

vendor are of great significance.

Table 4.9 Opinions on different aspects of HR outsourcing in relation to various HR functions.

Sr.

NoDifferent aspects of HR outsourcing Opinion

Completely

agree

Mostly

agreeAgree

Partially

agreeDisagree TOTAL

63

1.Is HR outsourcing is the answer to avoiding

high labour cost & expensive technology?80 16 4 0 0 100%

2.

Is HR outsourcing is a viable choice for small

to mid-sized businesses to limit staffing

burdens while maintaining high quality HR

functions?

60 23 10 7 0 100%

3.

Is HR outsourcing can provide services &

highly trained professionals that businesses

need often with significant cost savings over

hiring full time HR staff?

45 27 23 5 0 100%

Graph 4.9 Opinions on different aspects of HR outsourcing in relation to various HR

functions

Analysis:

From the table and graph no.4.9, it is evident that 80% of the HR Managers have completely

agreed with the fact that HR Outsourcing is an answer to avoid high labor cost & expensive

technology. 16% HR Managers Mostly agreed with the above fact; however 4% did agree that

the above fact is true in relation with HR Outsourcing.

64

As far as the statement “Is HR outsourcing is a viable choice for small to mid-sized businesses to

limit staffing burdens while maintaining high quality HR functions?” is concerned, 60% of the HR

Managers completely agreed, 23% mostly agreed, 10% just agreed & 7% partially agreed but none of

them was against the above fact.

As far as the statement “Is HR outsourcing can provide services & highly trained professionals that

businesses need often with significant cost savings over hiring full time HR staff?” is concerned, 45%

of the HR Managers completely agreed, 27% mostly agreed, 23% just agreed & 5% partially agreed but

none of them was against the above fact.

Interpretation:

Thus it is clear that all the three facts about HR outsourcing are very relevant & are of great

significance because 80%, 60% and 45% HR managers support the above opinions related to HR

Outsourcing. Thus it is evident that:

HR Outsourcing is the answer to avoid high labour cost

HR outsourcing is a viable choice for small to mid-sized businesses

HR outsourcing can provide better services & highly trained professionals at

comparatively lower cost

Table 4.10 Type of the legal service agreement standard included in HR Outsourcing Contract

Sr. No. Legal Service Agreement Standard Included In HRO

Contract

Percentage

1 Employee Satisfaction 30%

2 Issue Resolution 36%

3 Delivery of Data 22%

4 System Availability 12%

5 TOTAL 100%

65

Graph 4.10 Type of the legal service agreement standard included in HR Outsourcing Contract

Analysis:

From the table and graph no.4.10, it is evident that issue resolution (36%), had been the most

important legal service agreement standard of HRO contract, while system availability (12%),

was least important reason for this fact. However employee satisfaction (30%) & delivery of data

(32%) had also been the important factors of this issue of HR outsourcing.

Interpretation:

Thus it is clear that issue resolution (36%) must be kept in mind and should be essentially

fulfilled in the matter of legal service agreement standard of HR outsourcing, but rest of the

factors, i.e., Employee Satisfaction (30%), Delivery of Data (22%) and System Availability

(12%) can’t be ignored in this respect.

66

Table 4.11 HR Functions Which Are Not Outsourced Or Being Outsourced Either

Partially or Completely.

Sr.

NoMajor HR Functions

Not

Outsourced

%

Partially

Outsourced

%

Completely

Outsourced

%

TOTAL

1 Payroll processing 10% 22% 68% 100%

2 Training & Development 8% 19% 73% 100%

3 Recruitment 11% 12% 77% 100%

4 Manpower planning 20% 45% 35% 100%

5Employment Law & Regulatory

Compliance30% 55% 15% 100%

6 Tax Management 25% 39% 36% 100%

7 Performance Management 17% 52% 31% 100%

8 Conducting Employee Survey 51% 34% 15% 100%

9Maintenance of Personal

Records20% 45% 35% 100%

67

68

Analysis:

From the table and graph no. 4.11, it is evident that the major HR functions which are

completely outsourced by different organizations are recruitment (77%), training &

development (73%), payroll processing (68%).Tax management (36%), Maintenance of

Personnel Records (35%), Manpower Planning (35%) and Performance Management (31%). The

other HR Functions which are completely outsourced are Employment Law & Regulatory

Compliance as well as Conducting Employee Survey (15% each).

The HR Functions which are Partially Outsourced are Employment Law & Regulatory

Compliance (55%), Performance Management (52%), Maintenance of Personal Records (45%),

and Manpower Planning (45%). The other partially outsourced HR Functions are Conducting

Employee Survey (34%), training & development (19%) and Recruitment (12%).

There are some organizations which do not outsource some of their HR Functions like

Conducting Employee Survey (51%), Employment Law & Regulatory Compliance (30%), Tax

Management (25%), Manpower Planning and Maintenance of Personal Records (20% each).

However minimum incidences of HR Functions which are not outsourced by certain

organization are Payroll Processing (10%), Training & Development (8%) and Recruitment

(11%).

Interpretation:

Thus it is clear that the Recruitment is the most important HR function which is completely

outsourced by 77% of organizations, partially outsourced by 12% and not outsourced by 11% of

organizations. Training & Development is the next most important HR Function which is

completely outsourced by 73% of organizations while 19% of organizations outsourced it

partially but 8% organizations handle it in-house. Payroll processing is another important HR

Function which is completely outsourced by 68% organizations, partially outsourced by 22% and

not outsourced by 10% of organizations.

The next important HR functions which are completely outsourced by 36%, 35%, 31% and 15%

of organizations are Tax Management, Maintenance of Personnel records, Performance

Management, Conducting Employee Survey and Employment Law & Regulatory Compliance

respectively. The other important HR Functions which are partially outsourced by 55%, 52%,

45%, 39% and 34% of the organizations are Employment Law & Regulatory Compliance,

Performance Management, Manpower planning , Maintenance of Personnel Records, Tax

Management and Conducting Employee Survey.

69

The HR Functions which are not outsourced by 51%, 30%, 25%, 20% and 17% of the

organizations are Conducting Employee Survey, Employment Law & Regulatory Compliance

Tax Management, Manpower planning, Maintenance of Personnel records and Performance

Management respectively.

Table 4.12 Opinion about the impact of HR Outsourcing on various HR attributes.

Sr. No HR Attributes Excellent Very Good Good Average Poor TOTAL

1 Business performance 60 20 13 7 0 100%

2 Employee & Organization Co-

ordination

53 19 24 4 0 100%

3 Employee Job-Fit 49 23 15 13 0 100%

4 Employee Performance 58 16 22 4 0 100%

5 Employee Development 65 15 9 11 0 100%

6 Employee Moral & Motivation 45 24 13 18 0 100%

7 Employee Satisfaction 52 19 16 13 0 100%

8 Effectiveness of training 67 18 12 3 0 100%

Graph 4.12 Opinions about the impact of HR Outsourcing on various HR

70

Analysis:

It is evident from the table and graph no.4.12 that HR Outsourcing has an Excellent positive

impact” on various HR attributes and Functions such as Effectiveness of training (67%),

Employee Development (65%), Business Performance (60%), Employee Performance (58%),

Employee & Organization Co-Ordination (53%), Employee Job fit (49%) and Employee Moral

& Motivation (45%).

As far as the “Very Good Positive Impact” of HR outsourcing on different HR Functions &

Attributes is concerned it was found to be 24%, 23%, 20%. 19%, 18%, 16 % & 15% for

Employee Moral & Motivation, Employee Job fit, , Employee Satisfaction, Employee &

Organization Co-Ordination, Employee Performance and Employee Development respectively.

As far as the “Good Positive Impact” of HR outsourcing on different HR Functions &

Attributes is concerned it was found to be 24%, 22%, 16%, 15%, 13%, 12% & 9% for Employee

& Organization Co-Ordination, Employee Performance, Employee Satisfaction, Employee Job

fit, Employee Moral & Motivation, Effectiveness of Training and Employee Development

respectively.

As far as the “Average Positive Impact” of HR outsourcing on different HR Functions &

Attributes is concerned it was found to be 18%, 13%, 11%, 7%, 4% & 3% for Employee Moral

& Motivation, Employee Job fit & Employee Satisfaction, Employee Development, Business

Performance, Employee Performance, Employee & Organization Co-Ordination and

Effectiveness of Training respectively.

Interpretation:

Thus it is clear that HR Outsourcing has an Excellent Positive Impact on Effectiveness of

Training (67%), Employee Development (65%) and Business Performance (60%). HR

Outsourcing has a Very good Positive Impact on Employee Moral & Motivation (24%),

Employee Job fit (23%), Employee Satisfaction (19%), Employee Performance (16%) and

Employee & Organization Co-Ordination (19%).

Thus it clear that HR Outsourcing is a boon for enhancing various organizational capacities and

for overall improvement of different HR functions of different organizations according to their

various needs & requirements.

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Table 4.13 Opinion about Outsourcing Options with Reference To organizational HR


Sr. No. Response Regarding HR Outsourcing Percentage

1 Yes 76%

2 No 15%

3 Can’t Say 9%

4 TOTAL 100%

Graph 4.13 Opinion about Outsourcing Options with Reference To organizational HR


72

Analysis

It is evident from the Table and Graph no. 4.13 that most of the HR Managers (76%) are of the

opinion that HR Outsourcing can boost the performance of IT industries; however 15% were of

the opinion that it may impact negatively. However 9% HR Managers were indifferent.

Interpretation:

Thus it is clear majority of HR Managers (76%) are of the opinion that to improve the condition

of the IT industries, HR Outsourcing is essential, but while doing so proper care & precaution

should be applied so as to ensure the proper implementation of organizational policies &

practices.

Table 4.14 Opinion of HR Managers on whether HR Outsourcing may help to reduce the

Rate of Attrition in IT Organizations?

Sr.

No.

Opinion of HR Managers on "whether HR Outsourcing may

help to reduce the Rate of Attrition in IT Organizations?"Percentage

1 Yes 86%

2 No 08%

3 Can’t Say 06%

4 TOTAL 100%

Graph 4.14 Opinion of HR Managers on whether HR Outsourcing may help to reduce the

Rate of Attrition in IT Organizations?

73

Analysis

It is evident from the above Table and Graph that HR Outsourcing is very effective in controlling

the rate of attrition in the IT sector. 86% HR managers supported the above view; however 8%

were against it, while 6% were having an indifferent opinion.

Interpretation:

Thus it is clear that HR Outsourcing can effectively control the Problem Attrition in IT Sector.

Attrition is the biggest nightmare for HR Managers in IT services and outsourcing companies.

Thus it is clear that both HR outsourcing & IT Industries may be benefitted by mutual co-

operation & co-ordination because they are inter-dependent and inter-related as 86% HR

Managers agreed with the above fact.

Table 4.15 Opinion of HR Managers on how well have your HR outsourced functions fulfilled their

objectives?

74

Sr.

No.

Opinion of HR Managers on “How well have your HR

outsourced functions fulfilled their objectives

Percentage

1 Excellent 78%

2 Very Good 11%

3 Good 7%

4 Average 4%

5 Deteriorated 0%

6 TOTAL 100%

Table 4.15 Opinion of HR Managers on how well have your HR outsourced functions

fulfilled their objectives?

Analysis

75

From the table and graph no. 4.15 it is clear that outsourced HR Functions were “excellent” in

fulfilling the different objectives and needs of the organizations for which they were undertaken.

78% of HR Managers agreed with this fact. However 11%, 7and 4% were of the opinion that the

outsourced HR functions were “very good, good & average” in fulfilling the given objectives.

Interpretation

Thus it is clear that the concept of HR Outsourcing has proved to be a boon in completing the

different tasks, objectives and needs for which they have been assigned. 78% HR Managers have

rated its efficiency as Excellent, 11% have rated it as Very Good, 7% have rated it to be good

and the rest 4% have rated it as Average in performance. In no case Deterioration was observed.

Thus it has been proved that HR outsourcing can provide services & highly trained professionals

that businesses need often with significant cost savings over hiring full time employees.

76

CHAPTER-5

SUMMARY

OF

FINDINGS

77

CHAPTER-5

SUMMARY OF FINDINGS

The present study titled “THE IMPACT OF HR OUTSOURCING ON VARIOUS HR

FUNCTIONS WITH REFERENCE TO IT INDUSTRY” is an attempt to understand the pros

and cons of HR Outsourcing on various HR functions. Based on the data collected an in-depth

analysis has been made and the results are interpreted. The following findings are given based on

the analysis of the data obtained through survey.

5.1 To study the different aspects of HR outsourcing

To study the different aspects of HR Outsourcing, the questions 1 to 3 & 7 to 8; from the

questionnaire have been used to collect the required data and information on the basis of

which the following facts have been observed about the different aspects of HR Outsourcing.

Most of the respondents belong to large organizations but small & medium enterprises

(SMEs) also have a significant representation and the majority of HR Managers feel that HR

Functions should be outsourced.

Most of the organizations are outsourcing a significant no. of manpower which is up to 5000

and even more than 5000. Small and medium size enterprises (SMEs) are also outsourcing a

considerable amount of HR, which comes under the range of 100 to 1000.

HR Outsourcing is an answer to avoid high labour cost & expensive technology.

HR outsourcing is a viable choice for small to mid-sized businesses to limit staffing burdens

while maintaining high quality HR functions.

HR outsourcing can provide services & highly trained professionals that businesses need

often with significant cost savings over hiring full time HR staff.

As far as the legal service agreement standard included in HR Outsourcing contract is

concerned, the Issue resolution, had been the most important legal service agreement

standard of HRO contract. However employee satisfaction & delivery of data had also been

the important factors of this issue of HR outsourcing.

78

5.2 To study the important reasons for HR Outsourcing

To know the important reasons for HR Outsourcing, the question no.5 from the questionnaire

has been used to collect the required data and information on the basis of which the

following facts have been observed about the important reasons for HR Outsourcing in the

order of rating, merit and significance.

A) The most important reasons for HRO are: (B) the other important reasons for HRO

are:

To save cost *To achieve better ROI

To save time *To increase capacity of organization

To increase productivity *To gain expertise support

To gain tax benefit *To improve the quality of service

To improve levels of performance * To improve efficiency

5.3 To study the important factors responsible towards choosing a third party supplier for

HR Outsourcing.

For this purpose question no.6 has been used from the questionnaire to collect the required data

and information on the basis of which the following facts have been observed in relation to the

important reasons for choosing a third party supplier for HR Outsourcing in the order of rating,

merit and significance.

Service Quality

Existing Relationship

Lowest Cost

Strong HR Process Expertise

Strength In Customized Solution

In this reference, a relevant factor was noted that though the lowest cost was considered as an

important factor in choosing the vendor or third party supplier for outsourcing different HR

Functions but most of the managers gave top priority to the quality of service and their existing

relationship with the vendor.

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5.4 To study the major HR functions being outsourced in the Indian industry either

completely or partially

For this purpose questions 4 & 9 from the questionnaire have been used to collect the required

data and information on the basis of which the following facts have been observed in relation to

the major HR functions being outsourced in the Indian industry either completely or partially in

the order of rating, merit and significance.

The most commonly outsourced HR functions by most of the organizations & companies were

Recruitment, Payroll Processing and Tax Management. The next most common category of

outsourced HR functions was Training & Development, Maintenance of Personal Records,

Performance Management and Employment Law & Regulatory Compliance.

The major HR functions which are completely outsourced by different organizations are

recruitment, training & development, payroll processing &Tax management

The HR Functions which are Partially Outsourced are Employment Law & Regulatory

Compliance, Performance Management, Maintenance of Personal Records, and Manpower

Planning and Conducting Employee Survey.

5.5 To study the impact of HR outsourcing on various HR functions & on the effectiveness

of the HR department.

For this purpose question 10 from the questionnaire have been used to collect the required data

and information on the basis of which the following facts have been observed in relation to the

impact of HR outsourcing on the various HR functions & on the effectiveness of the HR

department in the order of rating, merit and significance.

HR Outsourcing is a boon for enhancing various organizational capacities and for overall

improvement of different HR functions of different organizations according to their various

needs & requirements

HR Outsourcing has an Excellent Positive Impact on:

Effectiveness of Training

Employee Development

Business Performance

80

HR Outsourcing has a Very good Positive Impact on:

Employee Moral & Motivation

Employee Job fit

Employee Satisfaction

Employee Performance

Employee & Organization Co-Ordination

5.6 To study the co-relation between HR Outsourcing & IT industry

For this purpose questions 11 and 12 from the questionnaire have been used to collect the

required data and information on the basis of which the following facts have been observed with

reference to the co-relation between HR Outsourcing & IT industry.

Majority of HR Managers are of the opinion that to improve the condition of the IT

industries, HR Outsourcing is essential.

Majority of HR Managers agreed with the fact that both HR outsourcing & IT Industries

may be benefitted by mutual co-operation & co-ordination because they are inter-

dependent and inter-related.

that HR Outsourcing is very effective in controlling the rate of attrition in the IT sector

5.7 To study the effectiveness of HR function that is being outsourced.

For this purpose question 13 from the questionnaire has been used to collect the required data and

information on the basis of which the following facts have been observed with reference to the

effectiveness of HR function that is being outsourced in the order of rating, merit and

significance.

HR Outsourcing has proved to be a boon in completing the different tasks, objectives and

needs for which they have been assigned. 78% HR Managers have rated its efficiency as

Excellent, 11% have rated it as Very Good, 7% have rated it to be good and the rest 4%

have rated it as Average in performance. In no case Deterioration was observed.

81

CHAPTER-6

SUGGESTIONS

AND

CONCLUSIONS

82

SUGGESTIONS

On the basis of the present study, the following recommendations are suggested for a successful

HR outsourcing:

The outlook of the Indian industry is gradually shifting from anti to pro towards HR

outsourcing, but there is still a long way to go as far as trusting an outside organization

(vendor). The companies need to build a relation of trust and understanding with total

communication as the base. This would help to serve the interest of both the parties better

and to a greater extent.

In terms of effectiveness, it is important for the company to be engaged continuously with

the vendors in order to succeed. Unless one engages with the vendor upfront to explain the

requirements and expectations in detail, it is difficult to get efficient results from outsourced

operations. Accountability is the key success factor.

Fortnightly or monthly meetings should be held with the vendors in order to understand the

level of progress as well as to assess the needs of the vendors. Understanding the business

from the vendor’s point of view is essential for the success of any outsourcing contract.

Compensation of the employees is a major factor which should be kept in mind before

outsourcing. The amount of compensation has a significant impact on the effectiveness of the

HR functions. For example as the avg. Monthly salary increases the effectiveness of the

outsourced recruitment with respect to the level of psychological contract proportionately

increases. So in such cases companies paying higher compensation can outsource their

recruitment function to a vendor for greater effectiveness.

The outsourcer should exercise great care while engaging a vendor. This task will largely

determine the success of the partnership. The task may be entrusted to a consulting company

or be done in-house. In the latter, the outsourcer can form a team to select the vendor

Based on the analysis it is important to device a proper reporting relationship with the vendor

for an on-going and transparent communication process to make HR outsourcing more

effective. For this purpose, first shortlist probable candidates and brief them clearly about the

job expectations. These expectations have to be realistic and achievable. This will in turn

help the service provider to assess whether it can measure up to those expectations.

Provide enough information to the prospective service provider with regard to the scope of

the relationship, the time- frame, and the price that is being offered in return for the services.

83

Vague issues should be clarified and prospective vendors should be asked to provide

references of clients whom they have served so as to get in touch with them and seek their

opinion about their services & performance.

For effective HR Outsourcing, the client company should keep in the mind the technical

know- how and expertise available with the vendor. Experience is also a factor that should be

considered. Pricing or the cost factor largely determines the success of outsourcing.

However, a low cost factor alone should not be the criterion for selection because the quality

of service has a great impact on the success of client.

The HR vendor performs specialized operations to keep up its market competitiveness; so the

employees of the vendor may need training to spruce up their skill. It will be in the client

company's interest to ensure and provide training to the outsourced employees. Legal issues,

labor laws and taxation policies all have a major role in determining the success of

outsourcing so the terms and condition of the relationship should be mutually agreed and

written down in order to avoid confusion or vagueness.

It would be better for the client to entrust a small project to the service provider initially. This

will reduce the extent of risk and give a fair idea of how well the service provider is going to

perform.

Cultural differences are likely especially when it comes to offshore outsourcing. The

relationship between the outsourcer and the service provider is best served when these

differences are identified, understood and respected. Programs to bridge the gap should be

held where both sides can come closer.

84

CONCLUSION

This research helps to gain an insight to the contemporary developments in the field of HR

outsourcing in the Indian industry. It helps to clarify many myths about HR outsourcing and also

brings up interesting facts about the same. Most of the respondents belong to large organizations

but small and medium sized enterprises (SMEs) also have a significant representation. Most of

the organizations are outsourcing a significant no. of manpower which is up to 5000 and even

more than 5000. Small and medium size enterprises (SMEs) are also outsourcing a considerable

amount of HR, which comes under the range of 100 to 1000.

The most important reasons for HR outsourcing are to "save cost" or to reduce costs, to “save

time”, to gain tax benefit, to increase the capacity of organization, to achieve better ROI (Return

On Investment), to increase productivity, to gain expert support, to improve quality of service, to

improve level of quality & performance and to improve efficiency. The important reasons for

choosing a third party supplier for HR Outsourcing in the order of rating, merit and significance

are Service Quality, Existing Relationship, Lowest Cost, Strong HR Process Expertise and

Strength in Customized Solution.HR Outsourcing is essential to improve the condition of the IT

industries. HR outsourcing & IT Industries both are benefitted by mutual co-operation & co-

ordination because they are inter-dependent and inter-related. It is very effective in controlling

the rate of attrition in the IT sector.

HR Outsourcing is a very effective tool for enhancing various organizational capacities and for

overall improvement of different HR functions of different organizations according to their

various needs and requirements and also in completing the different tasks, objectives and goals

for which they have been assigned. It has an Excellent Positive Impact on Effectiveness of

Training, Employee Development and Business Performance and it also has a very good positive

impact on Employee Moral & Motivation, Employee Job fit, Employee Satisfaction, Employee

Performance and Employee & Organization Co-Ordination.

The present study has been conducted on a smaller sample size due to time constraint and the

respondents were from specific areas and did not cover whole of India and the primary data is

based on the responses to the questions which can be influenced by personal bias and subjective

perception of the individuals and the present study is limited only to IT Industry.

85

SUGGESTIONS FOR FURTHER RESEARCH

Although a lot of work has been done in similar areas before, this research is an effort to look at

the things from a fresh and a different angle. Thus this research work can be used as a source of

secondary data by other researchers as it contains significant amount of analysis in areas which

have not been explored much till now. It can also be used as a tool for comparative analysis of

the past and present HR outsourcing scenario and to understand the changes that have taken

place. It is also suggested that further research studies should be conducted on this topic, on a

larger scale with a bigger sample size, including more industrial sectors which outsource

different HR Functions like ITES, Logistics, Healthcare, financial Services and Manufacturing

Sector in India.

86

BIBLIOGRAPHY

87

BIBLIOGRAPHY

Books:

Armstrong, M “A Handbook of HR management practices”, 8th edition 2002

Journals:

Bondarouk, T.V. and Ruel, H.J.M (2009) “Electronic Human Resource Management, the

International Journal of Human Resource Management.”

Kern, T and Blois, K. (2002) “Norm development in outsourcing relationship, Journal of

Information Technology”

Logan, M.S. (2000) “Using Agency Theory to design successful outsourcing relationships,

International Journal of Logistics Management”

Reports & Reviews:

Hesketh, Anthoy, A report on “Outsourcing the HR Function- Possibilities & Pitfalls”

Klementive, Alexey “Society OF HR Management- Outsourcing Survey Report about HR

Outsourcing”

McFarlan, F.W. and Nolan, R.L (1995) “How to manage an IT outsourcing alliance, Sloan

Management Review”

Nahapiet, J. and Ghoshal, S. (1998) “Social capital, intellectual capital, and the organizational advantage, Academy of Management Review”

Willcocks, L., Hindle, J., Feeny, D., and Lacity, M. (2004). “IT and Business Process Outsourcing: The Knowledge Potential, Information Systems Management”

Willcocks, L.P., and Kern T. (1997). A report on “IT Outsourcing as Strategic Partnering.”

Websites:

www.google.com

www.hrmgt.com

www.shm.org (Society for Human Resource Management)

www.younghrmanager.com

www.hr.com

www.hrmgt.com

88

ANNEXURE

89

ANNEXURE

Questionnaire

On

THE IMPACT OF HR OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY

(This Questionnaire is being prepared purely for academic research purpose by Mr.Nirvan; a MBA

Final Semester Student of Acharya Institute of Management And Sciences (AIMS), Peenya

Bangalore. This research work is done to complete my dissertation titled “THE IMPACT OF HR

OUTSOURCING ON VARIOUS HR FUNCTIONS WITH REFERENCE TO IT INDUSTRY” for

the degree of MBA from Bangalore University. Respected Sir/ Ma’am I need your valuable time &

support to complete my project, so please answer the following questions by your experienced &

learned responses. The Data collected through this questionnaire will be kept completely

confidential.)

Designation- Department-No. of years of experience-Name of organization/company-

1) What is the total manpower strength in your organization?*Please mention the approximate No.-

2) Has your organization outsourced manpower? Yes No

3) Please specify the approximate no. of people outsourced by your organization?100-500 501-1000 1001-5000 5001 & AboveOthers, please specify-

4) What are the major HR functions outsourced in your organization?(Please tick in the given boxes & also rate the outsourced HR functions from 1 to 5) 5-essentially outsourced, 4-frequently outsourced, 3-sometimes outsourced, 2-rarely outsourced,1-never outsourced

Payroll processing 1 2 3 4 5Training & Development 1 2 3 4 5Recruitment 1 2 3 4 5

90

Manpower planning 1 2 3 4 5Employment Law & Regulatory Compliance 1 2 3 4 5Tax Management 1 2 3 4 5Performance Management 1 2 3 4 5Conducting Employee Survey 1 2 3 4 5Maintenance of Personal Records 1 2 3 4 5Outsourcing Entire HR Functions 1 2 3 4 5

5) Please rate the following reasons for outsourcing HR functions by your organization from

1 to 5?

5-most important, 4-much important, 3- important, 2-less important, 1- least important

To save cost 1 2 3 4 5

To save time 1 2 3 4 5

To increase the capacity of the organization 1 2 3 4 5

To gain tax benefit 1 2 3 4 5

To improve levels of quality & performance 1 2 3 4 5

To improve efficiency 1 2 3 4 5

To increase productivity 1 2 3 4 5

To improve quality of service 1 2 3 4 5

To achieve better ROI 1 2 3 4 5

To gain expertise support 1 2 3 4 5

6) When choosing a third party supplier for HR outsourcing; what factors are most

important to you?

Please rate them in order of their importance from 1 to 5.

5-most important, 4-much important, 3- important, 2-less important, 1- least important

Lowest Cost 1 2 3 4 5

Service Quality 1 2 3 4 5

Existing Relationship 1 2 3 4 5

Strong HR Process Expertise 1 2 3 4 5

Strength in Customized Solutions 1 2 3 4 5

Other factor if any please specify- 1 2 3 4 5

91

7) What is your opinion about different aspects of HR outsourcing in relation to various HR functions?Please rate them from 1 to 5.

Aspects Opinion With Rating 5 – 1a) Is HR outsourcing is the answer to avoiding high labour

cost & expensive technology?1 2 3 4 5

b) Is HR outsourcing is a viable choice for small to mid-sized businesses to limit staffing burdens while maintaining high quality HR functions?

1 2 3 4 5

c) Is HR outsourcing can provide services & highly trained professionals that businesses need often with significant cost savings over hiring full time HR staff?

1 2 3 4 5

5-Completely agree 4- Mostly agree 3- Agree 2-Partially agree 1- Disagree

8) What is the legal service agreement standard included in your HR outsourcing contract?

Employee SatisfactionIssue ResolutionDelivery of DataSystem Availability

9) Please specify the different HR functions which are being completely outsourced or partially outsourced or not outsourced in your organization:

Completely Partially Not Outsourced Payroll processingCompletely Partially Not Outsourced Training & DevelopmentCompletely Partially Not Outsourced RecruitmentCompletely Partially Not Outsourced Manpower planningCompletely Partially Not Outsourced Emp. Law & ComplianceCompletely Partially Not Outsourced Tax ManagementCompletely Partially Not Outsourced Performance ManagementCompletely Partially Not Outsourced Conducting Emp. SurveyCompletely Partially Not Outsourced Maintenance of P-Records

10) What is your opinion about the Impact of HR outsourcing on various HR Attributes?(Please rate them from 1 to 5)

5-Excellent 4- Very Good 3- Good 2-Average 1- Poor

HR Attributes Impact with rating 5 to 1Excellent Very Good Good Average Poor

Business performance 5 4 3 2 1Employee & Organization Co-ordination 5 4 3 2 1Employee Job-Fit 5 4 3 2 1Employee Performance 5 4 3 2 1Employee Development 5 4 3 2 1Employee Moral & Motivation 5 4 3 2 1Employee Satisfaction 5 4 3 2 1

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Effectiveness of training 5 4 3 2 111) Do you agree that HR needs to help IT Organizations to evaluate their outsourcing

options with reference to their HR policies, practices & organizational talent needs?

YesNoCan’t Say

12) Do you think that HR outsourcing can help to reduce the rate of attrition in IT organizations?

YesNoCan’t Say

13) How well have your HR outsourced functions fulfilled their objectives?

ExcellentVery Good GoodAverageDeteriorated

Thank You!

93

Documents

project on hr outsourcing on various functions in it industrya