- Offshore Outsourcing: Fad or Trend?
- Trend #1: Offshore Business Models Are Growing
- Trend #2: Outsourcing Firms Are Offshoring
- Trend #3: Product Engineering Is Headed Offshore
- Trend #4: Offshore HR and Transaction-Processing Apps Gain Momentum
- Trend #5: New Offshore Project-Management Skills Are Needed
- Conclusion
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Trend #4: Offshore HR and Transaction-Processing Apps Gain Momentum
Companies experienced and comfortable with offshoring business processes often begin to wonder what other noncore areas of their operations they can send offshore. Many people have heard about corporations offshoring software development and customer service, but offshore human resources and transaction-processing applications are fairly new areas.
While outsourcing basic HR processes such as payroll, HR call centers, and recruiting has been an accepted best practice for decades, only in the last few years has the necessity of shedding entire noncore functions moved to the forefront of the outsourcing discussion. As more companies accept the notion of HR outsourcing, mega-deals as large as the ones that occurred previously in IT outsourcing are starting to appear. A case in point is Procter & Gamble (P&G) and IBM's 10-year, $400 million global agreement for HR services. In January 2004, IBM assumed operational responsibility for three of P&G's HR shared-services delivery centers in Costa Rica, England, and the Philippines. IBM will absorb about 800 P&G employees.
Back-office transaction processing is also moving offshore. Residential and commercial mortgage processing, insurance claims processing, medical transcription, and content management are a few of the traditional back-office tasks that companies are offshoring. Swiss Re, for example, created a captive center in Bangalore, India, where it completes various administrative activities including technical reinsurance accounting, contract administration, claims settlement, and current account management.
What does this mean for you? If you're in a job that deals with paper-based transaction processing or HR call centers, chances are high that management is reviewing your job as a possible offshoring candidate. This trend is strongest in the financial services industries—insurance, banking, and mortgage processing—and will begin to make inroads into other industries in 2004. The good news for IT is the tremendous growth in document scanning, processing, and management applications to support the paper-based processes that go offshore.