Human Resources Outsourcing

Topics: Management, Outsourcing, Service level agreement Pages: 9 (2467 words) Published: March 28, 2009

In this globalization era, Human Resource Outsourcing (HRO) has come to the surface of business life as a solution. When Multi-national companies decided to outsource its Human Resources Operations, they had only one major goal in mind and that is cutting costs. They have decided to outsource end-to-end human resource operations to third party and today it has become the greatest of exposures.

This interesting solution is the main reason why this paper was being written. This paper will discuss about the real concept of outsourcing especially human resource outsourcing, advantages and disadvantages of outsourcing, and so forth. By discussing all that, it will be clear why human resource outsourcing is quite a trend among Multi-national companies these days.


It is important to know the definitions of outsourcing before we go to further discussion in this paper. Outsourcing is about using the service of third party in doing particular role or function. Organizations usually seek outsourcing as efficient and cost effective ways to handle global HR operations.

In defining outsourcing, every individuals and institutions has their own definition; therefore there are lots of definition that is being quoted in this paper, as follows: 1.According to Wikipedia, outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering firm or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources. 2.Outsourcing is, in simple words, giving the responsibility and the management of an activity to an external supplier (manufacturing activities) or provider (service activities), instead of doing it internally. It is different from subcontracting, which implies an obligation of means, whereas outsourcing is based on an obligation of results. It must also not be confused with downsizing, which consists in increasing productivity, efficiency, and competitiveness by reducing the size of a company (Renaux, 2003) 3.Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Outsourcing is a trend that is becoming more common in information technology and other industries for services that have usually been regarded as intrinsic to managing a business (CIO, 2007)

Outsourcing takes place when an organization transfers the ownership of a business process to a supplier. The key to this definition is the aspect of transfer of control. This definition differentiates outsourcing from business relationships in which the buyer retains control of the process or, in other words, tells the supplier how to do the work. It is the transfer of ownership that defines outsourcing and often makes it such a challenging, painful process. In outsourcing, the buyer does not instruct the supplier how to perform its task but, instead, focuses on communicating what results it wants to buy; it leaves the process of accomplishing those results to the supplier. (Peter Bendor-Samuel, 2009)

According to all definitions above, with using simple words, the definition for outsourcing would be that outsourcing is the concept of taking internal company functions and paying an outside firm to handle them. Why do companies use outsourcing? Well there are three major reasons for that answer. The first reason is to save money in terms of lowering costs. Second, to improve quality. The third is to free company resources for other activities such as focusing more on competencies.

The concept of outsourcing began with the data-processing industry and today it has spread to vase areas, which include of tele-messaging and call centers. It would not all be wrong to say that...

References: Dessler,G. Human Resource Management (Eleventh International Edition). Singapore: Pearson, 2008.
Shiravastav,P. Outsourcing. 2007 (journal)
Norwood et al. Off-Shoring: An Elusive Phenomenon. 2006
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