Gartner: HR outsourcing to grow 18 percent this year

Companies outsource their human resources (HR) functions more than any others and will continue to do so, according to Gartner, which predicted this week that HR outsourcing would grow 18 percent by the end of this year over last year.

HR business process outsourcing (BPO) revenue is set to grow to $46 billion in 2003, Gartner said, compared to $39 billion in 2002. What's more, the researcher predicted that the market would reach $51 billion by 2004 and represent 39 percent of all BPO revenue.

Businesses view HR outsourcing as less risky than outsourcing other critical practices, and see it as good value for money, Gartner said. Payroll and benefits services are the most popular outsourced HR practices and are driving the market growth, the researcher noted.

The recent squeeze on companies to cut costs amid the economic downturn has led them to sign more HR outsourcing contracts with immediate cost ramifications, the analyst company said. As companies see the benefits of these practices they will likely sign more long-term contracts, Gartner predicted.

While most of the HR services are currently priced on a utility basis, in 2004 more contracts will be signed that involve multiprocess services, the researcher said.