India has always been the first choice for outsourcing due it its geographical advantage, high level education, its capability to work hard and smart and lower cost of operations.  Being a co-founder of an IT services company, I am certain that the most critical question for Indian IT and BPO industry would be “Is outsourcing recession proof” I wish had the answer.  My belief is that the answer has to be yes, primarily because though it’s important to ensure there are jobs available for local people but at the same time in current economic scenario it’s important for the companies to stay competitive.  So for companies/ countries that outsource it’s a catch 20 situation and a double edge sword.  If they decide to create government policies which will ensure that local jobs stay local then the local companies tend to lose the chance of being competitive globally. These companies have huge scale of operation would really find it difficult to sustain.  As a result i feel outsourcing is recession proof and in fact i would like to think that outsourcing will see an increase as recession will force companies to cut the fat and become lean and mean to stay competitive.

My gut feel is that during economic downturn people will outsource more and the primary driver would be to cut down costs.  Increasingly we will see a change in the mental models of companies and vendors alike.   The forces that will initiate this change are:

Don’t forget to download “2009 the year of outsourcing dangerously” the Black book of outsourcing  at the end of the article.

Economic pressure on companies: The government and general public would try and create policies and procedures to try and protect local jobs. At the same time companies would want to outsource more and more to save cost.  It would be interesting to see how these companies will beat this dilemma.

Deals getting smaller: I foresee that increasingly deal will get smaller but grow in numbers as companies will try and adopt a mix between non-core and absolute non-core and also create a healthy mix between keeping jobs local and getting it outsourced.

Falling margins for vendors: The dollar rupee equation is anyways enabling companies to push vendors to lower their prices. Coupled with smaller deals and current situation vendors will be forced to reduce their margins to grab these deals.

Terms and condition: Large companies with comparatively bigger outsourcing deals will arm twist their vendors for stringent SLA and Deliverables. So vendors will have to deliver more at lower cost to get deals and stay competitive themselves.

Opportunity for smaller players:  The Indian IT services industry is largely governed by the big 5 as far as bigger deals are concerned but the new cost structures and stringent deliverables there will be an opportunity for smaller players to compete with the biggies.

In current scenario everyone is thinking to outsource or not to outsource. There are always 2 sides to a coin and similarly there are people who come from different school of thoughts. I have done some preliminary research which suggests an increase in Outsourcing deals.

Outsourcing in the news (2009)

The Good

• Hindustan times in partnership with Google have developed an election portal to offer information about the constituencies.
• Xerox will pay $100 million over six years to outsource data-center services to HCL Technologies.
• JPMorgan to up outsourcing to India by 25%
• IT majors sign new deals at a discount
• Recession-hit Japan turns to Indian IT Co’s
• India will remain a top outsourcing destination because of its tech-savvy and English-proficient urban workforce whose wages are much lower than their western counterparts says Moody’s
• Outsourcing will continue to grow in 2009: Gartner
• AstraZeneca outsources IT to India’s Infosys
• Premier Foods renews outsourcing deal

The not so good

• IT outsourcing prices will fall – Gartner
• Recession may drive re-thinking of some outsourcing deals
• India’s Outsourcing Woes

Download “2009 the year of outsourcing dangerously” the Black book of outsourcing.

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This article deals with what really is recruitment process outsourcing and why RPO is the latest buzzword amongst people involved in attracting, hiring, and retaining manpower.   In last few years I have been actively involved in the RPO space and would like to share my views via this article.

To me outsourcing of HR services is a very old concept, in early days and even today most companies outsource their sourcing of manpower to recruitment agencies and staffing & manpower consultants. Gradually it moved from sourcing to non-core processes like payroll processing, fit gap analysis, reference checks and to a certain extent on-boarding.  Smart marketers at that time labelled it as human resource outsourcing. HRO generically deals with outsourcing full or part (non-core) processes to a specialist vendor.  RPO in its basic essence is an integral part of HRO where the recruitment process (in part or full) of the organization is outsourced.

In current market scenario Recruitment process outsourcing is beginning to catch on as large companies strive to improve their bottom lines and maintain quality at the same time.

RPO definition: what is RPO?

According to Wikipedia, Recruitment Process Outsourcing (RPO) is a form of business process outsourcing (BPO) when an employer outsources or transfers all or part of the recruiting process to an external service provider.

Why RPO?

RPO just like any other outsourcing arrangement is a mindset and not just another way to reducing costs. Businesses can derive substantial benefits if RPO is adopted as a long term strategy to achieve operational excellence and high degree of cost savings.

Major reasons why my clients have chosen RPO are:

• Create operational efficiency via addressing the shortage in skills and expertise within the organization
• Achieve cost benefits by outsourcing non core functions.
• Focus organizational resources on core functions
• Reduce management and overhead cost
• 24×7 recruitment operations due to geographical advantage of India

The RPO mindset:

As explained earlier, RPO is a mindset and companies planning to adopt RPO as one of their strategic initiative should be ready for an uphill challenge right from having top management’s buy in, setting right expectation internally and to ensure transparency with the vendors.

1. Support of top management.

Outsourcing the recruitment process will have an organization wide impact hence buy-in of top management is an absolute must.  Unless the top management has full faith and is driven at strategic level RPO will not yield desired results.

2. Expectation setting

RPO will bring in a lot of changes in the way the organization functions as a result it is critical to set right expectation amongst all stake holders be it your employees, your end clients and your RPO vendor. One has to be very clear on what is expected out of the whole RPO activity.

3. Identify functions to outsource

It’s important to identify the right activities to outsource.  There are vendors who are capable enough to take care of your entire recruitment life cycle and would promise the world to you.  I would suggest start with absolute non -core activities like sourcing and then move up the value chain.

4. Measuring

Once the RPO activity is on its way it becomes important to measure the effectiveness of RPO.  Don’t start immediately talking about ROI and set metrics to measure substantial cost saving and operational efficiency.  I would suggest look at smaller and more direct parameters like Time to hire ratio, source to submission ratio, submission to interview ratio and interview to offer ratio

RPO benefits:

• Cost savings
• Reduce time to hire
• Focus on core activities (interviewing and on-boarding)
• Employee retention
• Customer satisfaction
• HR effectiveness
• Better utilization of resources
• Improve quality of hires.

I can certainly say that in my interactions most companies who have tried RPO are happy with their decision and adopting RPO has helped them to improve service, save time and money and since I look at it from Onsite and offshore perspective it also derives immediate financial benefits as well.

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