Outsourcing continues to grow and accelerate, and the benefits and human resources (HR) area is predicted to enjoy a large growth rate in 2000. Bryan Doyle, business leader, benefit administration operations for Hewitt Associates, says the most significant development for outsourcing in general, as well as HR and benefits outsourcing, will be greater utilization of the Internet.
"I think it is going to change and enhance the customer experience. It will also allow providers to have broader relationships with clients and with business partners. In the case of Hewitt Associates, a benefit plan provider, we will see broader relationships with the plan participants that are in benefit plans."
Doyle says the Internet is a vehicle that allows work to be performed on an easier basis. With the Internet being a driver or enabler of broader working relationships, he says we will see more consolidation, more alliances, and more joint ventures. Hewitt was the first HR consulting firm to establish a presence on the Internet and the first to link HR, compensation, and benefit programs to improve business results.
On the international scene, the impact of the Internet is even greater. He explains that a primary influence on where outsourcing is going in the areas of HR and benefits depends on the specific laws in certain regions and countries. Outsourcing in other countries is also dependent on business practices and the way that companies treat their employees. "In countries like Japan, everyone is waiting to see what type of laws emerge--particularly in the defined contribution area," he explains. "Japan seems to be headed toward providing more choice to employees and more financial options in their benefit plans; but we are all watching to see how those laws emerge."
Although Hewitt is known for its innovative approaches and adopting advanced technology for its clients, Doyle says that Internet technology makes possible different ways to provide resources and to utilize resources. This is especially pertinent in countries outside the USA. For example, in the traditional manner of outsourcing, a company might need to have a call center in every region or every country. If, however, benefits administration is delivered through the Internet, it may be possible to have one call center in a region support a group of countries.
Focus on People
Doyle believes a great deal of outsourcing in 2000 will be focused on (HR) and benefits and that its primary driver is companies' realization that their most important assets are their people. "We've gone through the merger and acquisition mode and through spin-offs and investing in technology," he says. "But at the end of the day, companies are realizing that the way they are going to differentiate themselves in the marketplace is with their people. Pretty much everyone can get the same technology and infrastructure."
How companies treat their employees is of prime importance. He points out that outsourcing of HR and benefits allows companies to bring best-in-class solutions, which brings better benefits and a better experience to employees. Organizations gain a competitive advantage when they employ strategies that bring out the best in their people.
Doyle says that benefits outsourcing in 2000 will have buyers from two different categories of companies. Some companies have gone through the change to outsourcing and, for those, relationships are starting to evolve to the next generation. They talk about strategies to form a partnership. "Those companies talk about how we can better leverage the investment that we have made together," he says. "They also want us to help them make better health care and financial decisions, based on the technology and the services that we are providing." Many companies who have not yet outsourced their HR or benefit processes are now in the initial phase of a transformation mode.
Focus on Broader Areas
Some of Hewitt's existing clients, he says, are exploring broader outsourcing, talking about including all HR processes, rather than just the traditional ones. "We have a new hire center that we have implemented for a company that is in the Global 25 category," he comments. "But some of the other functions are less transactional and more integrated within other aspects of the business. So, while HR outsourcing is certainly a growth area, it has not been as clean-cut as the benefits area."
"The training function, the new hire function--those functions are hard to break up into easy-to-outsource entities because they tend to be shared with other things that the organization does," explains Doyle. Some of those functions, however, are easier to outsource for very large companies because of scale and size. "We expect some of those functions to fit well as an extension on what we are doing in benefits outsourcing," he says.
Doyle believes we will see government outsourcing picking up this year. He notes that Hewitt has seen more requests for proposals in the benefits area from several states to provide benefit administration services for state governments. On the federal side, he says it will be interesting to see how the national savings account concept evolves and if Social Security has a defined contribution component. "None of that has been decided yet, but I think it could drive some outsourcing in the future," he says.
There is a lot of attention and focus on business process outsourcing this year, and benefits outsourcing is a key component of that. Doyle points out that it is an indication of where outsourcing in general is headed. He believes outsourcing will continue to accelerate as companies focus on their core competencies and that companies will look to others to provide business operations support.