HR BPO market to reach US$24.6B

The worldwide market for business process outsourcing (BPO) for human resources (HR) is expected to reach US$24.6 billion in 2006, an increase of 4.7 percent from US$23.5 billion in 2005, according to Gartner.

But growth is starting to slow, the analyst said, as some vendors struggle with profitability and try to improve bottom-line results.

Gartner said more companies are looking to use HR outsourcing as a way of cutting costs by automation.

In Western Europe, HR BPO revenues are expected to reach US$4 billion in 2006, an increase of 6.5 per cent from 2005. The slightly higher growth in the European market is helping to offset slower rises at a global level, it said.

The overall worldwide BPO market is expected to reach US$134.7 billion in 2006, an increase of 8.3 per cent over 2005.

Payroll services and benefits administration services comprise the largest segment (almost three-quarters) of the total worldwide HR BPO market in 2006.

The remainder of the market is made up of education and training, hiring and recruiting, and personnel administration services.

But Gartner said companies' fear of losing control is a major obstacle to BPO adoption. Companies are warned to "weigh strategies to displace internal functions and staff" before adopting BPO models.

Dan Ilett of Silicon.com reported from London.