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The human resource outsourcing (HRO) market size is forecast to increase by USD 13.65 billion at a CAGR of 5.65% between 2022 and 2027. The growth of the market depends on several factors, including the digitization of HRO, the growing demand for neo-sourcing, and the need to improve the HR value chain. Human resource outsourcing is the process of subcontracting human resource functions to an external supplier. The market size is calculated based on the revenue generated from services, including multi-process human resource outsourcing (MPHRO), recruitment process outsourcing (RPO), benefits administration outsourcing (BAO), payroll outsourcing (PO), and learning services outsourcing (LSO). This market research and growth report also includes an in-depth analysis of drivers, trends, and challenges. Furthermore, the report includes historic market data from 2017 to 2021.
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The market encompasses third-party organizations providing specialized expertise in HR tasks, including performance management functions and recruitment analytics. This market caters to various industries, such as the IT and hospitality sectors, leveraging technological advancements like IoT, cloud computing, and big data to ensure efficiency and scalability. These agencies offer services like Benefit Administration Outsourcing, LSO, and Payroll Outsourcing, enabling industrialization and market development opportunities. HRO also includes talent acquisition and employee engagement strategies. The Service Level Agreement (SLA) is a crucial aspect, ensuring quality and reliability in HR services. Digitalization through digitization and augmented reality further enhances HR processes.
The digitization of HRO is driving market growth. The market growth is attributed to the digitization of HR functions in various industries, including BFSI, IT, healthcare, retail, hospitality, and manufacturing. External service providers and third-party organizations offer HR tasks, performance management functions, and feedback mechanisms to HR managers, enabling them to manage complex tasks and employee performance efficiently. Cost savings, specialized expertise, and improved efficiency are key benefits of outsourcing HR operations. The IT sector, hospitality sector, and other industries leverage agencies for recruitment analytics, benefit administration outsourcing, and learning services outsourcing. Technological advancements, such as IoT, cloud computing, big data, and cloud-based services, facilitate scalability and reduce administrative burden. However, privacy and security concerns may pose challenges to market development opportunities. The recruitment process is being transformed through the use of social media and advanced performance appraisal systems. The market is expected to experience significant growth during the forecast period due to industrialization, service level agreements, and the financial imbalance and market distortion in the labor market.
The rise in the adoption of recruitment analytics is a key trend in the market. Human resource functions are increasingly being outsourced to external service providers and third-party organizations. HR tasks such as performance management, appraisal systems, and feedback mechanisms are efficiently handled by external HR professionals. Analytics solutions, utilizing statistical and scientific methods, offer insights derived from raw data, enabling organizations to recruit top talent and manage recruitment processes more effectively. Cost savings, improved efficiency, reduced administrative burden, and scalability are key benefits. The IT sector and hospitality industry are major adopters, with recruitment analytics, outsourcing agencies, IoT, cloud computing, big data, cloud-based services, social media, and payroll outsourcing driving market development. However, privacy and security concerns persist. Technological advancement and digitization continue to shape the landscape, with benefit administration outsourcing, learning services outsourcing, and BSFI sectors also adopting these trends. The agreements ensure service level agreements, addressing potential financial imbalances and market distortion.
The increased dependence on outsourcing agencies is challenging market growth. The market refers to the delegation of HR functions to an external service provider or third-party organization. This approach allows companies to offload HR tasks and operations, enabling cost savings, improved efficiency, and reduced administrative burden. However, relying on the agencies for performance management functions, feedback mechanisms, and employee performance can lead to a loss of control and potential dissatisfaction among employees. Outsourcing HR functions can offer specialized expertise, scalability, and benefits in sectors like IT and hospitality. However, concerns regarding privacy and security, IoT, cloud computing, big data, and cloud-based services, as well as social media and recruitment processes, must be addressed. The agencies may not align with a company's business standards, missions, or Service Level Agreements, leading to market development opportunities, industrialization, and financial imbalance. Benefit Administration Outsourcing, Learning Services Outsourcing, and Payroll Outsourcing are popular HRO services. Technological advancement and digitization have significantly impacted the market, with BSFI, healthcare, and other industries adopting these trends. These agencies must ensure compliance with regulations and provide customized solutions to meet clients' unique needs.
This market report extensively covers market segmentation by end-user (large enterprises and SMEs), service (PO, BAO, MPHRO, RPO, and LSO), and geography (North America, Europe, APAC, South America, and Middle East and Africa). HRO involves large enterprises engaging external service providers or third-party organizations to manage HR tasks and operations. This collaboration brings in external HR professionals, performance management functions, and feedback mechanisms to enhance employee performance. Cost savings, specialized expertise, improved efficiency, and reduced administrative burden are key benefits. HR functions such as recruitment analytics, agencies, and payroll outsourcing are common in sectors like IT and hospitality. Technological advancements like IoT, cloud computing, big data, and cloud-based services facilitate this process. However, concerns over privacy and security persist. Market development opportunities exist in areas like benefit administration outsourcing, learning services outsourcing, and BSFI, healthcare, and payroll outsourcing. Technological advancements and digitization continue to shape the HRO landscape. Service Level Agreements, financial imbalance, and market distortion are challenges to consider.
The market share growth by the large enterprises segment will be significant during the forecast period. Large enterprises comprise more than 5000 employees. Moreover, they constantly seek opportunities for collaboration and hire industry leaders. Additionally, they ensure that they hire individuals from diverse organizations with operational footprints in the Americas, Europe, and Asia.
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The large enterprises segment showed a gradual increase in the market share of USD 30.50 billion in 2017 and continued to grow by 2021. These act as a vibrant pathway for HRO to drive innovation into the enterprise which allows more companies to participate in the HRO provided by these large organizations. This will further increase the popularity of this segment in the market and accelerate segment growth during the forecast period.
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North America is estimated to contribute 43% to the growth of the global market during the forecast period. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period. The market in North America is experiencing growth in the mid-market and transatlantic segments, driven by advanced economies generating and consuming large volumes of data. Augmented Reality and recruitment automation are transforming talent acquisition. Employee engagement, workforce management, training, and development are key areas of focus. Organizational culture, performance metrics, succession planning, diversity, and inclusion are essential components of HRO. Change management, strategic workforce planning, and labor laws are critical considerations. Data security is paramount in HRO, with talent management, onboarding, offboarding, workforce analytics, remote work solutions, and global workforce management shaping the industry. HR consulting, employee relations, HR software solutions, workforce optimization, and HRO trends are shaping the future of HRO. However, US anti-outsourcing legislation restricts public sector organizations from business process services. Key areas include leadership development, performance metrics, workforce diversity, and HR consulting.
The market report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Adecco Group AG - The company offers human resource-outsourcing, which provides innovative solutions that enable employers to optimize their workforces and employees to take control of their careers.
Aon plc - The company offers human resource outsourcing-services such as payroll, benefits administration, talent management, and retirement planning.
Automatic Data Processing Inc. - The company offers human resource-outsourcing that provides payroll, time and attendance, talent, benefits and insurance, HR services, HR-outsourcing, and PEO, integrations, and app marketplace.
The research report also includes detailed analyses of the competitive landscape of the market and information about 20 market companies, including:
Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.
Human Resource Outsourcing (HRO) is a significant business practice where companies contract external service providers to manage and execute HR functions. Functions may include recruitment, payroll, benefits administration, and training. The market is expanding due to various factors such as cost savings, improved efficiency, and focus on core business activities. Companies seek to leverage the expertise of HRO providers to manage complex HR processes and stay competitive. The HRO market is driven by the increasing adoption of cloud-based HR solutions and the growing trend towards flexible work arrangements. Additionally, the market is influenced by the need for compliance with labor laws and regulations. HRO providers offer a range of services, including full-service outsourcing, co-sourcing, and project-based outsourcing. The market is expected to grow at a steady pace in the coming years, driven by the increasing demand for HR services and the need for businesses to optimize their HR functions.
The market forecast report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in USD Billion for the period 2023 to 2027, as well as historical data from 2017 to 2021 for the following segments.
Market Scope |
|
Report Coverage |
Details |
Page number |
176 |
Base year |
2022 |
Historic period |
2017-2021 |
Forecast period |
2023-2027 |
Growth momentum & CAGR |
Accelerate at a CAGR of 5.65% |
Market growth 2023-2027 |
USD 13.65 billion |
Market structure |
Fragmented |
YoY growth 2022-2023(%) |
4.79 |
Regional analysis |
North America, Europe, APAC, South America, and Middle East and Africa |
Performing market contribution |
North America at 43% |
Key countries |
US, China, Japan, Germany, and UK |
Competitive landscape |
Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks |
Key companies profiled |
Accenture Plc, Adecco Group AG, Aon plc, Automatic Data Processing Inc., Capgemini Service SAS, Capita Plc, Ceridian HCM Inc., CGI Inc., FMR LLC, Genpact Ltd., HCL Technologies Ltd., Hewlett Packard Enterprise Co., Hexaware Technologies Ltd., Infosys Ltd., International Business Machines Corp., ManpowerGroup Inc., MHR International UK Ltd., Randstad NV, UKG Inc., and Wipro Ltd. |
Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, and Market condition analysis for the forecast period. |
Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
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1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by End-user
7 Market Segmentation by Service
8 Customer Landscape
9 Geographic Landscape
10 Drivers, Challenges, and Trends
11 Vendor Landscape
12 Vendor Analysis
13 Appendix
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