Human Resource Outsourcing in China Goes for Gold

For immediate release: The spotlight is on China like never before. In addition to hosting the Olympic games, Chinese economic growth in recent years has put it firmly on the map for the world’s global organisations. Today, sourcing advisory firm EquaTerra has published its white paper titled, Human Resource Outsourcing in China. The report provides a snapshot of the maturing human resource outsourcing (HRO) market in China today and an expert analysis of current and future trends. The author of the paper is EquaTerra’s Shanghai-based consultant, Vibhash Ranjan.

Key insights include:

An Overview of HRO in China

The recent spectacular growth in the Chinese economy is compelling foreign owned organisations based in China to adopt sophisticated HR related practices. Factors influencing the growth of HRO include rising labour costs, new types of employee supplemental benefits and a rise in the focus on employee engagement and talent management.

The market is witnessing rapid growth

In 2008 and 2009, the HRO market is expected to expand by at least 25 per cent. However, due to the prevailing operational complexities in China, most multinational companies choose to adopt the services of Chinese HR service providers such as FESCO or CIIC.

Drivers of HRO in China differs significantly from global drivers

In line with developing into a more mature marketplace, Chinese businesses are now challenged with attracting, retaining and motivating their workforce, and this is proving to be a tough proposition for many multinational enterprises. Subsequently, one of the key reasons that an organisation will choose to implement a HRO strategy is to free up the HR department from transactional and administrative tasks and let them focus on strategic tasks of planning and management.

Key regional markets in China

The adoption of HRO in China has traditionally been driven by multinational client companies, using Chinese government service providers and these account for over 90 per cent of the number of deals and total contract value. As these companies have their major operations based in Shanghai, Beijing and Guangdong regions, these three areas account for approximately 85 per cent of the market.

The importance of ‘Guanxi’

Many multinational organisations based in China prefer outsourcing selected HR functions to domestic players due to their extensive knowledge of the Chinese regulatory landscape and the ‘Guanxi’ relationship network (essential to navigate business environment in China). Leading domestic players such as FESCO, CIIC and China Star (owing to State ownership) also have access to privileged information and resources.

Future outlook

To date, China still does not have enough skilled manpower to meet the growing demand of the HRO services market. This will lead to wage acceleration for providers, margin erosion and raiding other providers (especially of benefits administration and compensation providers) for resources. Ultimately, the dominant provider players will be those companies that can obtain and retain quality delivery people.
For further info on this press release, to receive the white paper in full or to request an interview please contact:

Stuart Kirby (Public Relations, Europe and Asia Pacific)
D/L: +44 (0) 207 347 5156
Email: stuart.kirby@equaterra.com

About EquaTerra

EquaTerra sourcing advisors help clients achieve sustainable value in their HR, F&A, Procurement and IT processes. Our advisors average more than 20 years of industry experience and have supported over 2,000 transformation and outsourcing projects across more than 60 countries. Supporting clients throughout the Americas, Europe, Middle East, Africa and Asia Pacific, we have deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions.

For more info, contact Lee Ann Moore at +1 713.669.9292; leeann.moore@equaterra.com; www.equaterra.com.