HR outsourcing finds heavy-hitting fans

Globally, human resources (HR) outsourcing is picking up steam with the likes of Pepsi, Whirlpool and other big names choosing to use service providers to avoid stressing already stretched IT staff.

However, this trend isn't so popular in Australia, particularly in government, and in view of a high-profile failure at the Department of Defence which made headlines last week.

Full details of the Defence debacle were released in an Australian National Audit Office (ANAO) report which came out last month.

The goal was to deliver a single, human resources computer system for Defence personnel by June 2000.

But the Management Key Solution (PMKeyS) project, which wound up in December 2002, overshot its budget by $26 million and was three years late.

The first phase of the project was delayed by 39 weeks and parts of phase two ran as much as 158 weeks' late, the ANAO said.

The total cost of the system - $131 million - was $26 million more than the department expected to spend on personnel systems in the five years to 2003.

"The total cost to Defence to bring PMKeyS into service, including the production support costs during the rollout period, is estimated to be at least $131 million," the ANAO said.

"This cost exceeded Defence's 1998 estimate of $103.5 million to maintain its legacy personnel systems for five years by more than $26 million."

ANAO also found the project had no approval from Cabinet which the Labor party described as 'farcical'.

"This audit report is further evidence of the government's multimillion-dollar bungling of the Defence budget," opposition Defence spokesman Robert McClelland said.

"Financial management in the Department of Defence is in a state of high farce."

He said it was particularly concerning because of a recruitment and retention crisis at the Australian Defence Force (ADF).

Despite the debacle many government agencies who spoke to Computerworld last week said they are committed to keeping their HR functions in-house including the Department of the Environment and Heritage, the Department of Industry, Training and Resources and the Department of Immigration and Multicultural and Indigenous Affairs.

However, a number of departments do outsource a small portion of their HR function including the Department of Communications, Information and Technology and the Department of Employment and Workplace Relations which uses a provider for its online recruitment facility.

But those that do choose to outsource are focused on getting maximum value.

Late last month, Whirlpool signed a 10-year deal to outsource HR business processes for 68,000 employees to Convergys Corporation.

A significant reason was the need to improve HR technology, said Abby Luersman, vice president for HR solutions at Whirlpool.

Whirlpool was under-investing in IT and needed "better decision-making with better data", Luersman said.

So far, Whirlpool is using Convergys to integrate its self-service model with its SAP system and take over some of the transaction processing, she said.

But over time, some HR IT systems could move to the outsourcer's data centre, Luersman said.

"This is a 10-year agreement with Convergys, and clearly we're doing it in bite-size pieces," she said.

Memorial Health Services Corporation is a PeopleSoft ERP shop that already had an HR application licence but decided it would be cheaper to outsource benefits and other functions, said Patti Ossen, senior vice president of human resources at the hospital group.

Deploying PeopleSoft's benefits software would have required an external consultant, cost about $US350,000 and taken about 5000 hours, she said. So Ossen turned to hosted providers, including Employease.

But it's not a path for all companies. David Rudzinksy, CIO at medical instruments maker Hologic, said he uses the payroll services of Automatic Data Processing whose system is integrated with the human resources module in his Oracle eBusiness Suite 11i ERP system.

"This was a major improvement in the process and makes the payroll/human resources people more efficient," he said, adding that he doesn't want to use any external providers of other HR functions.

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More about Australian Defence ForceAustralian National Audit OfficeAustralian National Audit OfficeAutomatic Data ProcessingDepartment of CommunicationsDepartment of DefenceDepartment of EmploymentHISHologicLabor PartyNational Audit OfficeOraclePeopleSoftSAP Australia

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