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	September 1, 2006 Hewitt's Challenges: Is HR Outsourcing Broken? Profitability In HR Outsourcing Deals Still Proving Elusive by Bill Martorelli with Francesca Bartolomey	Average: 5  (1 rating)

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Executive Summary

Despite its significant recent growth, HR outsourcing has yet to be proven profitable, as indicated by the financial results of industry leader Hewitt Associates. Fairly or unfairly, Hewitt, a publicly held company, offers one of the very few windows into the financial implications of large-scale HR business process outsourcing (BPO), and the view is not currently a pretty one. The financial implications of its success in winning a slew of HR outsourcing awards during 2005 were recently revealed during an investor's conference call. A thorough analysis of these transactions reveals that instead of delivering a positive, double-digit profit margin, the group will instead yield a negative margin in the low single digits. Hewitt's challenges have renewed questions about whether large-scale HR outsourcing can be a profitable undertaking for BPO suppliers. As demand for HR outsourcing continues to grow, the nature of HR outsourcing delivery must evolve toward a more predictable, profitable operation.

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