For over two decades now, much of the literature on the role of the HR function has tended to emphasize the fact that HR departments in organizations are seen as administration departments. They do very little value addition in the realm of human potential and capital management. In most organizations, pay-roll administration, applicant tracking, training and development record- keeping, performance appraisal follow-up, human resource policy clarification are all transactional activities. These are people and effort- intensive activities but are routine in nature. Such activities, repetitive and routine in nature, ought to be automated or outsourced.

Outsourcing rests on the premise that activities which are core and central to the organization need to be performed effectively within the organization. Outsourcing transactional HR activities offer cost-savings, standardization of processes, increased speed and quality of service. Effective delivery of transaction is the first step in the journey of the HR department towards becoming a strategic partner.

Outsourcing of HR function has to be a part of an integrated business strategy for it to succeed. The key, however, is for the senior management team and HR professionals to identify the core HR processes, and the non-core processes that can be outsourced.

(Source: Everest Research Institute)

PeopleStrong's research with HR managers for better understanding of HRO space brought out the following interesting facts.

All the major HR activities have operational and management components while strategy forms a very small portion outside of Organizational Development, Organizational Design and Compensation. The time of HR Heads that is freed up from transactional- operational and management activities, can be better utilized in managing these strategic activities.