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Growth In Business-Process Outsourcing Will Come On Human-Resources Front

Companies' comfort level with the practice will drive a $51 billion market by 2004.

Human-resources management is the most commonly outsourced business process and the market for HR outsourcing will enjoy robust growth over the next year, according to a new study from Gartner.

The IT market research firm says sales of HR outsourcing services will likely reach $46 billion this year, an 18% jump over last year's sales of $39 billion. Sales will hit $51 billion in 2004, Gartner forecasts. Also by 2004, HR business-process outsourcing will represent 39% of all revenue from BPO sales, Gartner says.

Gartner analyst James Holinchek says businesses' desire to cut costs is helping to drive growth in the HR business-processing outsourcing market. He also notes that it's a mature services offering, meaning that many companies are already comfortable with the practice. "Enterprises perceive HR BPO options as less risky and good value for the money," Holinchek says.

New pricing plans by service providers are also driving sales, says Holinchek, noting that more and more vendors are adopting so-called utility pricing plans under which customers' payments vary depending on the level of service they require at a given time. IBM and Hewlett-Packard are among the service providers that have been aggressively pushing utility pricing in recent months.

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