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HR Outsourcing Ready To Catch A Big Wave

Services to account for more than a third of business-process outsourcing revenue
Evidence is growing that big companies want to farm out human-resources operations to service providers here and overseas to cut costs. The market for outsourcing these business processes is expected to grow 18% this year, to $46 billion, and reach $51 billion next year, according to research firm Gartner. Circuit City Stores Inc. will contribute to the ramp-up, having signed a deal last week for Exult Inc. to take over the bulk of its employee-administration functions.

Exult will handle HR for Circuit City.

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Under the seven-year deal, Exult will manage payroll, benefits, compensation, and employee-contact centers for Circuit City's 38,000 employees. Exult will manage the services from facilities in Charlotte, N.C., and Mumbai, India. Soundview Technology Group analyst John Jones estimates Circuit City will pay Exult $40 million to $50 million. The move will help the elec- tronics retailer "aggressively cut costs," he says. Circuit City declined to comment.

The HR market will account for 39% of all business-process-outsourcing revenue in 2004, Gartner says. With demand booming, vendors are looking for more-efficient ways to serve customers. Hewitt Associates just completed integrating its Web-based Total Benefits Administration System and Payroll Workforce Management System. "It's a one-to-many deployment, where we can bring a new customer on extremely quickly," says Sanjiz Anand, chief technology officer.

Accenture has launched a project under which some internal resumé screening is handled by employees at its Bangalore, India, facility. If the pilot is successful, Accenture will extend the offering to clients to help lower their HR-services costs.