Marriott And Delta Latest To Outsource HR Functions

Human-resources-management outsourcing continues to be one of the service industry's hottest markets. On Monday, Delta Air Lines said it would hand off operation of human-resources functions to Affiliated Computer Services Inc. under a seven-year, $120 million deal. Also Monday, travel services company Marriott International tapped Hewitt Associates to handle its HR needs for the next seven years. Financial terms weren't disclosed.

ACS will handle a broad range of functions for Delta, including compensation and benefits administration, payroll, call-center, and information services. ACS already provides Delta with some accounting services under a separate contract. For Marriott, Hewitt will provide benefits administration, compensation, and recruiting services, and learning and development services for more than 133,000 Marriott employees worldwide.

The deals provide further evidence that the market for HR business-process outsourcing services is set to boom. Market researcher NelsonHall says the HR BPO market will grow 21% annually through 2008, when global sales will reach $7 billion. Analysts say the prospect of big savings is what's driving the demand. According to a study released last week by the Yankee Group, big companies can cut their HR administration costs by up to 20% through a properly crafted outsourcing deal.

ACS presented Delta Air Lines with a "convincing economic value proposition" to outsource its HR needs, the airline's human-resources VP, Beth Johnson, said in a statement. Delta says it expects to reduce its HR and payroll costs by more than 25% over the life of the deal.