Gartner Says Worldwide HR BPO Market Will Grow 18 Percent in 2003; Gartner Analysts Are Discussing Latest BPO Trends During the Gartner Outsourcing Summit in Los Angeles.

Business Editors

LOS ANGELES--(BUSINESS WIRE)--June 24, 2003

Human resources (HR) is the most outsourced business process, with worldwide HR business process outsourcing (BPO)revenue on pace to reach $46 billion in 2003, an 18 percent increase from 2002 revenue of $39 billion, according to Gartner, Inc. (NYSE:IT and ITB). By 2004, HR BPO is forecast to reach $51 billion and represent 39 percent of all BPO revenue.

Gartner analysts are providing their outlook for the outsourcing industry this week during the Gartner Outsourcing Summit, which is being held June 23-25, at the Century Plaza Hotel and Spa in Los Angeles.

Payroll and benefits services are the most popular in HR BPO and are driving the growth of the market. Companies that are already outsourcing HR processes expect to significantly increase their investment in HR outsourcing in the next 24 months.

"Best practices and vendor scalability have been proven in HR over time, and enterprises perceive HR BPO options as being less risky and offering good value for money," said James Holincheck, research director at Gartner. "HR is a more mainstream and common BPO undertaking, so inhibitors to its uptake are low compared to other processes."

Gartner analysts said that in 2003, a short-term drive to cut costs is leading to an increase in enterprises signing HR contracts that are focused on immediate cost ramifications. As more companies become comfortable with the premise of BPO, they will shift their focus to longer-term engagement models that transform their HR processes.

The bulk of HR BPO deals in 2003 are priced on a utility basis, while in 2004, there will be more multiprocess deals that emerge. Traditionally, HR outsourcing deals have been low in flexibility, but in 2004 there will be an increased ability to change service levels and adjust process delivery outputs. Gartner analysts said that by 2004, an increasing number of businesses, encouraged by an improving economic and competitive climate, will become mainstream adopters of end-to-end, strategic BPO deals.

"Enterprises should note that HR BPO is a vast, mature and growing external services option for their businesses. However, the market is not monolithic, and enterprises must understand what 'flavors' of HR BPO can most meaningfully impact their business," said Holincheck. "Creation of a sourcing strategy for HR that determines the proper mix between internal and external services will be critical to success."

Gartner analysts and industry luminaries are providing further information on the outsourcing market during the Gartner Outsourcing Summit. The three-day summit is the most comprehensive conference ever organized for users of outsourcing services, providing a 360-degree view of today's most important outsourcing issues, and access to the market's leading solution providers. Additional information about the conference is available at www.gartner.com/us/itsourcing.

To keep up to date on latest outsourcing issues, please visit Gartner's Outsourcing Web site at www.gartner.com/outsourcing. This Web site offers content, tools, products and services that are needed to make effective, strategic decisions around outsourcing. When browsing the site, users receive a breakdown of key outsourcing issues, industry trends, and best practices for making smarter business decisions. This area also includes relevant research and links to Consulting and Measurement services. Custom Alerts are also available, enabling users to stay current on new research focused on their outsourcing agendas. Free copies of the Gartner outsourcing handbook, Outsourcing: The Real Deal, can also be ordered on the Outsourcing Web site.

More information on the industry is available in Gartner's IT Sourcing and Procurement Directors Membership Program. Gartner recently launched a robust new research tool that is focused on outsourcing, sourcing, and procurement, that brings together expertise from across Gartner in an integrated package specifically tailored to the business and technology issues facing the executives. The Gartner IT Sourcing and Procurement Directors Membership Program will help executives increase the visibility, reputation and success of IT sourcing or procurement initiatives. It will also enable executives to respond more efficiently and effectively to the multitude of demands typical of the current time-, budget- and resource-constrained environment. For more information, visit www.gartner.com/mp/ITSP, or call Gartner at 203-316-1277.

About Gartner

Gartner, Inc. is a research and advisory firm that helps more than 10,000 clients leverage technology to achieve business success. Gartner's businesses are Research, Consulting, Measurement, Events and Executive Programs. Founded in 1979, Gartner is headquartered in Stamford, Conn., and has more than 3,800 associates, including approximately 1,000 research analysts and consultants, in more than 75 locations worldwide. Revenue for calendar year 2002 totaled $888 million. For more information, visit www.gartner.com.