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In order to save costs, reduce capital spending, and transform fixed costs into variable ones, national and state governments all over the world are rapidly going the private sector way in outsourcing key human resources and other functions.
According to a Conference Board report, sponsored by Accenture HR Services, the outsourcing movement is taking hold in governments and government agencies, showing how countries such as the United Kingdom and Australia moved early into outsourcing.
However, the study notes that governments must carefully weigh negative consequences, such as job losses, skills transfers, unemployment costs and the disruption of local services against the promised benefits.
"Through technology tools and processes that most public-sector organisations could not afford to build internally, outsourcing can provide much improved and more convenient services for employees," says Ton Heijmen, Senior Advisor to The Conference Board on Outsourcing/ Offshoring.
"This is a particular concern for public-sector organizations, which generally cannot compete with the private sector's pay packages to attract and retain talent."
But convenience and cost reduction are not the only attractions offered to public organizations by HR outsourcing.
Outsourcing can enable public sector organizations to centralize often complicated and fragmented processes throughout their organization, helping their HR departments keep talented workers and improve service to US citizens.
Some 10 to 15 states are now said to be considering HR outsourcing. The government trailblazers include the US Transportation Security Administration, the State of Florida, Detroit Public Schools and the Texas Health and Human Services Commission.
The study has identified three forces that are converging to fuel the HR outsourcing movement in US government. First, IT systems are reaching the end of their life span.
Legacy computer systems, which are 25 years old, need to be replaced and second, the economic downturn that struck the nation in the late 90s has created severe budget shortfalls throughoutthe government sector, particularly in state governments. Also, rising deficits threaten governments' ability to perform key services.
The Office of Personnel Management, the federal government's HR agency, is also weighing the merits of outsourcing HR. In the US, the trend is likely to center on the federal and state level, since scale is necessary for organisations to realise outsourcing's full benefits and justify its costs.
Despite political sensitivities and union resistance, many in the industry see no abatement of interest from public-sector organizations. As one study participant observed: "HR outsourcing in government is ready to explode."
"Our experience worldwide has been that once the perception issues about HR outsourcing have been overcome, public sector outsourcing spreads rapidly," said David Clinton, president of Accenture HR Services, an Accenture business that provides people-management services on an outsourced basis.