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Special Report: APAC HRO would solve all of their HR issues," he adds, "When it didn't happen, they came away disappointed." With the overall global maturation of the HRO market, he anticipates more cautious growth, as providers and clients become more sophisticated. "Companies are now viewing outsourcing as a channel to help them do things more efficiently, deal with HR skills shortages, and benefit from cost savings, but in a manner which is more realistic," he explains. As far as pricing and compliance are concerned, Choo agrees they are key factors driving outsourcing decisions in APAC. "Pricing has to be competitive against the costs of doing things internally or with local providers," he says. From a regulatory standpoint, he notes that compliance with auditing standards is less stringent in Asia, "although many multinational corporations centrally managed outside of Asia still insist on this compliance," Choo says. There are many arguments, indeed, to make in "selling" HRO in APAC. Sundarason maintains that outsourcing presents an "optimum way" for companies to overcome the challenges created by their milieus, and business goals. Before even thinking of engaging a provider, Singh advises APAC companies to undertake a "broad transformational exercise," he says, either on their own or with the help of a consultant. "The key is not just to outsource any transactional function in HR, but to make it more efficient and at less cost," he adds. "Many companies can achieve this by fully outsourcing HR, while others achieve it only through partial outsourcing of selected functions." To establish a typical shared-service infrastructure with blended outsourced, co-sourced, and in-house operations, Singh recommends that HR leaders in APAC companies benchmark their HR processes against other comparable organisations, establish a baseline for the costs of outsourcing, and then build the business case by outlining both the financial and operational benefits. "Where the program should be launched, and how much time it should take, really depends not only on the current state of your HR operations, but also on the target future state," Singh says. rapid regional expansion. "HRO lets you focus on core business," Sundarason explains. "It also offers process standardisation—one way of handling core HR processes, with only necessary local differences." Cummings agrees that Asian companies, like all companies, "want to focus on their core activity, reduce cost, improve reporting capabilities, and expand both regionally and globally," he says. "And they want to do that with a provider that has already done it in each region where they are doing business. They do not want to be 'bleeding edge' and work with providers that are not already established." Cultural Compatibility The key challenges for HRO in APAC are cultural and commercial. "From a cultural perspective, Asian companies do not have the same history of outsourcing that European and American companies do," says Cummings. "As an increasing number of APAC-based multinationals explore the notion of outsourcing and realise its benefits, we expect to see some of the cultural differences dissipate." On the commercial front, Singh says the business case for European companies to outsource is easier to make, since most European countries have high employee and operating cost structures. "Asia has only select countries like Singapore, Hong Kong, Japan, and Australia with comparable GDP per capita and a cost of living" on par with European countries, he explains, "making the HRO business case easier than in countries like China, India, Vietnam, and Indonesia." Such countries "tend to be large and complex to drive outsourcing decisions," Singh adds, noting that the "edge that Asia has on outsourcing is that offshoring of any activities becomes more of a 'near shore' engagement, if executed within Asia where language and cultural barriers are easily addressed." Still, several observers commented that no golden rule governs when it comes to growing HRO in APAC, simply because companies come from so many industries and tend to operate differently, due to differences in their cultures, management philosophy, regulatory and competitive [14] HRO TODAY GLOBAL | SUMMER 2011

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