Uncharted shores

IBM’s ground-breaking HR service centre in Portsmouth, covering Europe, the Middle East and Africa (EMEA), has been moved to Budapest, with the loss of more than 100 UK jobs

In what is believed to be the first example of HR offshoring from the UK, the company has spent the past year winding down the centre. It follows the transfer of HR administration from the IBM parent company to its subsidiary, IBM Business Consultancy Services, bought from PricewaterhouseCoopers in 2002.

IBM said several people had moved to Hungary to aid knowledge transfer. Others had been redeployed within IBM or taken voluntary severance. The company declined to comment on numbers, but it is known that around 130 people worked in the Portsmouth centre, some of whom were agency staff. It was one of the first HR service centres in Europe when it opened in 1998.

Steve Wilkinson, EMEA business transformation outsourcing HR solutions leader at IBM, said Budapest was chosen as the ideal location for a European service centre on grounds of cost, language and political stability.

IBM already has a presence there, with other administrative functions operating out of the same centre. It is understood the site, which already houses more than 200 people, will be used for future HR outsourcing contracts, and cover more countries than Portsmouth did.

Wilkinson said the migration from Portsmouth to Budapest had started in February with the most basic call-centre jobs, but had been so successful it was decided to accelerate the relocation of second-tier jobs.

The move will worry workers at the Procter & Gamble HR service centre in Newcastle, which IBM took over in September 2003 as part of its first major HR outsourcing deal. But Wilkinson said there were no plans to close it.

The news will also give shape to fears about the possible consequences of outsourcing and the concentration of HR administrative jobs in service centres.

On the other hand, a CBI report last month (see “HR will not be moved abroad”, 25 November 2004) found that firms involved in offshoring believed HR was the area most likely to stay in the UK.

The IBM news emerged at the recent HRO World Europe conference, held by the Shared Services and Business Process Outsourcing Association (SBPOA) and HRO Europe magazine. PM was a media partner of the conference, which was sponsored by 15 HR outsourcing providers.

A poll of delegates showed that 47 per cent felt HR professionals were very concerned about job losses arising from outsourcing and 40 per cent thought they were somewhat concerned.

HR directors whose companies had not yet opted for major HR outsourcing said line managers were also worried. Suzan Barghash, regional HR director at Honeywell, said her company was interested in outsourcing HR 18 months ago. But there was a “great push-back” from line managers. One told her a personnel manager came to the plant once a week to talk to people.

“They want to know: how can you do that through outsourcing?” she said.

Chris Verougstraete, group HR director of Reuters, said his line managers did not trust an outsider and were happy with their HR business partners. “To outsource, there’s a lot of investment up front and our friends here [the vendors] are not cheap,” he said.

However, most providers expect outsourcing to grow, although they concede the market is overcrowded.

Andrew Kris, chairman of the SBPOA advisory board, said the HR business-process outsourcing market was still in its “pimply teenage years”, but that it was a sound concept with power and brains behind it.