Web services drive up costs at BP Amoco

Oil giant BP Amoco saw its human resources costs rise by 33% after outsourcing the entire HR department to Web services company...

Oil giant BP Amoco saw its human resources costs rise by 33% after outsourcing the entire HR department to Web services company Exult.

Implementation difficulties in the UK and US have forced BP to postpone the global rollout of its self-service HR system.

Exult, which has Unisys and the Bank of America as clients of its Web-enabled HR system, signed the deal with BP last July. BP later agreed to extend the deal to include the employee information services unit of Arco, with which it had merged.

At the time of the extension, Don Packham, senior vice president of human resources at BP said: "We have been extremely pleased by the successful implementation of our e-HR sourcing partnership with Exult to date.

"We anticipate that that the expansion of this relationship, to cover many of Arco's employees, will be an important factor in smoothing integration and promoting a shared corporate culture between the two companies."

However, John Melo, vice-president of downstream digital business at BP Amoco, recently admitted to CW360.com's sister publication, Personnel Today, that the project had not gone according to plan.

Employees appeared reluctant to use the online systems, he said, which was leading to expensive duplication.

The UK HR outsourcing market is predicted to grow to £50bn by the end of this year, but the news from BP casts doubts over the cost-cutting benefits of Web-based or outsourced HR systems.

Commenting on the reluctance of BP's employees to use the new system, Karen Giles, an adviser in organisation and resourcing at the Chartered Institute of Personnel Development, said: "There are two issues here: training and development, and communication and involvement.

"[These are] very important and should be tackled at the point when a company is discussing the business needs for adopting the outsourcing model."

She offered a warning for companies thinking about outsourcing their HR functions. "If you are outsourcing because you think it is the most cost effective way [of managing a department] then alarm bells should be ringing," she said. "Cost efficiency is not a good reason for doing this, especially in an economic downturn [when there is increased pressure to cut costs] and outsourcing is patently not delivering."

Jane Voisey, director for human resources consulting at PricewaterhouseCoopers, said: "There is a big difference between aspiring for cost reduction and actually delivering it; it can take as long as three years in some cases."

"Employees need to be happy moving from paper to Web-based systems. You need to assess an organisation's willingness for change and then invest money and time in helping people change."

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