Market Overview

Size of the HR/general affairs outsourcing market (total major 14 categories) for FY2018 rose by 6.6%, achieving 7,782.3 billion yen. The breakdown was as follows: the Shared Services Market (comprised of shared services centers and school administration operations outsourcing) rose by 3.4% to attain 422.5 billion yen, the HR Operations Outsourcing Market (comprised of payroll calculation outsourcing, attendance management ASP services, corporate training services, RPO (Recruitment Process Outsourcing), and assessment tools) up by 4.5% to reach 917.4 billion yen, the Outsourcing of General Affairs Market (comprised of EAP (employees assistance program), health check support services, welfare outsourcing, and B2E services (business to employee services)) rose by 7.1% to attain 256.3 billion yen, and the Recruiting Business Outsourcing Market (comprised of temporary staffing, recruitment, and outplacement) expanded by 7.1% to achieve 6,183.1 billion yen, indicating that the Recruiting Business Outsourcing market occupying about 80% of the whole market.

Among the total 14 categories, 13 categories expanded the market size, except for the Outplacement market where demand usually shrinks during the favorable business environment. In particular, the following four services successfully showed strong sales to achieve double digit growth and boosted the entire market: “Attendance management ASP services,” which has become indispensable for productivity improvement via appropriate time-keeping in the situation where Work Style Reform being in progress; “RPO (Recruitment Process Outsourcing)” as well as “Recruitment” which are increasingly demanded as an effective method to solve shortage of excellent human resources chiefly young personnel stemming from decreasing working-age population; and “Welfare Outsourcing” that support health maintenance and promotion of employees, contributing in steady employment and productivity improvement.

Noteworthy Topics

Expansion of Service Demand to SMEs

When observing the environment surrounding user companies outsourcing HR and GA tasks, the following factors have motivated them to outsource the tasks not directly connecting to sales: Favorable sales performance in recent years caused by stronger economy that generated affordability; deployment of excellent human resources to core business due to decreased working-age population and man power shortage; and increase in compulsory retirement of skilled workers with thorough knowledge. Major enterprises, in particular, have begun concentrating their management resources on main business while reducing the expenses for non-sales activities furthermore, which led them to step into utilizing outsourcing as an option. Outsourcing services used to be deployed only for building and operating IT systems, but they have begun being used even for human-required tasks. Outsourcing service providers have started promoting their services to long-neglected SMEs for the service areas that had overall been covered at major enterprises. This expanded user companies, accelerating the market expansion.

Future Outlook

Adding values to the services as well as providing one-stop services for multiple business tasks have been in progress at HR and GA outsourcing service providers in recent years, because of repetitive demand at user companies, enhancement in the services provided, and growing number of promising prospects of SMEs that are yet to introduce outsourcing services, which is expected to augment customer acquisitions and market expansion. As for the demand at SMEs, advent of cloud services led to rapid increase of cheaper services, which improved awareness of such services and contributed to market expansion. This evolution of the market during the past few years is likely to continue, which can draw attention as a driving force of market expansion.

The government measures are expected to play a certain role as a trigger of service demand. The current attention-attracting measure as such a trigger is the Workstyle reform.

Also, digitalization or HRTech has rapidly been underway, and introduction of HRTech at companies is a newsworthy topic. In order to review the services to improve their streamlining abilities furthermore, to shift them from labor-intensive to knowledge-intensive, and to drastically rectify workflows to improve in-house task productivity, the systems for routine works that use RPA (robotic process automation) and the services to levelling out tasks seem to draw further attention.

Thus, the human resources/general affairs outsourcing market has various growth factors. However, as COVID-19 pandemics in early 2020 stranded the economic activities by preventing humans from physically moving around, the market needs to be carefully watched to see the influence.

Research Outline