Lately, large businesses like Hewlett-Packard and IBM have been leaving their core business strategies and changing their business models to helping other companies run specific departments. HP redefined itself as an outsourcing agent for IT services, while IBM focuses on business strategies and solutions for other companies. The trend of companies refocusing to a specific area of expertise and offering outsourcing solutions is happening across the nation, from payroll services to customer service, from financial departments to even upper level managers and they are running smoother because of it. While the trend may have started in the first half of the 20th century, it has really picked up speed over the last 10 years as companies can no longer waste precious resources in areas that they don’t understand or that change so fast they don’t have time to keep up. It’s even worse when you factor in the time needed for training new employees, the special programs like E Verify that has to be navigated for government requirements, or the cost to run a department who’s only function is to manage the day-to-day of other departments.

A company may spend an average of $500,000 a year on their human resources department, between the salaries of the employees, the time needed to train any new employees, the costs of putting together new-hire documents and legal materials, and time spent managing payroll systems. This amount doesn’t include employee benefits across the company or the payroll of everyone in the company; this is only the HR department. Now, if this same company were to hire the services of a payroll outsourcing company, they could have a specialized company step in and perform all of this work for a fraction of the cost, around $200-300 thousand a year. This is because the PEO is built around handling these tasks. They have a trained staff that can put together documentation with little effort and they already have a payroll system up and running. If one of their employees’s quits, they hire and train a new one at no cost to the company who is contracting to them. By having hired a company that specializes in payroll services, the original company can now focus on their primary business strategy and leave all the HR tasks to someone else; the fact that they save money in the process only helps cement the decision.

While companies like National PEO are the future of HR and companies like HP are the future of IT, there is still a question of how well these companies will work together if a company hires both of them to work different sections of their business. While the answer is still off in the future as most companies are only outsourcing small pieces of their business on trail bases right now, it can be assumed that this will become a very real situation in the near future. A better question may be, when companies needs to hire an IT, a customer service and a payroll outsourcing company, how long will it take before outsource brokerage companies become the market of the future and who will they hire to manage their payroll services?