'Most companies do not want to employ many more HR staff but they have to find a way to improve efficiency in the HR department and one way is to acquire a better system to help them with their daily operations, so that they can [concentrate] more on the strategic focus of the company,' he said.

HR outsourcing ranges from specific processes, such as payroll administration, to comprehensive solutions that cover HR functions from benefits administration to training, recruitment and severance.

The most sophisticated technology on the market deals with the entire placement cycle, from recording client, candidate and vacancy details, through to searching, matching, letter generation and e-mail submission, and then placements and follow-up requirements.

There are several advantages to outsourcing HR functions. Tony de Liseo, managing director of Bond International Software (China), said foremost were the rewards for the bottom line, as HR departments were becoming increasingly answerable for their spending.

'We are seeing a growing trend in company procurement departments looking to gain efficiencies and use the sort of standards and reporting that has been available in the other areas of spend to the HR process,' he said.

They are making these savings by outsourcing HR functions because this has the potential to decrease baseline costs of delivery, convert fixed costs to variables and reduce the need for the firm to use capital on new systems to deliver HR processes.

Companies were also attracted by the idea of increased efficiency in the HR process, Mr de Liseo said.

'[With HR service providers], companies are paying for the expertise as they need it, rather than hiring a person and expecting them to master the whole HR process,' he said.

This expertise can be invaluable when organisations move into new market sectors or geographical markets.

'Outsourcing HR may also introduce a new source of candidates, or provide a faster turnaround than previously enjoyed by the organisation,' he said.

A further consideration was the impact of HR on a company's brand. An efficient HR system, which was liked and trusted by employees, could have a positive impact, Mr de Liseo said.

'For some companies, their customers are also potential employees and the company's brand can be impacted if the potential employee has a negative HR experience with the organisation. This is the case for many generation X and Y companies, such as mobile phone companies,' he said.

Economic factors also play into the rising uptake of HR service providers in Hong Kong.

Mr Lam said large established companies which now enjoyed the buoyancy of the market had more funds available to upgrade their HR systems.

And the business boom on the mainland had provided opportunities, he said, as many start-up businesses still preferred to base themselves in Hong Kong and then outsource some of their internal support functions.

'They like to set up new offices in Hong Kong first as a stepping stone [to the mainland] and do not have many employees initially, so they prefer outsourcing instead of maintaining several extra staff to do the HR functions,' he said.

There are a number of additional factors that will continue to have a positive impact on the industry.

Mr de Liseo said: 'There is a continued acceptance and trust of outsourced HR and e-commerce solutions and high levels of trust in the internet to successfully load, select and process job vacancies and candidate applications.

'In addition, there are much higher expectations from organisations that they will have e-commerce connectivity as part of their overall recruitment strategy, whereas this has historically been more of a 'phase two' activity.'