The boom in sunrise sectors has only worsened the HR headaches. Take for example, the background screening industry that almost didn’t exist seven years ago but seems to be on rocket fuel these days. There are about 200 small and large players in that business, some even one man outfits.
It all started with the multinationals setting up business in India, when they realized that this was one of their international best practices that could be imported here as well. Subsequently, it grew with the IT/ITES segments when clients insisted on a background check and eventually even Indian companies started seeing value in it.
Incidents like terrorists working for a BPO and cases of money being defrauded made companies realize the value of conducting background checks. And newer services like end to end campus recruitment solutions, policy helpline a service where employee queries on organizational policies are answered 24*7 and on-boarding and induction are being introduced everyday.
There is so much pent-up demand in some areas like temping, that the industry has been growing at 100% year on year for the last four years and is expected to continue to grow at 75-100 % for the next two years. Regulatory issues are hindering the growth of the temping industry in India, but temp staffing is gradually being accepted as a mainstream industry.
Traditionally when companies looked at HR outsourcing, it was only about the pay roll process which was duly farmed out to accountancy firms. But as companies grew bigger with over 5,000 employees and became multi-location local service providers didn’t fit the bill any longer. Companies are realizing that they need to move to bigger partners.
Over the last two years, companies have understood the importance of out sourcing. For instance the recruitment process goes from talent screening to sending out an offer letter, providing information on the compensation details and updating the demographic information. Further, this can go into performance appraisals etc. So as various HR processes get more complicated, companies are realizing the benefits and importance of outsourcing them.
Companies witnessing hyper-growth are struggling with the sheer challenge of interviewing and assessing thousands of people in a day. So industries like BPO, retail, and IT services are looking at assessment services, a business that too is almost doubling every year.
Market leader Meritrac witnessed a phenomenal 170% jump in business over the past three years. Finally the commonness of large recruitment programs involving for example 100 campuses or 25,000 candidates requiring specialist partners has meant the limelight is firmly focused on the assessment industry.
Every part of the HR value chain is growing; be it strategy, processes, technology, or people. Even areas that were slow to take off like consulting are now growing at 30-40%. Till a few years ago, Hewitt used to carry out an employee engagement survey and operational compensation benefits for an Indian conglomerate.
But over the last few years, it has gone on to working on the return on investment on compensation spends, ways to enhance the quality of the workforce and engaging every month with the company on various HR and talent management related issues.
Companies no longer view HR consultants as vendors but strategic partners. They put in a lot more faith and trust in the consultants now. The function of HR consultancies has evolved over the last four years to go from providing merely transactional services to executive training and coaching and dealing with merger related HR issues.
The HR industry has in India has undergone the first phase of M&A activity in the last three years, with some temping companies like Mafoi, People One and some recruiting companies like ABC and Grow talent being acquired by MNCs looking to enter India or strengthen Indian operations.
Some bit of domestic M&A has also happened. First Advantage took over Verify, the second biggest player in the segment in India in February. But given the fragmented nature of the industry and the astronomical growth rates, a second round of consolidation could occur when things cool down a little.
And interestingly, the Top 10 players in the staffing business like Teamlease and Mafoi have less than 15% of the market, whereas in any industry the Top 10 players usually account for 60-80%. Surely, in the talent trade, there will be hundreds more entrepreneurs more colorful monikers and inventive business descriptors in the days to come.