How is India poised to become the 6th largest market for staffing in the world by 2025?

Xpheno is a specialised staffing firm, a brainchild of leading industry experts Kamal Karanth, Ex Managing Director at Kelly Services India and Malaysia along with Anil Ethanur, Ex Managing Director of RGF-Select India. Kamal and Anil bring with them, a collective experience of over 30 years, in the staffing business. Xpheno is a one-stop shop for companies who need professionals on projects as well as direct hires. It focusses on Direct Hire, IT Staffing, Engineering Services and Sales Staffing .

Kamal Karanth, Co-Founder of Xpheno, shared his perspective on how India is going to gallop into centre-stage and emerge as 6th place. Xpheno is a specialised staffing firm headquartered in Bangalore.  He talked about drivers for growth in the specialist staffing business and staffing trends over years.

How are staffing trends changing in India over past years?

Over the last 18 years Staffing Industry has catapulted from a sleeping 100 million $ industry to a 6 billion dollar industry today. Shorter tenures of senior executives, multiple job opportunities for junior executives, emergence of new sunrise industries like Insurance, Telecom, Ecommerce over this period have grown the Staffing Industry. High skilled industries like IT and Engineering Industry have significantly utilised outsourcing of staff to augment their cyclical needs. Shorter assignments are seen as flexibility than insecurity by professionals in technology Industry. Larger brands have utilised contract-to-hire models to test talent before on boarding them. What used to be a MNC driven model is today dominated by large Indian enterprises. Large corporate houses have created their own captive staffing companies for self-consumption like in Japan.

How India is poised to become 6th largest market for staffing in the world by 2025?

Today, India is the 13th largest market at 6 Billion $ market size, growing at a pace higher than 15% plus. The global staffing space has matured and the growth rates have flattened to 1-2%. Factors like demonetisation and GST have pushed formalisation of employment to a faster rate. Companies appetite for just in time workforce has increased. Many large consumer and BFSI Customers need to reach rural markets of India for further market penetration. This requires huge extended workforce and outsourced staff is the only logistical choice. Rapid rate growth rate of construction Industry which employs large number of contractual staff is also increasing growth of staffing Industry. Last, but not the lease is the efforts of large Staffing companies. There 23,000 recruitment companies in India. There are more than 10 staffing firms now who have a turnover in excess of 1000 crores, couple of them are close to 5000 crore turnover. These juggernauts are increasing the awareness and benefits of staffing to large corporates. All these factors are pushing India to reach 20 billion USD market and overtake Netherlands which is currently the 6th largest market by 2025. 

What are the drivers for growth in the specialist staffing business?

IT Companies are pressurised to have lower bench strengths. Skills are getting transient in the technology space, Organisations are no longer able to predict skills required for the future in IT. Automobile companies have to get their next generation green/electric vehicles sooner and also maintain current market demands. So Engineering and Technology organisations have to hire more ‘Just in time’ workforce. This is causing specialist staffing to rise. GICs in India are expanding their contingent to workforce to about 15 % from current single digits to show lower headcounts in India. These are high salaried technology talent. The growth of these workforce will impact specialist staffing.

What are the challenges faced by staffing industry?

Complex labour laws have increased compliance cost. Insignificant number of Integrated skilling schools hamper ready to deploy staff. Tax deduction at source on top line makes it a cash intensive business. It’s a non-regulated industry and scope for lots of unscrupulous players thereby lowering the standards of delivery.

Where India stands as compared with other countries now?

In terms of market size and growth India is far ahead. India does not have a problem of talent supply on a relative basis compared to many countries which have an acute talent problem. In terms of regulations India is far behind other markets. The penetration of staffing Industry is less than 0.1% which offers opportunity to grow.

Will it lower brain drain?

No, it won’t as the brain drain has different influencing factors.

What verticals are going to embrace the specialist staffing route?

Currently IT and Engineering are consuming 95 percent of the specialised staffing market. Going forward accounting, sales and Homecare would be the segments which would lead the growth. In fact homecare can be the next big thing!

Throw some light on huge consolidation of small boutique IT staffing companies and how merger and acquisition is the trend 

67 percent of the market is held by SME Staffing firms which offers a huge opportunity for acquisition. The large staffing firms have already begun this. Some of the boutique IT Staffing Companies have already been bought. Last 2 years 10 IT Staffing companies have been bought by the top 2 players. Many entrepreneurial firms are viewing this as an opportunity to encash. But, most of these companies don’t have a turnover more than 50 crores and have huge influence of the promoters. Small acquisitions give access to smaller clients base and minus the promoter many of the businesses may not even sustain or grow. That’s the flip side to these acquisitions. One has to acquire few companies to get the benefits of a significant acquisition. But, that creates hurdles and complexity of multiple transactions.

How it is creating opportunity for half a dozen Indian billion dollar staffing companies to emerge from India in next decade?

Couple of Listed Indian entities have already crossed 4000 crores turnover, couple of more are in the 1000 plus crore category. In the past, capital was the challenge for Staffing companies to grow. With numerous VCs now backing this Industry that problem is solved as risk is low for VCs. Top staffing companies are already growing at 30-40% plus organically. When the full benefits of GST and 6 percent GDP growth are combined together with a well-oiled Industry, Billion dollar companies are a logical output.

How is your organisation working to increase the efficiency of staffing process?

We are focussing only on Specialist Staffing business. We have tech enabled our field sales staffing business which allows organisations to track and engage their field force. We have tied up with some niche engineering skilling players to get the Hire-Train-Deploy model on the engineering side. Essentially this ensures the supply side of talent is well managed. Internally the entire process of engaging the staff is tech based which increase efficiency and positive customer experience.  At the right scale we shall add the skilling integration to our staffing business to maximise the productivity of our deployed staff. We believe there are many efficient technologies in the open market which can be integrated seamlessly to the staffing cycle (source-match-assess-interview-offer-onboard-employ-skill-redploy). We would be efficient integrator of technology-process- and people.

Changing role of HR 

HR needs to comprehend technology better. They need to discover that complex policies under with organisations are run will fail people. HR has to find its space in managing the diversity of workforce. Full time employees, contract employees, remote workers, freelancers, diverse genders and the changing demographics of employees is a complex mix. HR can only give direction to the future of talent supply chain. Influencing the sourcing, matching, assessing, employing engaging and demobilisation of workforce can happen efficiently if technology and line managers are equally involved. HR alone will not be fit for purpose in this complex talent issue.