Staffing India: It’s a Matter of Scale

India is today seen as a Significant Staffing market thanks to the growth Staffing Industry in India have seen in the last decade. Additionally, the formalisation surge and the 12 million new workforce entering every year also had an impact. Till about 15 years ago there were hardly any global MNC Staffing companies in India. Today, there are about 20 MNC Staffing firms in India with sizable operations mostly through the M & A route. So, what’s changed in the last decade that has brought India to the top 15 staffing markets in the world?  

More than 3 million employees in India work through the Staffing route (as Contractors or Temp Workers). This Tripartite agreement agency market has today reached close to a 6 billion USD value in India. Furthermore, Leading research analysts have estimated that the Indian staffing market will reach 20 billion by 2025. If that happens then India is likely to be in the top 6 countries of the 430 billion dollar global staffing Industry. That is some serious growth to ignore.

Growth Drivers

It’s not difficult to guess the rapid growth stimulants for the Staffing Industry. Few of them though obvious need mention

  1. Consistent GDP growth in excess of 6% over the last decade
  2. Indian IT Outsourcing Industry’s growth into a 170 Billion dollar behemoth has given rise to a high margin IT Staffing market
  3. Rapid and massive expansion of Large Indian Financial Institutions, Telecom Networks & FMCG Companies to the unpenetrated vast rural markets and not to forget the smartphone ownership reaching almost half a billion people.
  4. The explosion of consumer internet companies increasing last mile connectivity
  5. Increased entry of MNCs to India who understand the benefits of Staffing
  6. The recent push to GST eliminating offline transactions, informal employment, and increasing formal employment

However, the staffing penetration to the organized workforce is less than 1% signifies the growth potential ahead for staffing firms

Staffing Industry Clusters

One has to note that the staffing wave has not swept through India. In spite of a growing reduction in average tenure of senior and mid-level executives, the clamor for so-called permanent jobs is still high. The attrition at entry level jobs is increasing even amongst knowledge workers. On an average, a fresh graduate spends less than 18 months in their first job. In this context, some of the sectors have adopted staffing modes more readily than others.

  1. Service Technicians: The Telecom Industry has had a huge impact on last mile connecting Resources. The infrastructure and mobile handset sellers today staff thousands of service engineers manage the operations throughout India’s 720 districts. This semi-skilled segment has already seen its peak and would stabilise in the coming years
  2. Delivery & Warehousing Personnel: The last 5 years have seen the explosion of delivery & warehousing personnel driven by the VC Funded local Internet firms and Amazon. Increased internet and smartphone penetration have resulted in an explosion in online purchase which in turn has given rise to hundreds of thousands of bike borne delivery boys. Even more, the logistics sector also has seen increased funding has adopted Flexi staffing in its warehouses and last mile connectivity.
  3. Security Guards: The increase urbanisation, growth of large jobs in the large cities, huge infrastructures built across India have also necessitated the large deployment of security personnel. This is a high attrition sector and large local and International Security firms have grown this business via the staffing route
  4. Field Sales: FMCG Firms were the early adopters to increase their spread to rural India. The last 15 years have seen consumer goods and durable firms adopting either full-time contractors or contract to hire the model. Consequently, many first-time job seekers have come to formal employment and this has helped the jobs spread to the remote parts of India. This will be a growing area of specialisation beyond providing recruitment support. Technology-driven productisation of these services could make it a specialised scaled staffing opportunity.
  5. Engineers: India’s IT industry’s rapid growth in the previous decade fuelled the talent development in the software space. Even more, the growth and profitability pressure on the services companies in this decade has increased the Industry to rapidly embrace IT Staffing. Firms like IBM, Accenture, TCS, Wipro, Cognizant & Infosys are major consumers of IT Staffing. Skills getting transient also has hastened this space. Over 300,000 Engineers today work as contractors in assignments through staffing firms.

 

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Staffing Skills Segmentation

The Success Stories:

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The European and American firms entered India in early 2000 whereas this decade has seen the entry of Large Japanese firms. Many of these firms entered India via the M & A Route. Some of them chose to scale up via acquisitions after their India Entry. Staffing Industry had its aha moment in 2015 when Teamlease had a successful IPO listing which was followed by a blockbuster IPO by Quess Corp. Certainly, these 2 Indian firms have redefined scale in the Indian staffing context and continue to show impressive growth post listing. In the last few years Staffing Industry has organised itself by forming Indian Staffing Federation (ISF). ISF has been the voice of Staffing firms and has been spearheading the Formal employment movement in India.

It’s still a long path ahead for staffing firms in a low margin Industry. But the scale and the strong growth are incentives enough for them to keep at it. As the Industry matures growth, scale and profitability will find their own equilibrium. The balance is rightly tilted towards the staffing firms.

Anil Kumar ET Anil Ethanur |