There are largely two opposing views on whether to go for a single window service provider or choose a separate player for each need
Every business has its own engagement models - E. Balaji, MD & CEO, Ma Foi Randstad
How will you define the industry of HR and what is its total size today in India?
The size of the HR Industry in India depends on what areas of business you include in this industry. As per our estimates the industry of HR in India is around 1.5 billion euros or INR 9,500 crores, this is taking in to consideration Staffing and Temping which is the largest component of the industry with 50% or more of the rupee size, then follows the training piece, which I believe is the second largest, then search and selection which are the high margin business in recruitment, then follows HR consulting that includes compensation structures, assessment solutions, climate studies etc, and finally small still in India but growing rapidly the HR outsourcing piece, today dominated specially by payroll and benefits administration.
Interesting characteristics of this industry are that one is complex and two is fragmented.
This is a very complex industry. Even if you ask some of the players at the top of the value chain, for example HR consulting or executive search they will have a different view of the nature of the industry and most likely they will not consider themselves as part of this industry and they will just compare themselves with their direct competitors.
As the industry is very fragmented, when we look at defining the industry we look at only those players that at least pay service tax, that helps in eliminating all single-handled type of operations and that helps us in identifying the size by doing reverse calculation of companies in the space. The only issue we have faced in this exercise is that companies like security companies are also classified as manpower services.
How do you define the relationship between vendor and supplier and how is it evolving?
The nature of relationship between vendor and supplier varies extensively from piece to piece. For example in terms of payroll processing, the service is technology intensive and mostly transactional as opposed to executive search or consulting that requires a more intimate relationship between the parties that results in more business insights and deeper engagement required. Every business has its own engagement models and its own nature of business. For example, executive search or consulting are both high margin services, that require high level of people, they are driven by individuals and are hugely susceptible to economic cycles. Versus for example outsourcing payroll has certain continuity regardless of economic cycles.
From the costumer’s point of view, there are largely two opposite views: some costumers are happy to work in a single window model, where there is an account manager and is a one stop shop services for the HR needs. Other believe that a one single organization cannot be good at everything and hence they will chose to go to different vendors looking at who is the specialized in the area. From my experience, taking one or the other approach depends on the philosophy or the nature of the organization but by at large, international companies will tend to go for specialized solutions as their benchmark levels tend to be higher and companies growing very fast or entering the market new might be comfortable to look at a single window offering concept as the speed of delivery plays a very important role.
What are the Key Trends you see in the industry?
1- Industry growth linked with GDP growth. In terms of the expected growth of the industry, our estimate is that this growth will be directly linked to the GDP of the country and it will grow at an additional 3 to 4% of the GDP growth
2- Industry is getting recognized as an industry in its full right and hence is able to attract from other industries and people are identifying this industry as a potential career opportunity
3-Consolidation is happening but it is being dominated by MNCs. The industry has grown overtime by consolidation, by inorganic growth, that is the DNA of this industry, individual players will find it difficult to compete and will need better technology, will need more marketing muscle or will require the synergies and benefits of being part of a larger player, so those aspects will drive this type of consolidation. The effect of globalization in the Indian HR industry has meant that many of the Indian organizations have been bought over by MNC, from example ABC sold one part of its business to Manpower, or People One to Addeco or Mafoi being today Mafoi Randstad. There are only three organizations from this industry in the Fortune 500 list, that is Addeco, Randstad and ADP. So organizations are relatively smaller and need to consolidate to grow.