HR in India, starting from independence until the mid 70s was purely transactional and focused on industrial relations. From the 70s, the focus shifted to personnel management and this continued until the early 90s. HR, as a function, evolved post liberalization era when global business standards were introduced and the competition for talent intensified. The HR buyer began to look keenly into recruitment services to gain access to a larger pool of quality talent. 

As business complexity grew, management of the employee lifecycle became more challenging and HR functions started feeling the pressure to manage the scale and complexity of a larger and more diverse workforce. While recruitment is still the predominant preference, the last 10 years have seen organizations open up to a broad spectrum of HR services. There are three markets of HR buyers in India― multinational corporations with access to global markets, homegrown owner-promoted companies, and SME and small companies.

The multinational corporations are the largest consumers of HR services in India, and homegrown Indian companies are far behind the curve in terms of adoption maturity. Large multi-national corporations who have significant service budgets, however, typically address their need for value-added HR services at an international scale and Indian players have to compete with global players in a more mature market. Education and awareness about HR services among homegrown owner-promoted and small scale companies is low and hence, the bulk of the business for service companies comes from the lower spectrum of the value chain, such as compensation benchmarking, transactional activities, and administrative services. The HR buyer in India is yet to mature enough to consume high-value services such as leadership development and succession management.

Another problem in the buyer community is that HR professionals in India are not skilled to build a solid business case for investment in services. As K. Ramkumar, Executive Director, at ICICI illustrates, “the role of the HR professional while explaining the value of services to the CEO is like that of a doctor or an engineer diagnosing a problem to a client. Excessive use of technical jargon dissolves the value and leads to a weak business case. HR professionals in India lack the maturity to drive the business case.”

Few services will likely see a spurt in demand in the coming months. According to Prince Augustin, EVP-Human Capital & Leadership Development at Mahindra & Mahindra, skilling and education are two sectors where buyers and service providers will collaborate. Sudeep Banerjee, Head-Organizational Capability at Bharti Airtel, forecasts that the HR buyer will be keen to employ integrated HR services to manage the complete horizon of a particular function, such as talent management. The outlook for 2013 will be of stable investments, but the real growth of investments will come across the next 10 years.