Global companies like Manpower Inc (NYSE: MAN), Hewitt (NYSE: HEW), Kelly Services ((NASDAQ:KELYA) and Exult (NASDAQ: EXLT) have already launched offices in India, and are leading the trend toward outsourcing recruitment processes to India.

Technology is now allowing professionals sitting in remote locations to mine data banks, shortlist resumes, and even conduct interviews with prospective candidates over video conferencing; and companies across the globe are considering offshoring of recruitment functions to concentrate on core activities, and cut down on ever-increasing costs. Other factors that have contributed to the growth of offshoring are access to larger databases both in terms of numbers and geographical reach, contractual partnerships and expertise offered by vendors at each stage of candidate selection and the ability to cater to bulk requirements in contingent situations.

Recruitment outsourcing to India has been slow to take off, as it involves a sensitive issue about letting in outsiders into company decisions on employee selection. However, activity in the sector picked up in 2006 and is predicted to sustain growth in 2007. A host of recruitment companies are taking advantage of the skilled workforce and lower costs in India to set up a base for their global operations. Futurestep, the RPO subsidiary of Korn Ferry International set up its office in New Delhi in 2005. Although Korn Ferry has been in India for more than a decade, its subsidiary was set up to cater only to recruitment process outsourcing. Another U.S. based recruitment process outsourcing company, Kenexa Technologies, operates from Hyderabad and provides services such as talent acquisition, recruitment management and support, retention consulting and employee survey administration and analysis from India.

Apart from the subsidiaries of foreign recruitment companies, several India based vendors are also trying to tap the global opportunity. Their business model can be of two types: providing services to a recruitment company abroad or to an overseas company directly. In the former, the vendor develops a relationship with the recruitment company for outsourced services, but does not directly deal with clients. In the latter, the vendor generally looks to cement long-term relationships with clients. Then the vendor caters to requirements across geographies, and develops dedicated databases to fulfill volume-based needs.

Most Indian vendors are as yet catering to the lower end of the value chain where they sift through databases, select candidates, contact them and fix interviews. But the higher value adding work – which involves conducting interviews and recommending a candidate to the company – is slowly finding its way into India. Vendors believe that this will grow over time, as they build greater understanding of issues such as education systems abroad, structure of particular industries, etc. Vendors have initiated expansions looking at the growth prospects – Elixir Web Solutions, a leading Indian recruitment services provider, plans to obtain licenses in the US, UK and China by 2008. Elixir has developed specific teams for industries such as BPO, IT, FMCG and Retail.

The opportunity certainly seems huge. Some estimates show that the potential for recruitment process outsourcing to India will be at least $30 billion by 2008. Besides, firms that have a presence in India also have an expanding domestic opportunity to look forward to. Industries like IT, ITES, Pharma and more recently retail have brought in a job boom – the market is growing at 20 to 25 percent per annum – and Indian companies too, are turning to professional recruitment agencies to handle the additional HR workload. Although the domestic market is at a nascent stage, hectic activity is expected in the next two or three years, and as of now, marking their presence in India seems to be a win-win situation for recruitment companies.

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