October 31, 2018
India will account for more than half of Asia’s workforce in the next decade
The HR tech sector in India has attracted total funding amounting to US$15.1 billion till April 2018
In October 2018, in a bid to enter the growing HR tech market, global consulting firm New York headquartered Mercer, acquired Mettl, an online assessment platform
HR tech firms have chatbots to communicate with applicants and predictions about attrition rates in companies
One year ago, a subsidiary of a Japanese seed fund, Incubate Fund India, invested in Skillate, an artificial intelligence recruitment solution platform that helps companies to optimize their hiring process. Founded two years ago, this Bangalore based company, part of SAP Labs Incubation, scans resume databases, uses a social media footprint to update candidate’s bio-data and matches job position with skill sets. Skillate counts leading ecommerce company, Big Basket, HDFC Bank, Expedia as clients.
On their website, Incubate Fund India explains why they made this investment: India’s “massive” working population continues to grow and sourcing the right candidate is always a challenge for all corporates. Skillate’s “cutting edge technology” will solve this problem by reducing time and the cost of sourcing dramatically.
Similar to Skillate, a slew of HR tech start-ups offering such solutions, have been attracting investor funding on the back of estimations that India’s workforce is set to grow and get bigger. And, there will be a demand for their services bolstered by technology. According to a report by global consultancy firm, Deloitte LLP report, India will account for more than half of Asia’s workforce in the next decade. In fact, the report points out that India will drive the third great wave of Asia’s growth. India’s potential workforce is set to expand from 885 million people today to 1.08 billion people in the next twenty years, and it will remain above a billion people for half a century.
These new workers are expected to be better trained and educated than the existing Indian workforce, the press release adds. So, how are corporates going to deal with this influx of skilled candidates? How will they source the right candidate from a plethora of applications to suit the requirements of their job?
As an answer to these challenges, a large number of home-grown HR tech companies have sprung up tapping into current, cutting edge technologies such as artificial intelligence, machine learning and predictive analytics to build plug and play platforms to help companies with large-scale recruitment, simplify the hiring process and to sharpen employee engagement. And, like fin-tech and health-tech, HR tech too seems to have caught the attention of VCs and PEs.
According to analyst Tracxn, HR tech sector in India has attracted total funding amounting to US$15.1 billion till April 2018.
Corporates seem to be turning to these tech-assisted HR functions to help reduce time and money while hiring and retaining people. PeopleStrong, an HR outsourcing and technology firm estimates that India Inc. can save at least $ 600 million annually by 2021 using HR technology. According to their study, PeopleStrong estimates that Indian companies spend nearly US$500 million towards managing full-time employees and HR technology firms can save at least 30 per cent of the expenses through their time saving and efficient solutions for better talent acquisition, talent retention and to scale down attrition rates. Industry veterans feel that HR technologies can help companies cut people management expenses in the coming years. For example, IT industry veteran T V Mohandas Pai has pegged the annual cost reduction of people management with HR technology solutions at 25-30 per cent in an interview to Mint, the leading business daily.
Also, according to a Mc Kinsey Global Institute report, India’s Technology Opportunity Transforming Work, Empowering People, technology diffusion and adoption in India has an immense potential to add economic value to the tune of US$550 billion to US$1 trillion per year in 2025 and create millions of well-paying productive jobs.
In a world where companies need to respond to market realities quickly, HR tech companies are deploying AI based technology platforms that mine big data to make quick intelligent decisions, automate repetitive hiring processes, provide services such as resume parsing(extracting information from CVs and formatting them) and matching and crowdsourcing talent from social media platforms.
Bangalore based HR tech firm, Belong.co which provides talent acquisition solutions, has developed an algorithm to hire right candidates based on their digital footprint. The three-year-old company taps social networks such as LinkedIn, Facebook, GitHub and ResearchGate to match a company’s hiring history and position requirement to candidates’ profiles. Belong, which has clients like Snapdeal, Practo; Pay Pal, etc., claims to save 15-20 hours of a recruiter’s work every week. Last year in 2017, the company raised US$10 million in funding in a series B round led by Sequoia Capital.
In the same year, a HR software-as-a-service start-up, Darwinbox, a cloud based integrated HR technology product that takes care of all HR needs across the employee cycle, caught the interest of the India dedicated fund of California based Lightspeed Venture Partners, who invested US$4 million in a series A round of funding. Existing investors of this company such as Endiya Partners, StartupXseed Ventures and Mohandas Pai’s 3one4 Capital also participated in the round. On their website, Darwinbox lists Paytm, Nivea, Delhivery, Swiggy among others as their clients.
The Bangalore based EdGe Networks, which was set up in 2012 and selected for the Google Launchpad Accelerator Program, also secured US$4.5 million funding from investors including Kalaari Capital and Ventureeast last year. The company said they will use the funding to strengthen its core products – HIRE Alchemy which enables the search, rank and recruitment of talent; internal workforce optimization solution; and a talent analytics tool to make the shift from transactional HR reporting to transformational people predictions. The company, which plans to expand and tap into new industries and markets with the fresh funding, counts Wipro, HCL and Virtusa as some of their clients.
Funding in this sector seems to have continued at a steady pace in 2018 as well. To name a few here, in February, Qandle a cloud based HR management and employee engagement platform for small and medium-sized business raised US$1.2 million US in a pre-series A round led by Hong Kong headquartered venture capital firm Redwood Internet Ventures Ltd. And, this was followed in April 2018 by the funding received by Gurgaon based HR technology start up Benepik, which provides mobile based solution for employee communication, engagement, rewards and recognition.
2018 also saw global companies acquiring Indian HR tech firms. In October 2018, in a bid to enter the growing HR tech market, global consulting firm New York headquartered Mercer, acquired Mettl, an online assessment platform. Mettl, is a Gurugram based company which offers solutions to track technical skills, aptitude and psychometric skills of potential and existing employees. Mercer summed it up well when they released a statement during the acquisition saying that the combination of their “pedigree and talent industry experience in India and Mettl’s leading edge and scalable proprietary technology platform will enable companies in India to improve their workforce as they prepare for the future amidst rapid digitization.”
Earlier in March, HR tech platform Recruiterbox, which makes an applicant tracking software to help HR departments to manage their hiring, has been acquired by San Francisco based private equity firm Turn/River Capital in an undisclosed deal. This acquisition was in line with Turn/River’s strategy to build a suite of HR technology products. Recruiterbox’s solutions ensures that no candidate falls through the cracks and gives the company team all hiring related information in one central place such as who had applied for a certain opening, stage of the interview process etc.
From identification of potential candidates based on social activity to automation of recruitment to personalized onboarding and career mapping, these companies are drawing on the latest technology to revolutionize and transform traditional HR functions. HR tech firms have chatbots to communicate with applicants and predictions on candidates likely to drop out; technology to understand human behavior to drive workplace culture and predict attrition rates. This is a sample of the gamut of services they offer and as technology improves, so will their solutions and with sustained push from seed funders, this sector seems to be on a winning road.