MOSL: STAFFING-Technology staffing poised to double in five years-Positive for Quess Corp and TeamLease

​STAFFING: Technology staffing poised to double in five years; Positive for Quess Corp and TeamLease; reiterate Buy

We attended Indian Staffing Federation’s (ISF) conference on Artificial Intelligence and Machine Learning in Bangalore to gauge the impact of the alteration of the linkage between headcount and revenue in newer technologies, and its consequent impact on technology staffing. We have come back with a positive view, cementing our stance on both Quess Corp and TeamLease.

ISF expects a growth of 14-16% per annum over 2017-2021 in the Indian IT staffing industry. This quantum of growth over a five-year period would double the size of the industry from the current USD3b – fairly optimistic compared to expectations around the growth of the Indian technology industry.

Concerns around lower headcount growth in the IT industry have been spilling over to dependent businesses like staffing. There are two possible contrary outcomes here for the IT staffing industry (both plausible and possibly coexistent): [1] proportional pressure on headcount growth, and [2] increased demand, as customers seek flexibility, efficiency and agility. Consensus view on this predicament has been leaning towards the latter.

Leaving demand dynamics aside, newer technologies have been helping add some flavor to the otherwise vanilla offering of staffing. Combined with efficiency benefits, financial implications are being directly witnessed in increased revenue growth (led by differentiation and higher pricing) and higher profitability (driven by operational efficiency).