HR technology is experiencing a boom that resembles the tech gold rush of the last two decades. After business and personal apps saw their heyday, human resources is getting the full attention of software developers from large-scale companies like SAP and IBM and start-ups with five employees and a dream.
The numbers don’t lie.
According to HR Technology 2021: The Definitive Guide, a report published by industry analyst and HR Tech Conference opening keynoter Josh Bersin, more than 12.1 million employers in the U.S. spend over $5 trillion on payroll, benefits, training and other employee programs. Likewise, the L&D marketplace is worth more than $240 billion per year, and recruitment, advertisement, assessment and interviewing tools account for a $250 billion-plus market. And the market for wellbeing, benefits, insurance, workplace tools, and workplace productivity systems is similarly large.
And Worktech reports that global venture capital investment into HR tech since January 2017 has totaled $28.4 billion, with the pace of investment increasing each year. So far, 2021 is at “a fever pitch,” says Worktech founder and analyst George LaRocque, who says $13 billion has been invested in HR technology so far this year.
But although the market is expanding, it’s not crowded yet, says Janet Mertens, research director for The Josh Bersin Company. “There is a lot of movement inside the [HR tech] market and when it comes to vendors, it is really healthy with lots of acquisitions and movement towards new platforms for HR,” she says.
“Microsoft has never been in the employee experience or HR market before and they’ve just come out with [Microsoft Viva] that sits inside their productivity platforms, so inside Teams and inside Microsoft Office, and it’s all about health and wellbeing.”
Today’s HR technology consumers no longer resemble their risk-averse forebears who shied away from cutting-edge solutions from no-name start-ups. Now, they’re willing to embrace new technologies and solutions from newer software developers, says Natalie Egan, CEO and founder of Translator, a DEI analytics solution provider.
Later this month, Egan will be participating in PitchFest, a live competition among 30 new HR tech solutions during the HR Technology Conference & Exposition in Las Vegas, which runs from Sept. 28-Oct. 1 at Mandalay Bay. The winner will receive a $25,000 prize donated by Randstad Innovation Fund, as well as booth space at next year’s HR Tech.
“With a lot of the new demands around diversity, equity and inclusion technology, there’s demand coming from the top [such as] the board of directors, the investors, the C-level suite who say, we need to do things and it needs to be tech-driven and measurable, scalable and repeatable,” Egan says. “We’re finding that our market is much more open to experimenting and trying different technologies more rapidly as opposed to committing to a full-blown implementation of some HCM technology that [costs] multi-million dollars.”
Although her company is now in a growth stage after closing its fundraising round earlier this year, she saw firsthand the new interest in HR solutions from start-ups–and not just established software name brands. A few years ago, “I’d say HR tech didn’t sound as sexy, but you’ve seen record levels of capital going into education tech and into HR tech over the last two years. You’ve seen a lot of companies also raise a lot of capital showing that there is a really large market opportunity,” says Tao, who will speak on a panel about women in leadership during the Women in HR Tech Summit on Sept. 28 during the HR tech conference in Las Vegas.
HR tech drivers
The COVID-19 pandemic, along with the Great Resignation, the aftermath of the murders of George Floyd and Breonna Taylor, and the #MeToo and the Stop Asian Hate movements all have been drivers for new technology, especially for tools that focus on DEI.
“Everything that’s happening in the world and the trends that have been putting it in the spotlight well before COVID [are important], but COVID really amplified many things,” says LaRocque. “We’re seeing a lot of replacement of systems, a lot of new technologies, new products hitting the market, and a lot of investment coming into this space.”
The hunger for new solutions is not exclusive to CHROs. Other senior executives inside companies are eager to expand their HR toolkit, as well. Tao recalled speaking with a chief financial officer who was interested in making a half a million-dollar investment in coaching for the company’s employees.
“They justify that [by saying], ‘I have 700 employees where if I sort of normalize what the cost is per employee, it’s a very low cost for me to feel like these people will be better equipped to be more productive, to have more impact at work.’” Tao says. “Before, spending half a million dollars on employee development might’ve been a hard decision, but now it’s really seen as a must-have decision.”
Egan hopes for the same reaction when she participates in PitchFest later this month. She’ll join 29 other start-ups, including Cauldron, HCM Unlocked, INTalent and Stayhome Inc., vying for one of two prizes: $25,000 for the winner and $5,000 for the Talent Experience second-place finisher. The competition will feature three rounds of 10, three-minute demos, with the top two vote-getters in each round competing in a final matchup on Sept. 30. The first round begins at 5:30 p.m. Sept. 28 in the Pitchfest Theater.
“I don’t like pitching investors. The idea of pitching to a market at an event is interesting because they’re not looking for like 15x returns in 10 years or it needs to be a unicorn in their portfolio,” she says. “The opportunity to win this money and create a relationship with Randstad, who’s sponsoring it, that’s interesting to me. They’d be a great customer and partner of ours and there’ll be a lot of great customers and partners at the event.”
She adds, “I mean, we just like exposure. I actually think we can win.”
For more about Pitchfest and the rest of the HR Tech Conference, including how to register, click here.