HR Tech: A longitudinal view of the industry
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What we were
Over the last three decades, the business ecosystem has seen many sweeps of changes. Waves of emerging trends hit the business world, yet the fundamentals of doing business have rarely been contested. A brick-and-mortar company in the industrial town for ages or an unseen e-commerce startup; hail-a-cab became call-a-cab; or the modern company with a swanky office in an upmarket business district – Cost, Quality, Service, and Speed are the obvious common pursuit of them all. Kaoro Ishikawa’s 4M’s of business extended to six. Man, method, machine, material, milieu, and measurement got into an interplay to create a process matrix of people, operations, accounting, strategy, finance, and marketing. Interesting but by no means elementary. Every business process domain eventually took to technology to make life easier. HR too! From the Bundy Clock time-tracking machine which had workers inserting a thick card into a slot to get their in-time stamped to the modern retina scan, HR has soared the technology curve and is now galloping ahead.
Cut to the 2020s and India is seeing the largest population of Gen X in the world. A whopping 34.23 percent who come to work with diverse career aspirations, and workplace preferences. The managerial life of them and their managers is transforming too. The pandemic and the business complexities associated with it are only making the recipe of success even more complicated. Therefore, enters the next-level technology. PeopleStrong says that Indian companies can save at least $600m annually by 2021 using HR Technology (PeopleStrong, 2017).
What we are
The top-7 trends in next-level HR technology are:
- IoT Wearables in HR - Facilitating remote-level tracing in hard-posting areas, engagement, health, and fitness options with the glitch-free cloud-based services in an ecosystem.
- AI Augmented HR Processes – Wherein human intelligence will be augmented with artificial intelligence for sharper predictive analytics and decision making.
- Cloud-Based HR – Millennials and Gen-Z run the ‘shared economy’. ‘Share it in the cloud’ and that’s often the best road they take to productivity.
- Bite-sized learning – Delivered to the device wherever you are. Responding to tests and assessment by the flick of the finger is changing the classical models of instruction design and pedagogy in L&D.
- Health – An app for meditation encouraging you to observe your in-breath and out-breath is the new age reality and it works.
- BYOD – Despite gearing up on the security front, more and more organizations are asking employees to ‘bring your own device’ that they are most comfortable with syncing their personal and professional lives through their personalized IoT network.
- Freelance Economy – Run by the people with Gig Mindset are those who want to work for you but without compromising their need for freedom, independence, and away from the nine to five frames. That is an ask from technology for solutions round-the-clock accessibility if not availability.
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Why HR adapts tech
Two imperatives drive HR to adopt the technology. First, even those companies which stay small and lean on headcount are seeing widening scales of operations across geographies and timelines. They use technology to augment their remote business processes. Secondly, with more and more organizations shifting to an organizational design that is a matrix, synergies of processes are in demand. Thus, technology is leveraged for optimal collaborations across functions.
The figure below represents the process technology adaptation by HR. Business exigencies triggers the need for finding the maximum or minimum value of an activity for some constraint, which must be true regardless of the resultant solution. This means the best possible remedy for a given problem under a well-defined set of organizational constraints. These activities sum up the process. Within each activity lies many tasks. Technology helps us to go deep into the multiple layers of tasks, activities, and processes and enhances our ability to retrieve and process data for information analytics for business decision-making. All this sounds great but ‘is there a business viability of this’ – is what the executive think tank ponders upon.
Once the business logic is agreed upon, the big ‘acquisition choice’ is to build or buy. This is what the HR Tech industry is built upon. And of course, the final stage is that of the continuing cultural adaptation of the technology embarked upon.
What the HR Tech Industry looks like
With more and more business houses laying greater emphasis on ‘managing people’ effectively, the number of HR professionals in the world is increasing. The median ratio of human resources staff to total employment may be declining, but more organizations are having HR professionals on board increasing the width of the profession. COVID-19 swept its axe and cut down many heads in HR but come 2022, pre-pandemic growth in the profession is expected to accelerate. Globally, a spike of 15-18% is what is predicted by 2025 by most trendwatchers.
HR tech integrates HR tasks to HR activities thereby helping to map HR processes. The genesis of this industry was by making life simple on HR payroll by offering payroll software. However, the HR Tech industry now paints a much larger canvas with a diversified portfolio and aggressive footprints on the 7-top trends as mentioned above.
Pandemic has been a blessing in disguise for the HR Tech industry. Work from home and remote productivity challenges have pushed many companies to adopt HR Tech. The industry thus became attractive to investors. The last six months’ trends of industry players like Service Now, Ceridian, and some more in the stock market show a steady rise. Ceridian saw a steep rise in its stock price during peak pandemic months.
Legacy HR tech firms had the biggest slice of the market pie in 2019, with an aggregate value of approximately 60.4 billion U.S. dollars. By 2025, the projected market value of the HR Tech industry is expected to be more than double.
Legacy HR tech companies battled the COVID-19 pandemic slump much better than start-ups. The principles and subsidiaries' relationships helped them leverage many integrated strategic advantages. Ceridium and Ceridium HCM Pty of Singapore, ServiceNow Software Development India Private Limited – subsidiary of ServiceNow America, Linkedin of Microsoft are glowing examples.
Start-ups on the contrary are the more nimble-footed greenhorns. They are faster, even more creative with novel solutions in the areas of tech-based workgroup engagement and offering unique capacity for interconnected platforms, systems, and unique applications. Start-ups continue to provide ground-breaking HR Tech products that the biggies do not see business scale worth a punt.
India has a fertile HR Tech start-up climate. The sector is poised to reach $41 billion by the year 2022. About a $4.5 billion worth of the pie belongs to APAC with India going for a big bite. The APAC market is expected to move to a fast-track growth with an annual growth rate of 13.5 percent from 2019 to 2025, becoming the fastest-growing region.
HR Tech product portfolio
The archetypal payroll product has yet not hanged its boots. It rules the portfolio with about 58% share, followed by recruitment products. These have evolved many generations with cloud-based offerings and other task-organizing and analytical frills, enjoying a fair share of about 27% of the pie. Newbies in the HR Tech product portfolio are learning & development and rewards & recognition products. They make a promising debut with about 3% each. Given the bite-sized microlearning and blended learning boom, these are set to mature faster in the COVID-19 season. Analysts are apprehensive if learning and R&R have the potential to dislodge the payroll king. This is the niche in the market that HR Tech start-ups are eyeing. Nonetheless, the COVID-19 pandemic continuum surging in waves, workgroup engagement, and connectivity products are set to enjoy a spurt of about 14% taking its share to 24% by 2025.
Conclusion
The HR Tech industry will see start-ups growing faster than legacy firms. Yet, the growth rate is not expected to be universally spread across products and geographies. Payroll products will remain the top seller as more organizations will want fewer complexities around compliances and calculations. Cloud-based SaaS solutions will appeal to millennials and Gen-Z - the ambassadors of the shared economy. If work from home continues, engagement and connectivity products will grow. Interesting to observe would be L&D products. Can a remote platform remove the ‘classroom’ from our consciousness? HR Tech is surely a sector to watch.
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