With somewhere around 3 billion people now working around the world1, the marketplace for HR technology and services is enormous—and ever-changing. This year, as I try to recap all the disruptive changes taking place, the simplest way I can put it is this: The market is reinventing itself. Three micro-trends are driving this reinvention: changes in the overall technology landscape, changes in the way we work, and changes in the way we manage organizations.
1. A New Focus on Tools for Workforce Productivity
When it comes to workforce productivity, the first thing to understand is that the amount of time workers spend online is still increasing. Further, we are about to go through a massive global shift away from email as we know it and toward conversation-based systems such as Slack, G Suite, Workplace by Facebook, Microsoft Teams, SAP Jam Collaboration, and many more. Over time, this will likely include voice-recognition software similar to Amazon’s Alexa and Apple’s Siri, as well as intelligent chatbots.
As companies replace hierarchical management with a networked team structure, we are going to be using new tools purpose-built for teams. For example, Cisco System’s team enablement leader found that while the company has 20,000 teams actively working on projects, none of their work or team-related data is in the HR systems of record—so the company has implemented a brand-new team-based management system to manage goals, performance, coaching, and more.
2. ERP and HCM Move to the Cloud as the Talent Market Reinvents Itself
One of the most important decisions an HR department can make is what core HR platform to purchase. These platforms act as systems of record and can manage compliance, payroll, and benefits for all employees. The major players in this market (Oracle, SAP, Workday, Ultimate Software, Infor, Ceridian, ADP, and dozens of others) are all growing rapidly as companies replace their legacy systems with cloud-based platforms. This global market is in the tens of billions of dollars, and the movement of these products into the cloud represents a significant shift from
purchasing to leasing (since cloud-based software is essentially a lease)—a change that many vendors are finding very attractive.
Remember also that the core HR technology and the payroll services markets are not quite the same: One is a software business and the other is a service business. As companies continue to become more global, they face the challenges of global payroll—so many of the payroll-centric vendors (such as ADP, Ceridian, Paychex, Paylocity, and SAP) are growing as well, particularly those that offer hybrid managed payroll service options with their cloud solutions. Most big companies buy payroll services from a variety of local providers around the world (in fact, I recently met with representatives from several Indian companies focused entirely on payroll). So this market remains somewhat separate from core HR software for many vendors.
3. Continuous Performance Management Has Arrived
One of the most pervasive transformations we’ve seen in HR over the last decade is the reinvention of performance management. More than 70 percent of the companies we studied in Deloitte’s 2017 Global Human Capital Trends research said they are well on their way to reinventing the performance management process in their organizations. Bersin has defined seven steps in this transformed process, and a new set of tools and platforms is coming to support it.
A fast-growing set of exciting new tools has also entered the market. Some of the leading tools were designed by experienced game designers, which means their systems are typically very easy to use, very agile, and very data-driven. This category includes companies such as Alliance Enterprises, BetterWorks, Reflektive, 7Geese, HighGround, Impraise, Small Improvements, TINYpulse, NEOGOV’s Perform, Zugata, and others, as well as new solutions from Globoforce and O.C. Tanner.
While it’s too soon to say which of these vendors will win in the long run, the market is very hot and companies are seeing tremendous value in these types of systems. Once again, the ERP vendors have lots of work to do, which is why many are investing in this area. Can they build something as engaging as the products coming from the new vendors? I know they’re trying, but we can probably expect some amount of consolidation in the years ahead.
4. The Explosion of Feedback, Pulse Survey, and Analytics Tools
Let’s face it: Almost every company worries about employee engagement. Bersin’s research with Glassdoor shows that while employee engagement has, on average, been almost flat since 2009, there is a bell curve of companies that are good and bad at keeping their people happy. The drivers of engagement are complex (which the Bersin Simply Irresistible model explains in more detail), but the bottom line is that you cannot really maintain positive employee experience without listening to your people on a continuous basis.
we are going to see integration between this area and performance management in the years ahead. Employee engagement data, manager feedback, coaching, and social recognition are all different forms of feedback, so ultimately they belong in one place. Employees tend to want a single “team management” platform to use, so I believe we should expect to see integration.
5. The Reinvention of Corporate Learning Is Finally Here
The corporate learning market has experienced a great deal of transformation during the last few years, and it feels like the renaissance has finally arrived. We now have a marketplace of next-generation learning management systems, learning experience platforms, microlearning platforms, MOOC33 and program management systems, and an amazing new set of virtual reality and assessment tools. Many companies have been somewhat slow to adopt all these new technologies because it wasn’t yet clear which way the market would go. But I believe we now have clarity, which will help accelerate market growth.
Businesses around the world spend about $140 billion on L&D annually ($500 to $3,000 per employee depending on the industry). Of that spending, roughly $4 to $5 billion is spent on core learning platforms, while the rest is spent on tools, content, instructors, classrooms, and facilities. And after a few years of stagnation, learning and career platforms are now the fastest growing segment in the industry, driven by more clarity in the market and the fact that virtually every company is worried about reskilling and the future of work.
AI can now begin to address both of these issues, automatically tagging content and creating taxonomies to help make sense of the chaos while also recommending content to learners based on their prior positive experiences and what others like them are consuming. IBM, Skillsoft, LinkedIn, Workday, EdCast, and nearly every other learning vendor understands this vision. Over the next year, I expect these capabilities to become available; buyers should now consider how vendors are building intelligence and machine learning into their offerings.
6. The Recruiting Market is Rapidly Changing
The biggest talent spending area around the world today is recruiting.45 While companies spend around $1,200 a year per employee on employee training (making it an approximately $140 billion market), recruiting spend is about three times larger. The reason is simple: More than 20 percent of all workers change jobs every year, so employers are constantly advertising, sourcing, recruiting, interviewing, assessing, and onboarding new people.
Fifty-five percent of companies are now increasing investment in video assessment, the fastest growing new area of spending in talent acquisition.50 The number two area of growth is candidate marketing solutions, which focus on building employment brand and talent pools (with 51 percent of companies expecting to increase their investment in this area51). The third area is game- and team-based assessment (at 33 percent).52 As I mentioned above, these new areas indicate a big shift away from recruitment automation; vendors are now focusing on the earlier stages of the
process, when sourcing and differentiation of candidates is critical. AI tools can help make all these applications smarter over time.
I want to highlight one particular disruptive event that took place in 2017: the launch of Google Cloud Job Discovery, which essentially puts the world’s largest Internet search and advertising company into the talent acquisition market. Over several years of development, Google has developed a job family architecture, technology to categorize
jobs in a meaningful way, and a set of search tools that leverage location, Google Maps, and other Google data sources to give candidates an accurate listing of local, relevant jobs in their area. This offering has the potential to disrupt LinkedIn, Indeed, Glassdoor, and other job search sites. Google has also introduced a low-end ATS called
Hire that could impact the small and mid-size recruitment markets over time.
7. The Wellbeing Market Is Exploding
It seems that every few years, I learn about another emerging market and have to scramble to figure out what’s going on. Several years ago, it was the pulse survey and feedback market. Lately I’ve been trying to rationalize the learning and performance market. I expect the next big one will be the market for wellbeing tools and solutions. At the moment, this market is big, complex, and not yet clear.
The HR technology market now boasts dozens and dozens of tools, platforms, training programs, and analytics systems designed to measure, monitor, and improve our wellbeing at work. And this rapid growth has attracted well-funded insurance companies, training providers, and technology companies.
8. The People Analytics Market Has Grown and Matured
I’ve been studying the world of learning analytics, HR analytics, and now people analytics for almost 20 years. During my early days as an analyst, analytics conferences were sparsely populated and mainly attended by techies who were excited about what they were doing but frustrated that their leadership did not understand the value of their work. This has totally changed. People analytics is now a well-known discipline and a must-have domain within HR and IT.
The new generation of performance management tools essentially collect network data through feedback, so I expect we will see ONA reports from these types of vendors soon. As these vendors grow in scope and capability, I believe we will see this kind of technology incorporated into core ERP and talent management platforms. So we can expect innovation, as well as mergers and acquisitions activity, to increase in this part of the market.
9. Intelligent Self-Service, Communications, and Employee Experience Tools
The final marketplace I want to discuss in this report is the large and quickly growing market for employee experience or employee self-service tools. As we discussed in the 2017 Deloitte Human Capital Global Trends report, companies are now shifting their thinking away from employee engagement to instead focus on the end-to-end employee experience.74 And with a new focus on productivity and wellbeing, this means making HR transactions easier, more automatic, and more intelligent.
In India earlier this year, I saw a demonstration of a vendor product built entirely around conversational and intelligent interfaces. Every employee transaction was performed via a chatbot. It worked extremely efficiently. This particular vendor does most of its business in Asia, but it really convinced me that this is the future. And the future is now: IBM’s CHRO presented the company’s HR journey at our 2017 IMPACT conference, and explained in detail how IBM leveraged Watson and other intelligent tools to redesign their performance management process, manager
coaching, employee voice and feedback, retention analytics, career coaching, learning, and more, all built on the Watson API, a set of easy-to-use programming experiences.
10. HR Departments Are Becoming Digital and Innovative
This brings me to my final disruption: the growth in experimentation, innovative integration, and creative thinking within HR. For many years, people have written articles about the bureaucratic, unhelpful HR team. I’m here to say those days are truly over. The HR organizations of today are generally creative, innovative, experimental, and technology-savvy. In the old days, HR professionals could delegate someone to be the “HR tech guy”; he or she just “bought the right solution,” and that was that. The world is quite different now.
HR departments are increasingly focused on design thinking—an online search for “Design Thinking in HR” returns thousands of hits—and are now talking about empowering people, culture, engagement, and new models of management. I’m really inspired by this research, and its findings represent a disruptive change in the level of creativity and experimentation in the entire HR profession.
Today, however, innovation is coming from HR functions themselves. HR departments are thinking more creatively, asking more questions, and pushing vendors to adapt to new management models. Many are demanding vendor solutions that are more team-centric, intelligent, easy to use, and development-focused. So we, as innovative thinkers in HR, are disruptors as well.