The market for
This year, reducing inefficiencies in HR processes and cutting spending for those processes will be the main drivers of HR technology spending, says George LaRocque, founder and chief analyst of WorkTech, an HR tech advisory firm based in New Providence, New Jersey.
"We've just had incredibly inefficient processes from hiring through to onboarding and performance management," as well as with employee learning programs, LaRocque says. C-suite executives want to increase productivity within HR while also reevaluating their HR head count and technology stacks, he says.
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Companies are also looking to consolidate the many standalone human capital management tools they acquired during the pandemic, says Evelyn McMullen, who manages research of HCM technologies for Miami-based Nucleus Research. "Folks were left with situations where: 'OK, now we have all these tools that don't really talk to each other;' the integrations aren't working out as well as they had expected. So now they're looking to go with as few vendors as possible to get things done," she says.
For employers, trying to integrate multiple standalone point solutions to work together is
Utilizing AI tools more effectively
The advent of AI tools has also fueled consolidation because companies want to take advantage of embedded AI capabilities across several processes, McMullen says. If those AI tools are point solutions provided by multiple vendors, then companies may face a "toggle tax" that requires them to manually re-enter data or make other cumbersome accommodations so the point solutions can work with each other, she says.
"Organizations that want to take advantage of those AI experiences, the ones that are deeply embedded, they're going to want to have that all within the same product," she says.
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Standalone tools have been especially
HCM vendors have also renewed their focus on workforce management, in part because of the resources they need to devote to keeping up with changing regulations and complexities in that area, McMullen says. Besides complying with regulations, workforce management tools help schedule employees to perform work with the right skills at the right time, while avoiding unplanned overtime and minimizing labor costs.
Workforce management tools in demand
The fervor among vendors for the workforce management market, particularly for tools for companies with frontline retail and manufacturing workers, is at its highest point in five years, McMullen says. That signals much more vendor investment and competition in the future, especially among full-suite vendors trying to add customers.
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Employer spending on talent acquisition, especially for hiring front-line hourly workers, has been particularly inefficient as companies struggle to keep their pipelines of candidates full, LaRocque says.
While finding talent for front-line jobs hasn't gotten easier, HR tech — particularly artificial intelligence — has become better at controlling spending in talent acquisition, he says. For example, rather than just putting up evergreen job notices on job boards to drive candidates into the pipeline, systems are much better now at matching candidates to employers.
"Zero-click" or one-click systems will soon become popular, LaRocque says, where AI can work across an applicant tracking system or database of candidates and, based on the company's hiring needs, put together a targeted advertising campaign for human approval. The AI can then analyze the results and adjust the campaign to focus on the messaging and ad sources that performed best with the desired candidates, he says.
Employers can decide when to put a human in the loop, with the AI potentially tasked with initiating contact with the candidates through texting or an app interface, or even extending job offers, he says.
"That type of intelligent automation is emerging quickly across the whole employee lifecycle, but one of the biggest spends that we'll see HR going at in the next couple of years is the waste in advertising," LaRocque says.
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Will AI take over HR?
As companies assign their more mundane HR tasks to AI tools, they need to first consider what new strategic work they will assign to their human HR staffers who performed those tasks, McMullen says.
AI generally won't cause HR staff to lose their jobs, but it will slow the growth of HR jobs and force the roles to evolve, LaRocque says.
"There will always be layoffs, but these tools aren't coming into the work force and causing mass layoffs," he says. "We're going to see HR teams of all types--whether it's recruitment, HR, employee relations — they'll be responsible for a lot more and they'll be able to engage more strategically with their stakeholders."
