Between 2014 and 2015, spending by human resources departments increased by 4 percent. Of this, between 5 percent and 8 percent was towards investments in tools and technology. Large companies spent the most on technology at almost 10 percent of their HR budget. This increased spend has resulted in large market growth for cloud-based HR technologies. According to Bersin by Deloitte, the entire HR software market is over $10 billion in size and many segments are growing at double-digit rates. CB Insights, a venture capital and angel investment database, reveals that HR technology firms had already received roughly $600 million in venture capital across 106 deals by the end of the first quarter of 2016.
This trend is being driven by a variety of macroeconomic factors and business trends, including an aging workforce, the fierce war for talent, breakdown of performance management strategies, and the need to drive retention and productivity. While many companies have started to realize the benefits that can be derived from good HR tech, some are still unable to put the resources in place to take advantage of the full potential of these newer technologies.
One of the key areas where companies are investing is in mobilizing key features of HR functions through self-service capabilities. This helps HR departments save time and also greatly aids in worker engagement and a positive employee experience. According to a recent survey by Sierra-Cedar, mobile HR increased by 92 percent in 2015, from 13 percent average mobile-enabled HR processes in 2014 to 25 percent in 2015; a 47 percent average is expected for 2016.
A survey by Information Services Group (ISG) explored the changing landscape of HR technology and service delivery. The findings helped to illustrate some key insights into the areas where HR tech investment is increasing.
Companies continue to transition from on-premises Human Resource management Systems (HRMS) to Software-as-a-Service (SaaS) based technologies. According to the ISG report, over 70 percent of respondents have already implemented or plan to implement a HR SaaS within the next two years. And as per Deloitte’s 2016 Global Human Capital Trends report, over 40 percent of all companies are currently in the process of replacing their core HR technology with a cloud system.
Other hot trends include:
“HR is leading the migration to the cloud. Those legacy systems are going to break down and HR leaders are ready to take chances on where they want to go next.” ~Wes Bryan, Co-Founder of OneSource Virtual
As for where in the company the funds for this increased HR tech spending are coming from, it seems that CIOs are still in control. According to a survey by CEB, CIOs control approximately 60 percent of the average IT budget in a company. The other 40 percent, however, is being utilized by a range of departments, including marketing, finance, and HR.
“It’s becoming increasingly common for HR departments to have technology as part of their budget, as more companies realize and acknowledge the business benefits and efficiency achieved from effective HR systems.” ~Kevin Brooks, National Sales and Marketing Manager at Frontier Software
The Different Categories of HR Tech
There are many comprehensive HR software tools that are designed to help HR departments more effectively manage many of their responsibilities. However, there are also many HR tech solutions on the market that cater to a specific function of the HR space, including: