HR Technology 2023: What’s Hot? What’s Not? – JOSH BERSIN – Josh Bersin

The HR Tech market has been on fire for the last few years. More than $15 Billion of venture and PE money was invested and the number of startups is astounding. The average large company now has more than 80 different employee-facing systems (OKTA), and this number has increased by more than 40% over five years.

There were two reasons for this growth First, the low-interest rate investing environment unleashed billions of dollars to entrepreneurs, so there are hundreds of new tools. Second, we’ve had a massive need to manage, hire, and support employees during the pandemic. Remote and gig workers need scheduling systems, remote payroll platforms, onboarding, and more. So HR buyers have had a blank check, shopping for tools and platforms with almost no limitations.

Well all that is about to change: 2023 is going to be a year of slowing growth, market consolidation, and new category definition. So let me give you my thoughts, and also thank Stacey Harris for publishing the 25th Sapient Insights HR Tech survey, which contributed to my analysis.

1/ The HR Tech Market Is Slowing Down.

As much as I’m an optimist, I believe HR Tech spending is going to slow. While roughly half of companies plan to increase their spend, the number cutting back almost doubled (from 5% to 8%), and I expect that trend to continue. And as hiring slows, so does the need for more HR software.

The number of product categories continues to expand (more below), but the “per-employee” spend will moderate. Areas likely to slow include software for recruiting, learning (old systems are going to bear more load), core HR (I see a shift in value creation from HCM platforms to employee experience and talent intelligence systems), and ongoing systems for wellbeing. Generally speaking, Employee Experience software is a massively growing, early-stage category, as are other white hot areas below.

I also have a feeling the price of cloud-based HCM systems may come down. Workday remains the darling of the market, but even their customers are buying alternative talent tools on a regular basis, forcing Workday to further open up its platform.

2/ HCM Vendor Satisfaction Remains Mixed.

While the fit and finish of core HCM systems has improved (Workday, Oracle, SAP, ADP, UKG, Ceridian have all upgraded their platforms), the Sapient study shows an overall 7% drop in vendor satisfaction. Why this gap? Vendors are stretching themselves thin. HCM vendors are trying to do everything, and their overall average satisfaction is around 3.5 out of 5, not a spectacular …….


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