As published to Entrepreneur
There’s a pattern in the lifespan of human resources (HR) technology companies of the past two decades: they get gobbled up. The pioneering firms in HR technology from the late 1990’s to early 2000’s were mostly acquired by bigger enterprise companies in need of a few product parts. IBM acquired Kenexa, Oracle bought Taleo and SuccessFactors was acquired by SAP.
With those acquisitions, founders and early employees left and innovation died. Then came the Great Recession and all investment ended. Today, industry experts like Sheeroy Desai, CEO at recruiting and HR management platform Gild, think job growth is finally hitting stride. Though some bigger players appear stagnant and still, HR tech companies are growing quickly, as hot, agile startup technologies enter the field.
“In the past decade this stagnation has allowed Workday to emerge as a new disrupter,” Desai remarks, “but with almost no real competition even Workday has not brought the level of innovation that is truly needed.”
“Almost every current HR function operates under 20th century principles of past practices, efficiency, risk avoidance, legal compliance, and hunch-based people management decisions,” remarks HR thought leader, Dr. John Sullivan. But, today, there is a new set of entrants who are challenging the status quo.
These companies are different from their predecessors in HR technology, in that they are founded by fresh-eyed engineers and non-HR practitioners approaching technologies and processes from a consumer perspective. HR tech companies like Zenefits (now valued at $4.5 billion in just two years) in the HR benefits space, Expensify in employee reimbursements, ZenPayroll changing payroll, and Gild in the area of recruiting.
Bigger, faster, better.
According to the Industry Trends in Human Resources Technology and Service Delivery Survey by Information Services Group (ISG), those HR technologies succeeding are the ones where:
- They’ve built user interfaces that deliver a consumer-like experience and include mobile and social capabilities.
- Cloud technology is creating massive economies of scale for HR customers at the same time, reducing IT resource involvement.
- Real-time workforce visibility and flexibility allow for organizations to respond to changing market conditions.
- New technologies can be integrated into surrounding business processes.
HR tech is, out of necessity, playing catch-up to marketing and operations technology advancements. Data-driven marketing predictions and decisions are made more quickly from today’s advanced big data collection and interpretation. But old-school, limited HR practitioners don’t have these same decision-making tools. It’s costing companies in employee engagement.
“Instant feedback mechanisms can significantly improve engagement and motivation by consistently guiding employees in the right direction,” warns Matt Straz, founder and CEO of Namely.
Meanwhile, some are suggesting that advanced predictive analytics may be the future of HR and talent management. That’s where the engineers and data crunchers come in. Better HR technology directly affects them. Think spotty expense reports or desktop-only benefit form completion. Today’s HTML5, social authentication and flat, optimized UI design is an entire toolkit of material to work with to improve legacy systems.
Data shows organizations are upgrading to these new capabilities, too. While incumbent companies appear to be missing this wave, and have lost sight of the needs and pressures of their customers, fresh, new customer-engineered technologies are advancing the human resources industry.