HR Technology Space – Then and Now

HR Technology market was one of the fast evolving B2B tech markets along with Sales Technology market when we started Talview in 2012. It still remains true. Globally HR has produced some of the fastest growing tech companies including Workday, LinkedIn, SuccessFactors, Zenefits, etc. The Indian market has a lot of catching up to do but, as we move on to the year 2017, I can positively say that the future looks promising.

In the past few years, the HR Tech domain has evolved significantly and many new categories have emerged. In 2012, HR tech was broadly classified into HRIS, talent acquisition, performance management, benefits & compensation, learning & development and job sites. In 2016, we look at onboarding, HR analytics, engagement tools, recruiting tools like video interviews & assessments, wellness management, and collaboration/communication tools as new HR tech categories.

The potential innovations that can be seen in 2017 can be:

Globally, the market is as big as USD 15 billion. However, there aren’t reliable reports available to draw a solid number for the Indian market. Estimates put the APAC market size in the range of USD 3 billion. However, there is a much larger HR services market that the software automation can target. For example, Talview targets a part of the USD 400 bn plus RPO Industry that has everything under its purview from temporary staffing to permanent staffing and has a large list of established providers, while Piqube is bringing in automation in what was traditionally Recruitment Consultants domain.

The number of new HR tech startups also points towards a growing market. For example, in the Indian set up, when we started Talview (then Interview Master) there were less than 50 companies active in the space in India, however, today we see approximately 300 businesses in the domain. In a recent report by Tracxn, we see that in 2012 around $10 mn was invested in HR tech startups, while in 2015 around $50 mn was invested. 

Enterprise users in a matured technology market like the US demand better user experience, automation, and robustness. These aspects can be provided only by a well-designed product that undergoes a rigorous QA process. A standardized user experience irrespective of a sector or geography is easier in some categories like Talent Acquisition where technology is key. A few Indian HR startups that have had traction for their solutions globally are in the Talent Acquisition space like Hackerrank, and RecruiterBox. These companies have many Fortune 500 clients using them in different parts of the globe.

Startups can offer innovation in two main ways — category creator and category disruptor. Companies like Hackerrank can be considered a category creator since they had virtually created a category by entering the space in the nascent stages and taking it mainstream.

Category disruptors can either disrupt with an exponentially better product, distribution model or cost structure. Zoho Recruit is taking the route of distribution and cost disruption. Talview is aiming to be a disruptor in the video interviewing solutions category by automating analysis and decision-making capability in screening and selection than just providing video interviewing capabilities.

The first set of Indian HR startups had a very strong India focus barring exceptions like Zoho Recruit. The likes of Merittrac, Aspiring Minds, Co-cubes were built to solve problems specific to India like Campus Recruitment. Another set like Greytip, Hirecraft, Adrenalin had distribution models which restricted them to India. A few such players tried venturing to western markets but couldn't get the desired response due to inherent aspects of the business model which is probably better suited for India and similar markets like Southeast Asia. Some of these companies were largely content IP driven and where every geography has a unique or different requirement in terms of content, in most of the developed markets, the quality expectation of content is also much higher. Some of the companies are in spaces that are emerging in India but are in maturity stages of lifecycle in the developed markets.

More recently, there is the second set of startups that are providing technology-driven solutions and are operating in spaces that are in early stages of its lifecycle in global markets. Also distribution models like inside sales and self-subscription make it possible to target a wider geography without having to be present there. A few of these startups like Hackerrank were focused on global markets from day one. And organizations like Mindtickle and Talview have established market fit in India and are now targeting global markets. What’s important to go global with the business is financial support — the distribution models require upfront investment in these markets. 

Indian market is still far behind the US market in terms of size and evolution. The US organizations are more forthcoming about buying HR Technology as they are educated about the need and have seen the benefits for decades. There are multi-level problems why Indian market is behind the US market:

However, global exposure in sectors like IT, BPO, Pharma has helped Indian companies to adopt some of the global best practices in terms of buying HR technology. Companies are realizing and measuring benefits, and are becoming role models for other sectors.

There are also startups that provide interesting solutions to India-specific problems. IDfy, for example, offers an online platform that provides background verification services. Others like Aspiring Minds, Mettl have been very successful in building success stories by catering to campus hiring and skill development initiatives of the government. The market potential for HR tech in India is very good and in a few years, we can expect it to mature to become a sizeable market where successful companies can be built.

India is a talent driven economy and most of the outsourced jobs that come to India are primarily for the human capital that we provide. The sudden growth from past 10 – 15 years has created a lot of structural problems in the way HR functions. Many HR Tech startups are built by teams and individuals that have been part of the system and have experienced these issues. More importantly, in terms of size and potential, the HR domain is one of the largest verticals within the technology sector this attracts both talent and capital.

Of the 300 HR tech businesses, a significant majority is yet to mark their product-market fit. Amongst the ones that find a fitment, some will emerge as winners who will attract more capital and clients. Companies that have proven their business models are growing fast, and one can expect to see geographical expansion and competition to their global peers. A few of them can potentially also emerge as category leaders in their niche. Others might stop existing or dissolve into a more mature organization through consolidation. There are HR technology companies like LinkedIn, Kenexa BrassRing and SuccessFactors that have their product development centers in India and they might also pick up some of these companies in their fold. Additionally, Indian HR companies like QuessCorp, Team Lease who have recently completed their IPO will also be looking at expanding their portfolio by proven HR tech products. Another aspect is that a lot of leading IT companies in India are also looking at providing cutting edge HR tech solutions to their customers across the globe as a part of the global digitization drive and will strike partnerships with companies that have products which meet high standards.