Solving particular HR problems? 2017 may be the year

More often than not, necessity breeds invention. HR as a function has over the years evolved, and so has its necessities. Josh Bersin call this an evolution “from talent management to people management”, which in simple terms means that a linear ‘pre-hire to retire’ talent management approach is becoming obsolete and is being increasingly replaced by a non-linear ‘network of teams’ organization design. 

With the evolution of organization designs and ways of working, HR technology solutions have also evolved. The early and mid-2000s witnessed the consolidation and expansion of integrated talent management systems because organizations approached talent management in a linear manner. Fast forward today, organizations are more networked, and have very specified demands when it comes to solutions for their HR problems. Resultantly, HR technology companies which are entering this ecosystem lately have been very niche solutions solving particular HR problems. 

Specific issues like reimbursement, rewards, or hiring are solved by generic solutions. But a product which is designed to only recruit technical talent can work manifolds better than a generic solution that tries to solve all of those challenges. Most of the individual niche startups solve problems like these in a correct, albeit completely different way than the current ‘talent management solutions’. In a key business function like HR, one is important to be certain of the tool(s) being used. If it is just a singular tool void of certain functionalities, then the idea of using the product as a solution will fall short. Organizations also now demand functionality, even if it comes at the cost of dealing with multiple vendors. 

The People Matters-SAP HR Technology Study 2016 which revealed that the top most ability organizations seek in HR technology products is their ability to integrate with other technologies. So organizations demand a combination of functionality and ease of use – for which they need multiple systems and their ability to speak to each other. 

If the integration challenge is solved, the end user’s only interface is one core system while at the backend there are multiple other systems solving respective problems. Taking HackerRank as an example. The solution was a platform for hiring technical folks. Slowly then emerged the need to integrate the platform with incumbent Applicant Tracking Systems, so that the end users have only one dashboard to look at (that of the ATS’s). As of today, a significant number of companies, which use HackerRank, do not even come to hackerrank.com – they talk to the platform using HackerRank’s APIs. The platform then evaluates the result at the backend and sends the results to the users which are readily available on their respective dashboards.

Most products in this day and age, can integrate seamlessly with other systems; which wasn’t really true a few years ago. It is this functionality of integration is one of the reasons investors are being pulled towards this ecosystem. The functionality has evolved, the demand from the market has increased, and so has the interest from investors. With an influx of HR technology solutions in the market, most of which have integration capabilities; and with organizations also vying for the functionalities which address their business problems – investors are going to get continue to get attracted to this ecosystem. They are just warming up to the idea of investing in HR technology startups tackling specific HR problems. Broadly there are two criteria which HR technology startups need to fulfill to attract investments – First, they should solve actual HR problems which are out there; and second, they should have the capability to integrate seamlessly with other systems (whether incumbent or new).

Investments took a hit in early 2016 across all domains. But smart investments started coming in the right companies in the latter half of the year. Hopefully, 2017 will be very promising for niche startups.