Why entrepreneurs are venturing into HR technology space?

There was a time when investors were watching the FinTech markets like hawks. It is still a big pie in India and globally. But there has also been another shift in another space to prepare for, and it has been in the making for a few years now. The HR Technology market is not done reinventing itself yet. It’s a space that has seen an unprecedented growth. The tide is bringing disruptive changes with 2015-16 seeing up to $4.36 billion in start-up funding globally, and $65 million in India. If recent forecasts are to be believed, we’re looking at a market size of 14 plus billion globally in the coming year. Is that a big enough pie? Are there too many players? Is it getting saturated? These are important, relevant questions. Let’s see if we can shed some light on them by using what we know, and what the market and its trends are telling us. 

We start at the beginning. There was a fundamentally wrong notion that people took time to adopt technology in their lives. People have welcomed technological transformation in their personal lives, and we have enough data to show that employees don’t draw hard lines between their personal and work lives. This means that they are predisposed to bring in the same set of behaviors and quirks to the workplace with them. The reason this is important is that HRM and its decisions start and end with people. We talk about organic growth, and this organic change happens via people. It is what got companies to think about using technology in HR in the first place. They realized technology can be used better and leveraged more to get better results from their employee engagement. The disruptive change we have been witnessing in this space over the last few years is owed to this realization. Companies want to purge older, more conventional ways of managing their HR functions and bring in the new, technological advances that give them an edge in a competitive environment. The bonus at the end of the line is that they can save time, resources and even manpower by using technology to drive their processes. At HR roundtables and conferences, we notice all the time that this trend isn’t limited to millennial managers or Gen Y. In fact, even more experienced professionals who’ve no doubt begun their careers before there were signs of disruption are not only open to newer ideas, but in a lot of cases, they’re the ones at the helm driving the change. In a nutshell, I think, we now have a clear view of how disruption takes place. Now, it’s safe to say that the days of skepticism and baby steps are over. Leaders are committed and the signs are clear. Why should tech companies not heed the call?

So what kinds of trends have we witnessed over the years in the HR Technology space? The choicest disruptions are those that have altogether replaced archaic ways of doing things, and also those that have improved upon processes that are still existent. Companies are using human resource technology to better recruit, retain and manage workforces. For instance, video job interviews equalize geographic differences, making it easier for both candidate and interviewer to connect without dramatically altering their schedules. Mobile optimization in recruitment practices mean a potential employee could apply for a job and get a response all on the move through a mobile app. It’s easy to take such advances for granted because they have become commonplace, but at the essence of it, it can be quite liberating. Software as a service (SAAS) is increasingly being adopted in HR. Some reports suggest that this may double in the next two years alone. Cloud-based HR systems have begun to make a mark as well, so much so in fact that a lot of companies have begun to replace their HRM systems. They’ve begun to increase their budgets for these system upgrades. These new upgrades are cloud-based systems. Training is another area that’s seen all the same signs. Learning content delivered on demand through the cloud is being favored over classroom training sessions. Redefining these lines is the business of disrupters. The demand for these technologies gives us a clue as to why there are so many players entering this space. Even though at first sight, it may seem like the market is saturated with these players, one must understand that HR Technology is a very wide space with wider frontiers. Companies entering this space should diversify and specialize, and in doing so, look to offer something that’s unique and look to solve a problem in a way it hasn’t been done before. In that sense, the pie is large enough, and can be cut up into innumerable pieces – enough to go around for some time. However, it doesn’t mean there is scope for mediocrity. Companies must be able to add value in the long run or none of this really counts.

It would be unfair if we had a conversation about technology in HR and not cover aspects of Big Data and People Analytics. It is true that one of the incentives for companies venturing into this space is people data. Predictive analysis is gaining momentum and for that, you need data. 

When it comes to HR, there are multiple areas where it can make a big impact. Those are recruitment, workforce planning, turnover and compensation to name a few. Data mining and pattern recognition are common tools that can be used in the workplace to provide the much-needed insights that help HR make decisions. Global and national labor data, for instance, can go a long way in up-sizing operations.  That kind of knowledge is invaluable and ultimately any company that has access to data has the key that opens many doors. 

For me, my interest in this is the opportunity to bring disruptive change to HR practices that don’t make much sense anymore. Take employee tax benefits for instance, who can honestly say that they enjoy this process? Do HR managers and payroll departments like spending hours maintaining manual records of things and doling out benefits physically? Do employees like to queue up and attempt to wrap their heads around a process that’s essentially inconvenient? The answer to all these is a unanimous, resounding no. People aren’t saving as much tax as they can be doing legally.  It’s the answer to the question that motivates me in this direction. With Zeta, I really believe we’re bringing about a disruptive change and transformation in a much-needed direction. 

Is 2017 going to be the big year in this space that we’ve been waiting for? Everything suggests yes. It is certainly going to be the biggest we’ve had so far. Market data supports it and experts everywhere are foreseeing it. But most importantly, the best work is yet to be done.