A New Wave Of HR Technology Consolidation Begins
As I describe in the article “The HR Software Market Reinvents Itself,” we have entered a new world in the $14 billion market for HR software and tools . While many large organizations have made the shift from licensed software to cloud-based HR systems (fueling growth by Oracle, SAP, Workday, ADP, Infor, Cornerstone and others) and smaller companies are now snatching up platforms like Gusto, Namely, Zenefits, and others, a new market has emerged: the market for tools focused on teams, feedback, continuous performance management, and data-driven recruiting.
Two weeks ago ADP announced plans to acquire The Marcus Buckingham Company (TMBC), a vendor of next generation performance management software, and late last year Ultimate Software acquired Kanjoya, a provider of feedback and data analytics tools. And in January Atlassian, a fast-growing software company, announced the acquisition of Trello for $425 million. While these deals are all different, they illustrate a trend: a new wave of innovation in team management tools has emerged, forcing larger cloud vendors to make acquisitions to keep up.
As you can read about in the report “HR Technology Disruptions for 2017,” HR software is used for a wide range of needs. At its core, these systems manage the traditional processes of payroll, recruitment, and employee record management. And these functions, including learning administration, benefits administration, and organizational wide reporting, are as critical as ever.
Today, however, as organizations become more agile and team oriented, these tools are moving in a whole new direction. Now we need software that facilitates teamwork and agile goal management (Trello’s market), helps people give each other feedback (Kanjoya’s focus), and helps facilitate continuous performance management and self-improvement (TMBC’s focus). These tools are consumer-like, easy to use, and mobile by design.
Our 2016 Deloitte Human Capital Trends research (and the 2017 report coming soon) clearly shows that the #1 issue facing organizations today is the need to reorganize their companies to be more customer-focused, innovative, and “digital” in nature. This shift demands a whole new set of tools, most of which are being developed by small, innovative, new software companies.
The set of new vendors is staggering in size, and CB Insights estimates that more than $3 billion of venture capital has helped them in the last year. These smaller, fast growing companies include:
• Continuous performance management tools, such as: Reflektiv, TMBC (acquired by ADP), BetterWorks, Impraise, Workboard, TinyPulse, SmallImprovements, Zugata, HighGround
• Feedback and data driven engagement tools, such as: Glint, CultureAmp, CultureIQ, Hyphen, Waggl, Thymometrics, Questback, OfficeVibe
• Learning Experience and smart learning tools, such as: Degreed, EdCast, Pathgather, Axonify, Everwise, Landit, BetterUp, GameEffective
• Social Recognition and rewards tools, such as: OC Tanner, TemboSocial, Globoforce, Achievers, AnyPerk, Payscale, Comparably
• Wellness and fitness tools, such as: VirginPulse, Limeade, Ceridian LifeWorks
• Candidate analysis and sourcing tools, such as: HireVue, PhenomPeople, Lever, Smashfly, Greenhouse, SmartRecruiters, Unitive, Pymetrics, Entelo
• Team productivity tools, such as: Slack, Workplace (Facebook), Google Teams, Microsoft Teams, Trello (acquired by Atlassian), Basecamp, Asana, and Wrike
This cycle of consolidation and subsequent innovation occurs in waves. Less than ten years ago we had a similar wave of acquisitions in talent management: SAP acquired SuccessFactors, Oracle acquired Taleo, IBM acquired Kenexa, Skillsoft acquired SumTotal, and ADP acquired Workscape. Today, while the new market for team-centric tools is still young, the consolidation may happen sooner.
Each of the small companies above is solving a problem never really considered important by large HR vendors in the past. Yes, ERP providers are innovating (Oracle and SAP now offer wellness solutions and SuccessFactors has introduced continuous performance management and new diversity tools). But the big rush of new applications, focused on team-centric, employee-empowering, productivity-focused systems, is almost all being invented by startups. (And I haven’t even mentioned the new market of AI-based tools coming.)
Perhaps even more significantly, they are also building functionality that embeds them into other apps. Many of these tools, for example, have plugins for Outlook, Slack, Salesforce, Workplace by Facebook, and Microsoft Teams, making it possible to set goals, give feedback, share goals, or even assess peers without ever having to login to an HR application at all! (SuccessFactors just announced, for example, that their new Continuous Performance Management product exposes itself as a Chatbot in Slack.)
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