In part one, I discussed a number of structural changes impacting HR functionality, HR leaders and businesses since the pandemic. The feedback from the numerous analysts and vendors I met with at the HR Technology Conference provided some illuminating insights.
Much of the discussion in that first document concerned how vendors were trying to solve either the lack of available talent for businesses today or the responses technology could bring to bear to retain the talent a firm already has.
In Part Two, I’m examining some additional issues that flavored the conversations at the show.
What color is your collar?
It’s sort of amazing to notice that so many HR technology vendors focus on blue-collar, temp or hourly workforces. It’s as if white color professional workers present no challenges to employers. So why do vendors do this? The answer is simple in that vendors make more money selling solutions that have more users. And since blue-collar, temp and hourly workers make up the bulk of the work force, then this is where vendors concentrate.
So why is this an issue? It’s a challenge because most firms possess both kinds of workforces. And, each has its own challenges and requirements. But you wouldn’t know it based on today’s solutions.
Let’s start with recruiting. Many ATS, resume screening and recruiting technologies assume that jobseekers want a job just like the one they currently possess. I’m not sure that assumption is even correct but it does flavor way the algorithms and matching routines always keep suggesting that employers consider jobseekers who possess almost exactly the same skills listed in the job listing because that’s exactly what their current job is.
For career, not job, oriented jobseekers, they are looking for opportunities to stretch their professional development. They don’t want to do the same old job they’ve always had. They want to broaden their responsibilities, acquire additional skills and continue to move their career forward.
What’s missing in recruiting, talent management and other systems is a recognition that some people possess a certain velocity around their careers and may in fact be developing a specific trajectory where they want their career to take them. It’s unfortunate that today’s HR systems are so woefully ill-equipped to spot this and optimize for it.
If career-oriented functionality appears anywhere it does in applications like salary/compensation administration and career/succession planning. This is interesting because a job seeker has to first get through the badly designed recruiting technology and become hired before they can resume their career with downstream HR technologies. I would challenge any HR vendor to develop fast tracking, career oriented job seeker personas and see if they could ever get through the recruiting and ATS technologies that are part of their suite.
The HR technology marketplace is predominantly designed for jobseekers not career-oriented persons. I saw scant evidence to the contrary at this year’s show.
A whale sale is a huge customer deal that is clearly way beyond the size and scope of a vendor’s typical deal. Many vendors worry when they sign an employer with 100K employees or more. The mega-whale (over 1 million employees) is a bigger challenge to support.
While these big accounts often bring in a lot of cash for the vendor and some serious PR/bragging rights, they can also swamp a vendor if the whale requires a lot of support and hand-holding. A whale sale is almost always a blessing and a curse.
A couple of vendors mentioned to me some recent whale sales their firms have booked. I quizzed these CEOs heavily about these deals to see if they fully understood the risk, rewards and responsibilities these deals could bring. I will certainly want to get updates from these vendors regarding the progress of these transactions.
Whale sales can also indicate how much a product line is maturing and able to move upmarket. These deals provide a glimpse into market validation for the vendor, particularly a vendor that is relatively young.
Interestingly, while these CEOs mentioned these deals to me, they weren’t overhyping or promoting the existence of these deals to the general public. This is a prudent move because if something goes awry or the customer scales back the scope of the solution or its implementation, it could create a PR and brand challenge that may be difficult to mitigate.
One take away from this is that big companies are willing to do big deals with newer firms. The market for HR solutions is not just the purview of large HRMS vendors. HR technology buyers appear to do a reasonably good job of evaluating all kinds of options and technologies as part of their selection efforts. It is from that experience that allows them to pick solutions that fit well with their business and business needs and not just buy a famous solution because of its brand awareness.
Advanced HR tech
As in finance and ERP software markets, there has been for the last decade a growing interest in advanced technologies like process mining, robotic process automation, artificial intelligence, machine learning, chat bots, etc.
Leading up to the pandemic, virtually every HR vendor wanted to bend my ear and tell me about their modern cloud platform, their hyperscaler hosting environment, their myriad of microservices, their application marketplace, and, of course, their super long-range product roadmap where they would envision using all manner of advanced technologies in changing how the work of HR is completed.
But the pandemic changed the timetable and those best laid product roadmaps, too.
Last week’s discussions regarding the deployment of advanced technologies in HR application software were more muted or less overhyped than before. Yes, I cringed a couple of times when a vendor started to tell me about their cloud technology platform. A discussion of advanced technologies was something I had to initiate instead of vendors launching into those conversations automatically.
It was a bit surreal. For a change, vendors were more excited to share with me stories about new kinds of outcomes instead of starting first about some technical or advanced innovation. For example, an incredible vendor, Joyous, has some slick technology to connect real people and real experts to others in the firm needing their guidance. They’re not using chat bot technology or a knowledge database to do this. But they are doing some slick behind-the-scenes intelligence gathering and connecting people in a way that more rapidly improves business productivity.
Some advanced technology discussion did pop up in relation to cultivating better relationships between jobseekers and employers. Whether this is through collaboration technology, candidate relationship management technology or even office automation software, vendors were selling the business benefit primarily in the underlying technologies to support it as a secondary point.
Who to sell to?
If you want to be surprised from time to time at a show like this, ask vendors who their target buyer is for their product. Sure, almost all the time it’s a HR director or chief HR officer but you can get surprised.
I like talking to vendors who predominately sell to operational leaders within a firm and not necessarily to the HR organization. This is interesting because so many HR products were built by and for HR personnel. If the technology happens to have some interesting or productive benefit to the rank-and-file employees within the company, that is sort of a bonus.
Products that are sold to operational leaders may actually have a greater chance of being successfully implemented in firms as they already possess the backing and endorsement of operational leaders. They also may get access to funds and broader geographic rollout because of the same connection.
Believe it or not, the HR products that may be the most challenged from a implementation and rollout perspective are the ones being sold to a CIO. These are products that neither HR or operations may have wanted or are willing to pay for.
Last week I only ran into one product that is sold to line of business executives.
The channel is everything
Channel conversations are omnipresent at get-togethers like this. I actually get a lot of questions from vendors about how to get meetings and develop relationships with big integrators like my old employer Accenture. Wanting these relationships and getting these relationships in place are two very different things with the latter being exceptionally difficult to do.
Some vendors though are absolutely brilliant at building out their channel. One vendor I met with has over 2000 partners who have helped them sell to over 540,000 customers. 99% of their product sales have all been channel driven. If you’re an HR vendor, stop, and reread this paragraph a couple of more times.
On the other extreme, I met with a founder whose firm has only one customer to date and it’s a whale sale. They’re not even ready to think about another customer yet because of the pastoral care they need to impart for the near term on this huge first customer.
Building out the channel, HR vendors often need to cultivate relationships with accounting firms, systems integrators, insurance brokers, learning firms/institutions, consultants and more. Some partners will be other HR software firms who have a symbiotic interest in their mutual markets and customer bases. Some of these will simply want to resell the vendor’s product, some may introduce the product to net-new customers while others will want to incorporate the vendor’s products into their solution offerings often as a white label product.
I think the reason the HR tech show is usually held in Las Vegas is because so many vendors want to go with their partners to the numerous wedding chapels and formalize a new long-term relationship.
The vertical is everything
Not only was the channel an important discussion topic but having a vertical industry focus also got some consideration. These conversations mostly centered around large HRMS suite vendors and ERP vendors. These technology companies appear to be making major shifts in their go-to-market approach. Specifically, they are shifting their long-standing focus on selling a horizontal or functional solution and supplementing or replacing that with that greater emphasis on organizing, tailoring and selling products in defined verticals.
In making the shift to a vertical market focus, these firms may have an opportunity to forge even tighter relationships with consultants, systems integrators, process automation and other firms who also have crafted expansive and tight vertical solutions. What makes a vertical solution so compelling is that it can contain a number of highly customized solution components that speak to the unique needs of certain firms. A generalized cross industry solution will rarely contain this.
Some verticalization has been in place in the HR space for years. The higher education segment is one very notable vertical with solutions like PeopleSoft’s dating back to the 1990s. Today, some HR vendors are offering more vertical solutions in service industries, asset intensive industries and other verticals.
Where customers will see the biggest change is likely in the way vendors go-to-market. They may rely more on third-party partners, like systems integrators, to build out unique process flows, specialized reports, create custom tables, and find and integrate relevant third-party products that complete the whole vertical solution.
This could become a big deal in the years to come. It could make it more difficult for generalized, cross-industry vendors to sell their wares in an increasingly vertical specific set of markets. It could also drive large and small software companies closer to integrators and other third parties and take account control away from vendors and shift more of it to these third-party players. The only way vendors can avoid some measure of marginalization will be to develop more vertical solutions and/or solution components themselves.
DEI (Diversity, Equity and Inclusion)
DEI concepts and functionality appeared throughout products and conversations at the show. Some solutions now permit users to select their own gender identifiers and pronouns. I heard of an Outlook add-in that lets users record how they want their name to be pronounced. And of course, there are numerous tools that help detect and remove potential bias opportunities in applications like recruiting.
DEI functionality has been getting integrated into HR solutions for several years now and has become quite integrated with HR products today. I suspect we will continue to see more DEI functionality in future year’s events as well.
What I didn’t hear
While I can’t be everywhere and talk to every vendor or software buyer in a show of this magnitude, I did notice some things that got no discussion.
First, there was virtually no discussion regarding contractors, freelancers, or the gig economy. I believe that many just assume that these resources are simply part of a bigger talent acquisition challenge facing businesses today.
There were some mentions of platforms or HR books of record, but, vendors didn’t seem to have a compelling value proposition with them as part of these conversations. Either vendors believe these capabilities have a self-evident value in and of themselves or that they do not need to provide this information. Either way, selling ‘platforms’ isn’t compelling or interesting without something else as part of the justification. If a vendor’s ‘platform’ sale isn’t winning over converts it could be because there’s nothing to the story/narrative.
What's changed since the pandemic
Let’s wrap this up with a dose of conference reality.
In the last couple of years, Las Vegas has gotten quite expensive. Taxis from the airport are now on a flat fare that’s high and gets much higher with the added fees, charges, etc. Uber rides were almost always in surge pricing mode, too.
Hotels are no bargain either. The ridiculous ‘Resort Fee’ charge takes a high room rate to even higher levels. And, who gets to enjoy the ‘resort’ experience when you’re in a conference ballroom all day long?
And let’s not forget the joy of chewing one’s kneecaps on those overcrowded and less than luxurious airplanes to Vegas. My outbound was oversold by 11 people, had a homesick puppy in the row in front of me, and left late. I missed my first meeting as a result.
If you didn’t get to the show, I hope these two pieces helped you get a sense of the issues and topics of note. So, what can you conclude from all of this? Here are a few of the key points:
- A lot changed in business and HR technology since the pandemic
- Many new HR technology firms appeared in that timeframe and both they and existing firms captured a lot of new capital
- The HR technology market may be due for some structural changes if M&A, IPO and other liquidity events start to ramp up
- HR solutions vendors frequently don’t agree on the key business problems affecting prospects or the correct way to mitigate these issues
- The completeness or science behind some solutions may leave you wanting sometimes
- And, integration is the problem CHROs are still confronting with few great solutions in sight
Well, there’s always next year!