The world of HR software is busier than ever. Established players have been usurped, or even swallowed up, by upstarts. Technology has shifted its emphasis to cloud-based solutions. Companies have embraced a “Moneyball” approach to managing their human resources, turning increasingly to analytics.
As HR software continues to evolve as companies find better ways to serve their customers, three big trends to watch in 2015 are industry consolidation, the shift to cloud-based solutions and a greater emphasis on analytics.
The current wave of consolidation began several years ago — IBM buying Kenexa for $1.3 billion back in 2012, after Kenexa bought Salary.com — and has picked up pace through 2014. Smaller vendors have been snapped up by their larger competitors, who in turn have been acquired by still bigger firms.
Consolidation causes significant disruption, and although tech companies have often struggled to integrate smoothly, mergers and acquisitions improve platforms by making them more complete and, therefore, making customers happier, at least in theory.
Despite consolidation, HR software systems continue to grow long in the tooth. Last year, the average large-company HRMS system was more than five years old. More than half were more than seven years old. With enterprise software approaching obsolescence after seven years, companies are increasingly looking for new solutions.
That’s where cloud-based HR software comes in. Until recently, companies have been slow to make the shift to the cloud. But now nearly all the major HR software players are offering cloud-based solutions, raising the exciting prospect that HR managers won’t have to keep upgrading their systems every couple of years.
Perhaps no company embodies the shift to cloud-based HR software than Zenefits. The California-based upstart has been touted by its investors as “the fastest growing SaaS business in history.” Zenefits provides its HR management customers a cloud-based dashboard designed to assist small businesses as they make hiring, firing, payroll and benefits. It operates as a new kind of insurance broker and boasts a killer price point — it’s free. The company turns a profit from commissions earned from clients who opt to sign over their insurance management.
It’s a brilliant model. Alas, Zenefits has run afoul of the Utah Insurance Department. TechCrunch says that giving its software away for free violates state law and is unfair to traditional insurance brokers. Not only is the department urging Zenefits to stop advertising that it offers its services for free, it is also arguing that it should be forced to charge “fair market value” for its software. The state is threatening fines of $5,000 per violation, plus twice any profit earned from those violations.
Still, Zenefits is thriving, despite this potentially painful bump in the road. Forbes recently reported that the company has beat out Uber and Airbnb to become this year’s fastest growing startup by valuation, and the momentum of that, plus the $78 million it raised in its Series A and B rounds, is sure to keep Zenefits one of the top HR software firms to watch in 2015.
HR software manufacturers are increasingly interested in creating better talent analytics. The potential for BigData analytics is driving adoption as nearly all major players now offer integrated analytics aimed at providing buyers with single solutions. SAP’s SuccessFactors has become the industry leader in cloud-based HR software, Oracle is enjoying great success with Fusion, PeopleSoft and Oracle E-Business and other industry leaders like ADP and Workday are thriving.
Talent analytics, the application of BigData to human resources, will see increased growth in 2015. According to Forbes, “the vast majority of hiring, management, promotion and rewards decisions are made on gut feel, personal experience and corporate belief systems.” But by embracing and utilizing talent analytics, companies can better understand what truly delivers the best results. The numbers don’t lie, and companies are increasingly understanding the value of Big Data in human resources applications.
Going forward into 2015, further consolidation, an accelerated shift toward cloud-based solutions and a greater emphasis on talent analytics will be three major trends to watch in the exciting and ever-changing world of HR software.