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HR Technology Spending Is Up. What Are Employers Buying? – SHRM

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Companies are spending more on ​IT right now. An Enterprise Strategy Group (ESG) study found that almost two-thirds of organizations intended to increase IT spending in 2022. They especially planned to outlay more on cybersecurity, cloud-based applications and artificial intelligence (AI).
Some of this spending is being done to offset a general skills crisis in IT. This is an effort to compensate, to some degree, for the struggle many HR departments face in filling urgent cybersecurity positions.
"There is plenty of funding in 2022 for security technologies and services that can help to offset this personnel shortage while making the existing staff more productive," said Jon Oltsik, an analyst with ESG.
The ESG survey found a distinct parallel between the areas of higher investment and the pain organizations face on the staffing and talent acquisition front.
"The technology areas that top the list for expected spending increases are also ones in which many organizations face a problematic skills shortage, as the demand for skilled workers in those areas continues to outpace the available supply," Oltsik said.
More than half of those surveyed said their organization has a shortage of cloud/IT architecture skills; 48 percent said they lacked people with the needed mix of cybersecurity skills.
In addition to investing in automation and technology to mitigate a severe lack of available IT and security talent, organizations are investing heavily in HR technology to improve recruitment success, reduce attrition and, in general, provide far more efficient human capital management (HCM).
"Business leaders in all industries are beginning to realize the value of investing in their workforce when facing hiring challenges, mass resignations and general uncertainty," said Evelyn McMullen, an analyst at Nucleus Research. "Nucleus expects all eyes to remain on human capital management software providers in areas spanning talent, core HR and workforce management, and reassessing the talent acquisition processes, people and workforce management analytics, on-demand pay, and upskilling as critical trends to watch in 2022."
HR Technology Investments
Fortune Business Insights projects that global human resource technology market spending will rise from $24 billion in 2021 to $35 billion by 2028. That’s a rise of almost 6 percent per year. But what exactly are they spending on and why?
According to Fortune Business Insights, HCM, talent management, workforce management and payroll management are all hot tickets. As with IT as a whole, HR spending is favoring tools and platforms that provide AI capabilities, are cloud-based and come with built-in security.
AI algorithms, for example, are being integrated into recruitment tools such as applicant tracking, social sensing and hiring platforms. AI and analytics, too, are being deployed to tie HR databases into various systems that measure enterprise and employee productivity.
Forecasting of future skills gaps is another way that analytics and AI are being harnessed in HR. With the ongoing push to use greener technologies and lower emissions as part of broader climate goals, gaps in future needs must be addressed. AI is being used to detect potential shortfalls in the years to come so that these can be addressed by urgent reskilling of the existing workforce, partnerships with schools to improve the educational pipeline and recruitment drives to bring in the needed resources.

HCM specialists such as Cornerstone OnDemand, IBM and Workday are among the companies incorporating such features to boost sales. Talent management, too, is expected to perform well over the coming decade. Fortune Business Insights believes that talent management will play a vital role in areas such as acquisition, employee performance and career development, as well as succession management.
Cloud Spending
Cloud spending accounts for a big part of the increase in HR technology revenue. According to CloudHealth by VMware, enterprise cloud spending is set to rise by over 20 percent over the next few years. Those HR vendors with the most advanced cloud-based features are destined to benefit the most.
Josh Bersin, founder of talent management consultancy Bersin & Associates, noted that investment is rising, too, in tools to improve employee satisfaction and ensure a smooth employee experience across the workplace.
In terms of verticals, ESG research noted that the biggest HR technology spenders will be banking and financial services, IT, telecommunications, manufacturing, retail and health care. But it is the IT and telecom segments that are leading the charge toward greater IT/HR technology convergence. Gone are the days when HR systems were in the back end and were the province of the few. Nowadays, they must be integrated with business management platforms as well as AI and analytics systems. And they must be able to operate in the cloud.
Regionally, this combination of factors is driving spending in the North American HR segment from less than $12 billion a year currently to more than $17 billion by 2028, according to ESG. That makes it by far the largest area of HR spending.
In addition to the companies mentioned above, others destined to take advantage of this upsurge in HR investment include ADP, Ceridian, Cezanne, Infor, NetSuite, SAP, Talentsoft, and Ultimate Software. To succeed, they will have to provide HR tools that fuse together the needs of the business with the needs of its employees. According to consulting firm Mercer’s Global Talent Trends 2022 report, 81 percent of employees feel at risk of burnout, up from 63 percent two years ago. Reasons include not feeling sufficiently rewarded for their efforts, lack of emotional well-being and a rise in stress levels.
"Employees are more stressed than ever before, and companies could be doing more in terms of offering a holistic and inclusive well-being strategy that meets the needs of a multi-generational and diverse workforce," said Ilya Bonic, president of Mercer’s career business and head of strategy.
Drew Robb is a freelance writer in Clearwater, Fla., specializing in IT and business.

Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
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