A flood of HR tech investment may feel more like a trickle for HR professionals

The traditionally placid waters of HR technology have, in recent years, been churned by a conga line of venture capitalists screaming, “Caaaannooonnn baaaallll!!!!” as they leap into the pool of payroll management systems and ATS software. The HR tech space has been flooded with cash over the last 18 months, with splashy products and startups netting tens of millions from investors.

At first blush, it might feel like HR tech is on the precipice of a radical overhaul that will rock the industry to its core—which is true, at least to some extent, experts tell HR Brew. But, they argue, baby steps are necessary before the pool party can really commence.

Big money, big changes? In 2021, VC investment in HR tech reached $18.6 billion, according to data shared with HR Brew last month by Acadian Ventures founder and general partner Jason Corsello. It was a watershed year for investment in the field.

But not all startups and new products will endure, and those that do make a long-term impact in HR will likely take a while to become widely used, let alone indispensable, said John Sumser, principal analyst at the HR tech analyst firm HRExaminer. “There will be things that look like the most important thing in the world that turn out to not be the most important thing in the world.”

Joey Price, the CEO of HR consultancy Jumpstart HR, said he is hopeful that a period of tech evolution is on the horizon. “HR tech has notoriously and historically always taken a back seat when it comes to adoption in an organization. I’m excited to see the energy and excitement around solving HR problems” with new technology, he told HR Brew.

But questions loom over the boom: How quickly will new technologies catch on and what obstacles remain in their way? For Price, the answer is twofold. “For the traditional, stereotypical HR manager at a larger organization…I don’t think that they’re going to be more inclined to adopt these technologies. Because I don’t think they’re willing to embrace the change.”

Another potential issue? The C-suite. HR leaders will have to convince company leaders, like CFOs, that investing in a new technology is worth it, since they’re typically the budgetary gatekeepers.

“It requires the HR professional articulating the business case for this new technology,” Price said. “And we unfortunately haven’t been accustomed to doing that successfully.” 

Trickle down adoption. It’s unlikely that the increased investment in HR tech will transform the industry in a matter of months or even years, Sumser told HR Brew. “Innovation [doesn’t] hit a discipline like HR all at once,” he said.

Sumser said that it’s often larger companies leading the charge in adopting new tech. “Thinking about [how] technical adoption works, you have early adopters who can take risk and who can afford to take risk, and you have technology laggards who can’t afford to take risk. And technology flows towards the laggards.”

New companies and products often emerge to much hype and fanfare but ultimately it can take a while to catch on, if they ever do. “That’s the story of business technology,” he said.

But what tools prove valuable to the industry for the long haul will likely trickle-down from big companies to small ones. “There’s an adoption curve. And the adoption curve is largely…big companies first.”

For his part, Price sees a clear connection between the pandemic and the HR tech investment boom. “Covid has created a blank canvas for us to imagine how we work. And so what you’re seeing is a lot of [tech] companies stepping up to the plate and saying, ‘I think I have an answer that can change the way we work for good.’ And while I think many are more based on hypothesis than proven business, I love that there’s attention. I love that there’s the attempt, I love that there’s the money flowing into it.”—SB

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