Contributed By Pankaj Bansal, Co-Founder and CEO of PeopleStrong
e as a generation of citizens of India have been really lucky. We saw the transformation of India from being a closed economy to the fastest growing one, from a manual job intensive market to the technology hub of the world and from being a dot in the global business world to the nation with the largest human potential.
Amidst this action, one of the key things that never received enough attention is HR. Though an industry in its own might (globally), it continued being a backend function in India until recently (as recent as 5 years ago). Times have changed and so has our focus on Talent and Technology.
Being part of this journey for that past decade, we thus felt that this would be the best time to talk about the subject which impacts businesses even more than we realize. And to start with we chose our personal favourite topic – the HR Tech Market.
The entry of ‘technology’ in HR started with the mainframes, which were used for administrative tasks like record keeping and payroll management. Then came the time of Traditional ERPs, where the problem of physical space was resolved, but it was still difficult to implement and manage systems.
This was followed by the phase of point solutions which were on-premise software on top of which internal teams build HR systems. Then came the wave of cloud, mobile and the latest Artificial Intelligence.As the maturity of technology grew, the market and its dynamics became all the more interesting. Here’s is our take on it!
Getting the numbers just right!
HR as a function has often been blamed to have a nemesis in numbers and perhaps that is the reason why even experts globally could not agree to a market size!! While conservative assumptions peg the market for a number of 10 – 14 B USD (Gartner etc.), there are others who say it is an approx. 400 B USD market.
The difference in the two numbers is very huge and hence when we started studying the HR Tech Market, we spent time understanding different segments. After a number of interactions with experts and a lot of secondary research, we came up with our own market size.
From what we saw, HR Tech by 2021, will be a mammoth $34 billion industry globally. By this, a sizable chunk of almost $20 billion will be commanded by existing solutions largely in Human Capital Management, another $8 billion will be the Payroll Software and the remaining $6 billion will be the new market that will get added to the equation as “Gig-Economy” systems gain popularity.
The India Focus: How big is it on the global map?
Once we had the overall number, the next Herculean task was to understand how each of the geographies phases out. Where all experts agree, is that the US Market which currently forms approx. 60% of the market will have 50% share by 2021; APAC and MEA are expected to contribute nearly one-third of the total international HCM business.
That’s about $6.7 billion. The Asia Pacific and the Middle East-Africa regions have always been the tacit metrics of measuring an organization’s global evolution because the developing regions having such untapped territories hold the maximum potential.
Of this total number, Japan and China together will be at $2.4 billion, MEA at $0.7 billion, rest of APAC will be close to $3.6 billion of which India would be a billion-dollar market and rest $2.6 B would be ASEAN countries. Looking at the current number this would mean that India’s HR Tech market will double up in next 4 years!
Believe it or not!
While the geography wise study makes an interesting read, eye-opening facts came out when we started studying the functional market segments of HR Tech markets not talent management but Core HR and Workforce management system that needs the major focus. Just to contextualize, we divided the market into Recruitment, Core HR (which is employee data, administrative tasks, self-service, mobility), Workforce management (leave, timesheet, scheduling), Talent Management (Performance, Learning, Compensation etc.), Payroll.
Today, if we ask anyone that what would be the most talked about term in HR (apart from recruitment) – the response would either be performance or learning. An interesting revelation that came as part of our study was that even though these segments are most talked about ones, they form hardly 5-10% of HR Tech expenses. In fact, more than 70% of the HR Tech expense globally is made up of HRIS, Payroll and Workforce management. This is a common trend across geographies and segments.
A Billion dollar pot that remains unnoticed
Just like we have seen, the Big4s in the world of Audit, there had always been the Big 21/2 (SAP, Oracle and Infor) in the traditional ERPs. However, they could also not survive the jolt of cloud solutions and went on acquiring companies like SuccessFactors, Taleo. This study is eye-opening and will help in understanding the market dynamics. And as we can see, the Indian market is huge and is shouting out loud for smart individual HR Tech players to manage the workforce of Tomorrow.
We hope that as we move towards being a billion dollar market, excitement in the journey increases and so does the pace of innovation.
Here’s the roller coaster ride ahead. Cheers!
- Overall market pie
- APAC, India Size
- Market spends