Employer spending on HR technology this year bounced back after dropping sharply in 2020, according to a recent analysis. Organizations’ tech spending is up by 57 percent in 2021 compared with last year and is above the totals from recent pre-pandemic years as well.
“HR tech buying patterns show a continued increase in spending plans,” said Stacey Harris, chief research officer and managing partner at Sapient Insights Research Group in Atlanta, which produced the comprehensive 2021-2022 HR Systems Survey. “And HR technology budgets are projected to go up again next year, especially among larger employers.”
The latest Sapient Insights data was collected in the summer of 2021, covering over 2,100 organizations of various sizes and from multiple industries, across 52 countries.
The enduring COVID-19 pandemic and shift to remote work are driving the spending, Harris said. “We saw a pullback in spending when the pandemic hit in 2020, and some tech implementation was delayed, leading to an uptick this year,” she explained. “In addition, COVID-19 has broadened the scope of what is considered HR technology. It was narrowly seen as applications to hire, pay or develop someone, and now there is increased attention paid to communication tools, for example.”
She said that things like virtual communication technologies and surveying tools, as well as skills management platforms that might have previously sat in an operations budget, are increasingly included as part of HR technology spending.
Madeline Laurano, who studies the talent acquisition technology landscape, said that spending on recruiting solutions also accelerated in 2021. “Spending on TA [talent acquisition] tech had been on the rise previously, but during the pandemic, 62 percent of companies increased their investment,” she said. “I expect that to continue in 2022.”
Laurano, founder of Aptitude Research, an analyst and advisory firm in Boston, said employers have especially shown interest in replacing their applicant tracking system and candidate relationship management platform.
“Maybe they had a little time in 2020 to rethink their technology options, then hiring ramped up in 2021, driving the need for new systems,” she said. “Increased turnover on TA teams—especially TA leaders—may have also contributed to the uptick, because new leadership often wants to build their own tech stack.”
Learning, Recruiting Tools Lead Growth
Harris said that spending shifted in 2021 from the typical big-ticket items—human resource management systems (HRMS) and payroll modules—to talent management tools like learning and recruiting platforms and emerging technology like artificial intelligence, machine learning and robotic process automation software.
Spending increases in 2021 were earmarked for recruiting and learning technology at small and midsize firms, while large employers have been focused on HR analytics tools, according to Sapient Insights.
“Learning tools continue to be the leading applications to be replaced or evaluated for replacement, followed closely by HR service delivery applications such as help desks, portals, feedback tools and more,” Harris said.
She added that most learning and development funds went to content, “as well as ways to share that content with a distributed workforce.”
Within talent acquisition, there’s been significantly more investment in assessment tools, Harris said.