HR Tech Conference Showcases “Fifth Inning” of SaaS, Other Trends in $10 Billion Industry

November 17, 2015

HR Tech bigIt’s hard to believe another HR Technology Conference has come and gone. As active investors in the broader HR software and services segment, it’s always incredibly insightful to mingle with innovative new companies, attend demonstrations of the latest HR tech/human capital management solutions and brainstorm strategies with our portfolio companies in attendance.

As we reflect on what we learned at the conference this year, we’re just as bullish on the space as we have been in years past.

Here are some takeaways Richard Maclean, one of our Managing Partners, and Principal Scott Hoch brought back from this year’s show:

  • The market is still relatively unpenetrated by software-as-a-service (SaaS) solutions. In fact, I’d say we’re in the fifth inning of movement to SaaS and the automation of antiquated systems across the employee lifecycle. This mid-game stage creates a better environment for our strategy with plenty of time left to play, but not an overhyped early-inning venture market.
  • Our HR technology-focused portfolio companies are in three of the four highest growth sub-sectors:
    • #1 Recruitment Process Outsourcing (RPO)—25% growth—WilsonHCG is generating tons of buzz as one of the few legitimate players.
    • #3 Talent Acquisition/Management—15% growth—Recently named as the #1 social recruiting and talent management software built for the hourly workforce, talentReef has proven the ability to help employers quickly identify and manage the talent required to efficiently run day-to-day operations, thus resulting in better service and reduced employee churn.
    • #4 HR Information Systems—10% growth—ECI, an HR, payroll and employee benefits management company, is in a unique space with strong revenue and high growth.

Let’s delve a little deeper into these segments, as well as a couple other we’re finding interesting.

  • Talent Acquisition / Recruiting: There is a war for talent going on right now, which makes talent acquisition highly strategic. Solutions involved in talent attraction and conversion are a strategic imperative, which is why job boards such as “Snag-a-Job” are trading for upwards of $150 million.
  • HR Big Data and Analytics: Big data and analytics are the next big thing in HR Tech, with workforce analytics solutions that use data and analytics to screen, target, compensate and develop talent, as well as measure performance. Other big hits are solutions that empower people to spend recruiting dollars more effectively and solutions using data and analytics to predict workforce events like attrition and job fit.
  • Talent Management Software: This segment continues to be high growth because once you have a good employee it’s a strategic imperative to keep them. It’s all about employee engagement.
  • Benefits Administration Software: While this segment isn’t growing quite as fast as the others (5%), it is still strategically important and a good demand driver spurred by the Affordable Care Act (ACA). The ACA is a big deal with a big trend that will persist: HR departments can’t manage the compliance and HR systems needed to solve the problem, so be on the lookout for ACA-automated reporting and analytic solutions that will.

The growth of these HCM segments validates our strategy to allocate capital, add value and deliver strong returns going forward. We’re excited to see the continued growth of the industry, as well as what our portfolio companies will do to meet the evolving HCM needs of organizations worldwide.