Why HR tech lagged behind sales & marketing software
Emerging HR trends
Over the past few years, there has been a proliferation of human resources (HR) software tools for small and mid-sized businesses. Investors in Silicon Valley have seen an opportunity to streamline the HR challenges small businesses face. For example, Zenefits made headlines as a “unicorn”with valuations in the billions, and its founder, Parker Conrad, recently raised $45 million for his next HR venture.
Up until recently, there haven’t been many options for businesses of this size to streamline HR responsibilities, such as onboarding and benefits enrollment. For many of the country’s 30 million small businesses, these tasks are still being handled on paper. The amount of investment capital flowing to HR tech tools demonstrates the scope of this market opportunity — but why did it take Silicon Valley so long to get here?
Following The Money
The short answer is that Silicon Valley investors follow the money, and HR is often underfunded. When considering the lifespan of the software-as-a-service (SaaS) industry, this is a key point to keep in mind.
For example, Salesforce is often credited with creating the first SaaS product — and its founders were smart to target the space where most organizations allocate significant funding. (Full disclosure: My organization is a former Salesforce client.) In my experience, sales often gets the biggest portion of an organization’s budget, with customer support and marketing as a close second and third. After that comes everything else, with HR a distant fourth, fifth or even last. The SaaS industry has followed this same priority list. After addressing sales needs, the tech industry targeted marketers, with a wave of options like HubSpot, ExactTarget, Pardot, Eloqua and Marketo. These dynamics have driven the prevalence of sales and marketing software for small businesses.
The Digitization Of HR
Now, other parts of the business ecosystem are becoming digitized — especially the paper-based world of HR. From billing and invoicing to applicant tracking and onboarding, HR is getting the Silicon Valley treatment as founders and investors build platforms to better manage employees and organizations.
The advent of these tools is also related to the changing workforce. Traditionally, business leaders have often been uninterested in HR at best or, at worst, actively tried to minimize its footprint in the organization. But HR teams are instrumental to organizational and employee success. Experiencing a strong economy and the lowest unemployment rate in 50 years, more organizations are prioritizing business culture, hiring, career growth and other “people-centric” responsibilities, in my experience. The result is that HR tasks once overlooked are now being prioritized.
Software Eating The World
Business trends aside, HR is likely just one sector among many to go digital in the coming years. In fact, I believe it won’t be long before almost every industry process and service has a tech component.
This dynamic was described years ago by Marc Andreessen, Netscape co-founder and venture capitalist, in his Wall Street Journal column “Why Software Is Eating The World.” In the column, Andreessen predicted that software companies are braced to take over large parts of the economy as businesses and industries are increasingly run on software or offered as online services. He covers examples of industries moving their entire value proposition and service processes online and away from physical goods and hardware, such as photography, telecom, agriculture, financial services and more. I don’t know Andreessen, but I believe his insight to be correct when he wrote, “Companies in every industry need to assume that a software revolution is coming.”
The Next Wave Of Software
This software-driven change has already come to sales, marketing and now HR, but where is it headed next? For business owners or tech founders in other spaces, there are two potential takeaways.
First, regardless of what industry you’re in or how offline it may currently be, don’t assume technology won’t transform it. Keep an eye on how your value proposition may evolve as software tools are introduced and adopted.
Second, if you’re a founder of a software solution that hasn’t found mass appeal yet, stay the course. Eventually, industry dynamics, economic trends and the tech industry’s hunt for the next big thing might align to pull your product or tool into the mainstream for your industry.
Check out this column in Forbes Technology Council.
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