IT spending in general is currently on the rise. A study by the Enterprise Strategy Group (ESG) found that nearly two-thirds of companies intend to increase their IT spending over the course of 2022. In particular, they plan to spend more on cybersecurity, cloud-based applications, and artificial intelligence (AI).
Some of this spending is being done to offset a general IT skills crisis. This is an attempt to compensate, to some extent, for the struggle many HR departments face in filling urgent cybersecurity roles.
“In 2022 there is ample funding for security technologies and services that can help fill this workforce shortage while making the existing workforce more productive,” said Jon Oltsik, analyst at ESG.
The ESG survey found a clear parallel between the areas of higher investment and the issues companies face on the workforce and talent acquisition front.
“The technology areas that top the list for expected increases in spending are also those where many companies face problematic skill shortages as demand for skilled labor in these areas continues to outstrip available supply,” Oltsik said.
More than half of respondents indicated that their organization has a lack of cloud/IT architecture skills; 48 percent said they lacked staff with the required mix of cybersecurity skills.
But that is only one side of the coin. Yes, organizations are investing in automation and technology to fill a severe shortage of available IT and security talent. But they are also investing heavily in HR technology to improve recruiting success, reduce turnover and generally provide far more efficient human capital management (HCM).
“Business leaders in every industry are beginning to see the value of investing in their people when faced with hiring challenges, mass layoffs and general uncertainty,” said Evelyn McMullen, analyst at Nucleus Research. “Nucleus anticipates that all eyes will remain on human capital management software providers in areas such as talent, core HR and workforce management and the processes of talent acquisition, people and workforce management analytics, on-demand -Pay and training to be reassessed as critical trends to watch in 2022.”
Investments in HR technology
Fortune Business Insights forecasts that spending in the global human resources technology market will grow from $24 billion in 2021 to $35 billion in 2028. That’s an increase of almost 6 percent per year. But what exactly are they spending on and why?
According to Fortune Business Insights, HCM, talent management, workforce management and payroll management are hot tickets. As with all IT, HR spend favors tools and platforms that offer AI capabilities, are cloud-based, and have built-in security.
For example, AI algorithms are integrated into recruitment tools such as applicant tracking, social sensing and hiring platforms. AI and analytics are also being used to integrate HR databases with various systems that measure company and employee productivity.
Predicting future skill gaps is another way analytics and AI are being used in HR. With the continued drive to deploy greener technologies and lower emissions as part of broader climate goals, gaps in future needs need to be filled. AI is being used to identify potential bottlenecks in the years to come so they can be addressed through urgent reskilling of the existing workforce, partnerships with schools to improve the education pipeline, and recruitment campaigns to provide the necessary resources.
HCM specialists such as Cornerstone OnDemand, IBM and Workday are among the companies incorporating such revenue-boosting capabilities. Talent management is also predicted to perform well in the coming decade. Fortune Business Insights believes talent management will play a critical role in areas such as acquisition, employee performance and career development, and succession management.
Cloud spend accounts for a large portion of HR technology revenue growth. According to VMware’s CloudHealth, companies’ cloud spending will increase by more than 20 percent in the next few years. The HR providers with the most advanced cloud-based capabilities will benefit the most.
Josh Bersin, founder of talent management consultancy Bersin & Associates, found that investment in tools to improve employee satisfaction and ensure a smooth employee experience in the workplace is also increasing.
In terms of sectors, ESG Research found that the biggest spend on HR technology will be banking and financial services, IT, telecom, manufacturing, retail and healthcare. But it’s the IT and telecom segments that are leading the rush for greater convergence of IT and HR technologies. Gone are the days when HR systems were in the backend and reserved for the few. Today they need to be integrated with business management platforms, AI and analytics systems. And they must be able to operate in the cloud.
At a regional level, this combination of factors is driving North American HR spending from less than $12 billion per year today to more than $17 billion by 2028, according to ESG, making it by far the largest area of HR spending.
In addition to the companies mentioned above, other companies that will benefit from this increase in investment in human resources are ADP, Ceridian, Cezanne, Infor, NetSuite, SAP, Talentsoft and Ultimate Software. To be successful, they must provide HR tools that connect the needs of the company with the needs of its employees. According to consulting firm Mercer’s Global Talent Trends 2022 According to the report, 81 percent of employees feel at risk of burnout, up from 63 percent two years ago. Reasons include feeling under-rewarded for their efforts, lack of emotional well-being, and increases in stress levels.
“Employees are more stressed than ever, and companies could do more to offer a holistic and inclusive wellbeing strategy that meets the needs of a multigenerational and diverse workforce,” said Ilya Bonic, president of careers business and head of Mercer strategy.
Drew Robb is a freelance writer based in Clearwater, Florida, specializing in IT and business.