HR tech spending jumps as workloads increase
HR tech spending is rising, thanks to the 'Great Resignation,' and a need to invest in automation technologies such as chatbots and RPA to handle increasing workloads.
HR operational budgets, used to plan for salary and day-to-day needs, will be flat this year, despite increased workloads, The Hackett Group reported in a new study. But HR tech spending will increase by more than 9% this year, with talent management -- including recruiting tools -- at the top of the spending list.
HR workloads are increasing because of COVID-19 issues and return-to-work office strategies, said Franco Girimonte, North American HR executive advisory practice leader at the Miami-based management consulting firm.
HR departments aren't adding staff to help with the added work. The Hackett Group found that HR budgets will decline by 0.2% this year, and headcounts will contract by 0.4%. Meanwhile, HR workloads are increasing more than 9%.
Hackett surveyed HR and business leaders at 250 midsize and large firms globally. About 75% of the firms had revenue of $5 billion annually.
Franco GirimonteNorth American HR executive advisory practice leader, The Hackett Group
Without staff growth, HR departments are increasing capital spending and turning to systems such as robotic process automation (RPA) and chatbots to automate some functions, Girimonte said.
"That can take a huge amount of the workload off HR's shoulders, if you get those systems set up properly," he said.
HR automation increases
But many HR departments struggle with RPA, which can automate some basic processes, such as filling out forms.
Nearly 50% of the organizations have trouble "realizing their business objectives" with RPA, according to Hackett. "The learning curve for RPA remains steep," the report stated.
Chatbots, another form of automation, can handle many of the total questions that come into HR and reduce workloads, Girimonte said. But rising employee turnover adds to the HR workload, with recruiting and onboarding workers as well as offboarding employees.
"There's a lot of work HR has to do to close somebody out of the organization," said Harry Osle, global HR advisory practice leader at Hackett.
Market research firm IDC also predicts an increase in HR tech spending. It has estimated that the worldwide HCM applications market will reach $22 billion this year, an increase of 7.7% over 2021.
The increase in spending is related to the "Great Resignation" and to a "new focus of ensuring a positive employee experience to improve retention," among others, said Lisa Rowan, an analyst at IDC.
Other HR application spending areas include investment in skills training, tools related to creating a safe work environment and accommodating a hybrid workforce, she said.
Patrick Thibodeau covers HCM and ERP technologies for TechTarget. He's worked for more than two decades as an enterprise IT reporter.