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HR budgets, tech spending will be flat this year

HR tech spending will increase slightly, although some investments may be harder to track given the rise of WorkTech.

HR departments will be underfunded and overworked this year, according to a new study. The Hackett Group, a management consulting firm, said HR's 2023 forecast is for budgets to remain flat as staff workloads increase and HR tech spending barely rises.

Hackett surveyed more than 350 HR and business executives at midsize to large companies. The survey reported that HR budgets are forecasted to rise by 0.4%, while staff sizes grow at 0.3%. The survey was global, but a majority of respondents came from the U.S.

Compounding the problem of anemic budgets are the expectations on HR departments. Workloads have been on the rise as departments have dealt with higher-than-average quit rates and increased recruiting demands, and are now managing layoffs. The size of HR workloads has increased about 10%, according to Hackett's survey.

HR will have to add more workers, outsource some of the work or increase the HR tech budget to meet demand, said Franco Girimonte, Hackett's HR executive advisory practice leader. Some of the report's findings are detailed in a podcast.

If the workload is increasing, something has to give. Franco Girimonte
HR executive advisory practice leaderThe Hackett Group

"If the workload is increasing, something has to give," Girimonte said.

HR tech spending will go up by a little less than 2% this year, indicating that tech is a "higher priority" than staffing in HR. The increase in tech spending fell compared with last year, when a similar survey showed an expected increase of more than 9%, Girimonte said. That jump in HR tech spending was a response to COVID-19-related shifts, such as the move to remote work, however some -- including independent HR analyst Josh Bersin -- saw a possible bubble in HR tech venture capital market.

The WorkTech wrinkle

But HR tech spending may be higher than it appears when just looking at HR budgets, according to Girimonte. About 50% of the respondents in the Hackett survey said they plan to upgrade meeting and facilities technologies to enable hybrid work arrangements, but the money for those investments may come out of the CIO's budget.

Technology to improve hybrid work may fall under the broader category of WorkTech, which walks the line between IT and HR and includes collaboration and productivity tools. This is an area that may still be growing strong, according to data from George LaRocque, founder and principal analyst at WorkTech.

"WorkTech and HR tech have been performing better through the second half of 2022 and early 2023 compared to the broader tech market," LaRocque said.

According to LaRocque's analysis, global WorkTech venture capital investment is outperforming the overall venture capital market. The total addressable market, or market size, for global WorkTech is forecasted to increase at a compound annual growth rate of 20%, or from $562 billion in 2022 to nearly $1 trillion by 2026, he reported. 

Patrick Thibodeau covers HCM and ERP technologies for TechTarget Editorial. He's worked for more than two decades as an enterprise IT reporter.

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