IIM ROHTAK HUMANE-R PRESENTS IMPRESSIONS March 2022 HUMANE.R@IIMROHTAK.AC.IN
Why HR Tech is the Next Sunrise Sector for Start-ups in 2022
Introduction The pandemic finally drew attention to the maligned HR role in businesses. With hybrid working arrangements becoming the norm, HR managers will have an extra responsibility as they assist staff working in numerous locations. Everything in the HR business is changing, at least in part due to the remote work environment, from how we find personnel, deliver training, and establish a company culture in which individuals no longer meet each other in person. HR departments throughout the world are undergoing one of the most significant transformations in history. Moreover, the next HR tech upheaval is expected to influence the workforce significantly. There is currently a strong emphasis on exploiting technology, and the developing HR tech area is seeing a technological boom. Delta in Work Arrangements Firms have recognized that the human resources department must be more dynamic and adaptable, with the flexibility to pivot based on external situations. For the foreseeable future, hybrid working arrangements will be the standard, with some businesses, such as Twitter and Microsoft, enabling workers to work from home permanently. This irreversible move to a hybrid workforce will strain HR managers since employees will need to be supported across different locations by the same HR manager. On the other hand, employees have learnt that their overall well-being, which encompasses their mental well-being, is the decisive factor in whether or not they stay with a particular company. Employees prefer more significant levels of employee engagement, which affects retention, job productivity, and loyalty, resulting in improved client satisfaction and a more robust bottom line. Because the pandemic has caused many individuals to believe that there is "more to life" than their employment, employees have been resigning in droves, searching for better flexibility and work-life balance. Employees must be treated with more respect at work, and employee engagement is a
clear indicator of this. Companies will need to undertake a determined effort to ensure that their workers are happy, engaged, and appreciated when we might emerge from the pandemic. HR Tech start-ups that can help with any of these will be in high demand next year.
Focus Areas HR Tech businesses attempt to provide HR managers with the tools to efficiently manage a more prominent, scattered workforce with higher expectations. Start-ups are interested in developing several elements of the HR value chain, including recruitment/hiring, strategic planning, diversity and inclusion activities, individualized training, and employee upskilling. Major areas on which start-ups can concentrate their efforts: HR Tech start-ups that can assist enhance staff’s morale and providing outsourced perks like mental health therapy will be significant competitive advantages for businesses trying to retain their best staff. With the advent of the remote work culture, the next obvious step would be to allow employees to plan their work around their preferences and other obligations. The problem is that firms must organize and administer it for all of their personnel. While many firms have developed their solutions, there is a lack of a complete SaaS option. As WFH increases, there is a growth in cybersecurity issues. HR professionals who work from home frequently manage sensitive employee data, making them an appealing target for hackers. Over the last year, more than 55% of remote workers have faced a cybersecurity issue, with malware and phishing being the most prominent risks. Companies are expanding their investment in internal learning initiatives. They are under pressure to reskill their staff as the gap between the skills required in a digitalfirst world and the capabilities possessed by their personnel and job hopefuls grows. To handle tax law obligations across regions, organizations must acquire and manage remote employees without expanding staff, and mid-sized businesses know they can access fresh talent if these concerns are addressed.
In recent years, it has been evident that increased diversity and inclusion (D&I) inside organizations have tangible effects on a company's culture, brand, employee engagement, and customer happiness. In a post-pandemic world with remote employees and a worldwide client base, business executives have recognized that a diverse workforce provides a considerable competitive advantage since diversified end-users want to buy from firms that "look like them." During the pandemic, many remote-based workers reported depression, anxiety, and other mental health difficulties, and companies have gradually caught on. 'Zoom fatigue,' along with feelings of isolation caused by lockdowns and work-from-home arrangements, is a typical complaint.
Current Trends in HR Tech in 2022 The growing acceptance of new working methods such as remote and hybrid work models, AI, advanced analytics, machine learning, and cloud-based HR solutions have proven to be a massive boon for HR professionals, allowing them to shift their focus away from time-consuming administrative tasks and toward critical business concerns that have arisen as a result of the 'new normal.' By embracing digital transformation and utilizing people analytics, HR departments can make significant gains toward a more efficient and collaborative workforce. HR managers can make more strategic, datadriven decisions throughout employee recruitment, engagement, and retention by employing smart analytics and intelligent technology. Few instances where digital workplace technologies are allowing HR professionals to envision the future of work – AI-Assisted Hiring Artificial intelligence is gradually becoming a buzzword for HR Tech start-ups trying to disrupt existing HR practices and standards, notably in recruiting. AI is being used in major corporations to filter resumes and "interview" people for white-collar occupations such as managing associate roles. On a bigger scale, more advanced AI-driven technologies will be employed to help discover appropriate candidates using facial expression analysis, speech analysis, individuals' emotional intelligence, and leadership potential. These AI solutions can be rolled out in different languages for global corporations, making it easier to employ foreign applicants as and when they are needed. Chatbots as HR Tool Businesses already use Chatbots as part of their recruitment and onboarding processes to answer simple inquiries and provide real-time information. Chatbot technologies are also growing more intelligent, helpful, and engaging with human-like discussions. Its applications as low-cost, high-impact instruments can be expanded. A well-programmed chatbot can answer frequently asked questions and provide basic information on workplace policies and company holidays. It is also possible to utilize them to provide step-by-step instructions during the enrolment process and provide rapid feedback and
insights from surveys and performance reports. Wellness in HR Tech Companies will prioritize their employees' physical health and well-being, so there is a huge potential to establish a wellness-focused HR digital solution. Some suggestions include developing an app that encourages employees to take frequent deep-breathing breaks, fitness and step monitors that encourage employees to include exercise into their workdays, and one that provides a range of motions and stretches that employee may perform during audio conversations. Mental Health & Wellbeing A slew of HR Tech start-ups has emerged in employee mental health and general wellbeing, offering private psychological counselling services to employees in need. Employees are given the certainty that resolving their mental health difficulties will not jeopardize their future career possibilities at their workplace by maintaining anonymity and ensuring that nothing reaches HR or top management. Workforce Planning We see significant potential for a robust, configurable SaaS solution that businesses can build depending on their needs, regardless of industry. Companies may even take it further by providing solutions for complex situations such as government contracts, procedures, and cross-border taxation and continue to put human resource elements and characteristics into it. Cyber Security Developers that can provide HR-focused cybersecurity solutions, such as role-based access restrictions, will have a massive potential in the future years. Businesses should also educate HR professionals and workers on recommended practices for preventing security breaches.
Stronger Emphasis on Diversity & Inclusion A slew of HR Tech start-ups have emerged in the D&I area, seeking to employ deep data analytics to determine how diverse and inclusive an organization truly is. HR Tech startups have stepped up with a wide range of products to conceive and produce industrystandard definitions for both terms, generating particular KPIs and rating businesses based on their attention on the issue. Start-ups have also assisted them in seeing patterns over time, allowing them to adjust their emphasis accordingly. Improving Recruitment Process With technology impacting the whole employment lifecycle from recruiting to retention, HR is increasingly all about the experience for workers and prospects. HR technology that enables HR teams to tap new solutions and resources to expand their global reach and adapt to their employees' specific demands to provide an overall pleasant experience will be in high demand in the coming years. High Influx of Funding into HR Tech The COVID-19 pandemic has profoundly altered how businesses must approach HR function. Some of these changes were already underway before the pandemic, but COVID-19 has hastened the upheaval of established HR practices. Aside from remote working/hybrid arrangements, the pandemic has resulted in much-needed attention on employee welfare (especially mental health) and staff upskilling. Moreover, it appears that investors are on board as well. According to Crunchbase statistics, HR technologies have received over 3.6 billion USD in venture capital for 260 agreements between January and July 2021, which has eclipsed all of last year's investment of over 2.2 billion USD across 500 funding deals. Another analysis from Fortune Business Insights predicts that the HR tech industry would grow at a 5.8 per cent CAGR from 24.04 billion USD last year to 35.68 billion USD in 2028. According to the research, adopting innovative approaches to meet the demands of employees would be a significant development element for the sector.
Since the beginning of 2021, Indian HR Tech businesses have raised about USD 300 million with Apna. Co is raising $100 million and earning unicorn status in only 21 months. Darwinbox, Sense, My Ally, Refyne, Advantage Club, Proton, Talview, and Multiplier are among the other Indian HR Tech businesses that have garnered substantial financing.
Conclusion The Covid-19 pandemic has finally thrown the much-maligned HR function in organizations into the spotlight. The pandemic has triggered a 180-degree shift in how firms now approach the HR function, emphasizing utilizing technology in all HR activities. Some of these shifts were already underway before the pandemic, with numerous job search sites and cloud-based HR management systems gaining traction in recent years, but Covid-19 has further expedited the disruption of traditional HR paradigms. However, in recent months, the pendulum has begun to swing in the opposite direction, with banks and financial institutions, in particular, asking for all staff to return to work. "Zoom burnout" and "WFH fatigue" have visibly influenced employee morale, engagement, and productivity, with numerous managers expressing legitimate concerns that some face-to-face connection is required
dynamics and overall business culture. HR Tech, therefore, assists the organization in balancing both strata of the company, assisting them in keeping a balance and embracing the hybrid time. As a result, HR Tech may wind up being the area that creates the most unicorns in the next three to five years, rather than merely the next sunrise industry for entrepreneurs. Human resources technology companies with specific niches based on area, market, job, skill type, sector, or any combination of the above that can bridge the gap between human resources and technology are primed to emerge as one of the most effective tools for organizations.
Sudhanshu Aggarwal (SJMSOM, IIT Bombay)
Organizations throughout the world had a challenging year in 2021. In terms of containing the spread of new Coronavirus, the record-breaking manufacturing and distribution of COVID-19 vaccinations across the country and around the world is very noteworthy. COVID-19 has not been totally destroyed, but it has been severely reduced, thanks to the quick production of new variations and limited breakouts. This has had a cumulative effect on global business.
Hybrid working solutions, which were previously exclusively used by a limited number of companies, have now become the norm. Amid the epidemic, HR technology has emerged as a bright spot for companies. Businesses are nothing without their people, and HR Tech platforms that make employees feel more valued, involved, and engaged are destined to win big in 2022 and beyond.
Investors are interested in HR Tech firms that provide full-stack human resources services and management to enterprises. Between January and August 2021, Indian start-ups such as Apna.co, Refyne, My Ally, Advantage Club, Sense, DarwinBox, and Protonn raised more than $250 million USD.
"Opportunity in this industry has risen because of two major factors, formalizations of all major sectors and hastened pace for digitalization. The market opportunity is huge with multi-million dollars," stated Nirmit Parikh, co-founder of Apna.co.
VC money is pouring into the HR software market, according to a report by Crunchbase News, as firms seek innovative methods to acquire, recruit, and retain their people. According to Crunchbase statistics, between January and July 2021, HR technology received nearly 3.6 billion USD in venture capital for 260 projects, surpassing the previous year's total of 2.2 billion USD invested over 500 funding agreements.
According to Fortune Business Insights, the HR technology industry will grow at a 5.8% CAGR from 24.04 billion USD last year to 35.68 billion USD in 2028. According to the research, the industry's key growth component would be adopting innovative approaches to respond to employees' demands.
Rising Demand for HR Tech "We are seeing super competitive funding rounds in the HR tech space, which has gotten pretty hot in the past two years," Capital One Growth Ventures partner Adam Boutin said. Investors are attracted to several trends that combine human resources operations with technology. Everything is screaming at a significant investment moment, with the need for people growing, the epidemic changing the way we work, and more firms wanting to improve their HR IT stacks. "It is no surprise, demand for talent has never been this high, and the last year has only accelerated workforce changes. The work environment is complete upside down, and there is no script for it," said Job van der Voort, CEO of Remote, a firm that assists employers with payroll, benefits, and compliance concerns throughout the world.
According to Saad Siddiqui, everything in the HR business is changing, at least partly due to the remote work environment, from how we recruit personnel, deliver training, and establish a corporate culture where individuals don't meet each other in person, a principal at Telstra Ventures. It all poses hurdles, and one of the significant challenges firms are seeking to tackle is maintaining their culture in the new remote-work environment. As a result, we should expect additional investment in this area. "Everyone has worked remotely over the past 16 to 18 months, and not everyone appreciates it. As a result, the challenge is how to make it more entertaining," Siddiqui explained. For Start-ups, the Future of HR is an Emerging Opportunity and as previously stated, the HR market faces several issues and has also been one of the most active corporate industries in recent years. As a result, HR departments worldwide are undergoing one of the most significant transformations in history. And the next HR technology upheaval is expected to have a massive influence on the workforce. According to experts, HR's function will become significantly more multidisciplinary in the near future. Businesses have combined, organized, and saved their HR data by switching from traditional HR operations and systems to a cloud-based SaaS model. This technological explosion in the HR IT field can be seen worldwide, especially in India. HR Tech is one of the most active industries for investors, according to Tracxn statistics, with total financing of 51.5 billion USD in over 5k firms. It's also worth noting that half of these funds were raised between 2018 and 2020. "There is an unmet need from small and medium-sized businesses who wish to implement HR solutions in their businesses. According to Mohan Kumar, founder of Avataar Ventures, "these organizations favour cloud-based products, resulting in tremendous traction in the HR IT market. Over the previous few decades, there had been no meaningful disruption in the area, and a few large corporations dominated it.
Start-ups, on the other hand, have begun to contribute value and fill holes in the market for temporary and gig labour. He continued, "Overall, there is a sizable addressable market." The hybrid working paradigm has changed the function of HR and gave a boost to HR technology, which had previously been underutilized but is now seeing a lot of investment. "Until the coronavirus epidemic prompted the broad implementation of WFH, there were few use cases in HR technology." The HR tech economy sprang out of the epidemic, and more innovation is expected in the coming days. This industry's chance is here to stay." Anshuman Das, CEO of CareerNet, remarked. Experts anticipate that the emergence of the gig economy will accelerate the trend, resulting in increased financing. The HR IT business has also seen increased employee upskilling and wellbeing. HR-based companies are attracting attention because they assist organisations in attracting talent and competence. According to Ankur Pahwa, a partner at EY India, cloud-based HR solutions will define a new working world in a fast-changing work environment. Once a company has cracked its home market, there is a possibility for expansion into international areas such as the Middle East, Southeast Asia, and North Africa. The year 2021 was marked by a lot of change. The Covid-19 epidemic, which had caused worldwide lockdowns, had lost its grip, allowing humanity to return to normalcy. However, when people return to work and new learning modalities become more popular, it is clear that the world has accepted the new normal. We have changed our lives due to the adaptive tactics we used to survive the epidemic. We're being pushed to re-evaluate the definition of productivity, and as a result, we're looking for technology tools that help us interact, learn, and participate more effectively.
Organizations will check for vaccinated personnel just when they come to work or travel for business. Still, they will overwhelmingly choose for some of the hybrid approaches that kept them afloat during the pandemic's deadliest days. Expect these tendencies that were amplified throughout 2021 to continue long into the future as the weather grows cooler and the calendar changes to 2022. The hybrid workplace is unquestionably here to stay, and organisations will eagerly anticipate pushing digitalization to the next level in 2022. The pandemic's lessons have only reinforced current systems and procedures, opening the path for more efficient, tailored, and digitalized solutions to be implemented.
India's HR Tech Startup Incubators & Accelerators Many Indian incubators and accelerators provide a variety of initiatives to assist HR Tech firms. These incubators and accelerators assist companies in finance, mentorship, co-working space, networking, and marketing, among other things. The Indian HR Technology Industry's Growth Prospects and Future, the need for HR technology in India will be unparalleled in the future as the country's need for effective and targeted recruiting strategies grows. The demand for a Human Resources Management System will grow as technology advances and provides better solutions. Cloud, machine learning, IoT, AI, virtual reality, augmented reality, and other similar technologies will improve and give solutions for businesses. In India's HR technology industry, entrepreneurs have plenty of opportunities to grow. The following reasons demonstrate several growth prospects for entrepreneurs looking to enter the Indian HR Technology business. The demand for effective and targeted recruitment approaches is growing. Convenience and quick access to personnel data are required.
The Asian HR Tech market is projected to be around $9 billion, with plenty of room for expansion. HR Technology Trends and Opportunities in 2022 and a tool for Workforce Planning Chatbots as an HR Tool Many firms currently employ chatbots to answer simple queries and provide real-time information as part of their recruiting and onboarding processes. Because chatbot technology has advanced, they are becoming more innovative, helpful, and engaging with human-like dialogues. Its applications as low-cost, highimpact instruments can be expanded. A well-programmed chatbot can answer common queries and provide basic information on various topics, including workplace regulations and corporate vacations. They may also be used to provide a step-by-step guide through the registration process and provide immediate feedback and insights via surveys and performance reports. With the advent of remote work, the next obvious step would be to allow employees to plan their work according to their preferences and other obligations. The problem is that businesses must schedule and manage it for all employees. While many firms have developed their own solutions, a comprehensive SaaS solution appears to be lacking. It is believed there are significant prospects for a complete, customized SaaS solution that businesses can configure to meet their own needs, regardless of industry. You may take it a step further by providing solutions for additional complex challenges such as government contracts, procedures, and cross-border taxation. And continue to put human resource elements and characteristics into it.
Improving the Recruitment Process With technology impacting the whole employment lifecycle from recruiting to retention, HR is increasingly all about the experience for workers and prospects. The introduction of solutions that improve the whole recruiting process addresses one
of the most pressing concerns facing businesses today: recruitment. Companies are finding it increasingly challenging to locate competent candidates for open positions and much more challenging to retain good staff. And it is here that such tools and platforms may provide a plethora of advantages. HR technology that allows HR teams to tap into new solutions and resources to expand their global reach and adapt to the specific requirements of their workers to produce a pleasant overall experience will be in high demand in the future.
Summary The epidemic placed the much-maligned HR department in businesses into the spotlight for the first time. There is currently a strong emphasis on using technology in all HR procedures. Most significantly, companies began to see the need for HR to become more agile and dynamic. As hybrid working arrangements become more common, HR managers will face the added challenge of supporting workers who work in numerous locations. With cloud-based HR technologies becoming more crucial than ever, here is where HR tech firms can shine. Furthermore, new-age performance management systems that analyse an employee's performance using a variety of measures will ensure that no remote workers are unfairly penalised. It's also worth noting for our HR colleagues that HR Tech businesses won't be able to replace or disintermediate experts. They'll provide you with the tools to effectively manage a more significant, distributed workforce with higher expectations from their bosses. Investors appear to agree as well. In the midst of the epidemic, HR technology has emerged as a bright spot for companies. HR Tech systems that help employees feel more appreciated, active, and engaged are poised to win big in 2022 and beyond. Although the HR tech market appears to be congested and overrun with apps, there is still plenty of potential for growth and fresh company ideas.
Everything we've spoken about leads to a market for HR Tech businesses that are consolidating and increasing. HR Tech firms that can bridge the gap between human resources and technology in specific niches based on geography, market, job, skill type, sector or any combination of the above are primed to emerge as one of the most effective tools for organizations.
Atanu Ghosh Symbiosis Institute of Management Studies, Pune