Observers of the HR tech market over the years have undoubtedly noted some opportunities for better alignment between customer needs and the way solutions are often created. For one thing, many, if not most, HR solution providers base their go-to-market strategy on the premise that it’s better for their business to focus on either a tech-led product or a human-centered service but not both. While having one main area of core competency may prove to be a winning strategy for many businesses, my years of operating as an HR tech buyer on three continents have resulted in the view that customers are often not the beneficiary of this “one or the other” approach.
Nonetheless, with respect to enterprise software companies, for example, the desire to function as a “pure tech player” and let others handle the (hopefully) complementary service aspects might be attributable to valuation multiples or stock price considerations. Another explanation is that many product or service-centric companies find that operating principally in one camp or the other makes it easier to manage complexities and risks.
Whatever the reason, the fact is that most offerings in this domain are not very holistic in nature and therefore do not qualify as the “total solution” that modern buyers want. This has been a prominent dynamic for decades.
That said, a particular category of HR solutions is making a good case for vendors to re-think age-old business strategies and models. This newer solution segment includes offerings typically described as Employer of Record (EOR), Professional Employer Organization (PEO), or even more recently, a derivative of one or both. These HR solutions help businesses onboard, pay, and manage international staff compliantly - a highly complex task that requires both efficiency and human expertise.
Related Market Dynamics
Certain research findings from prominent analyst firms covering this market over the years - from Bersin and Associates (my home base a dozen years ago) to the 2022 annual HR Tech Survey of Sapient Insights Group (SIG) - strike me as interesting. And it’s mostly because they stay extremely consistent year after year. I’m referring to customer satisfaction findings. Scores averaged in the measly “3s” a dozen years ago, and they remain in that territory still. And apparently, it doesn’t matter which HR service delivery area a customer is engaged with; it can be an HR function characterized as more operational or more strategic.
Combine this with the SIG finding that over 50% of respondents are considering replacing foundational applications such as payroll and time attendance solutions in the next 12 to 24 months, and a similar storyline emerges: HR solution design and delivery models that might help vendors achieve their business goals are not always doing the same for customers.
Other Elements of a “Total HR Solution”
Let’s take the example of a global payroll function reporting into corporate HR. We know there are several key elements that come into play when evaluating vendors, whether it’s an enterprise software application licensed by the end customer or an outsourced delivery model. These include strategic aspects such as which of the two approaches fits best where, regional or business area requirements, and team staffing and skills requirements, as well as analytics, reporting, data management, and security. A key point here is that when all these solution elements come together in a well-designed and tightly integrated way, the customer’s agenda is logically being served at the highest level.
Moreover, at the center of this whole range of solution elements is the letter “H”: the human or people component. It not only serves as the connector, if not a seamless integrator, of the different infrastructure pieces but also ensures that the right mix of delivery aspects and services is calibrated to best fit each customer group’s business context now and into the future. No technology I’m aware of today can successfully perform this role by itself - that human touch is always needed to achieve the highest quality experience for customers.
A New Breed of HR Solution
Whether it’s related to the go-to-market strategy of vendors or customers wanting to be in better control of today’s fluidity and uncertainty surrounding new and alternative work models or enterprises looking to quickly start operating on a global scale, today’s business environment is clearly more complex than ever before. This has created a major opportunity, the magnitude of which is compellingly captured in these two data points: the EOR market is projected by leading HR-related analyst firms to exceed a value of six or seven billion USD in the next five years. Additionally, multiple providers operating in this market segment have raised over $100M from private equity partners, a few significantly over that century mark.
There’s a universal recognition that today’s operating environment for global businesses involves new levels of complexity and uncertainty and, therefore, risk. The EOR model, and different variations of the PEO/EOR service delivery approach, are getting tremendous market validation in the form of major investment capital and the truly impressive results of a select set of providers. This is particularly true of those able to expertly design and deliver the best-fit model for each customer situation.
The players that will win are, without question, keeping the “H” firmly at the center of their HR solution.
About the Author
Steve Goldberg's 30-plus-year career on all sides of HR process and technology includes HR exec roles on three continents, serving as HCM product strategy leader and spokesperson at PeopleSoft, and co-founding boutique Recruiting Tech and Change Management firms. Steve’s uniquely diverse perspectives have been leveraged by both HCM solution vendors and corporate HR teams and in practice leader roles at Bersin and Ventana Research. He holds an MBA in HR, is widely published, and is a featured speaker around the globe. He’s been recognized as a Top 100 HRTech Influencer. Steve can be reached at SGoldberg@HRTechAdvisorySvcs.com.
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