#hrwins Trend Report: HR Tech Innovators Target Middle Sized Businesses

One of the most interesting trends to unveil itself through this year’s #hrwins process has been the number of HR Technology companies that are now getting real traction for their solutions at companies with under 5,000 employees – or what is traditionally called the Small and Medium Business segment (SMB).  For the sake of this post we’ll consider the SMB to be companies with up to 5,000 employees.

This trend isn’t a surprise.  For many years HR Tech vendors have tried to get real traction in the SMB.  The interesting thing is that it’s now more realistic for HR Tech across several categories to penetrate the SMB succesfully.

I expect some new HR Tech leaders to emerge in the SMB over the next 18 to 24 months.

The opportunity is huge in the mid market given the amount of employment in the segement, as well as the sheer number of possible customers.  The US Bureau of Labor Statistics 2011 data shows 61.39% of employment in firms with under 1,000 employees.  The available data from the US Census Bureau shows 5.9 Million Businesses with under 5,000 employees (see breakdown in chart below).

Source: US Census Bureau

 

In the past there were generally two things standing in the way of HR Tech gaining traction in the SMB: 1) SMB firms and HR decision makers within them were difficult to find and quantify.  A large part of the SMB has no Head of HR.  In this segment HR is a function that is either part of an Operations or Finance department, OR spread out across all of the company’s management team.  SMB firms are also generally off of the traditional HR Tech marketing radar.  They don’t attend industry events in large numbers.  They also don’t show up with any consistency in large databases like D&B/Hoovers or OneSource.  2) HR Technology was difficult to adopt in the SMB.  Outside of, what used to be, the necessary evil of time and payroll systems there was no wide scale adoption of HR Technology across the segment.

The emergence of the Cloud as a cost-effective platform for the SMB, Social Networks, Social Media, and Social technology trends, Mobile, and the consumerization/gamification of applications across all segments have 1) made the SMB more visible to HR Tech Vendors and 2) Made the HR Technology more adoptable in the segment.

We’re seeing products across almost every segment become more feasible for the SMB to adopt:  Talent Management, Talent Acquisition, Workforce Management, Payroll, Time and Attendance, Assessment, Recruitment Marketing, Performance, Rewards and Recognition, HR Analytics, Engagement and Collaboration, etc…  We’re not only seeing feasibility, though.  We’re seeing real traction.

It seems that the vendors we spoke to that already have a product or service for the Enterprise segment (over 5,000 Employees) are continuing efforts there, but moving downstream into the SMB.  While most new vendors are focusing on Firms with under 5,000 Employees and leaving the extremely long sales cycles and battles with Platform Players in the Enterprise segment for another time.

Other than the Job Board category, where the SMB can work more transactionally, the HR Tech vendors that have classically supported the SMB look cumbersome and difficult to use in comparison to the new crop of tech entering the market.  When you talk to HR Pros in the SMB, there is a real sentiment of “settling” for HR Technology that was available at the time.

What are the challenges in the SMB for HR Tech?  Do you have a story about implementing HR Tech in a firm with under 5,000 employees (from the vendor or the HR Pro side)?  I would love to hear from you.

 

 

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About glarocque

George LaRocque is the leading strategist and go-to-market consultant for HR-related technology and the human capital management (HCM) marketplace. He has personally launched market-leading HR technology brands to profitability, funding or both. He is the president of LAROCQUE, a go-to-market consultancy, the operator and organizer of the InfluenceHR Conference, and the publisher of the #hrwins reports on Innovation in HR Technology.

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