The HR and Recruiting Technology industry is currently experiencing an explosion in innovation, investment and growth. Change and disruption seem to be occurring at a bewildering pace and it is very difficult for anyone to keep up with what is going on.
To help make sense of all this complexity I’m delighted that my guest this week is George LaRocque. George is Principal Analyst and Founder of HRWins and is a very close observer of the HR Technology market.
In the interview we discuss:
• Why there is currently so much investment interest in HR and Recruiting Technology?
• Does AI and Machine Learning actually exist in this sector or is it just marketing spin?
• Is the pace of change causing confusion and what benefits is it bringing?
• How well do vendors understand the challenges Talent Acquisition professionals are facing?
George also tells us what is currently surprising him the most about HR Technology and give his view on what we should be watching out for in the future
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Transcript:
Matt Alder [00:00:00]:
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Matt Alder [00:01:05]:
Hi everyone, this is Matt Alder. Welcome to episode 118 of the recruiting Future podcast. The HR and recruitment technology industry is currently experiencing an explosion in innovation, investment and growth. Change and disruption seem to be occurring at a bewildering pace and it’s very difficult for any anyone to keep up with what’s going on. To help make sense of all this complexity, I’m delighted that my guest this week is George LaRocque. George is principal analyst and founder of HRWinds and a very close observer of the HR technology market. To hear his insights, just keep listening. Hi George and welcome to the podcast.
George LaRocque [00:01:51]:
Matt, thanks for having me. It’s great to be here.
Matt Alder [00:01:54]:
My absolute pleasure. Could you introduce yourself and tell everyone a little bit about you?
George LaRocque [00:02:00]:
Sure. I’m George LaRocque, the principal analyst and founder at HR Wins. I’m a market analyst and advisor in the HR technology space. I’ve been in the market for over 27 years. I spent the first 10 years as a practitioner. I came out of third party staffing, moved onto employer side recruiting, ran consulting firm, then moved to the technology side for about 10 years, launched a few of the larger brands in the talent space and then the last seven. I spent 10 years there and then the last seven years have been in this evolution into this market analyst and advisor role, starting through consulting.
Matt Alder [00:02:49]:
And it’s been, I think the last, you know, certainly the last seven years and probably the last three years has been really, really interesting from an HR technology standpoint. There just seems to be so much investment in this space at the moment. I know that you do some, some tracking and some monitoring of those kind of levels of investment. What’s going on? Why is there so much investment in the HR technology space?
George LaRocque [00:03:16]:
Well, that’s a great question and there are a lot of factors that feed into that. Why are people investing? I Think the easy answers are there’s so much innovation and there’s so much new technology and new ways to solve business problems. But I think the bigger story is about the market growth for HR tech. So what I mean by that is we’re realizing now that the B2B business to business HR tech market globally is a lot larger than we previously realized. That’s my opinion. There are those macro trends like just access to technology and disruption happening across technology within employers, but also emerging markets markets and emerging market segments. So I’m seeing more global development of HR technology and adoption of HR technology as well as adoption of HR technology by smaller companies. It used to be largely focused on the large enterprise players and now small to medium sized companies are creating a bigger market. And of course the pace of innovation, how fast this stuff is coming at us, and the lower cost to develop technology means there are more entrepreneurs, more people with innovative solutions, and then investors who want to fuel that and obviously take advantage of it to make some money on the back end. So I think that’s a sort of thumbnail sketch, if you will.
Matt Alder [00:05:12]:
So within that, I know that talent acquisition is a space that you watch and you’ve seen a huge amount of investment. It just seems that that’s a space that’s getting more and more complicated in terms of the types of technologies that are available. What sort of categories are you seeing in the talent acquisition space in terms of technology companies coming through and being funded?
George LaRocque [00:05:39]:
Well, this is surprising to me. I don’t know how the audience will feel about it, but what’s surprising to me is that job boards are the within talent acquisition. Based on the data that I have for last year, that was the largest category of investment. And when you step back up close, I think, wow, we’ve been at this job board thing for so long. And yes, some of them try to provide additional services and call themselves marketplaces, but in large part they’re just matching candidates and jobs. And it seems that it just surprises me that we’re still generating hundreds of millions of dollars in investment in that category. But then when you step back, you realize it’s from a business model perspective. If you can get it right within a segment, if you can add value to candidates, employers will pay for that match for those quality candidates, and candidates will come if you’re adding value and making those connections. So it’s when you do the math on paper, from a business model perspective, it’s very attractive to investors. I haven’t seen anything from an innovation perspective on that front that jumped out at me from a technology perspective. Nothing’s really knocked my socks off there. But that’s the big category now. There are some new things happening that are exciting largely around selection. So there’s this whole. I think a new category is emerging that involves assessments. Not traditional survey based assessments, although that can be a small part of it, but more passive assessments that are easier for employers to analyze. Their entire pipeline of candidates. It involves innovative technologies like we’re thinking about artificial intelligence and machine learning to impact things like improving bias in recruiting and improving diversity and inclusion. And for skills matching as well. There’s this, I think, new, similar to what happened with recruitment marketing over the last six or seven years. I think there’s this new selection and I don’t want to call it selection, I don’t know what it will be called yet. But this new category emerging in that space, I’m seeing some, a lot, both investment and existing vendors investing in their product roadmaps to go at that part of the process.
Matt Alder [00:08:34]:
You mentioned artificial intelligence and machine learning there, and they were certainly the, they’ve certainly been the sort of the big buzzwords of the last 18 months in this space. You also mentioned in the job board space, you’re seeing much in the way of technology innovation. Do you think that the talk of artificial intelligence is just spin or is there genuinely some really interesting developments in that space?
George LaRocque [00:09:04]:
AI and machine learning? It’s hard to have a conversation without dropping those buzzwords these days. I do believe that we’re at the very beginning of this hype cycle. There is no doubt in my mind that those technologies are going to have material impact on HR in general, recruiting, hr, et cetera, like we do in this space of analysts, bloggers and influencers. We’re on the front end of this, looking at it closely. We’re probably a couple of years away from really understanding where the impact and most of the solutions that I’ve seen are in exactly the same place. They’re not really leveraging, they’re developing their AI and machine learning and learning with their customers. We’re far away from really understanding it. I think every report that I’ve read that looks closely at it would tell you that. But it’s, it’s definitely a thing, it’s definitely coming. Some of it will just be features that are invisible to the end user but make their lives easier. Some of it may be more of a product, but I see a lot of what’s happening, for example, in the analytics space. I think we’re going to see this year, more in application analytics and reports that are driven by the user’s behavior. If they’re running certain reports, the machine can be good at making suggestions based on the data that you’re looking at, other data elements to bring into the picture or other reports to run. There’s an awful lot of complexity in that on the back end, but the user would see that as just a very neat feature, very useful feature. It can get more complicated than that. But I think that’s when I look at the general VC market, I’m seeing a lot of deals in the broad data analytics space that are starting to explore leveraging AI and machine learning to give a better data experience to users. Right now in the HR space and in the recruiting space, it’s just companies like IBM or with Watson or some of the platform players who have been at it for a long time who have enough data to really address this. But we’ll start to see a wave of solutions. Less analytics platforms and more analytics tools that are embedded in platforms.
Matt Alder [00:12:17]:
Talking about the users of all of these tools, the client base, do you think that there’s not sort of a lot of confusion in the market with so much technology out there and is it possible that some of this technology is actually moving faster than the clients are kind of willing to adopt it? And is that a good or a bad thing?
George LaRocque [00:12:46]:
It’s absolutely moving faster than anyone can keep up with it. My job is to try to keep up with it. It’s overwhelmingly fast right now. There’s so much happening out there. So when it’s not your job to keep up with it, when your job is to manage recruiting for a large employer and you’re coming into a process, a distinct process to now evaluate what’s available, it’s incredibly overwhelming. And another issue along with the technology moving quickly, is that a challenge we’ve always had is and it’s not unique to recruiting software, but everybody sounds the same. We’re all addressing the same issue, which is either issues hiring faster, hiring better, or hiring better people faster. Looking at that, everybody’s messaging to the same high level business issues, it gets very confusing for the practitioners and the talent acquisition leaders out there. I think it’s good and bad. I think innovation is good. Out of this innovation comes new solutions and there has been an incredible amount of adoption of technology in the HR space. Overall, I, I tend to believe that the better solutions do rise to the top over time. I think it’s employers need, they would be smart to look for help to make sense of it all before diving into just looking at solutions, to doing a fair amount of research to really understand what’s happening out there and to try to make sense of it and understand what fits where within their enterprise.
Matt Alder [00:15:00]:
One of the things that I’ve noticed is that a number of solution providers seem to be partnering up to offer joint offerings to clients at the moment. Do you think that’s a trend? Is that a way of cutting through the noise and helping employers understand what they do and how they might work together?
George LaRocque [00:15:23]:
There’s definitely an advantage from an education perspective and a marketing perspective with those partnerships. I think there’s also the number one issue that I’ve identified the last two years, the employers that I’ve surveyed and that I’ve also worked with in the field. The number one issue around technology is integration and the way it normally is articulated is they want these systems to work together. We used to believe that there was a battle between platforms and point solutions, but in actuality, what I’m realizing, what the markets realized, is that the buyer doesn’t really care. The buyer just wants the features that they want and they want them to work together. I think any technology that has been developed since 2010 has largely been developed on platforms that have open APIs, application programming interfaces. So in theory, the ability to integrate is whether it’s easier or more straightforward or just more open. It helps address that issue for the end user. And smart vendors understand this and they’re looking for ways to integrate into. They’re less concerned about owning the desktop and more concerned with supporting the customer. And so they’re looking for ways to add that integrated value to the customer.
Matt Alder [00:17:10]:
A bit earlier you mentioned that in the recruiting space in particular, a lot of the vendors are kind of sort of aiming themselves at the same business problem. Do you think there’s actually a good understanding of the problems that talent acquisition professionals are facing? Do you think the vendors are actually addressing the real issues or are they heading in the wrong direction?
George LaRocque [00:17:35]:
As you might expect, there’s a curve. I think there are clearly vendors and individuals within any vendor that take an approach where their first goal is to understand the customer and understand the discipline. Some vendors make a concerted effort to bring people in who can add that perspective. At the same time, I see a lot of especially early stage vendors where the thing about recruiting, recruiting technology, get that there are more early stage startups, there are more VC deals there than any other category in HR tech. A part of that is because the challenge in recruiting, we’ve all experienced it in Our career, we’ve either been a candidate or part of an interviewing process or a hiring manager or an executive feeling the pain, or we’ve been all of of those things. The fundamental challenge in recruiting, finding good people and matching them to jobs and making hiring decisions faster sounds simple. In many ways it is until you try to scale it across different industries and large organizations that then have compliance issues. The ever changing candidates expectations in the market. I see a lot of early stage recruiting technology vendors where I honestly wonder if they’ve googled recruiting technology before they show me their product because I hear a lot of we’re the first ever and it’s wow, I’ve been doing this a long time and I can’t count how many I’ve seen that have done this. And it doesn’t mean that they can’t have a good business or they can’t scale a business or make money or be profitable. But it does beg for some perspective on the market. Those vendors who make it through that stage realize, I like to say, they scrape their knees a little bit, they learn that they don’t know what they don’t know, and then they go and get that perspective either by hiring people or working with customers, or working with consultants or analysts or whomever, or all of the above to get that perspective. Those are the ones who emerge and end up getting more substantial traction in my opinion.
Matt Alder [00:20:35]:
What surprised you most about HR technology in the last few years?
George LaRocque [00:20:42]:
Well, I’ll tell you this moment right now with this convergence of the market growing, based on those things I talked about earlier and what we can do with the technology, whether it’s automation or whether it’s some of the emerging trends that we talked about, AI and machine learning. This moment feels more like 1997 where we started to take companies onto the web and there was this great shift bringing B2B processes, and in this case recruiting and HR onto the web and into the cloud. That was an incredible time where there was a great shift. And this feels more like that than any time since that period. I think in large part we’ve had incremental innovation since 2001, 2002, when the bubble burst. But at this point I’m starting to see big opportunities for technology in the middle market, for point solutions in the enterprise space. It’s an exciting time. That itself has been a surprise, I would say. The other thing that I would add, historically we’ve had a perspective of the recruiting users and the HR users as, as technology averse, right? They’re experts in their process but not in using technology. Time has marched on and all of the assumptions that you would make about the users of these technologies are out the window. So technologies or things that might not have been adopted 10 years ago because of that technology aversion, just because of the shift, younger people are 10 years older now and there’s an entire generation that’s entered the workforce that is digitally native. All of those assumptions about those users and about the leaders are out the window. I think we’re going to see some exciting things happening in the application of these technologies as well as innovation in the, the disciplines themselves.
Matt Alder [00:23:33]:
We’re certainly living in interesting times and I suppose that sets up my final question. Really it’s kind of probably a summary of what you’ve talked about so far, but what’s really sort of on your radar for 2018? Out of all the trends that we’ve talked about, what should people be keeping a very close eye on?
George LaRocque [00:23:56]:
The recruiting and HR markets tend to be a little bit behind the broader business to business marketplace and the consumer side. When you think about candidates and candidate experience and job boards and things. I do believe while I mentioned earlier that so far I haven’t seen anything that really struck me as innovative in that candidate facing job board market. I do believe that we’re going to start to see some plays that look like completely candidate centric solutions where they’re monetized on the back end with the data that they capture. In today’s world, these marketplaces and job boards ultimately bow to the employer because that’s the revenue, it’s an ad driven revenue model. Right. So my experience is about pushing ads in front of users. And ultimately, while I may start very pure with my candidate experience, it ultimately falls apart because I’ve got to find ways to get everybody’s ads in front of everyone and nobody likes that. Ads being jobs, Right. In this example where we’re moving is to a place where I believe you can provide real value with the shifts in the market where, where people are becoming more contingent, more freelance based over the next five, 10 years or if not, I mean today we’re probably at 35 to 40% of the market being contingent individuals. Companies are starting to make decisions that are game day decisions as to whether I’m hiring a full time employee, a contractor, a freelancer, attempt whatnot. Individuals are going to start making those same decisions and there’s an entire approach there that needs to be candidate centric. Not just offering jobs, but offering them the ability to represent themselves and to train themselves up to handle those same types of decisions. And I believe the those won’t be necessarily paid for by the candidates, but the data that will be captured on the back end will be so valuable to employers and RPOs and other folks. I think we’ll start to see that emerge in 2018. Otherwise, I think again, as I mentioned earlier, where our analytics approach in the market has been more of implementing a business intelligence tool that sits in the enterprise and sucks data in. It’s an integration play. I think we’re going to see much smarter approaches to analytics, leveraging machine learning and AI. We’ll start to see them enter the market. They won’t be refined and polished, but that’s a big area as well.
Matt Alder [00:27:15]:
George, thank you very much for talking to me.
George LaRocque [00:27:17]:
Thanks for having me. I really enjoyed the conversation.
Matt Alder [00:27:20]:
My thanks to George LaRocque. You can subscribe to this podcast on itunes in Stitcher or via your podcasting app of choice. The show also has its own dedicated app, which you can find by searching for Recruiting Future in your App store. If you’re a Spotify user, the podcast is also available there. You can find all the past episodes@www.rfpodcast.com on that site. You can also subscribe to the mailing list and find out more about Working with me. Thanks very much for listening. I’ll be back next week and I hope you’ll join me.
