The recruiting technology marketplace is getting extremely complex, and it can be challenging for talent acquisition leaders to develop fully effective technology strategies.
My guest this week is David Wilson, CEO of industry analysts The Fosway Group. In our interview, David talks about the kind of approach and insights Fosway used to analyze talent technology markets. We also talk in some depth about the HCM suite versus specialist solution debate. A debate I can see raging for some time yet and one that will continue to shape the patterns of investment and acquisition in the recruiting technology marketplace.
In the interview we discuss:
- The role of an industry analyst
- Headline findings from Fosway’s 9 Grid report into Talent Acquisition
- Why the talent acquisition technology market is currently in flux
- HCM suite vendors versus specialists
- The evolution of the ATS / CRM debate
- Ecosystems over systems
- Current shortcomings in data and analytics
Download the Fosway 9 Grid report here
Subscribe to this podcast in Apple Podcasts
Transcript:
Matt Alder [00:00:00]:
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Matt Alder [00:00:57]:
Hi everyone, this is Matt Alder. Welcome to episode 237 of the Recruiting Future podcast. So after a two week break, the show is back for 2020. Thanks to everyone who’s filled out the audience survey. I’m going to keep it open for another week or so, so if you want to help shape the content for the show in 2020, please go to bit ly recruitingfuture 2020, that’s all in lowercase and fill out the survey. It only takes three minutes, so let’s get on with the episode. The recruiting technology marketplace is getting extremely complex and it can be very challenging for talent acquisition leaders to develop fully effective technology strategies. My guest this week is David Wilson, CEO of industry analysts the Fossway Group. In our interview, David talks about the kind of approach and insights Fossway use to analyze talent technology markets. We also talk in some depth about the HCM suite versus Specialist solution debate, a debate I can see raging for some time to come and one that will continue to shape the patterns of investment and acquisition in the recruiting technology marketplace. Enjoy the interview. Hi David and welcome to the podcast.
David Wilson [00:02:18]:
Good morning Matt, nice to speak to you.
Matt Alder [00:02:21]:
An absolute pleasure to have you on the show. Could you just introduce yourself and tell everyone what you do?
David Wilson [00:02:26]:
So I’m David Wilson. I’m the CEO of Fossway Group Group. So we’re an industry analyst based in Europe focusing on next gen HR talent and learning.
Matt Alder [00:02:36]:
Can you tell us a little bit more about frosui and what an analyst actually does in our industry?
David Wilson [00:02:42]:
That’s a great question. So we’re an industry analyst. So what that means is we analyze the marketplace around the set of topics which as I said for us is around next gen HR talent and learning. So first of all our clients tend to be European or EMEA quarter headquartered private sector companies, mid and large enterprise companies, often multinationals or the European end of global companies. And what we’re trying to do really is to kind of formally research, informally research and then sort of create dialogue with them around what they’re really doing in this market space or in these market spaces, who they’re doing it with, what works, what doesn’t, what they think of them and what really drives their success. So we do a lot of corporate research and we’ve been doing that for a long time. I set up Fossui in 1996, so it’s like 23 years ago I think. And we’ve been. So we’ve been tracking a lot of these topics for a very long time and we’re very interested in the next gen. So where is it all going, et cetera. The other thing we do is a lot of independent vendor assessment as well as you know, it’s a very fast moving market. There are lots of new companies coming into it. There are lots of existing, from a corporate point of view, existing relationships the companies have and they’re trying to work out where they need to kind of change and move those towards. So we do a lot of independent vendor assessment activity as well as obviously input from corporate and we’re known for things like our trends research, our kind of point of view. One of the things about the kind of phosphate brand, if you like, is it’s very much around trying to create a kind of very strong, what we call an unusually direct point of view around really understanding what’s going on rather than just restating a bunch of generic trends all the time. And we’re also known for things the phosphate 9 grids, which are our market assessment tools looking at different market segments including hcm, talent Management, talent acquisition and learning.
Matt Alder [00:04:57]:
So you recently published a nine grid round, the talent acquisition technology market. And I’m sort of keen to talk about it and sort of talk through some of the, some of the findings that came out of it. Before we do though, could you just.
Matt Alder [00:05:11]:
Give us a bit more of an.
Matt Alder [00:05:12]:
Insight into how, what one of these reports is and how you go about producing them?
David Wilson [00:05:17]:
Yeah, so the, so a phosphate 9 grid is our take on our assessment of the main supply options into our target client demographic. So in other words, the companies that are trying to sell solutions and they’re often software platforms, et cetera and things like this, although it’s not exclusively just around technology to our target demographic. So EMEA headquartered multinational companies and things like that, the input for that process. So most people know it because of the visualization, if effectively the 9 grid itself, with the visualization and the colors on it and the assessments on it. But the nine grid process is really hugely extensive. I mean, for example, as you said, we just launched what we call the interim version of this, of the Talent Acquisition 9 grid, which is the first version of it that we created publicly. And we’ve been working on that for three and a half years in the background. So what we’re doing is getting lots of input over a kind of fairly long period of time from the customers of these solutions, you know, the corporates themselves, to understand what they do, as I said, what they’re doing, who they’re doing it with, what works, what doesn’t, what they think of them. We then overlay on top of that form a kind of formal research and surveys, et cetera, across that corporate base. And then behind the scenes we’re also doing lots of independent vendor research, briefings, assessments and so on. And the view that we express, you know, if you like, it’s obviously always a combination of things that go into the assessments that go onto a 9 grid come largely actually from the corporate experience of this and their view about who is interesting and where they’re going as well. And we use the vendor side of this to cross validate. And that’s really important actually for somebody who’s looking at anybody’s analysis to understand is, you know, what wags, what wags the outcome on it, Is it driven by a vendor survey where it’s basically based on the vendor’s point of view, or is it based on, you know, the corporate experience and so on? And for us it’s a monster process. Each of these nine grids, we have five that we’re actively managing in different market segments at the moment is a kind of huge process in its own right, with lots of updates throughout the year and then a big peak cycle to make sure we’ve got the latest story from the vendor side and then obviously a whole big kind of reconciliation process around from an analyst point of view to determining the position. So it’s a kind of a bit of a monster, which is one of the reasons why we kind of limit them to what we call key market segments for it. And the other thing I would add to that is why Talent Acquisition? So one of the things that we found obviously from our broader corporate research around HR and hcm, around talent Management and so on, is that when you look at most of the corporates that we’re talking to are in a period of change around what they’re doing around Talent Acquisition, it’s a kind of critical area for them. And actually at a C suite level. When you talk to CEOs and COOs etc. Around what’s going on in their business, what their key people challenges is. Normally they’re. Most companies have got challenges around, you know, recruiting and onboarding staff and fast enough and things like that or transitioning their workforce where, where recruiting is critically important. So that’s one of the reasons we’ve also prioritized talent acquisition as a specific space to really kind of assess.
Matt Alder [00:08:48]:
So the interim 9 grid came out.
Matt Alder [00:08:52]:
Sort of a few weeks ago.
Matt Alder [00:08:53]:
Talk us through the headline, the headlines around that. What were the sort of the headline headline Findings from the, from the research.
David Wilson [00:09:01]:
Yeah. So I mean this is also one of the things that if you go and look at the diagrams, et cetera, it’s easier to understand the specifics and the assessment. So one of the things that we’re trying to do is we’re not just assessing, if you like, a kind of traditional view about capability and execution. What we call, we talk about potential and performance as the kind of key axis of it, but we’re also looking at the trajectory of those organizations, their market presence and also around total cost of ownership. I think the key headlines I would say around this, I mean first of all, this is the first nine grid we’ve ever produced without a strategic leader. So I think the key thing to understand is a lot of the legacy platforms that customers have used have in fact really either are in the decline or in some cases the wheels seem to have fallen off completely and they’re looking to replace them. There are a whole bunch of new players coming to the market. There are companies, you know, that are providing a broad set of capability across the sort of, if you like, a talent acquisition suite and there are companies that are specialists. It’s very, very noisy. Obviously it’s a, you know, there’s a lot of innovation. You can’t breathe without getting hit by everybody’s AI story and etc. And things like this. So there’s a lot of innovation going on in the market. But at the moment, what you know, from our perspective, especially looking at. So as I said because of our client target client demographic being organizations that are typically a mere headquartered or the mere end of globals, we’re looking about the ability to execute and the track record and their capability to serve that market rather than maybe just North America. And from that perspective, understanding companies that have the maturity and the ability to understand and execute in that space is also kind of an interesting challenge, particularly for a lot of the next, the new Generation kind of maybe US headquarter players that haven’t really yet built out an EMEA market presence yet and have not really internationalized their product. So when you apply all of those lenses together, what it means is we feel that the market is very much in flux. Some of the traditional enterprise leaders are in the decline. There are new players coming to the market obviously there’s also mergers and acquisitions going on. There are talent management vendors who are expanding into ta and the other, you know, the other factor of course is some of the HCM vendors are also trying to, you know, pull the TA piece from above as part of the overall integrated HCM suite. Although at the moment those aren’t actually included in the interim version in terms of that assessment. So. But we have that assessment in the background. We just have a specific restriction on how we include it at the moment. So yeah, that would be my biggest kind of conclusion. A lot of the US leaders or perceived leaders haven’t really moved across to become an EMEA leader yet. There are a number of players I think that have got a very much targeting that large enterprise customer base who have the capability to go that strategic leader. And there are a couple, particularly in the sort of, you know, more been in the mid enterprise space who are trying to step up into that space as well. But that, you know, the lack of a strategic leader plus this transition, if you like, away from maybe the historical split between an applicant tracking system and a candidate relationship management, you know, the ATS CRM debate that’s waged for a long time. I mean actually when we started the, when we started the analysis looking at the, or the input cycle, looking for this a few years ago, that was a very clear categorization in the market and we could have reflected that through into the nine grid and in reality we decided that was no longer really appropriate. So we talk now around talent acquisition suites and talent acquisition acquisition specialists that are focusing in some specific subparts of the cycle only. And I think that’s also the challenges though how we assess companies is potentially the scope of the solutions that we’re expecting them to offer now is more broad as well. So there’s lots of changes. But I would say the biggest key headline is this is the only 9 grid that’s ever been published by us over the last six, seven years, whatever it is, and across all the segments that doesn’t have a strategic leader.
Matt Alder [00:13:27]:
That’s really interesting and it kind of almost sets up the fact that there is a, there is a kind of a battle going on out there at the moment. I mean, you talked a bit about the, the big HCM software suites that have TA components and there’s obviously a number of specialist providers who are, who are doing really well and growing at the same time. I mean, how, how do you think that’s going to play out? Do you think that the HCM sort of total platforms are going to dominate or is Talent Acquisition going to kind of remain a sort of a specialist play?
David Wilson [00:14:02]:
Yeah, so I mean, I’m happy to be quite opinionated about this because obviously it’s something we’ve been looking at for a long time and you know, we name names on the nine grids itself. We’re talking about specific vendors. So first, the first thing, that dynamic you’ve just talked about, which is the sort of suite versus specialist play in some ways we see happening at almost every level of segmentation in the market. So it’s true, the whole kind of integrated talent story where you’ve got, you’ve got the ACM players versus the talent management players and then you’ve got specialists within those sectors. So if you like, the traditional suite at TATM level has kind of been eaten from above by HCM and eating even from below by specialists and that you can almost see that suite versus best of breed versus app type mentality playing at every level, whether it’s at top level hr, whether it’s in Talent Acquisition or even within some parts of that. Because it’s very much, we talk a lot around, this is all about ecosystem, not system. However much your vendor wants you to think that it’s all going to be about one uber system that’s going to cover everything. The reality is that’s just not true. And it’s never going to be true. And it won’t be true, not just at a silo level, but also at a macro level as well. But having said all of that, what we are clearly seeing is that vendors, who, particularly the H7 vendors, have really targeted the recruiting market subpart as a, a priority area. So companies like Workday SuccessFactors already obviously had capability in that space. Oracle did via Taleo and it’s kind of rebuilding, it’s rebuilt its recruiting cloud solution as part of the HCM cloud offering. So for all of those three vendors, that Talent Acquisition space is an important submarket where they are trying to really create a lockout or trying to create a scenario when somebody who buys into the full suite will adopt their component. The one thing I would say about Talent Acquisition as a market, it’s A very siloed sub market. So it’s not like it’s sort of really hard coupled into, if you like, a lot of the other parts of the talent life cycle and the HR set of HR processes in general. So it’s very much a kind of sub world of its own. A parallel universe. Maybe you want to think about it. We definitely see organizations that have made the decision to transition to the TA component of their HCM suite. And I think we still expect in the moment, particularly when you look at the growth of organizations like Workday, that that will continue to happen, that there will be, you know, because of the relative growth and also because the actually obviously for most organizations they deploy the core HR pieces first. There are still a lot more, for example, workday customers who have to deploy TA and are in that trajectory. I think though, the question you asked is do we expect that to be the end answer? And the answer is no. I think we expect to see a kind of hybrid situation. And as I said, go back to what I said right at the beginning about why did we do ta? And the fact that when you ask companies around their critical people issues and challenges, the inability to recruit enough of the right people comes up again and again and again. So if you like a critical measure of business success is about your ability to find and recruit critical talent going forward. If that is the case, is if you like being good enough or just being connected into a core HR data a compelling enough story, or is it actually matter? What maybe matters more to them is how effective they really are within those processes. Right. That becomes critical to the business, not just to a set of HR metrics or IT things. So you know, I think the reality is being really high impact and successful within talent acquisition is a really critical issue for most, for most companies. And even if they’re in the decline and transitioning their workforce or whatever they’re doing, reskilling, etc. You know, at the end of the day they still need that ability to do it. So therefore we, we certainly expect in other market segments where we see that kind of behavior and also where we see it’s very much an ecosystem, not system market, we expect them to look to also adopt specialist applications in there. Now in some cases that will mean just specialist things that they build around, maybe an ATS component from the ACM vendor. In other cases it will mean that they will go with a TA specialist. I think the challenge for talent acquisition leaders maybe at this point in time in the market is that the Kool Aid to buy into the one HCM solution is very strong and it’s being driven often probably as much or more by it as it is by the chro. They’ve got to be able to kind of create a compelling story as to why they shouldn’t necessarily do that or they have to wait until basically they’ve kind of failed to deliver what they need to do through the HCM platforms. And we expect that to happen. You know, we do expect the. An increasing number of BHM customers to also determine that that’s not a strong enough answer for them and that they need to kind of go out and buy specialist TA components on top or TA suite instead, etc. That will start to increase again, but it’s probably, you know, that’s not the biggest dynamic at the market at the moment. There are still more companies switching off specialist solutions moving to HCM than probably going the other way at the moment. But we do expect that to more normalize over time. Time.
Matt Alder [00:20:05]:
It’s a really interesting time watching that, watching that play out. Definitely. I suppose leading on from that, one of the things that you pick up on on the report is the, the lack of, the lack of tracking of quality of hire when it comes to determining TA success. And I found that quite interesting because normally one of the arguments for having a kind of integrated HCM system is that you have that unified data and you can track all these things all the way through. So the. That’s not happening at the moment.
David Wilson [00:20:36]:
I think it’s not happening at the level that we would expect in a mature operating model. So I think partly we know, as we said historically, TA was quite siloed and if you like, its measures of success were really about the ability to fulfill. Right. So the ability to find and recruit people, the speed with which they do it, time to hire, all these kinds of measures and potentially cost to hire, et cetera. As well. Well, and that’s a fairly challenging thing in its own right. What they’re obviously not typically doing because they only don’t have access to the data afterwards, is then looking at how good those people were and then even in many cases, did they even bother turning up on the job sometimes, especially in the sort of volume marketplace. So I think one of the things that’s critical about all of this is about actually around the business impact and filling a position isn’t a business impact statement. What’s the impact statement is, is what they do once they get there. Right. So I think you’re absolutely right in this kind of integrated, whether it’s from let’s say a broader talent management suite or whether it’s from an HCM platform. Theoretically they then have access to data around employee performance afterwards, for example, and retention and those kinds of factors as well. So I think part of the challenge is just because you’re buying it from an HCM suite doesn’t mean it’s actually joined up behind the scenes. Some of the suites have been built by acquisition. So although there is a sort of transition of an employee life cycle, in reality there isn’t necessarily always a holistic view of that employee. So I think that’s part of the maturity of those solutions. Now that’s not true with some of the HCM platforms. It’s much more obvious. I also think the other thing is that there is a. So probably as an argument that says looking at how HR manages performance and tracks performance actually has been going through a lot of change in parallel in the same time. So one of the other challenges is we’ve seen that the performance management processes of a lot of companies have come under quite a lot of scrutiny because they were effectively a process for assessing things that went into a compensation discussion around what sort of pay rise somebody got or not. They weren’t really driving a lot of performance outcomes or measuring performance outcomes really. And I think that’s one of the things we’re seeing things. So you can only really look at quality of hire if you know what the then doing afterwards. So that’s sometimes around tracking just the longevity of that employee, but also ultimately what their contribution is. And I think all of these areas are areas that are under more scrutiny and under more demand. And I think ultimately that a lot makes a lot of sense. But connecting and connecting across the lifecycle does absolutely make sense. Just looking at speed to hire when you don’t know whether the people even stay or whether they make any difference is kind of obviously a rather naive view of it. Although if you are in your silo bubble and that thing, that’s pretty much the only thing you can look at. Right. So I think the idea about joining these things up does make sense. The question is, do you have to have a single suite in order to have that point of view? And I think that’s where we talk about connected, an ecosystem where we have connected components rather than necessarily just saying, oh, it all has to be in one database?
Matt Alder [00:24:04]:
Final question, just around how people are actually buying tech and making buying decisions. What kind of buyers are out there? How are people deciding what software they should bring into the business?
David Wilson [00:24:16]:
Yeah, I mean So I think that depends a little bit on the type of organizations they come from as well. So there’s some customer segmentation I think which is quite relevant here. So we mainly look at private sector companies. So I mean the obvious factor here is scale, how big they are, how decentralized they are, et cetera. I think when you’re looking at mid sized companies there, organizational structure and they’re less siloed. Right. But the challenge we have of a lot of this is you don’t get typically very big in Europe before you become a multi country, a multi business unit. So the problems partly are still that you might have a fairly decentralized thing. So in other words we have recruiting teams or staffing teams or whatever in different countries, in different business units trying to connect what they’re doing. So I think overall we see buyers where the TA decision has been sucked into hcm. There’s a whole kind of sub raft of the market where that’s been the case. And I think what we’re seeing there is the TA leaders trying to assess whether what they’re going to get is good enough or not. In many cases it still may be an improvement for what they had before. But ultimately is it good enough to drive the outcomes they’re expected to do. We also see TA solutions being bought because obviously as I talked about the wheels have fallen off some of these other things or the customer experience maybe sometimes following an acquisition, previous acquisition is quite poor. So often companies are trying to transition just these components. At the same time they may be also making a decision around hcm. But you know, we’ve seen in the last two or three years that recruiting talent acquisition as a specialist buy. You know, 50% of companies are talking about changing their talent acquisition suite or solutions within the sort of two year horizon. So it’s a kind of, it’s fairly high up on the priority for change. And obviously then if you come down into the mid market situation where maybe it’s less siloed and maybe it has probably possibly less domination on the decision, then I think we therefore expect to see things a lot more functionally led out. Our client typically in these corporations is the functional leader, the Chro, the group head of talent, head of talent acquisition, the talent acquisition leader or head of learning or whatever it is all there. If they have an HR tech function or something around that, then those people as well. And what we’re seeing is obviously typically in the mid size solution, two things going on. One is they’re more motivated to solve individual problems but they actually have less maybe it resource or specialist teams to support different things. So you’ve got a dual dynamic going on all the time around whether that’s desirable to be a joined up decision. The one thing I would re emphasize though is for the last two to three years we’ve seen recruiting, talent acquisition and onboarding as right near the top of the priorities for change. And I think as I said that reflects back to that corporate two things. One is that the the existing solutions have not kept pace and together with that the recruitment, the ability to recruit is a critical function for at a business level and it reflects itself right up to board level in terms of the ability to solve these kinds of problems effectively. And therefore we expect that dynamic around the buying of new solutions to continue to go. As I said, we also expect that to be very much an ecosystem play, not system play. So people will create point additions around things in order to strengthen the to strengthen the play overall.
Matt Alder [00:28:08]:
David, thank you very much for talking to me.
Matt Alder [00:28:11]:
My thanks to David Wilson and you can find a link to Download the Fosseway Group 9 grid report for talent Acquisition in the show Notes. You can subscribe to this podcast in Apple Podcasts or via your podcasting app of choice. Please also follow us on Instagram. You can find the show by searching for Recruiting Future. If you’re a Spotify or Pandora user, you can also listen to the show there. You can find all the past episodes@www.rfpodcast.com. on that site, you can 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.
