US employers planned to increase their HR technology spend by 21% in 2022, up from a planned increase of 18% in 2021, according to the results of Sapient Insights Annual HR Systems Survey.* Recruiting tools topped the list of tech spend categories for all sizes of organizations.
Despite that increase, however, the numbers show signs of a market slowdown. After a 17% spending bump in 2021 following a pandemic-driven 12% drop in 2020, a slight decrease followed in 2022. Further, the number of employers reporting plans to decrease their tech spending rose from 5% to 8% during the same period.*
As a possible counter to this trend, at Gallagher we've observed that CEOs increasingly expect HR leaders to tackle strategic challenges. HR teams face this expectation despite their historically administrative orientation. The Sapient report noted an 11% increase in strategic HR function outcomes and a 5% decrease in compliance function outcomes. Leaders must assess their HR operations and identify ways to optimize HR to advance the CEO's agenda and meet the unknown challenges of tomorrow. The right technology can enable and advance these efforts.
And there's the rub. Buying the right technology to support organizational strategy isn't a simple process. The strategic purchase of HR technology may challenge organizations more today, given a 33% drop in HR tech buyers with more than ten years of experience, according to the Sapient report. That means fewer experienced buyers available to make critical purchase decisions.
At Gallagher, the biggest misstep we see is buyers of HR tech who lack the understanding that such a purchase involves so much more than software. Employers who fail to understand this perspective risk making a purchase that fails to support functional requirements and organizational strategy, as well as potentially disrupting operations — all at significant expense.
Before investing in your next HR technology solution, consider the nine elements you're really buying:
1. Innovation
You're buying a tech provider's commitment and capability to innovate. With the speed of tech development and new applications coming onto the market, you need to know your provider will, at the very least, stay current. Otherwise, your organization's needs quickly will outgrow the provider.
2. Change
With any new tech purchase, you're inviting change into the life of your team. Embrace that change. Many employers make the mistake of layering old processes on new technology. Get the most from your new technology by adopting the improved processes that the solution supports. Otherwise, you may as well have kept your old technology or manual processes. Change doesn't come easily, so use change-management strategies to prepare and actively manage the process evolution.
3. A relationship
Entering into a service agreement with a technology provider means buying a new relationship with an entity that's not your own. The relationship may be superficial or substantial; but, much like a marriage, you're stuck with these people. Work to make that relationship positive and productive by keeping open lines of communication.
4. Workforce culture
You're buying another company's culture, which may differ significantly from yours. Culture is important. For example, think about your organization's risk tolerance. Does your culture value risk-taking or a conservative approach to business? How does your approach match the provider's culture? If the cultures differ, can your team accept the difference? That said, we see a lot of employers make decisions based primarily on cultural fit. While culture is an important consideration, it should be one of many factors in choosing a provider.
5. A point of view
New technology will reflect a specific perspective embedded in the software. Consider decision support for benefits enrollment. One viewpoint reflects that employees want to be told what to do, and the employer knows best. Another perspective holds that employees must engage and understand their options to make the best decision for their needs. Both views exist in the marketplace. Choose a provider most closely aligned with your organization's perspective.
6. Technology and services
Your technology purchase comes with a service model, even if only to support you through implementation. Determine whether the provider company has a strong customer-support mentality. Understand the level of support you need beyond the initial purchase. Do you need tech support, as in "I can't get this to work?" Or do you need customer support, as in "I don't understand what this plan includes?"
Most providers offer short-term support, such as during open enrollment or temporary backup for an employee on leave. For ongoing support, expect to pay an additional fee.
7. Data security
Your organization is buying a vendor's commitment to keeping your data secure. Elements of that commitment include the company's security policies, processes, ID and password protocols, cyber insurance coverage and commitment to a security audit. Regular news of cyber security and data breaches should be enough to convey the importance of data security. Consider these safeguards as part of your assessment of a risk-tolerance fit.
8. Third-party integrations
Standard software integration capabilities add significant value. However, when you ask a benefits administration provider to integrate with a payroll provider, know that there's no contract between the two providers. If the integration fails, there's no service-level agreement to address resolution. Assess the provider's track record of integrating with your existing tools.
9. A set of tradeoffs
When you comprehend the complexities behind your purchase of HR technology, you can understand that you're also buying a set of tradeoffs. No single software will do everything you want. You need to identify and separate your "must-haves" from your "want-to-haves," and choose accordingly.
Each of these nine factors contributes to the decision-making process when selecting a best-fit HR technology provider. However, no one element should determine the decision.
Gallagher's Human Resources Technology consultants work with organizations to identify how HR technology can support strategy and advance organizational objectives. Our team of experienced consultants can help you consider and prioritize each factor before narrowing a list of potential providers. Contact us to see how we can help.
