How will the HR technology market look in 2023?

The HR Tech market leading into 2023 has seen a significant deterioration in the general macroeconomic environment, with inflation at decades-high levels and interest rates having been raised significantly in response to the inflation fears. Combine this with quantitative tightening by central banks and venture capital has become much more selective

HR Tech jumped into 2020 as the world was grappling with Covid and the healthcare debate began. As the economy recuperated and COVID-19’s impact eased, companies were better able to focus on how they ran their organisations and how they could continuously improve. This is when HR Tech became part of the conversation as companies began to find efficiencies in their own processes.

On the other hand, HR Tech startups that focus on the ‘softer’ side of HR such as employee benefits, organisational network analysis and the like will find the sales process in 2023 more challenging as they will have to go the extra mile in convincing potential customers to part with their hard-earned cash on projects which don’t have an immediate impact on the bottom line.

As an example, if an HR Tech startup’s focus is on allowing companies to hire larger quantities of workers, how would that work in a recessionary environment where companies are laying off hundreds of workers?

But despite these challenges, there are still some potential areas of success for HR Tech startups.

First of all, traditional banks tend to perform well in high-interest rate environments due to the positive impact on net interest margins as long as they keep a tight rein on their non-performing loans. Other recession-proof industries such as FMCG companies may also be potential targets for HR Tech startups.

Secondly, while hiring may have slowed down, it hasn’t stopped completely.

As such, HR Tech startups that make the hiring process cheaper and more efficient could still find success. As an example, a year ago there may have been only 5 applicants for a position. Today there may be 20 applicants for the same position. This increases the burden on existing HR managers so a tool that allows them to filter the list of candidates more effectively is likely to be a winning tool.

Similarly, HR Tech startups should think about focusing on geographies that will be potentially less impacted by the global slowdown. For example, India seems to have weathered the storm very effectively thus far, as borne out by strong financial results by the top companies year-to-date.

It is evident that companies will start growing in the very near future and people will be looking to work for them. Technology has made a human workforce more agile, flexible and adaptive than ever before. As a result, HR Tech startups can expect to see a lot of hiring going on soon as companies find themselves with excess labour and consumers are looking for added security in the form of skills.