The HR software industry is one of the most dynamic and innovative markets in technology. The market for talent management systems (software to manage recruiting, performance and succession management, learning management, compensation, and related areas) is over $4 billion, and we expect it to grow by over 20% next year. The market for core HRMS software is much larger — over $12 billion — and growing as well.
Within this market there are many "sub-markets" for various tools. These include applicant tracking systems (ATS), candidate relationship management systems, social rewards systems, compensation management tools, workforce planning tools, learning and collaboration systems, and more. The HR software market is among the most innovative industries I have seen: The market is huge (more than a million enterprises around the world) and the needs of HR are vast and constantly-changing.
And in the area of recruiting, there is an arms race going on. Companies are spending more than $3,500 per year on average per hire (varies widely by role of course) and the cost of hiring the wrong person is higher than ever.
The ATS Market
The grand-daddy of this marketplace is the Applicant Tracking Systems (ATS) market.
The roots of applicant tracking started with "resume scanning" tools which let candidates scan their resumes to a single number. These systems collected resume's in a database, tried to scan and index them, and gave recruiters an online view of job candidates. As the technology evolved these tools added better parsing (identifying name, job history, education, etc.), searching, and workflow.
In the early 1990s companies like Taleo, Vurv, VirtualEdge (now owned by ADP), and many others started to develop a thriving industry for these tools. In fact, this market was the first robust "talent management software" market and these companies rapidly grew and sold their systems to companies of all sizes. Today we estimate that more than 60% of all companies have some type of ATS, and as the market has shifted (Oracle, SAP, SuccessFactors, ADP, and most other major HR software providers sell them) the market grows continuously. There are now "free" ATS systems available (SmartRecruiters) and even companies like LinkedIn offer a small slimmed down level of applicant tracking functionality.
Even small companies need these systems to store and archive resumes, so while many vendors are being acquired by large providers, there continue to be new providers and new ATS systems available in the market. Some ATSs are well designed for high-volume recruiting, some are designed for small companies, others are designed for highly complex global enterprises.
Do Core ATS Systems Drive Competitive Advantage?
While most HR organizations need these systems, our research now shows that this market is no longer the "strategic" market it once was.
We are completing a major research program in High-Impact Talent Acquisition and just finished looking at many factors which contribute to world-class recruiting. What the data shows is that high-impact recruitment organizations (and we will define that as the research is launched) are not differentiated by their applicant tracking systems. In other words, while you do need an ATS to run your recruiting process well, the selection and implementation of an ATS is unlikely alone to bring you to world-class.
Why is this? The market has shifted, and today the "value-add" parts of recruiting are in the areas of employment branding, campaign management, candidate relationship management, assessment, referral marketing, and interview automation. These new areas of technology are "add-ons" to the ATS, and the ATS itself has now become a core part of HR infrastructure.
What are the new areas of differentiation and high value in talent acquisition? Candidate relationship systems, advertising management systems, assessment tools and technologies, workforce planning, video interviewing, social sourcing and reference checking (look at Gild, SkillsSurvey, Gooodjob, Jobvite, Hirevue) , and of course data analytics systems (look at the data provided by companies like BurningGlass or Evolve, for example.)
Nevertheless, the ATS Market Remains Core to HR
Oracle's acquisition of SelectMinds and SuccessFactors' acquisition of Jobs2Web was part of this shift. While vendors are innovating rapidly, the ATS has now become a core platform and it is available in almost every core HR system. Most major talent software vendors (Oracle, SAP, ADP, PeopleFluent, CornerstoneOnDemand, and soon Workday) will have some form or applicant tracking, making it a standard part of the HR infrastructure. And there are dozens of mid-market ATS providers (iCims, Healthcaresource, and many others) which offer these platforms.
My advice to HR buyers today is to look further. As you build your next-generation HR technology infrastructure, look beyond the applicant tracking system to build a world-class recruiting platform.
Josh Bersin is Principal of Bersin by Deloitte and a leading analyst and researcher in human resources, leadership development, talent management, and HR technology. You can follow Josh at @josh_bersin or visit the Bersin by Deloitte website.