Layoffs, hiring freezes spell trouble for HR tech market

Economic pressures on HCM

Trevor White, an analyst at Nucleus Research, said layoffs and hiring freezes may ultimately affect how managers make HR technology buying decisions. With a hiring slowdown, applicant tracking, onboarding and hiring tech-specific vendors will take the biggest hit, he said. 

"We will see anyone in the niche categories struggle," White said. 

The major HCM vendors offer enough HR functionality to meet most needs, and as firms seek to cut costs, these smaller vendors "are going to be the first to go," White said. 

In February, the Hackett Group, a management consulting firm in Miami, reported that HR tech spending would increase by 9% this year, with talent management most in demand. The demand for tech is growing while HR headcounts contracted slightly. The consulting firm said that HR departments were turning to HR tools to automate some functions to compensate for the staffing shortfalls.

In a presentation at the HR Technology Conference & Exposition in March, GM said its talent acquisition staff wasn't growing to handle increased workloads. To help improve operations, it turned to third-party HR tech, in part, to automate recruiting processes. 

In addition to GM, another bellwether of what's ahead in the labor market may come Wednesday when Meta, the parent company of Facebook, announces its second-quarter earnings.

Patrick Thibodeau covers HCM and ERP technologies for TechTarget. He's worked for more than two decades as an enterprise IT reporter.