The 1990s marked the rise of ERP systems as a substantial industry. Early movers enjoyed a first-hand advantage and a competitive edge, new but few players soon joined the bandwagon.
Initially, ERP systems focused on automating core business processes, and while some functions received attention, HR was overlooked. At the time, HR departments were primarily tasked with repetitive, low-value & mundane activities, placing them lower on the organisational priority list. Perhaps, this is why early ERP providers paid little attention to HR automation. However, as the new millennium arrived and most other business areas were automated, companies began to recognise HR as the “last frontier” for optimisation. As time passed by, established firms acquired smaller HR automation companies, seeing untapped potential in this domain. Simultaneously, the HR tech landscape saw an influx of new entrants, many of whom were engineers with limited HR knowledge but keen to capitalise on the low barriers to entry. The market’s growth potential—projected to reach $40 billion to $100 billion globally by 2033 with a CAGR of 8-12%—fuelled this surge. In India alone, the HR tech market is expected to hit $38.36 billion by 2030.
This rapid expansion led to a proliferation of HR tech solutions, creating intense competition and giving customers greater bargaining power. Unfortunately, most companies offered nearly identical products differentiated only by design and user interfaces. This lack of innovation triggered price wars, forcing providers to slash costs just to stay afloat. Survival became the industry’s primary focus, even analysts predicted continued double-digit growth due to HR’s increasing importance in organisational success.
Today, roughly 70% of HR tech companies still operate in the “Core HR” space, offering basic functionalities. Another 25% specialises in areas like talent acquisition, payroll, employee self-service, benefits administration, performance management, and learning and development. Only about 5% stand out with advanced, high-end solutions. Despite these challenges, the sector remains attractive due to its expanding role in driving organizational efficiency and success.
With the growing discoveries in behavioural science and neuroscience, HR’s role in organisational success has become more critical and complex. As it gains importance, the demand for automation is skyrocketing, with companies striving to stay sustainable in an increasingly competitive environment. Rapid changes in workplace culture, accelerated by events like the COVID-19 pandemic, have pushed organisations to adopt technology-driven practices for survival.
This lucrative market, with no entry barriers and easy access to knowledge about core HR processes, has attracted many players. The perception of quick profits from a fast-growing industry has led to a flood of new entrants. However, this surge has also created challenges. A lack of meaningful differentiation in product offerings has put pricing power firmly in the hands of customers. With little to set them apart, companies are forced into price wars to secure sales, often at the cost of long-term sustainability.
The situation is exacerbated by rising manpower costs, as the IT sector demands highly skilled technical talent. This mirrors the experience of the Indian telecom industry, which saw aggressive competition followed by eventual consolidation. A similar pattern is likely for HR tech, where only a few major players will dominate the market in the coming years.
Key reasons for this anticipated consolidation include:
- Increasing High Cost of Resources
- Limited Product Differentiation
- By & large, HR is seen by MSMEs as an avoidable cost
- Product not solving real HR challenges
In my view, the HR tech industry will follow a trajectory similar to the ERP sector, where only a few dominant players remain after CONSOLIDATION. However, for HR tech, this shift may happen within the next 8–10 years. Companies that succeed will be those offering innovative solutions that address real HR challenges, improve profitability, and drive revenue growth for their clients.
With that said, PRAJJO is undoubtedly a game-changer. As the first company in this segment to offer innovative products that are unique, impactful, and highly beneficial for both users and organisations, Prajjo has already launched several copyright products solving many age-old HR limitations: thereby expanding the limits of HR exponentially.
