Why HR Tech is The Next Sunrise Sector For Start-ups In 2022

The Covid-19 pandemic has finally brought into the limelight the much-maligned HR function in organisations.  As I am sure that most CHROs can attest, getting additional budget for HR projects in yearly review meetings with senior management is like pulling teeth with the usual retort being “Cut headcount!”. 

However, the pandemic has caused a 180 degree shift in the way that companies are now viewing the HR function with significant emphasis being given to leveraging technology in all HR processes.   Some of these changes were afoot before the pandemic with several job search platforms and cloud-based HR management systems gaining prominence in recent years but Covid-19 has only accelerated the disruption of traditional HR models.

Change in working arrangements due to COVID-19

Most importantly, companies have realised that the HR function needs to be more dynamic and nimble, with the ability to pivot depending on external conditions.  Until recently, we all thought that Covid-19 was behind us, but the new Omnicron variant is again necessitating a return to remote working for many employees in countries around the world.  As a result, hybrid working arrangements are going to be the norm for the foreseeable future, with some companies such as Twitter and Microsoft even allowing employees to work from home indefinitely.  

Even when the pandemic is over, both companies and employees will be so used to remote working arrangements that it will be impossible to put the genie back in the bottle.  This permanent shift to a hybrid workforce will put an additional burden on HR managers as it will require employees to be supported across multiple locations by the same HR manager.  HR Tech startups which can step up and cloud-based employee portals will be more valuable than ever.  Similarly, new performance management systems that leverage a range of metrics in helping evaluate employee performance will also ensure that remote-working employees are not unfairly penalized for not working “under the manager’s eye”.

Importance of overall employee wellbeing

The old HR paradigm of having one HR manager overseeing 500 employees in large organisations will also no longer fly in a post-Covid world.  Employees have begun to realise that their overall wellbeing, which incorporates their mental health, is the make-or-break factor in determining whether they stay with a particular organization or not.  HR Tech start-ups which can therefore help improve employee engagement and provide outsourced employee benefits such as mental health counselling services will be huge competitive advantages for companies looking to retain their best employees.  

HR Tech startups are also involved in other aspects of the HR value chain from recruitment/hiring, succession planning, diversity and inclusion efforts, personalised training and employee upskilling.

Huge influx of funding into HR Tech

It is important to note that HR Tech startups are not trying to disintermediate HR professionals but are simply giving HR managers the tools they need to effectively manage a larger dispersed workforce with greater expectations of what they expect the company to do for them.  And it seems that investors agree as well.  Indian HR Tech startups have raised close to US $300M since the beginning of 2021, with Apna.co raising $100M thereby achieving the rarified unicorn status in only 21 months since inception.  Other Indian HR Tech startups that have raised significant funding in recent months include Darwinbox, Sense, My Ally, Refyne, Advantage Club, Protonn, Talview and Multiplier among many others.

HR Tech is not just the next sunrise sector for startups, but could well end up being the sector that produces the largest number of unicorns within the next three to five years.  Companies are nothing without their people, and HR Tech startups that make employees feel more valued, engaged and involved will find many customers across the corporate landscape.

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