Sapient Insights Group, a research & advisory firm focused on the HR & Finance industries, released their 25th annual market analysis this month.

Sapient interviewed 2500 HR professionals organizations in 65 countries to try and get a pulse on what HR leaders are thinking about with regards to their software investment spend.

Here are some of the more interesting results with my analysis in italics below:

Hesitation from small enterprises - 55% of companies with 500+ employees expect to spend more on HR Technology in 2023, but only 35% of companies with <500 employees expect to spend more on HR Technology

This echoes on-the-ground experiences we've seen in Q1 with buyers pressing pause on evaluation processes until they see how the market shakes out

Recruiting spend is the #1 area where companies in every segment expect to increase their technology investment in 2023. Smart Recruiters, Greenhouse, UKG Pro and Jobvite were the highest rates ATS platforms.

No surprise to see recruitment so top of mind. The historically low unemployment rate gives job seekers the upper hand and forces companies to sharpen their talent acquisition skillset

HR Analytics is the #2 area that companies are expected to increase their HR tech investments in 2023.

Analytics has been a tricky space for companies to find the right solution. On one hand companies are most likely to want their main reporting tool to be embedded in their HRIS, since that's the source of truth. But, on the other hand, point solutions can often provide more advanced functionality

Vendor Satisfaction across every product vertical fell 7% since last year. And to no one's surprise, the HRMS vertical had the lowest satisfaction of all HR tech segments.

While I joke about HRMS / HRIS having low satisfaction scores, the truth is they are also asked to do the hardest job. When I see companies like Lattice or Greenhouse scoring 4.9 / 5 on software review websites, I always think 'It's a lot easier to make customers happy when you're not in the payroll business'

How can this report help us better prepare for 2023?

My main takeaway is: the number one challenge for businesses continues to be talent and as long as that is the case, HR will be empowered to make smart investments that can help their companies attract, develop and retain more great talent.

Budgets will be more restricted than in years past, however. Companies will need to do some bundling in the coming year, since paying for 8-12 different HR tech solutions likely won't make sense in a tighter economy.

I don't see all of that bundling exclusively taking place with HRIS vendors though. Instead, I think companies will look for best-in-class vendors that have added additional modules to become more platforms than point solutions - tools like Lattice, Leapsome, Clear Company.

Finally, many software vendors over-hired during the pandemic and are now facing a less active marketplace. If you want to get a good deal on new software, your leverage as a buyer has not been this high in years.