There have been some splashy headlines the last few weeks with Fortune 500 technology companies announcing large layoffs. First it was Microsoft announcing a 10,000 person layoff. Soon after, Alphabet (Google's holding company) announced a 12,000 employee reduction and SAP was the final large tech company to announce a layoff of their own (3,000 employees).
Although these big names caught the most attention, there were some smaller layoffs that impacted well known HR software companies, including:
The first and most critical point is that: most of the layoffs that we're seeing in the HR Tech space are happening with venture-backed companies that are selling point solutions. We have not seen major HRIS or HCM companies announce significant layoffs which lines up with a predicted trend: In a tighter monetary environment, companies will be more likely to bundle with platforms rather than take a best-in-class approach with many point solutions.
Another potential lesson we are seeing is that the HR tech boom of 2020-21 was less of an accelerator and more of a bubble. At the height of the fundraising frenzy, many analysts were saying "The pandemic has accelerated trends that would've taken 10 years and they're now happening in 2 years." The idea was that we were entering a new normal where tech ruled everything.
However, once the world re-opened, the most valuable companies in the world shifted from tech platforms to physical world companies like energy and healthcare.
Our expectation is that HR Tech will continue to see modest growth in 2023, but there will be significant consolidation, both from users opting for a more bundled approach and from start-ups that raised significant debt and need to exit.