The market for enterprise tech is huge - and growing

The market research company Gartner recently released their projections for Enterprise IT spending (think how much and for what types of technology upon which companies and organizations will spend their IT budgets), and what the Gartner data suggests is really telling and interesting for the HR and HR Technology space. Here's the data from the Gartner press release, then some comments from me after the chart:

A few notes and observations from this data, and one thing to think about if you are an HR leader and a consumer/shopper for new HR technology in 2018:

1. The enterprise IT market is massive - fast approaching $4 trillion (yes, that is with a T) in the US in the coming years. This is the manifestation of the old mantra the 'every company is a technology company'. No matter what your are business for, chances are in 2018 or 2019, you will be investing in more and better technology across the board in order to increase efficiency, expand market share, better serve customers, innovate on new products and services, and improve and enhance your human capital. Said differently, if your organization has not/will not be investing in technology you certainly risk falling behind competitors who are making those investments.

2. The enterprise shift to cloud-based, SaaS solutions is by and large complete. Look at the growth rate for the Data Center Systems category in the Gartner data. Organizational investment in their own data centers is expected to be about flat in 2018, and to decline in 2019. Most organizations, even larger, global ones, simply do not want to be in the business of building and maintaining their own data centers. Best to leave that to the Amazons, Googles, Microsofts, and Oracles of the world. From an HR tech perspective, if you are an HR leader at an organization who still utilizes on-premise HR solutions, 2018 could be the year that your CIO finally has a discussion with you about migrating off of your own data centers and into an HR tech provider's cloud.

3. And take a look at the growth rate Gartner estimates for Enterprise Software - the category that includes HCM solutions. They estimate 9.5% growth in spend for enterprise tech in 2018 and over 8% in 2019 - making this category the fastest growing by a large margin in all of enterprise IT. This tells us a couple of things. One, like I mentioned above, Enterprise Software is the IT category that offers the best opportunity to help drive competitive advantage for the organization. Whether it is tech that improves the supply chain performance, provides data to better market and target customers, or enables the organization to hire, develop, and retain the best talent - this is how/where technology spend can make a real difference in business performance.

And two, a growing and robust market for enterprise tech, (and HR Tech), is good news for you, the customer. You should see more and better solutions come to market, increased innovation from your current and established HR tech providers, and improved opportunities to implement HR and HCM tools to enhance your overall employee and candidate experience. The next few years appear to be a great time for HR organizations who are ready and willing to take advantage of this vibrant market for HR technology.

Happy Monday - have a great week!

Hating a workplace tech product is pretty common. But do you hate it enough to switch?

This week I'm out at Cornerstone Convergence, which is talent management techology provider Cornerstone OnDemand's annual customer event. Cornerstone puts on one of the HR Tech industry's best (and most fun) events each year and it is one event I am sure to make time for each year. Aside, ask me about last year's Poison concert at Convergence - it was amazingly fun. 

One of the data points that always comes up at these kind of events is customer retention rate, i.e., the percentage of customers that upon initial contract expiration, (typically after three years), decide to actually renew their contracts with the technology solution provider. At the Cornerstone event they mentioned a pretty high retention/renewal rate, somewhere north of 90%, (I can't remember the actual number and it doesn't really matter for the purposes of this post anyway).

And Cornerstone is not the only HR Tech solution provider that is able to boast such lofty customer retention rates, I would guess that every single time I have heard a vendor, any vendor, talk about customer retention rates their numbers are similar - they claim their existing customer renew at a rate of 90% or better.  And since I have neither a reason to doubt any of the individual reports of extremely high customer retention rates, nor the existence of some kind of industry-wide handshake agreement where every vendor reports 90% and higher retention rates, let's assume that in fact this is the case, and that most customers do in fact, renew their software contracts at these levels.

So what does that mean, or stated differently, why is a 90%+ retention rate important for the HR/Talent leader? I can think of three reasons, (although three will be easier to remember, so let's stick with that number for now).

1. If you're actually in the market, (or soon will be), for a new ATS, LMS, HRIS, or any other kind of software that ends in an 'S', you'd better choose wisely, since these extremely high retention rates tell us that most likely you will be in a relationship with this new technology for quite some time. Take a little bit longer in your up front process, engage more folks in the technology evaluations, heck, maybe even earmark some more budget for bringing in some outside experts to help you navigate the selection process. Even in the modern age of SaaS technology, most enterprise software decisions tend to stay with us for a long, long time.

2. We consistently underestimate people's aversion to change, even when presented with better alternatives. It has been estimated that in some applicaitions that a replacement technology has to be demonstrated as providing 9 times more value and utility than the existing solution in order for most folks to be willing to make a change. We don't like changing things as mundane as toothpaste brands or where we order coffee in the morning, and most of your workforce probably doesn't want you to change their workplace tools all that often, even if the 'new' ones are better. It's just too much hassle for the average, busy worker and manager to learn some new learning or recruiting or compensation tool. Said differently, they may not really like the tools they have now, but at least they know how to use them. 

3. The ability to consistently deliver on promised future product development promises probably needs to be ranked higher on any HR technology software selection criteria your organization uses when evaluating competing technologies. This is the classic 'It's on the roadmap' stuff that you will hear often in the sales cycle or even after you become a customer. One of the most important challenges for providers is to balance the need for new product and feature development with their simultaneous need to support customers, fix bugs, and stabilize existing applications. How the provider can live up to promised future capabilities, particularly ones that are critical for your organization, becomes more and more important the longer the customer/provider relationship lasts.

So take all that for what you think it's worth, I predict either if you agree or disagree, 90% or you (or more), will be back tomorrow for the next installment of this nonsense....