We’re about two-thirds of the way through our research process for our people analytics technology (PAT) study, so thought we’d provide three initial insights on what we’ve learned to date. (Please note, this research is ongoing.)
And now, without further delay, let’s move on to what we’re learning…
- It's all about the Benjamins. We’ve known for a while that the PAT market was receiving significant interest from the investment community – a point that was underscored by the $45 million Series D investment in Visier in 2017. However, our analysis of the market shows that interest has continued with great enthusiasm across the last few years. For example, in 2018, Humu raised $30 million and Culture Amp raised $40 million, among others. Earlier this year, Peakon raised $35 million in its series B, and Perceptyx just announced today a strategic investment from TCV, a private equity firm. New players, like Cultivate, are also off to the races with fair-sized seed rounds. There’s also been significant investment in people analytics technologies as a result of people analytics vendor acquisitions where the acquirer intends to invest significantly. Prime examples of this are Glint (acquired by LinkedIn/Microsoft, but had raised $80 million beforehand), Shape Analytics (acquired by Reflektive, which itself received a $60 million series C investment in 2018), and of course, Qualtrics (acquired by SAP in late 2018). And finally, there is Medallia, which just had its IPO last month, which provided it with plenty of cash to invest.
- Mo’ money… All that money appears to be making an impact, if you ascribe to the idea that more investment should eventually equal more revenue. Now, we aren’t going to spoil the surprise of our research by giving overall market growth numbers here, but we will tell you that nearly all vendors are reporting accelerating revenue growth, with 2019 looking to be the best year yet. In addition to the significant investment mentioned above, additional reasons for this revenue growth appear to be a healthy economy, broader corporate investment in people analytics teams, and people analytics teams’ increased sophistication (and therefore ability to use some of these tools).
- …Mo’ (user) problems? But there are some challenges ahead. As these vendors grow, they are looking to expand their user bases (the old “land and expand” approach) within existing customers. However, people analytics tech isn’t like a lot of other tech. First, not everyone should have access to the insights available within people analytics technologies – at least not carte blanche. Second, there are a wide variety of users within any given organization who have varying levels of data maturity, which requires different levels of sophistication and customization of dashboards, data structures, and data analysis tools and capabilities. Third, most of the vendors’ technologies were originally built to cater either to really sophisticated people analytics teams or to less data savvy HR business partners.
This combination of issues is resulting in challenges for these vendors as they try to expand their user bases. Essentially, we are seeing:
- Really sophisticated technologies trying to simplify aspects of their tech for a less data-savvy user (but the technology still being too difficult) OR
- Less sophisticated technologies struggling to make their technology adequately sophisticated for people analytics teams to justify the investment (versus those teams building it themselves)
As a result, we’re seeing instances of product/market fit when it comes to secondary users (the ones to whom these vendors must expand their offerings). Vendors are aware of this challenge (in some of our practitioner interviews, less-than-expected end-user adoption rates have come up as a real issue), but the path forward for many of them is not totally clear. We expect we will see some vendors shift their target users or potentially break up their offerings into more discrete packages to make it easier to build for and sell to different users. We see this as being one of the critical issues many PAT vendors will have to solve for in the coming 18 months.
We are analyzing our people analytics technology vendor data, and will be uncovering a lot more insights in the coming weeks. If you’re able to join us at PAFOW Philadelphia, September 5 & 6 for the sneak peek of the results, we strongly encourage you to do so! Otherwise, stay tuned here for more information on this research.
Stacia is a Co-founder and Principal Analyst for RedThread Research and focuses on employee engagement/experience, leadership, DE&I, people analytics, and HR technology. A frequent speaker and writer, her work has been featured in Fortune, Forbes, The New York Times, and The Wall Street Journal as well as in numerous HR trade publications. She has been listed as a Top 100 influencer in HR Technology and in D&I. Stacia has an MBA from the University of California, Berkeley, and a master’s degree from the London School of Economics.