In my last post I mentioned ADP as part of a group we call the Data Aggregators. Since that article several people have asked what the other vendor categories that we see in the HR Analytics market.
Running a firm in this space I feel it important to be able to define our broader market to help stakeholders understand where we fit in. I think it’s a useful framework for understanding how the market is developing.
Firms will often fall into multiple categories but have a dominant approach which drives their business models. Business models are important, even if you’re a client because it can make explicit what firms are selling and ultimately what is the product.
The question also is ‘what is HR analytics?’ We have to set the boundaries somewhere. For this classification I’m counting firms in if their creating tools that repurpose multiple data sources, especially a firms’ own data, in a way to enable better decision making. Doing so excludes two groups:
- Technology firms who make products which are useful to do HR analysis. SAS would be an example of this type of firm. Analysts will typically want such a tool, but the tool by itself doesn’t provide the service
- Measurement firms, like survey houses or selection tool providers. This was a harder one to decide on. Again, I took the view that measurement was a building block for analysis. Many could fall into Data Aggregators but I think many are wedded to their old ‘process’ mindset.
So, without further ado, here is the OrganizationView HR analytics market classification:
The Technologists take an IT-centric approach to analytics, with a revenue model that is heavily based on software licences and implementation services. In today’s market software is likely to be cloud-based.
A Technologists’ approach is likely to be successful if you are convinced that your requirements for analytics are predictable and stable. Alternatively they may be useful to cover the basics in a hybrid or combinational model.
The Data Aggregators
There are several firms who’s strength, and to some degree value, is from their large stores of cross-firm workforce data, usually at the level of an individual employee. These firms are now creating new business lines through the aggregation and analysis of this data.
During the last few years several large acquisitions have been linked to this approach. These would include CEB’s $660m acquisition of SHL and IBM’s $1.3bn acquisition of Kenexa. Previously conservative firms like ADP are worth watching in this space.
Analytics as a Service providers
Analytics as a Service firms can provide an analytics CoE capability on an outsourced basis, either to manage fluctuating capacity or specific skills. Most firms in this category will bring their own technology which enables them to automate common activities, delivering economies of scale. Whilst in other functions or sectors the market is established it is new within HR. The relatively small size of deals has made HR unattractive to date for the larger firms such as Accenture, Mu Sigma and Fractal, though all have shown interest in this area and will probably become more active as the market develops.
OrganizationView is an Analytics as a Service provider
Most, if not all of the major business consultancies with HR teams are offering People Analytics service lines. Whilst many have built, and in many instances retired, People Analytics technology, their project-based services are likely to meet the needs of many HR buyers.
EY is a good example of a firm in this space. Assignments are likely to be in the areas of workforce planning, workforce productivity & performance improvement modelling and setting up and advising analytics CoEs.
Some of the most exciting and advanced analytics currently being done in HR falls within this sector. Most firms in this sector make one or two products targeting niche areas. Many of these are in the area of hiring, especially for certain in-demand groups such as IT skills. The availability of large volumes of public data – including social media data – make machine learning to identify patterns possible. These services can be great add-ons to your analytics approach
I don’t think that any of these firms will dominate the overall market. Large organizations are likely to want to develop and manage an analytics ecosystem. It is possible that the analytics as a service providers could act as the cultivators of such an ecosystem on behalf of clients, in much the same way that an architects practice manages a host of specialists.
At the moment the market is immature and growing quickly. It’s a good time to be in HR analytics.