Total Addressable Market for Work Tech Expected To Grow To $970 Billion by 2026
Several factors have led to the emergence of work tech. Understand this category better, its drivers, and its future from this article.
As companies face new challenges, HR functions are looking for new approaches and technologies to hire, retain, and manage their workforce. Today’s problems and a few other factors have led to the emergence of work tech, a new category of HR tech. WorkTech conducted a study to understand this category better, identify its drivers, and understand its future.
Several factors, such as the pandemic, economic uncertainty, and the war in Ukraine, can send the job market and dependent tech providers into a downward spiral this year. However, the opposite seems to be happening. Looking at market indicators, the HR tech industry doesn’t seem to be facing the challenges like the broader tech industry. As crises hit companies, companies are looking toward HR to address increasing workforce challenges. In turn, HR is looking for new approaches and technologies to hire, retain, and manage their workforce, accelerating the march into the future of work.
These and other factors over the years have led to a new category of HR technology — Work Tech. And this new category is seeing growth similar to the broader HR technology. WorkTech recently conducted a study to define and understand this category better, identify the market forces driving it, and understand the immediate and long-term future.
Here are a few insights from the study.
See more: 2023 HR Predictions: Tech Will be Key to Harnessing Great Talent
Several Macro Trends Shape Work Tech
Work tech has been shaped by several macro trends, such as distributed work adoption, employees’ desires for meaningful work, and the shrinking workforce. While all these trends became accelerated post-pandemic, none originated from it. In fact, in its 2019 report, WorkTech predicted that distributed work would be the future. The same report also said that employees wanted to find meaning in their work. However, these trends are seeing the spotlight today.
Amid the constantly-changing business models and technical transformations, leaders have shifted their thinking toward their companies. While labor markets and hiring plans traditionally presented an early indicator of upcoming things, the challenges since the pandemic exposed how profound the workforce challenges truly are. As companies try to address the new realities of labor markets with innovative approaches, they are doing so while demanding new tech to enable the shift.
Further, companies are still planning for growth. Despite the economic uncertainty, 94% of respondents across all market segments expected to increase their headcount in the coming year.
Six Themes Guiding the Emergence of Work Tech from HR Tech
While long-standing workforce trends met several market accelerants, another dynamic made work tech a reality: the enabling core tech required for the shift was present in the market. Work tech’s emergence is also a story of adoption, starting with existing tech products that embody the following core themes, which exemplify both work tech’s definition and the differentiation between HR tech and work tech.
- Focusing on the flow of work
- Employee-first and experience-driven
- DEI&B is embedded as a core tenet
- Participating whole-heartedly in the work tech ecosystem
- All about the data
- Building on modern tech and demonstrating the ability to scale
Work tech is augmenting and extending HR technology into the flow of work with innovation from current and new tech providers. Here is a comparison of the work tech and traditional HR tech stack.
Work tech stack compared with HR tech stack
Source: New Technology Shaping the Future of Work
Work Tech Market Is Looking at a Massive Growth
The work tech market is growing rapidly and bringing HR tech along with it. It is introducing new tech categories, accelerating adoption in the middle markets while fueling rapid growth in emerging markets. Along with new categories and increasing adoption, work tech categories extend into new markets and market segments. The total addressable market (TAM) for work tech is expected to grow to $970 billion by 2026.
Global work tech TAM
Source: New Technology Shaping the Future of Work
Besides expanding in new markets and market segments, capital investments have surged in work tech since 2018. The global work tech VC funding grew to $13 billion in 2022 from $4 billion in 2018. The year 2021 saw the highest funding to date ($18 billion). This is primarily because investors see opportunities attached to the future of work.
Hiring Work Tech Is on a Growth Path
Hiring work tech is a crucial category in work tech. It includes all the tech categories involved in identifying, selecting, and hiring the workforce. A few key categories include applicant tracking systems (ATS), candidate engagement tools, candidate relationship management, interview scheduling, and talent acquisition analytics.
Today’s hiring work tech stack looks similar to the one shown below, excluding human capital management (HCM) platforms. It can be seen that skills assessments are more widely used than psychometric assessments. ATS is most widely adopted in enterprise segments. Digital or video interviewing is used across all segments but still has room to grow.
Hiring work tech adoption (top 12 categories, excluding HCM platforms)
Source: New Technology Shaping the Future of Work
Similar to the broader technology category, the TAM for the sub-category, too, is expected to grow. The TAM for hiring work tech is expected to grow to $244 billion by 2026 from $118 billion in 2022. Similarly, investments in hiring work tech, too, are expected to grow. Funding in this category grew from $1.4 billion in 2018 to $3 billion in 2022.
Regarding budgets, 71% of respondents say hiring work tech budgets will remain the same or grow in the coming year. The study also found that budgets are increasing across the top twelve categories of hiring work tech.
See more: HR Tech – Top Trends Driving Investments in 2022
Companies Are Adding To Their Hiring Work Tech Stack
The study found that employers are adding more tech to their hiring work tech stacks. The tech they are adding aligns with work tech’s core tenets.
According to the study, both skill-based and psychometric assessments topped the list of tech leaders expect to add. Chatbots and conversational AI are leading the way in candidate experience. Digital or video interviewing is used across all segments but still has room to grow.
Embracing Accelerated Transformation with Work Tech
Many of the workplace and workforce trends we see post the COVID-19 pandemic existed before the pandemic. The pandemic brought many issues that were already brewing to the spotlight. It accelerated transformation in the workplace. Work tech was shaped by many of these trends that started before and after the pandemic. Based on the findings, we can make a few predictions.
- CEO and top leadership will take a more active role in people decisions. This will also set the stage for the future of work tech and its continued growth.
- New hiring work tech leaders will emerge.
- The C-suite’s appreciation for people strategy has created an appetite for people data in the business planning process. The lines between people and business data will eventually cease to exist.
- Everything that can be automated will be done so.
- Global work tech adoption and investments will continue to outperform the market.
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Image source: Shutterstock
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