Study Spending on HR Technology to Hold Steady

The bottom isn’t falling out of the HR technology market, according to a recent survey from the International Association for Human Resources Information Management professional group.

Forty-two percent of the nearly 210 respondents reported that their human resources information technology budgets will remain the same in 2009 as in 2008, the association said in a release Friday, November 21. Another 21 percent of participants said budgets will increase by an average of 23 percent, while 37 percent said their budgets will decrease by a median of 15 percent.

“For companies in a good financial and cash position, they should take this opportunity to extend their market share and make long-term investments,” John Greer, senior vice president for HR and Development at Smart Financial Credit Union and incoming chair of IHRIM, said during a Web conference event Nov. 19. “Those without as much cash are waiting to see what happens. There is still a lot of uncertainty right now.”

The HR software market has been among the fastest-growing corners of the business software world as organizations seek to maximize the value of their people and prepare for any labor shortages. Talent management applications—which refer to tools for key HR tasks such as recruiting and employee performance management—have been particularly hot.

But there’s evidence HR software vendors are facing tougher going. This month, Kenexa said its third-quarter net income slipped by 24 percent to $5.4 million. Kenexa chief executive Rudy Karsan also said that during the last several weeks of the quarter, “the business environment deteriorated further and caused customers to pause as they evaluated how the changing economic climate would impact their business.”

IHRIM’s survey involved HR leaders, primarily from North America. It covered HR IT as well as other talent investment issues.

Thirty percent of respondents plan to spend the most on software purchases in 2009, followed by outsourced services, staffing and development at 20 percent each. Companies making software investments will spend the most on onboarding tools (28 percent) and benefits management products (25 percent), and less on core HR management systems (12 percent), the survey says.

Forty percent of those surveyed plan to make the largest budget cuts in training and professional development.

Greer argued that slashing development budgets is shortsighted and counseled against drastic job cuts.

“Companies are likely to lose their competitive advantage if they cut development budgets,” he said. “I am hopeful that companies do not make dramatic headcount reductions until they have a better feel of where economy is going.”