Gartner for HR

HR Technology
Planning Imperatives
for 2023 and Beyond
HR Technology Planning Imperatives for 2023
and Beyond

HR technology leaders face a balancing act for 2023. While most

organizations continue to navigate a talent shortage, challenging
economic conditions are limiting their budgets. This research
presents the HR-technology-related considerations that 138
organizations are prioritizing for 2023.

Overview
Key Findings
■ Forty-four percent of survey participants stated that driving better business
outcomes (revenue growth and profitability) was the No. 1 strategic priority for HR
technology transformation over the next three years.

■ According to survey participants, the three most important HR technologies for the
coming year are: skills management, learning experience platforms and internal
talent marketplaces.

■ The three HR domains on which HR technology leaders plan to focus most in the
coming year are: reporting and analytics, recruiting (i.e., talent acquisition), and core
HR or HR information systems.

■ Only 15% of survey participants say their HR technology landscapes will include any
on-premises applications by 2025.

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 Recommendations
HR technology leaders overseeing their organizations’ HR technology transformations
should:

■ Target technology investment on those that provide clearly defined and measurable
business value to help the organization weather worsening economic conditions.
The mantra for successful HR technology leaders in 2023 and beyond is “achieve
strong business outcomes and improve HR’s effectiveness and efficiency to
navigate through times of economic uncertainty and talent scarcity.”

■ Allocate at least 10% of the HR technology budget for innovation to spur skills
development and internal mobility and improve the learning experience.

■ Keep pace with peers by investing the bulk of the HR technology budget in reporting,
recruitment and core HR technology.

■ Work to decommission any remaining on-premises applications in the next three to

five years to reduce technology debt and deliver increased business agility and
value.

Strategic Planning Assumptions

■ By 2025, 60% of global midsize and large enterprises will have invested in a cloud-
deployed human capital management (HCM) suite for administrative HR and talent
management. However, they will still need to use other solutions for 20% to 30% of
their HR requirements.

■ By 2030, 95% of global midsize and large enterprises will have fully migrated to
cloud and have no remaining on-premises HR applications. Only organizations with
exceptional requirements (e.g., military, government) will retain any on-premises HR
applications.

Survey Objective
The 2022 Gartner HR Technologies Client Survey sought to understand organizations’
priorities concerning HR technology. Consequently, the results of this survey will benefit
HR technology leaders as a guide to what peers are doing and thinking as we head into
2023. This research includes results and analysis concerning HR technology strategy,
user experience, and HR and IT collaboration.

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Data Insights
Technology Strategy
1. Top Priorities for HR Technology Transformation

With a faltering global economy, HR technology leaders must anticipate greater levels of
accountability and greater demand for measurable outcomes to justify new investments
and their wider technology strategies. The top three priorities identified by HR leaders for
their HR technology transformation strategies are: better business outcomes (such as
revenue growth and profitability), growth in headcount and skills, and cost optimization
(see Figure 1).

Figure 1: No. 1 Strategic Priority for HR Technology Transformation

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Buyers will find that investment in HR technology may deliver the desired revenue growth
and profitability as well as growth in headcount and skills. However, achieving cost
optimization is more challenging and will depend on where an organization is on its cloud
HR journey:

■ For mature organizations that already have most of their HR applications on the
cloud, cost optimization is possible through consolidation of vendors (typically with
an HCM suite vendor). However, some compromise will be needed in terms of
functionality.

■ For organizations yet to move the majority of their HR applications to the cloud,
reducing operating cost will be impossible without severe sacrifices.

Organizations should not move to the cloud primarily to find cost savings; such efforts
rarely succeed. While cloud deployments do help organizations avoid the large capital
expenditure (capex) purchases associated with on-premises deployments, they usually
come with significantly higher operating costs, which eliminate any proposed cost
savings. Our research also indicates that a similar (if not greater) number of full-time
equivalents (FTEs) is needed to manage cloud applications compared to on-premises
applications.

The decision to move to cloud should instead be driven by a desire for:

■ Increased scalability and mobility

■ Reduced need for manual intervention (for example, data duplication and transfer)

■ Simplification of budgeting as a result of switching from an operating expenditure

(opex) payment model

■ Innovation offered by cloud services

2. The Top Three Hurdles for HR Technology

Many HR functions have been investing in HR technology; however, investment in
technology doesn’t automatically equate to adoption of these tools. Hence, it is
unsurprising that the top hurdle for HR technology leaders is ensuring ongoing employee,
manager and HR function adoption of the technologies in which they have invested (see
Figure 2).

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Figure 2: Top Three Hurdles for HR Technology

Without adoption, technology is a dead weight, providing zero value while incurring
ongoing costs. Moreover, employees who reject an HR technology spend time finding
workarounds, which leads to work friction and inefficiency (see Designing Work to
Unlock a Responsive Culture).

HR technology leaders should therefore actively drive adoption of the technologies they
introduce. This requires the application of end-user feedback to improve the technology
incrementally, change management and stakeholders’ digital maturity. HR technology
leaders must also focus on using data to improve the related resources and the process
flows of the most frequently used technologies.

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The employee and manager self-service capabilities of newer HR technologies offer
significant benefits, distributing effort while empowering end users. To take advantage,
HR technology leaders should focus on improving user confidence in self-service by
ensuring there is clarity, credibility and confirmation of the underpinning processes and
user journeys.

For further research on investment justification, see Justify Investment in Innovation by

Addressing the Inherent Uncertainty. For further research on developing a strategic
roadmap for HR technology transformation, see 2022 Strategic Roadmap for HCM
Technology Investments.

3. The Future HR Technology Landscape

Seventy-five percent of HR technology leaders expect that their HR technology landscape
in 2025 will be consolidated around a core cloud HCM suite. This group is then split: the
majority will have more than three additional applications from third parties to augment
mission-critical capabilities, and a minority will have fewer than three additional
applications from third parties (see Figure 3).

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Figure 3: Planned HR Technology Landscape for 2025

Anecdotally, the first cohort — organizations that expect more than three additional
applications from third parties — tend to be larger, complex and global. This cohort may
have transitioned from an on-premises and/or fragmented state, during which they
accumulated substantial experience with cloud talent point solutions. Because of this
history combined with their inherent complexity, this cohort’s expectations for talent
management module features and functions are greater than those of organizations with
a fully consolidated core cloud HCM suite. The first cohort will have deployed an HCM
suite for core HR, headquarters-country payroll and the most suitable talent modules
(typically, performance and goals, career development and succession planning).
However, other payroll localizations, analytics and workforce planning deployments will
be still in process. Learning, talent acquisition and advanced capabilities — such as
predictive analytics and talent marketplaces — will be often deployed outside the suite.

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With only 15% of respondents indicating they planned to host at least some applications
on-premises by 2025, we are way past the halfway point in the transition from on-
premises to cloud. HR technology leaders with on-premises applications must make
immediate plans to migrate to the cloud in order to deliver business transformation and
reduce risk (as almost all on-premises applications approach end of life).

Composable HR applications frameworks (CHAF) represent a potential successor of the

cloud HCM suite (see Innovation Insight for Composable HR Applications Frameworks).
We predict CHAF technology will emerge by 2030 as a dominant deployment approach for
HR technology. In the meantime, CHAF is likely too nascent for many organizations to
derive business value from it without significant investment, customization and
experimentation.

4. HR Technology Leaders’ Focus

At least within this sample, much of the decision making has been completed for
requirements setting and vendor selection as part of the HR technology strategy. The bulk
of the work next year will be spent on the deployment and optimization of existing
technology decisions (see Figure 4).

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Figure 4: Planned Allocation of Time for Strategic Objectives

It’s important to remember the continued management and attention cloud applications
require to deliver ongoing value to the organization. Most cloud applications get two to
four major updates per year, with smaller patches happening in between. These updates
are included in the SaaS fee; however, by default, most are delivered but initially turned
off. (After one or two future cycles, updates are forcibly turned on.) It is up to HR
technology leaders and their system administrators to communicate updates in a clear
and timely fashion so their organizations can benefit from new capabilities as they arrive.

Additionally, the organization’s requirements may change over time, a “set it and forget it”
mentality can be extremely harmful and must be avoided. HR technology leaders may find
their investments have become an expensive technological debt if they are unable to keep
up with changing requirements. This risk reinforces the importance of regular updates to
the HR technology strategy (at least annually) to ensure HR technology delivers the
greatest possible value for the organization.

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5. The Most Important Emerging HR Technologies
HR technology leaders spend about 10% of their budgets to transform certain targeted
areas of the business that they see as highly innovative. Skills management, learning
experience platforms and internal talent marketplaces are cited by HR technology leaders
as the areas where they see the most important emerging HR technologies for the coming
year (see Figure 5).

Figure 5: Top Three Important Emerging Technologies

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Organizations have been facing a troubling skills gap for years, and the problem has
compounded as the pandemic accelerated the adoption of digital technologies in all
industries. External hiring remains a critical strategic component, but talent leaders are
also looking beyond their traditional talent acquisition platforms and rethinking their
approaches to identifying internal talent and skills gaps. One approach is realigning the
organization’s talent management strategies by prioritizing an intelligent skills
management platform. HR technology leaders integrate this platform with existing
learning platforms and internal talent marketplaces to reskill or upskill the workforce for
future roles.

Another critical emerging HR technology is AI in talent acquisition. Current market

dynamics, the high volume of job applicants and the struggle to fill the current talent gap
have inevitably increased the workload for hiring teams and recruiters. This drives
recruiting leaders to layer their recruiting technology with various AI-based point solutions
to drive automation within talent sourcing, screening, marketing and interview scheduling.
Organizations also need to use automation within critical talent management areas to
drive targeted efficiencies.

6. Top HR Domains in Focus for 2023

In addition to investing 10% of their budgets in top areas of innovation, HR technology
leaders must continually upgrade their existing technology stacks to improve business
operations. The top domains selected by HR technology leaders as their investment
focuses for 2023 are reporting and analysis, and recruiting (see Figure 6). Evolving skills
needs, increasing skills gaps and unprecedented attrition levels are driving HR technology
leaders to augment their current recruiting technology stacks with various vendor point
solutions. And as organizations advance their HR technology strategies at the enterprise
level, HR technology leaders are increasing their spending on reporting and analytics
platforms to connect HR system capabilities with key business and talent outcomes.

Talent analytics initiatives can be expensive. To get the largest returns on their technology
stack upgrades and drive better business outcomes, HR technology leaders need to
identify and prioritize key metrics that underpin their organizations’ goals. (See
Benchmark the Top Metrics Talent Analytics Teams Report to Business Leaders for
examples of such metrics.)

It is also critical to have a strong core HR platform, which was the third most selected
domain in our survey. Organizations must maintain and enhance their core HR platforms
to meet changing business requirements and drive efficiencies.

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Employee experience has also become a core tenet of the employee value proposition,
making it a valuable domain on which to focus. Delivering a superior employee experience
in a postpandemic, hybrid world is challenging. To manage and retain talent, HR leaders
are prioritizing employee experience platforms as they seek to increase employee
satisfaction and create a modern experience.

Figure 6: Top Five HR Domains Based on Investment

For more information on the distinction between investments in applications that deliver
innovation and investments in existing applications and systems of record, see Use Pace
Layers to Align Your Application Strategy With Your Business Strategy.

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User Experience
7. Employee Satisfaction With HR Technology

Although 43% of survey respondents indicated their employees would be satisfied with the
HR technology operated by their organizations, the rest believed their employees would
feel either neutral or unsatisfied (see Figure 7). This is not a high satisfaction rate
considering the time, human effort and cost put into purchasing and implementing these
technologies. (This correlates with end-user adoption being identified as a top three hurdle
in Section 2 of this research.)

Figure 7: Employee Satisfaction With HR Technology

This dissatisfaction mainly results from a suboptimal end-user experience. Employees

from organizations that recently implemented new HR platforms or are still stabilizing
new systems are likely to have a seamed and unsteady user experience.

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Based on conversations with our clients, Gartner has identified the causes of low end-
user adoption to be:

1. Misjudging employees’ digital maturity or misaligning employees’ needs and

preferences with HR technologies

2. Insufficiently communicating the change and value of HR technology, so employees

don’t have technology awareness

3. Inadequate change management — particularly when business leaders and

managers fail to develop a robust change strategy that includes an ongoing internal
“sales and marketing” campaign

4. Excluding employee, manager and other non-HR-user input from the technology
selection process

5. Attempting to fit a custom and complex process into a product designed for simpler
needs rather than drastically streamlining the process to fit the product (preferred) or
deploying a product that can accommodate the existing process

HR and IT Collaboration
8. The State of Collaboration for HR Technology Investments
Thirty-nine percent of surveyed HR technology leaders indicated they tend to lead in
setting their own HR technology strategies, with support from IT. Another 45% indicated
shared leadership (see Figure 8).

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Figure 8: How HR and IT Work Together on HR Technology

These data points confirm that leveraging IT expertise and support is necessary. Although
many HR organizations try to fully own HR technology strategy planning, the HR team
alone is not likely to have all the skills and knowledge needed to define a holistic,
comprehensive HR technology strategy. HR, the functional domain expert, has the
necessary HR and business process insights, and it aims to improve functional efficiency
and employee experience. IT has technological expertise and can validate that the HR
technology strategy is feasible and actionable at scale. Due to their different areas of
expertise, HR and IT must be mindful of their respective roles in each task (e.g.,
integration challenges) and tailor their expectations, responsibilities and deliverables
accordingly.

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9. Ownership of Key Activities

HR technology leaders clearly indicate that central IT has become less involved in HR-
technology-related activities, such as building a business case or setting HR technology
requirements, when HR and HRIT reside in the same function. Organizations that have
formed a dedicated HRIT team within HR actively put a mechanism in place to improve
the partnership between HR and IT over time. As this team setup helps break operating
silos and foster and retain HR technology expertise within HR, central IT no longer needs
to be fully involved in every step of HR digital transformation and management. Central IT
is therefore more responsible for support, logistics, integration and assessment activities
instead of more cutting-edge decision making about technology use and innovation (see
Figure 9) (see Note 1).

For HR technology employees seated in IT, our 2022 HR Technology Leader Survey
indicated that system integration, managing releases for cloud applications, and
assessing strategic roadmaps and updates were the three most important roles and
responsibilities. 1

Figure 9: Owner of HR Technology Activities

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Evidence
2022 HR Technologies Client Survey: This survey was conducted online from 5 October
through 21 October 2022. In total, 138 clients participated. Clients from North America (n
= 94), EMEA (n = 24), Asia/Pacific (n = 14) and Latin America (n = 3) responded to the
survey. Of the 138 clients who participated, 21% identified as chief HR officers, 6% as
chief people officers, 12% as HR vice presidents, 24% as HR directors, 2% as HR IT vice
presidents, 12% as HR IT directors and 23% as “other.” Eight percent of respondents were
from organizations with more than 50,000 employees, 22% from organizations with
10,001 to 50,000 employees, 12% from organizations with 5,001 to 10,000 employees,
40% from organizations with 1,001 to 5,000 employees, 12% from organizations with 501
to 1,000 employees, 4% from organizations with 251 to 500 employees, 1% from
organizations with 101 to 250 employees, and 1% from organizations with 1 to 100
employees. In terms of industry sector, client participants were from the following:
financial services (16%); technology (14%); manufacturing, materials and heavy industry
(9%); professional services (8%); and healthcare (7%). Note: the results of this study are
representative of the respondent base and not necessarily the market as a whole.

Endnotes
1
2021 Gartner HR Technology Leaders Survey: This survey included responses from HR
executives at more than 40 organizations across different countries, industries and sizes.
Countries: U.S. (56%), Albania (3%), Australia (6%), Canada (9%), India (3%), Kuwait (3%),
Netherlands (3%), Norway (3%), Saudi Arabia (3%), South Africa (3%), Switzerland (3%),
U.K. (3%). Industries: construction (3%), consumer goods (3%), education (6%), financial
services (13%), food, beverage and tobacco (3%), government (3%), insurance (3%),
manufacturing, materials and heavy industry (16%), media, news and entertainment (3%),
nonprofit/nongovernmental organization (3%), oil & gas, mining and forestry (3%),
pharmaceuticals (6%), professional services (3%), real estate (6%), technology (19%),
other (6%). Median number of full time employees: 6,500

Note 1: Further Reading on HR-IT Partnership

To learn more about building an effective partnership between HR and IT, see Essential
HR Tech Roles and Resources for Implementing Cloud HCM Suites and 5 Principles for
Productive HR-IT Partnership.

Some resources only accessible by Gartner clients.

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