Meltdown in the Financial Markets -- What Does It Mean to HCM Software?

Gartner has a product offering specifically for the investor community.  We have quite a variety of investors from Venture Capitalist (VCs) to Private Equity (PE) firms to institutional investors.  The most common question, not surprisingly, that I have had from all of these constituencies is whether or not we see a slowdown in the HCM market due to the economy.  To date, the answer is that we have not seen evidence of a slowdown.  The number of inquiries related to HCM (and more specifically talent management) have grown in 2008 vs. 2007 (a banner year with close 20% growth).  However, the trouble in the financial sector and Kenexa's lower guidance on expected revenue does give one pause to think.

I started at Gartner in May 2002 at the tail end of the last of the last recession.  At that time, vendors definitely were struggling.  However, by 2003 vendors were growing again at healthy rates.  There was pent up demand that vendors filled in 2003.  It is hard to gauge the impact of financial sector crisis on the HCM market.  There could be a ripple effect that causes organizations to cut budgets or at least be more conservative with investments (as well as budgets for 2009).  It is important to realize though, even if the worst happens and the HCM market slows down for a period of time, that it should come back strong because the underlying drivers still remain:

• Demographic shifts will continue
• The need to attract and retain top talent for critical jobs will still remain
• The need to develop the next generation of leaders will still be there
• The desire to align pay for performance may be even stronger (because people-related costs are such a high percentage of total cost in most organizations)

What do you think?  Is the HCM market heading for a credit crisis/recession-driven downturn?  Is demand strong enough to weather the looming storm?  If the market does decline, how fast will it come back? 

Comments

[Amit Avasthi]

Jim, nice thoughts. I had actually blogged on it sometime back and stumbled on your blog post.
Hope you like and would give your views on this
http://amitavasthi.blogspot.com/2008/09/financial-meltdown-and-hcm-software.html

[Michael Brandt]

Jim,

I would think this is an ideal opportunity for vendors to adapt quickly to an opportunity for a greater impact in other areas. Having lived this once before during the dot com fallout with Vurv. They experienced the vast majority of growth while the market was down because HR departments were seeking ways to stop being reliant on recruitment agencies.

The focus just shifted as companies sought new ways to get more efficient and effective with smaller teams. HCM solutions become an even greater necessity as a means to help companies opperate leaner while recognising the maximum potential out of every employee they can possibly find.

Thoughts?

Michael Brandt
Softscape