HR Tech Investment Steady, HRMS Upgrades Gain Momentum

HR technology investment remains steady, with enterprises prioritizing HRMS upgrades and AI adoption for strategic business impact.

Employers intend to continue investing in HR technology next year, based on the latest HR Systems Survey by Sapient Insights Group. Though overall expenditure is stable, 41% of organizations intend to hike their budgets, with enterprise employers at the forefront.

Revealed at the HR Tech Conference in Las Vegas, the survey, which collected information from 3,300 organizations spanning 25 million workers, presents changing priorities in HR technology. HR management systems (HRMS) are now top of mind, with 25% of enterprise organizations set to replace a system—a spike in interest not experienced in more than a decade.

"Payroll system replacements were the headline last year. Although still the priority, HRMS replacements have become front and center," according to Stacey Harris, chief research officer at Sapient Insights. Fading user experience and vendor satisfaction, especially in global capability, integrations, and admin usability, are fueling the change.

AI adoption is still limited to 23% of organizations implementing generative AI (GenAI) for HR purposes, which is used mostly for job descriptions and automation processes. The largest employers of enterprises invest in AI most, while Workday emerges as the best-rated vendor in both payroll and HRMS products.

HR technology management is growing more sophisticated. 43% of organizations only have an established HR tech function, which is primarily in larger organizations. Furthermore, HR technology budget ownership is connected with strategic influence, and budgets owned by HR drive improved AI and data governance adoption.

As HR operations transform, Harris stressed the need to move from simply embracing new technologies to ensuring that they produce business outcomes. "HR leaders have to get past best practices and talk about how technology creates value for the company.”  With HR's strategic impact on the increase, HR technology will be pivotal in designing the future of work.