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For years now, TA solution providers could achieve success by being great at a specific recruiting function. Whether they were a sourcing platform, an ATS, an assessment company or a candidate communications provider, there were enough buyers in the market to build a profitable company with a best-of-breed solution. Those days are coming to an end.
There are at least two problematic dynamics driving this shift in the market.
First, many employers have dramatically downsized (or even eliminated) their recruiting teams. In just the last three years, for example, tech companies have laid off around 50 percent of their recruiters, with Meta alone handing 1,500 recruiters and HR staff the pink slip. Even a white-glove consultancy like McKinsey & Company has let some of its recruiters go.
These leaner or worse understaffed organizations still need to recruit, however, so they increasingly turn to technology to help them get the job done. There’s nothing new about that, of course. Employer investments in TA solutions have been on the rise for years (whether or not they were downsizing their recruiting teams). What is different now is the kind of solution they’re looking for.
Today’s smaller recruiting teams no longer have the time to shop for or manage the implementation of multiple, single-function TA products. Now, obviously that’s not the case everywhere, but it is, unfortunately, a reality that is growing more prevalent. Said another way, the market has shifted and now more and more Buyers see best of breed solutions as a luxury they can no longer acquire and instead want multi-function or even end-to-end talent acquisition solutions.
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The second problematic dynamic involves the big HR tech vendors. The shift from a traditional labor market to a still evolving talent market has put them in a bind. Their enterprise customers are waking up to their own reality: You can’t manage the workers you don’t have. All of a sudden, the less than world class talent acquisition functionality of their systems is a vulnerability they need to fix if they expect to remain competitive and meet their customers’ talent needs.
How are they addressing the problem? Some are investing in product development, especially in applying the power of agentic AI. That approach takes time, of course, so they are increasingly turning to best-of-breed acquisitions. As WorkTech consultant George LaRocque has opined, that was a significant driver in SAP’s acquisition of SmartRecruiters.
My view is different. As I wrote, this move was the leading edge of a wave of acquisitions that could provide a lucrative exit channel for solution providers. It’s always been there, but now, it’s picking up momentum. It also has a downside, however. It means that the market for stand-alone best of breed solutions is shrinking as employers increasingly rely on these more TA-capable HR tech companies. If you have any doubt about that, consider Workday’s announcement last week that it was acquiring Paradox.
So, what’s a talent technology company – even one that is legitimately best-of-breed – to do? How can it survive let alone prosper in the face of this morphing employer market and accelerating incursion by HR tech?
Become a more advanced version of a best-of-breed TA solution.
What does that mean? Best-of-breed can no longer mean excellence in a single function. It must instead mean multi-function greatness.
Reset the company as a top-to-bottom talent acquisition solution provider. Acquire the capabilities to provide world-class support to employers from branding and sourcing to selection and onboarding. Unlike HR tech companies, however, most TA tech companies will rely on partnerships and alliances rather than acquisitions. They will, of course, also continue to do product development, both within their own functional area of expertise and perhaps in adjacent capabilities, but the majority of their top-to-bottom solution is likely to be assembled with deals done with other best-of-breed providers.
Admittedly, that’s not a trivial undertaking. It has the power, however, to address both of the problematic dynamics in the market. First, it provides everything an employer needs to meet their recruiting requirements and it does so with a portfolio of integrated best of breed products and partners. And second, it leaps ahead of even the improved TA capabilities of HR Tech vendors by providing more capability than they can muster.
Food for Thought,
Peter
Peter Weddle has authored or edited over two dozen books and been a columnist for The Wall Street Journal. He is the founder and CEO of TAtech: The Association for Talent Acquisition Solutions.
