HR Tech Spending to Hold Steady in 2025

Employers plan to maintain their investment in HR technology next year, according to projections from the annual HR Systems Survey conducted by Sapient Insights Group.

Stacey Harris, chief research officer and managing partner of Sapient, debuted the 2024-2025 report findings at the recent HR Tech Conference in Las Vegas.

Sapient surveyed over 3,300 organizations, representing 25 million workers, and tracked 2,750 vendors across technology areas such as core HR, service delivery, time and attendance, talent management, analytics, and emerging solutions.

Technology spending projections show that overall spending will remain at current levels, with 41% of organizations planning to increase spending and 7% planning to decrease spending in HR technology investments. Broken down further, enterprise organizations are more likely to increase spending, while small and midsize businesses (SMBs) are more likely to keep their current budgets.

“This means we’re seeing a lot of holding on budgets, even though the market is slightly down from a business perspective,” Harris said.

The categories expected to receive that investment are shifting, she added. Not surprisingly, interest in recruiting technology has softened due to sluggish hiring plans. SMBs have revealed a focus on learning systems, while enterprises are interested in replacing or expanding their HR management systems (HRMS).

“I have not seen this kind of interest in HRMS replacement from large companies in over a decade,” Harris said. “Last year, the top story was replacing payroll systems. Payroll is still the No. 1 system to be replaced, but at a slower rate. Interest in the HRMS was at the bottom of this list last year, and now 25% of enterprise organizations plan to replace their HRMS.”

One reason for this could be the declining user experience and vendor satisfaction ratings for HRMS systems. Ratings for both HRMS and payroll systems have dropped almost 10% over the last four years, Harris said. “This is a big issue. The top challenges with enterprise systems include the capability to be global, integrations, and admin user experience.”

Customer ratings for learning and benefits technologies also declined, while ratings went up for time and leave management solutions. Workday was the highest-rated vendor for both enterprise payroll and HRMS this year.  

Enterprise employers are the only sized organization spending more on AI technologies, according to the survey. Only 23% of employers overall are using a generative AI (GenAI) solution in HR, the survey found. GenAI tools such as ChatGPT are mostly being used for creating job descriptions, followed by process efficiency and HR help desk questions.

“Workday has done the best job of making HR aware that they have AI solutions embedded in their HRMS platform,” Harris said. She added that there’s a communication gap about AI capabilities with most vendors.  

Technology Boosts Visibility

Sapient also asked respondents if their HR function is viewed as contributing strategic value. The percentage who said yes rose to 52% this year, up from 50% in 2023 and 38% in 2014.

“To be able to get the most out of your HR technology system, you have to have an HR function that is not only doing what they need to be strategic but must also be perceived as being strategic inside their organization,” Harris said.

“This measure started to plateau in 2019 but is seeing an uptick year over year since coming out of the COVID crisis,” she said. “Being a strategic HR function means that you are working on multiple levels: You’re doing compliance at a level that everybody expects; you’re making sure you follow best practices in the market; and you’re making sure that you’re focused on organizational outcomes.”

Just following best practices is not enough, Harris added. “We are seeing more HR functions having outcome-focused conversations. One thing they are doing differently is taking time not to just invest in technology but investing in what that technology does for the business.”  

The survey showed that HR technology is becoming more complex to manage, and HR technology professionals are juggling more priorities than ever.

“Every practitioner must not only manage their existing system, but also budgets, resources, customer service, maintenance and calibration, change management, and constant implementations,” Harris said. “It’s a strategic role too. Today’s HR technologist doesn’t only have to look at the situation today and the next two to three years out, but they also have to be a fortune teller to see where the organization could pivot. The systems must be able to flex as the organization does.”

Sapient reported that 43% of organizations have a defined HR technology function. This was mostly dependent on organization size, with a defined function generally being found among larger organizations.

The battle between HR and IT over the ownership of the HR technology budget is another critical area. In SMBs, it is typically owned by HR, whereas in large organizations, it is typically owned by IT.

“HR functions are more likely to be viewed as strategic if HR owns the technology budget,” Harris said. “Budget is important because if you want to harness the power of newer technologies like AI and machine learning, you must control the data. You can’t make use of the data unless you choose systems that prioritize data governance, and you have control over that data.”