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Recruiting Technology Trends

This article will focus on industry-wide trends you will see from the recruiting software vendors for 2005. We will not discuss individual companies, but rather the continuing evolution of an industry in hopes that this information will help you not only plan for today but understand what tomorrow brings. You will be armed with information and questions to evaluate a new software acquisition or reevaluate one made in the past.

Buy vs. Subscribe

While subscription models are certainly not new for 2005, they will continue to gain in popularity. Technology changes so quickly, that any ATS vendor that has a purchase only option runs the risk of losing market share to vendors that provide companies with an 'out' that doesn't cripple their wallets.

The early adopters of subscription pricing were the web-based vendors, but as the software industry in general started to feel pressure from customers to provide subscription options, many of the client-server companies followed suit. You will still see some vendors however, that have moved to subscription models still clinging to old revenue models where training, support and upgrades are sold a la carte or as yearly warranties. There are even a surprising number of vendors who will still charge you to export your data from their system. If someone can justify this to me, I would love to hear it.

Don't worry though. In the last few months of 2004, it seems more and more vendors are moving to all-inclusive subscription models where support and upgrades are bundled into the monthly cost. This is significant for a few reasons. First, you can accurately estimate your costs without having to predict how often you will need to email or call a vendor for support or training. Second, you can rest assured that you continually have the latest version of software available to you at no additional cost.

What will you see on this front in 2005? Flat rate subscription pricing that includes training, support and upgrades. Many vendors will continue to require some level of upfront activation cost and some minimum contractual obligation. But as other leading vendors push a month-to-month, all-inclusive model, your negotiating power will become stronger and stronger. Ideally, you should pay a flat rate per license and be able to add/remove licenses as your staff fluctuates.

Speed Kills - Hybrids Emerge

The recruiting software industry saw a fairly widespread move to web-based solutions several years ago. The promise of portability, automatic upgrades and no need to have the technical acumen to setup and support a system internally were seen as great selling points. Recruiters happily embraced this new platform but the major flaw in any web-based solution emerged - there is no such thing as right click functionality in a web page. You shouldn't have to work through several screens just to schedule a phone call.

Now, the Internet is great in terms of paying bills (I pay every bill I owe online), ordering goods and services and bidding on EBay for must-haves like the image of The Virgin Mary on a stale piece of toast. It just isn't ideal for sitting down at your desk at 8am and working through page loads and timeouts until quitting time.

Now, on the flip side, pure client-sever applications are great if everyone is in a single office, but quickly become an issue if you need to tie multiple offices and virtual workers together or just want to work from home in the evening. Simply accessing a client-server application that is designed to run on a LAN over the Internet can cause just as many headaches as you will find with pure web-based applications.

Each camp is starting to realize the shortcomings of their applications. There are a handful of vendors that have already created hybrid models that blend installed components and web technology. Many more will follow suit in 2005. Client-server vendors will tune or redesign their databases to be accessed across the Internet and web-based vendors will start using installed light clients.

Both approaches will create faster and more efficient solutions. Eventually, rich client interfaces will emerge as the model of choice where a product will behave as both a browser and an installed product. Microsoft is including rich client attributes in Longhorn. In the years to come, components will be loaded on demand as needed, web services from background checking companies, assessment companies and the like will be integrated and light clients will become 'intelligent' and load commonly used components into your cache upon login making the solution even faster. While these changes will take a few years, you will see first and second generation hybrids in 2005.

David and Goliath

When the large ERP companies decided to enter the recruiting software market by creating modules for HR departments, I am sure that many people thought it was the death knell for many established ATS vendors. Something curious happened though. ERP companies didn't start devouring ATS market share like many thought. Sure, some Fortune 2000 companies have gone with the big ERP guy's recruiting modules. But these were mostly decisions being made by IT trying to consolidate disparate systems onto one common platform. Why haven't the ERP vendors won the favor of corporations and large staffing firms by just knocking on their doors?

The main reason is that ERP recruiting modules are hiring manager-centric. They are designed to put a lot of power in the hands of hiring managers and effectively reduce the role of recruiters to that of administrators. While there are plenty of companies out there that see this as an effective model, there are many more that have strong human resource business units and believe in the value of recruiters.

On the other hand, ATS vendors, some enterprise vendors notwithstanding, create recruiter-centric solutions designed to empower recruiters. A little known fact of this industry is that many ATS vendors whose target market is small and midsize staffing firms have found favor with the Fortune 2000. Their software is either being used in tandem with ERP and enterprise systems or have replaced them altogether in some instances. What does it say when vendors a fraction of the size of the big boys, that focus little or no marketing effort on the Fortune 2000, end up winning accounts?

So what's going to occur in 2005? Surely the ERP and enterprise vendors aren't willing to concede market share. So, they will continue to try and go it alone, which takes both time and money or they will go another route. In 2005, you will see vertical integration either through acquisition or strategic alliances. Any acquisitions that occur won't be from a desire to gain a smaller vendor's customer base. The economics are pretty clear here. Acquisitions will occur quite frankly to gain access to features and functionality that the ERP and enterprise vendors simply haven't cracked. We may see strategic alliances that evolve into acquisitions over time. Regardless of how things evolve, there are serious gaps in the ERP and enterprise systems that many smaller vendors have addressed.

The Next Major Inflection Point

The next really major change that could rear its head near the end of 2005 and certainly in 2006 is the emergence and acceptance of HRXML resumes. When HRXML resumes become standard, there will be a weeding out process in the industry where companies that have planned for and are in a position to introduce HRXML-specific functionality will gain market share from vendors that have either had blinders on or are nursing out-of-date proprietary software and would need to essentially reinvent the wheel to accommodate HRXML resumes.

You may be asking what the big deal is about HRXML resumes and why would it become the standard for resumes? The first thing you should know if you already don't is that Microsoft already has unveiled Office with HRXML functionality, so a shift is closer than many think. Now, HRXML is more than just another way to create a resume, it is standardized XML for human resources that can be used for a variety of data transfers. The acceptance of HRXML resumes is however, going to trigger significant changes.

One major change will be that resume parsing engines will become obsolete. There are only a handful of parsing vendors that all of the ATS vendors use. Parsing is a very inexact science for the sole reason that there doesn't exist a standard way to write a resume. Many companies request ASCII text resumes to help the accuracy of parsing engines or ask for self-verification, which will drive away the passive candidate. How do you tell a candidate that they weren't considered for a position because they decided to put all of their contact information at the foot of their resume and they weren't properly parsed? Once HRXML is on the scene, you won't ever have to have that conversation again.

All it is going to take is a few Fortune 500 companies to dictate that all resumes submitted are in HRMXL or they will not be considered. They most likely will have an HRXML resume builder on their career site. Monster and HotJobs Yahoo! most certainly will. They will welcome job seekers to create and manage HRXML resumes on their sites and will provide job seekers a copy of their new resume they can download and submit to staffing firms and corporations.

Here is an example of the impact HRXML is going to have - A recruiter at a staffing firm receives an HRXML resume via email. She presses a button in her email client and the resume is broken down into its different HRXML tags to create that candidate's record in the recruiting database. During that process a check for duplicate records is done on the fly. Once that resume is 'parsed', the information in the database is the exact same as it was in the Body of the resume. Every piece of critical data is captured and since the data is transferred using the HRXML standard, there are no errors or omissions.

Now it is time to submit a resume to one of her clients. Her recruiting database has the requirement, hiring manager, client-company and the candidate information all stored. When she submits a resume via email, she can choose from any number of HRXML style sheets to alter the look and content of the resume. She can choose to replace the candidate contact information with her company's logo, her contact information and the job title submitted to. She may choose another option that plugs in the logo of the client company, hiring manager' name, job title and number, the body of the resume and her contact information and a short company fact sheet as a cover letter. There are any numbers of possibilities that require no more effort than sending a regular email today.

The resume then makes it to the hiring manager or to the HR department and the HRXML is parsed into their system along with identifier tags with our recruiter's name, company and contact information that is automatically checked against a primary vendor list and a list of previously submitted resumes before becoming active in their system. Make no mistake, if you are evaluating recruiting software; make sure that the vendors you talk to have a plan for adopting HRXML functionality.

Some of these trends, such as the evolution of subscription licensing models, are going to be seen immediately in 2005 while others, such as HRXML resumes, won't occur until later in the year. Hopefully these trends, as I see them, will help you understand the recruiting software industry a little better and help prepare you to make informed decisions in 2005. Remember, you are our clients and you are in the driver's seat. If you are going to reevaluate your current recruiting software or purchase new software in 2005, really beat a product up during the trial period and dig a little bit to see if the software, as well as the vendor, is headed in the right direction in 2005.

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