From the Blog:

Here It Comes: The Consolidation Acceleration

(Story by Henry Albrecht originally appeared on LinkedIn)

You’ve seen its beginnings: HR technology providers in the social recognition, well-being and engagement measurement have been after the same outcomes — helping you build a great company.

And I’ve said it before… but now I am ready to guarantee it: Industry consolidation will accelerate as these formerly separate functions and markets join to form a new employee engagement/experience market in 2018 to 2019. We’ve been predicting industry consolidation for a while now and we’ve already seen a lot of early momentum. Now it’s time for the global behemoths to enter these HR markets, too. I’ll share a few thoughts about who is coming, who is selling out and why.

The Future of Work (And the Technology That Will Help Define It)

Machine Learning, AI, robots, the gig economy and the majority of all the other HR trends stories all point to one thing: technology is enabling new actions that are reshaping the way we work.

And while both new and old generations of employees are faced with the fear of outsourcing and the like, it’s clear what people need from their organization to be their best: purpose, inclusion and a sense of community supported by consumer-grade technology experiences.

These needs require a different relationship between companies and people. A more bi-directional, committed relationship with better communication and a little more love. Who will provide it?

The Suite Life (Signs From the Past)

This idea of integration isn’t new, and done right, it actually works. In 1992, Microsoft made a bold move by combining four large disconnected solutions and markets (word processing, presentations, something called ‘spreadsheets’ and the next big thing — email) into a new productivity suite called Office. In so doing, they made a whole platform much greater than the sum of the parts, a bold move that created ridiculous global impact.

Similarly, in HR technology, we’ve already seen a few rounds of this, most recently with talent management. Some integrated talent management suites were pieced together via a litany of mergers and acquisitions. The aforementioned global behemoths like Oracle, SAP and others got involved nearly a decade ago as the functions and markets of learning, recruiting, performance management and more merged together. This consolidation mapped all of the transactional back-end elements of HR into mega-suites. The battles rage on with perennial assaults from ‘organic’ outsiders like Cornerstone — who recently attracted a few hundred million in investment from Microsoft (LinkedIn) and late-stage private equity firm Silverlake.

But no HR tech company has yet to live up to the promise of this integration to qualitatively change the way people work and improve their relationship with their company. In sum, they didn’t drive real employee engagement, well-being or commitment, nor did they fulfill the hope for massive topline business results.

What am I saying? The next HR revolution will be much, much bigger. Because there is much more at stake. It’s about nothing less than changing the way we work.

The Signs are Clear

I think one of the best predictors of the future is the past. And as with the early days of talent management, strategies are all over the place. While a few solutions and markets are closer to putting the ‘human’ in human capital management than we’ve seen to date — mostly hailing from well-being, social recognition and engagement — some early M&A activity is missing the mark. What are the markets and what’s going on?

Automating Benefits 2.0

  • This happened in the early stages of the talent management consolidation as well. Buyers, fed up with how confusing and inefficient their benefit functions were becoming, we’re looking to automate or simplify. And while this aspiration is important for any function, it still falls short of the big audacious promise. That said, there are many problems to solve in the business of managing health benefits, healthcare, health insurance, benefits aggregation and “getting people to the right health resource at the right time.” Recent acquisitions like AXA acquiring Maestro Health, Castlight acquiring Jiff and Willis Towers Watson acquiring Liazon point to this trend.

Scaling Physical Wellness

  • With their acquisitions of Virgin Pulse, Global Corporate Challenge, ShapeUp and Preventure, private equity firm Insight Partners has played the market roll-up card aggressively in the realm of steps, devices and physical fitness. They have bought scale, cut costs and will look for a great exit. Or will their appetites take them into adjacent markets — hinted by their partnership with OC Tanner?
  • Rally, StayWell, HealthWays and WebMD have all changed hands and other players here may be gobbled up soon. Perhaps by WellTok and ShareCare, who appear to be executing roll-up strategies themselves.

Driving Real Employee Engagement

  • Both internal development and early partnerships between engagement, recognition and well-being providers are scratching at the value of common platforms and messages.
  • We are also seeing new, disruptive solutions (like Limeade Daily) that drive more frequent engagement measurement tied to real action (not just recommendations).

Who is Buying?

First, there is a lot of interest from later-stage private equity firms, but they’re not alone. Consultancies like AON and Marsh & McClennan, large players like SAP, Oracle, IBM, Microsoft, Infor, Sodexo, IBM and maybe 10-15 other global companies are all out there watching (not to mention all the big healthcare companies dealing not just with health trends but with burnout and disengagement).

This year, you’ll see:

  • More partnerships between the traditional HR tech giants and platform plays to test the waters.
  • Consultants in talent management, health and benefits and strategy picking their spots between objectivity in some circumstances, and picking winners in others.
  • A consolidation of point solutions and niche players in anticipation of these broader platform plays.
  • A shift away from the information overload inherent in overgrown link farms of, “Frankensoftware” (as Workday once put it) to a more personalized, guided employee experience. One that takes the guesswork out for buyers and gives employees what they’ll actually want to use.

In the meantime — buckle your seatbelts.

What to Look For?

Look for vendors who walk their talk here — who get culture and actually do what they say you should do. Look for a cohesive vision — a strong, unique POV with the ability to execute well — because Net Promoter Score trumps deep pockets every time. Look for organic software development and consumer-grade experiences. It’s hard enough to build a cohesive service delivery model with a hodgepodge of companies (and layoffs) — it’s even harder to create a truly complementary and elegant technology solution. Company and core technology integration is costly, time-consuming and critically important.

Limeade will build and curate our partner network and acquire new technologies, but we’re not veering off our path of building one compelling employee experience — in pursuit of our mission to improve well-being in the world.

We’re focused on improving people and business. We’re focused on mutual commitment and strengthening workplace culture. We want a seamlessly integrated experience — focused not on every aspect of transactional HR management — but on the sweet spot of employee engagement, well-being and social recognition. This is how we’ll support the employee of the future.

This is a thrilling time to be a cutting-edge HR technology company. I welcome the inevitable consolidation that will shake up the market and keep you on your toes this year. Be ready and resilient — as always.