Two-thirds of enterprises will need AI-enabled HCM software by 2027 as employee expectations change, data’s potential expands, new research finds.
STAMFORD, Conn.–(BUSINESS WIRE) – AI is becoming a core requirement for human capital management (HCM) and employee engagement, with two-thirds of enterprises expected to need AI-enabled capabilities in their HCM systems by 2027, according to new research from global AI-centered technology research and advisory firm Information Services Group (ISG)
Software providers are integrating AI into all aspects of HCM, enabling more strategic use of resources and giving employees a more consumer-like experience.
The ISG Buyers Guides for HCM, produced by ISG Software Research, find the biggest driver of change in talent management and HR management system (HRMS) software is the growing use of AI and machine learning (ML) in these systems. Once focused on administrative functions, HCM has become a strategic asset over the past decade and is now central to developing and engaging a workforce to be more productive.
“Businesses expect HCM technology to improve workforce agility, decision-making and alignment with enterprise goals, all of which AI can help to achieve,” said Matthew Brown, HCM research director, ISG Software Research. “Software providers are integrating AI into all aspects of HCM, enabling more strategic use of resources and giving employees a more consumer-like experience.”
AI is the basis of new employee workflows and engagement, embedded analytics and personalized self-service, the research finds. These advances are transforming how organizations make strategic HR decisions. For example, predictive analytics allows leaders to anticipate and address talent shortages before they affect operations. Instead of relying solely on historical workforce data, companies can use AI to identify critical roles, assess internal readiness for them and decide whether to fill the roles through training or external hiring.
Enterprises upgrading their HCM software face a choice between consolidating disparate systems in all-in-one suites or integrating best-of-breed solutions, ISG says. While the former offers seamless integration across all HR functions, the latter may provide better capabilities for specific HR processes like payroll or workforce management, ISG notes.
A unified approach to HCM simplifies HR operations and employee data and eliminates silos and streamlines processes across an organization. Talent suites, meanwhile, support the entire talent lifecycle—including recruiting, learning, performance and talent planning—and providers are now adding AI-driven features such as skills matching and personalized learning.
When assessing or selecting software, companies often consider scalability and the level of embedded AI-driven automation. Organizations must carefully evaluate their unique needs and their HR and workforce objectives to choose the right applications and HCM platform, ISG says. One of the most significant shifts in the market is the growing demand for configurable platforms that allow for customization and integration of third-party applications and services.
Companies that invest in AI-enabled HCM will gain the ability to guide actions and unify decision-making for engaging and retaining employees, maximizing the value of talent and aligning workforce strategies with business goals, ISG says. To maintain that edge, they need to not only utilize the right software but continuously evolve their HCM strategies.
