Stephen Roberts recently attended Unleash World 2025, the leading global HR tech conference exploring how AI is transforming talent, learning, and organisational design. The theme of the conference chimes with what we see in our own portfolio, including HR tech platforms, Ciphr and CMap: AI is reshaping the requirements of an HR function, as well as the expectations of the providers that serve it.
1. AI is first and foremost a people issue
AI is first and foremost a people issue, with businesses rapidly changing in terms of team size, shape, makeup and training needs – all placing a new set of demands on the HR function.
What CEOs want from the Chief People Officer is changing. CEOs are looking to reskill the talent they already have, hire the talent they need, and add AI assistants and agents to workflows wherever they can. HR needs to play a role in that. Change management, and specifically bringing people with you through the transition to AI, will become one of the key roles of HR.
2. The expectations of the workforce are changing
Alongside changing demands from CEOs, there are also rapidly changing expectations in the workforce, particularly in terms of UI/UX. Employees are increasingly used to the conversational interfaces of LLMs and don’t want to be playing ’whack-a-mole’ between multiple internal applications to perform tasks or gain insights. In time, all those systems will work together, with an orchestration layer connecting everything, and a reasoning layer making sense of the data to help employees get answers or complete tasks. So instead of logging into five tools, you’ll just ask one system, and it will handle the rest.
To work effectively, AI needs to provide insights grounded in accurate and compliant data. The fundamental requirement for a system of record isn’t diminishing. However, the employee is increasingly used to interacting with AI – there will be lots of shadow AI already in most businesses. If the HR team don’t deliver what they expect (and by extension, if existing HR tech doesn’t keep up with the expectations of the end user), then there will be wedge threats from new tools being used further down the business. If offerings aren’t augmented with AI (and automation in the case of payroll) then they will quickly become antiquated.
3. A hot market for AI-first HR tech startups, and lots of M&A…
In that context of reshaped requirements of HR, there have been vast amounts of VC money coming into parts of the HR tech stack, particularly into talent acquisition. The vast majority of these products are niche and are augmenting an existing process – making HR functions more efficient, but not necessarily transforming them (yet). Examples would be AI-driven CV screening or job description generation. The most interesting businesses are those that are creating new business models altogether – things that can’t be done by humans. There are fewer of these, but they are coming.
Whilst some of these businesses have incredible products, few have the customer base or trusted market positions of the incumbents. It therefore feels likely that M&A will be a theme of the coming years in HR tech, as incumbents buy rather than build more AI capability. These businesses are typically the system of record and/or payroll providers, and are sitting on significant amounts of cash, so acquiring AI sparkle to sell into their huge bases is an obvious augmentation of their growth strategies.
Indeed, it has already been an active period as businesses like Workday (Sana and Paradox) and SAP (Smart Recruiters) acquire.
4. Implications of AI on HR tech business models
The talk amongst vendors at Unleash was the impact on the broader business models – marketing, sales, customer success and service.
The attitude of the leadership team is crucial in this regard. AI is evolving rapidly, and the technology is improving quickly. This increases the speed of new ways of working and new business models emerging. The best teams will demonstrate humility, make it clear internally and externally that they don’t know everything, but there will be significant change to come, the business is starting from a strong position and has inherent competitive advantages but is going to need to learn and adapt in order to maintain that. Job transformation is inevitable but that creates new opportunities.
Incumbent HR tech providers need to emphasise the advantages they hold – the data they sit on, the domain experience (in product and go to market), scale, brand and longevity. Buyers will generally favour buying from trusted vendors, provided they are maintaining a competitive product.
For those that do adapt, AI should be seen as a massive opportunity, both in terms of revenue growth but also in reshaping businesses. Agentic AI should extend the remit of HR tech (and by extension the addressable market for businesses), creating stickier customers, driving more value out of their HR software. Failure to adapt will see the system of record becoming infrastructure, with the ‘action’ happening on top if it – the equivalent of the copper cables that the internet start-ups were built on top of. This is an exciting moment for HR tech firms rising to that challenge for their customers.
