Human Capital Management Market Size, Share & Industry Analysis, By Offering (Software (Core HR, Talent Management, Workforce Management, Payroll & Compensation, and Others) and Services), By Deployment (On-premises and Cloud), By Enterprise Type (Large Enterprises and Small and Medium-sized Enterprises), By End-use Industry (IT & Telecommunication, BFSI, Government, Retail, Healthcare, Education, Manufacturing, and Others), and Regional Forecast, 2025 – 2032

The global human capital management market size was valued at USD 31.34 billion in 2024. The market is projected to grow from USD 34.12 billion in 2025 to USD 64.97 billion by 2032, exhibiting a CAGR of 9.6% during the forecast period.

Human Capital Management (HCM) encompasses HR systems, tools, and methods employed to enlist, appeal, nurture, educate, retain, and oversee employees to accomplish business objectives. HCM solutions are implemented using cloud-based and mobile technologies for generating reports, handling data, and delivering a seamless user experience.

The market’s growth is expected to be driven by the demand for people and performance management solutions and integration of advanced technologies, such as Robotic Process Automation (RPA) and Artificial Intelligence (AI) into HR solutions to automate human resource activities.

• Zippia has stated that nearly 97% of companies plan to boost their spending on recruitment technologies by 2025, with 47% specifically targeting AI technologies.

The operational structure and policy of nearly every industry were significantly impacted by the COVID-19 pandemic. Governments and businesses globally had to adhere to social distancing and lockdown measures due to the rapid spread of the virus. Consequently, companies had to implement work-from-home strategies to maintain business operations. As a result, the adoption of remote work solutions across companies led to significant market opportunities during this period.

Transforming HR with Generative AI: Enhancing Efficiency, Productivity, and Employee Engagement

Generative AI (GenAI) in human resources has a huge potential to reduce manual work, yield off-the-chart efficiency & productivity, lower costs, and result in fewer or no errors on the job. GenAI provides more familiar workflows and personalized information, which is just the type of delivery that might fuel its adoption as more employees prefer this form of AI to address their needs.

Various benefits of generative AI that help HR departments enhance performance management procedures and drive organizational success include predictive analytics for talent management, custom-made development plans, automation of performance evaluation, improvement in employee engagement & satisfaction, actual time feedback & training, and many more. For instance,

• According to industry experts, generative AI has the potential to drive over 30% productivity and efficiency in HR value chains. The various procedures that can benefit from GenAI include resourcing & recruiting, HR strategy & planning, learning & development, HR admin & other shared services, and employee engagement, among others.

HUMAN CAPITAL MANAGEMENT MARKET TRENDS

Emerging Technologies in HCM: Enhancing Talent Matching and Driving Market Growth

Businesses frequently use emerging technologies, such as machine learning to enhance various talent-matching processes. These include optimizing job requirements, improving applicant expertise, widening procurement pool, enhancing internal selection efficiency, and removing partial recruitment. These processes are also assisted by other tools, such as video tests, social sourcing tools, Chatbots, and predictive analytics to test candidates that suit the role.

Additionally, by integrating cloud-based approaches and machine learning technologies, key players are opting for various strategies to meet changing business needs. They are launching human capital management solutions to increase efficiency and drive business growth. For instance,

• In October 2022, sa.global, a Microsoft-affiliate, introduced the latest Evergreen HCM for professional services firms. This standalone solution uses HR functions from Dynamics 365 Finance to streamline processes and enhance the user interface for project managers at professional services firms and legal professionals at law firms.

Similarly, Robot Process Automation (RPA) capabilities embedded with Artificial Intelligence (AI) and Machine Learning (ML) enable enterprises to standardize their operations by eliminating additional IT costs. RPA is vital for delivering efficiency and innovation within HCM solutions and enables organizations to provide enhanced talent strategies.

Thus, the adoption of cloud and RPA in HCM solutions will create human capital management market growth opportunities.

MARKET DYNAMICS

Market Drivers

Cloud-Based HR Solutions: Enhancing Efficiency, Engagement, and Cost Optimization

In HR tools, cloud computing solutions motivate organizations to boost employee engagement and improve experiences by providing enhanced features that elevate performance and talent management functions.

Many companies are making the switch from traditional human capital management systems to cloud-based solutions to reduce infrastructure and maintenance costs. According to experts in the field, approximately 60% of businesses are using cloud-based solutions for activities, such as workforce management, recruitment, payroll & benefits, and core HR. By implementing centralized global payroll systems, multinational corporations can cut labor costs by about 50% through process streamlining, operational optimization, and automation. This allows HR managers to focus on more critical responsibilities, ultimately increasing overall productivity.

The HR and management teams can conveniently access and share business and personal employee data using reliable cloud-based solutions. Companies can benefit from these solutions by streamlining tasks, such as performance reviews, timesheet submissions, and payroll management, thereby opening up new opportunities for automation.

Furthermore, certain cloud-based HR management platforms can be customized by HR personnel and corporate staff without requiring assistance from IT experts. As a result, cloud computing enables HR managers to enhance efficiency and make informed decisions based on data.

Market Restraints

Challenges in Cloud-Based HR Solutions: Data Security and Compliance Risks

In cloud-based solutions, data breaches or leaks are critical limiting factors. This happens due to security breaches in cloud computing. Unauthorized parties or applications may access the data and other sensitive information stored, accessed, or shared by employees. The DoS cloud attack could shut down all cloud services to prevent users from temporarily accessing them.

In addition to data breaches, if the employee’s personal information is inaccurate, then businesses may be subjected to legal action. These entities have a responsibility to protect the privacy of their employees and HCM data. These factors may hamper the market’s growth.

Market Opportunities

Impact of Remote Work on HCM Solutions: Driving Demand for Flexible and Digital HR Tools

The rise of remote work has created significant opportunities for HCM solutions as companies adjust to a decentralized workforce model. According to industry reports, prior to 2020, only 17% of people in the U.S. worked from home five days a week. However, in recent years, that figure has risen to 44%. This change has led to an increased demand for human resource tools that can effectively handle remote employees, monitor their performance, and encourage efficient communication.

HCM software that includes self-service portals allows employees working remotely to retrieve essential HR information, request time off, and modify personal information from any location, creating a smooth and employee-focused experience.

• According to industry experts, after the pandemic, 76% of employees prefer to work for companies that offer flexible work arrangements. This shift offers incredible opportunities for Human Capital Management (HCM), pushing companies to rethink their strategies and invest in technologies that foster collaboration and engagement.

SEGMENTATION ANALYSIS

By Offering

Software Segment to Dominate with Growing Demand for AI-Driven Talent Management Solutions

Based on offering, the market is divided into software and services. Core HR, talent management, workforce management, payroll & compensation, and others come under the software segment.

Software segment holds the largest market share and is expected to continue its dominance during the forecast period. These software solutions can efficiently manage the employees and maintain transparency between them and the management. They can also assist businesses in delivering enhanced team member experience and higher productivity. Workforce Management (WFM) solutions assist with analyzing data for essential business operations and overseeing various HR tasks. WFM software is offered in various purchasing alternatives, such as being included in ERP suites, HR suites, operations applications, workforce management suites, or as independent applications.

Additionally, the requirement for talent management solutions is expected to rise considerably during the forecast period. Adopting artificial intelligence in talent management solutions will drive the human capital management market share. Under services segment, the report covers HCM consulting & application and HR transformation services.

By Deployment

Cloud-Based Solutions to Lead Growth Amid Rising Demand for Scalability and Efficiency

The market is divided into cloud and on-premises, based on deployment.

During the forecast period, the cloud segment is expected to grow significantly. This growth is due to organizations transferring their current solutions to the cloud for improved user experience, regular updates, and improved analytics & reporting, among other factors. There might be a strong demand from end-users for cloud-based business models integrated with HRM services. For instance,

• In October 2022, Topia introduced a remote work software solution designed to assist businesses in overseeing and supporting a dispersed workforce. The software also claimed to improve the process of automating taxes, approvals, risk evaluations, and social security. Topia supported HR teams in facilitating talent mobility, flexibility, and advocating remote work for all employees.

The on-premises deployment segment is likely to showcase slow growth in the coming years. However, traditional on-premises solution providers, such as SAP SE and Oracle Corporation continue to support their customers using on-premises HCM solutions.

By Enterprise Type

Large Enterprises Dominate, While SMEs Drive Rapid Growth

Based on enterprise type, the market is bifurcated into large enterprises and small & medium-sized enterprises.

The large enterprises segment is likely to capture a large market share. These enterprises are anticipated to increase their spending on core HR to improve their productivity. Large-scale companies have more HR/IT functions. Also, they constitute more HR functions, such as payroll, recruiting, and benefits on a larger scale as compared to small enterprises.

The small & medium-sized enterprises segment is anticipated to experience the most rapid growth as market players are increasingly required to offer cost-effective options that yield valuable outcomes.

By End-use Industry

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IT & Telecom Leads, While Healthcare Exhibits Highest Growth

In terms of end-use industry, the market is divided into IT & telecommunication, BFSI, government, retail, healthcare, education, manufacturing, and others (transportation & logistics and energy & utilities).

The IT & telecom segment is set to hold a sizable market share during the forecast period. IT & telecommunication service providers are anticipated to significantly adopt core HR, talent management, and workforce management solutions during the forecast timeline. Organizations across this industry are opting for HR software to administer employee benefits and oversee HR operations effectively.

The healthcare segment is projected to experience the highest CAGR during the forecast period. As the industry evolves, healthcare organizations must also modify their HCM systems to stay competitive and attract, hire, and retain top talent.

• In September 2023, Oracle introduced the Cloud Human Capital Management suite, which includes a new employee rewards and recognition platform, along with a workforce scheduling management tool, specifically for the healthcare sector. These updates are a result of Oracle's acquisition of healthcare technology company, Cerner Corp., in 2022.

HUMAN CAPITAL MANAGEMENT MARKET REGIONAL OUTLOOK

The market is geographically studied across North America, Latin America, Europe, the Middle East & Africa, and Asia Pacific, and each region is further studied across countries.

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North America: Leading Revenue Contributor with Strong Vendor Presence

North America is projected to exhibit a high growth rate and is the leading revenue generator in the global market. This is attributed to the significant presence of prominent vendors, such as Ceridian HCM Holding Inc., Oracle Corporation, and IBM Corporation, and substantial investments in cloud applications. The adoption of cloud-based solutions by small firms across the region is also contributing to the increasing popularity of cloud-based technologies and creating favorable business prospects.

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The market in the U.S. is expected to experience a strong growth rate during the forecast period. Organizations are increasingly utilizing predictive analytics in talent management to enhance decision-making and bolster their workforce by retaining human resources. This factor is anticipated to fuel the growth of the market in the U.S.

• In April 2024, the HR Path Group announced the acquisition of GroupeX Solutions (GroupeX) based in Toronto, Canada. This strategic move was intended to increase HR Path's footprint in North America and enhance and diversify its robust HRIS consulting practice.

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Asia Pacific: Fastest-Growing Market Driven by Digital Transformation

Asia Pacific’s market size is anticipated to showcase the highest growth. Growing digitization and adoption of advanced technologies, such as Industry 4.0, smart factory, Big Data, and artificial intelligence are likely to drive the demand for a more skilled workforce. This will fuel the intensity of hiring across the region. Also, expanding multinational businesses with substantial IT budgets is a major factor supporting the market’s growth in the region.

• In June 2024, Deloitte India and PeopleStrong, an enterprise work and HR tech company, announced a strategic partnership to expedite HCM transformations for Indian businesses. The goal of the partnership is to empower Deloitte India to leverage PeopleStrong’s contemporary, all-encompassing solutions and HR transformation expertise.

Thus, the above-mentioned scenarios are likely to further propel the demand for human capital management solutions in the years to come.

Europe: Rising Adoption of Workforce Automation and Compliance Solutions

Europe is expected to show significant market growth during the forecast period. The region is expected to show an increasing demand for workforce automation solutions to improve compliance. For instance, industries across the U.K. have deployed workforce management solutions to manage their employees. Also, the European Union has implemented a talent management strategy to lessen staff overload for professional growth. These aspects are likely to create new market opportunities across the region.

Middle East & Africa: Increasing Demand for Skilled Workforce and Digitization

The Middle East & Africa market is anticipated to grow at a healthy rate. The growing mobility of workers from different cultures and regions is one major factor contributing to the region's growth. The IT sector in the Middle East & Africa remains competitive as the industry is undergoing digitization, thereby boosting the requirement for highly skilled employees. Changing work demands are creating a huge need for advanced skills and capabilities.

Latin America: Steady Growth with a Focus on Employee Engagement

The Latin American market is likely to register a steady growth rate over the forecast period. Organizations in the region are expected to be more inclined toward communication and interaction at the workplace to drive engagement and retention of employees. Also, HR software features, such as career development, talent management & recruiting, and rewards & recognition are likely to gain more traction to drive employee engagement at the workplace.

Competitive Landscape and Growth Strategies in the Human Capital Management Market

Key Industry Players

Market Players to Strategize Partnerships and Acquisitions to Expand their Presence

Prominent players operating in the market are focusing on expanding their global presence through merger & acquisition strategies. Rising technological advancements and organizations' increased adoption of HCM solutions are projected to accelerate the market’s growth. These companies aim to acquire small and local firms to expand their business presence.

Long List of Companies Studied:

• SAP SE (Germany)


• Automatic Data Processing (ADP), Inc. (U.S.)


• Oracle Corporation (U.S.)


• Microsoft Corporation (U.S.)


• Cornerstone OnDemand, Inc. (U.S.)


• Ceridian HCM, Inc. (U.S.)


• Infor, Inc. (U.S.)


• Ramco Systems Ltd. (India)


• Workday, Inc. (U.S.)


• Paycom Software, Inc. (U.S.)


• UKG Inc. (U.S.)


• Cegid (France)


• Bamboo HR LLC (U.S.)


• Sumtotal Systems, LLC (U.S.)

And more…

KEY INDUSTRY DEVELOPMENTS:

• October 2024: ADP announced the acquisition of WorkForce Software, a provider of workforce management solutions that focuses on assisting large, international companies. This acquisition is intended to enhance ADP's global portfolio of workforce management solutions and facilitate future innovations in this area.


• September 2024: ADP introduced ADP Lyric HCM, an HCM platform to address the changing requirements of today's workforce with global HR, payroll, and service capabilities. Lyric combines GenAI technology with ADP's extensive dataset to provide adaptable, intelligent, and human-focused HCM solutions.


• March 2024: Cornerstone OnDemand announced the acquisition of Talespin, a company specializing in spatial, extended reality (XR) learning. The XR learning technology from Talespin will enhance Cornerstone's strong offerings in content subscriptions, curation, creation, and analytics, resulting in a comprehensive learning content solution that supports the future of work.


• December 2023: Workday and Kainos teamed up to introduce "Spark&Grow", a new solution to assist small and medium-sized businesses in implementing Workday’s solutions efficiently. Kainos will handle the deployment of Workday HCM and Workday Financial Management in just four weeks, providing expert guidance and support along the way.


• October 2023: ADP, a provider of payroll and HR systems, launched a customized Human Capital Management (HCM) solution, called ADP Workforce Now for Construction. This specialized software is designed to tackle the specific challenges that construction companies face, such as government compliance, job costing, union management, multi-site project management, and workforce recruitment.


• October 2023: IBM and EY announced the launch of EY.ai Workforce, an HR solution that allows organizations to incorporate artificial intelligence into their essential HR operations. This development signified a crucial advancement in the partnership between the two companies and a major achievement in utilizing AI to enhance productivity of the HR department.

INVESTMENT ANALYSIS AND OPPORTUNITIES

Several small-sized companies are securing funds to speed up and enhance their human capital management ecosystem. They are also using these funds to expand the team size and focus on innovation in relation to the market. Companies that opt for supporting businesses in the financial community are bolstering their efforts in developing technologically advanced solutions and a global customer base. For instance,

• In September 2024, Arya Health secured USD 4 million as seed funding in a round led by Twelve Below, signaling a significant milestone for the healthcare workforce automation platform. The investment will empower Arya Health to advance toward its goal of transforming workforce management in the healthcare sector by using cutting-edge AI and automation technologies.

REPORT COVERAGE

The report provides a detailed market analysis. It focuses on key points, such as leading companies, offerings, and applications. Besides this, it offers an understanding of the latest market trends and highlights key industry developments. In addition to the above-mentioned factors, the report contains several factors that have contributed to the growth of the market in recent years.

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