The New HRTech: Startups Focused On Addressing The IT Talent Shortage Will Thrive

By Pavel Podkorytov, founder of TalentService.com

It’s not like the tech job market was ever freezing, but in the last couple of years, it seems to be blazing hot. 

First, the pandemic put pressure on more industries to get online, making almost every company a tech business and greatly increasing the demand for IT professionals. Then, the work from home trend intensified, making it much easier for tech workers to find remote opportunities. Finally, the Great Resignation added fuel to the fire, boosting the talent shortage in technology to an unprecedented level. 

As a result, employers find themselves in a challenging job market, where job seekers have the upper hand. This power shift to employees has become apparent to researchers studying IT job market trends.

According to Graham Waller, vice president and distinguished analyst at Gartner, "IT professionals who have in-demand skills in data science, cloud, product or agile development, they can almost be like top athletes in the way clubs compete for top players". As Gartner research shows, only 29% of techies truly want to stay in their current job. Others are ready to explore their options, and for about two-thirds of IT employees work-life balance and WFH flexibility trumped compensation in decision making.

These findings are supported by a new Ladders Remote Work Report: 24% of all professional jobs in the US and Canada were hired for permanent remote work In Q1 2022, compared to only 4% before the pandemic. This abrupt increase in remote jobs highlights the speed of labor market transformation, with tech workers being at the forefront of it.

And it doesn’t seem like this trend is going to change soon. As indicated in the Employment Projections for 2020-2030 by The US Bureau of Labor Statistics, “computer-related occupations are expected to have elevated long-term demand”, meaning that today’s overheated state of the IT jobs market has a lot of chances to become the new norm for the foreseeable future. Even after the end of the pandemic, this market dynamics is probably here to stay, because COVID only accelerated the trends that were already underway.

By creating TalentService we tried to better reflect this new reality where companies are increasingly competing with one another for IT professionals. Unlike most hiring platforms, the AI algorithms of TalentService evaluate not the potential employee, but the employer. This allows us to assess whether the employer and the employee are a great fit for each other. As a result, the company gains a satisfied employee who is motivated to stay for a long time, and the employee gets the prime opportunity to fulfill her ambitions and expectations.

Thus the focus is shifted from company’s perspective to workers’ expectations, ensuring their needs and interests are the priority. We believe this approach to be beneficial to both the employers and workers, especially compared with today’s signs of business desperation to attract talent, such as offering candidates money to interview.

According to another Gartner study, 65% of employees rethink the place that work should have in their lives. Compensation can’t make up anymore for a bad work experience. As a result, predicts Gartner, companies will need to plan for a year-over-year turnover rate that is 50% to 75% higher than they are accustomed to. Most legacy hiring practices and solutions are not ready for this because they were designed with the old rules in mind. All of this adds impulse to the HR tech startups that offer fresh solutions to the unprecedented labor market changes.

In spite of support from the tight IT job market, the HR tech space faces a few major challenges that startups need to address to become successful in this new competitive landscape. 

One of them involves AI-induced risks. The introduction of machine learning and AI has been a game-changer for the HR tech in recruiting and retention. AI allows to automate and speed up processes, producing insights and ensuring potential hires and employees are assessed fairly. 

This is going to cause a drastic change of recruiter’s role in the coming years, as more tasks on matching the talent to the right job will be handled by smart algorithms creating a new tool that addresses HR professionals' needs related to the talent shortage.

Still, AI has its limitations when it comes to the quality of input data. Amazon famously had to shut down its AI recruiting tool after discovering it discriminated against women. The computer model was trained on resumes submitted to the company over several years, and most resumes in the tech industry come from men. This illustrates why AI ethics relies heavily on human judgment for assessing possible distortions in the data.

The advance in HR tech also raises new security risks as more data that is highly sensitive goes to the cloud and is accessed from remote locations. A study by Tenable and Forrester revealed that 74% of organizations have experienced cyberattacks linked to vulnerabilities in technology used for remote working. With remote and hybrid work gaining traction even as the pandemic fades, the importance of addressing security risks in the HR tech will only grow.

With IT professionals being the backbone of the modern economy, startups addressing tech workers shortage will continue to have a strong tailwind. Just as employees are adapting to the distressed job market, new AI-powered HR tools and challenges of remote work, the HR tech space should be too.

In today’s fast-changing environment, startups focused on evolving HR needs are destined to be in a high demand. After all, the most valuable part of any IT company is the people, and hiring and retention of new talent becomes increasingly complex in this hot seller’s market.