How to Stand Out in Your Category: Buyer Insights for HR Software

Tools buyers are replacing with HR software

When our advisors asked buyers what methods they currently use to handle day-to-day HR practices, 44% said they use third-party software, such as accounting and database tools, 25% said they rely on manual methods, such as spreadsheets or pen-and-paper, and nearly 19% said they do not have any system in place to manage HR operations. 

While manual methods and spreadsheets can work for small businesses, they can lead to inaccurate tracking and inefficiencies as the business scales. Likewise, using third-party software with limited functionality may cause misalignment and pose a financial burden, as it requires investment in multiple licenses, subscriptions, and integrations and, consequently, higher costs.

A dedicated HR solution can centralize operations, such as employee information management, recruiting and onboarding, and payroll processing.

→ Pro tip

Identify your buyers’ pain points and demonstrate how your HR software provides dedicated features that can lead to better business outcomes. Highlight your product's industry-specific functionalities, customization opportunities, and integration options.

It's important to clarify that despite requiring more upfront investment and time to implement, an HR software solution will improve functionality and efficiency and lower costs in the long run.

Why buyers switch to HR software

Our advisors conversed with buyers currently using either manual methods or third-party software and seeking a switch to HR software. These discussions shed light on organizations' real-life pain points—inefficiency (41%), limited functionality (27%), and unreliability (9%) of their existing tools.

• Inefficiency: Manual methods and third-party tools often lack advanced features and can lead to inefficiencies in workflows such as onboarding, leave management, and performance reviews. Such methods are also prone to errors such as typos, miscalculations, and omissions, resulting in inaccurate employee records, payroll mistakes, and compliance issues.
• Limited features: Most third-party software tools do not offer the required features and functionality for human resource management. For instance, third-party tools that lack automation features for routine HR tasks such as onboarding, offboarding, and performance evaluations can lead to manual errors and increased administrative burden.
• Lack of reliability: Third-party software hosted on unreliable servers may experience frequent downtime, affecting access to critical HR functions. Additionally, inadequate backup procedures or failures in data backup processes can result in data loss during system crashes or updates.

Compared to the existing methods used by HR professionals, a dedicated HR solution offers the following benefits:

• Centralized employee information management: HR software provides a centralized repository to store employee information, including personal details, employment history, performance evaluations, and training records. Authorized personnel can quickly access and update employee data, ensuring accuracy and compliance with privacy regulations.
• Streamlined recruiting and onboarding: From job posting and applicant tracking to interview scheduling and candidate evaluation, HR software automates and streamlines various recruitment tasks, helping reduce the time-to-hire and improve candidate experience.
• Efficient performance management: HR software facilitates the creation, tracking, and evaluation of employee goals and objectives, promoting alignment with organizational objectives. It also enables continuous performance feedback and coaching, enhancing employee development and engagement.
• Accurate payroll processing: HR software automates payroll calculations based on attendance records, benefits deductions, and tax withholdings, reducing errors and ensuring timely and accurate payments. It also facilitates direct deposit payments and generates payroll reports for financial analysis and compliance.

What HR software features are valued the most

When analyzing HR software functionality preferences, our findings reveal a discrepancy between buyers' and users' priorities.

Based on reviews analysis, current users (28%) rate employee database management as the most essential feature in HR software**. In contrast, most buyers (46%) interacting with our advisors seek payroll management functionality in an HR tool. Other functionalities buyers seek are time and attendance (40%), personnel tracking (35%), onboarding (25%), and applicant tracking (19%).

These findings indicate that businesses already using HR software find immense value in employee database functionality. A database stores detailed information about each employee, including personal details, contact information, employment history, and job-related data. Its centralized access reduces the risk of discrepancies and errors with manual data handling. It also ensures all HR staff members work with the same, up-to-date information, improving overall accuracy and reliability.

On the other hand, payroll management functionality allow HR staff to automate the computation of wages, including basic pay, bonuses, deductions, overtime, and other adjustments. The feature also helps calculate and withhold federal, state, and local taxes accurately based on the latest regulations, ensuring tax compliance.

→ Pro tip

Understand what organizations prioritize when buying software to adjust your product profile description and features. Highlight key strengths and illustrate how reviewers use your software to solve their organizations' needs and challenges. 

You can also promote how your product compares to the competition by showcasing earned awards and third-party badges based on ratings and popularity.

Use cases for HR software

Requested HR software features may vary depending on the use case and the industry in which a business operates:

• Healthcare and medical firms utilize HR software to automate candidate sourcing, track applications, and manage recruitment pipelines, which is crucial for healthcare organizations constantly seeking qualified professionals. Dedicated HR software for the healthcare industry also helps manage complex shift patterns and rotations for medical staff, optimize workforce utilization, and ensure adequate coverage.
• Nonprofit organizations use HR software to streamline volunteer recruitment processes, track applications, and manage onboarding tasks, such as background checks and training. The software also helps deliver online training content and tracks learning progress, ensuring skill enhancement and compliance with nonprofit sector standards. Many organizations implement recognition programs to acknowledge employee and volunteer contributions, fostering a culture of appreciation and engagement.
• Construction and contracting businesses utilize HR software to track and manage a diverse workforce comprising full-time employees, contractors, subcontractors, and temporary workers across projects and job sites. The software helps construction managers maintain records of employee certifications (e.g., safety training, equipment operation), ensuring compliance with industry standards and regulatory requirements. Additionally, the software automates onboarding tasks such as paperwork completion, safety orientations, and training sessions for new hires, ensuring rapid integration into project teams.
• Manufacturing firms use HR software to manage complex shift patterns, overtime, and workforce rotations to optimize production schedules and maintain operational continuity. The software automates payroll calculations, including shift differentials, bonuses, and deductions, ensuring accurate and timely payments aligned with production schedules. HR software also helps ensure adherence to labor laws, environmental regulations, and industry-specific standards through automated compliance tracking and reporting.
• Maintenance and field service businesses typically employ HR software to automate onboarding procedures, including safety training, equipment familiarization, and compliance documentation, to accelerate new hire readiness for field deployment. Some HR solutions also optimize the scheduling and dispatching of technicians based on skills, availability, geographic proximity, and customer service requirements.

Average budget for HR software across industries

The average budget organizations are willing to allocate for HR software ranges from $35 to $160 per user, per month. Additionally, the average budget across the top five industries for purchasing HR software is approximately $79 per user, per month. 

However, the budget for purchasing HR software varies from one segment to another based on factors such as the deployment model, integration capabilities, the number of users and employees, customization level, and required functionality.

→ Pro tip

When determining pricing for your software, consider the industry in which your target buyers operate. Some sectors may have more complex requirements that can drive up costs. To evaluate how you stack up against your competition, you can use the Capterra Shortlist^TM for human resources software.

Rise above your competition with strategic insights

HR software marketers face enormous pressure to set their products apart from the competition in a crowded marketplace. But with the right insights, you can better understand the key priorities and pain points of your target audience and address them directly in your product messaging to claim your fair share of buyer attention.

With more than 9 million active software buyers on our sites every month, Gartner Digital Markets can equip you with the strategic insights you need to level up your marketing strategy and become a leader in your category.

Log into your Gartner Digital Markets account and optimize your profile to ensure buyers understand how your software meets their evolving needs.

Caroline Hogan

Caroline Hogan is the Senior Director of Vendor Marketing at Gartner Digital Markets, where she manages the marketing strategy for the vendor platform. She has more than 20 years of marketing experience, leading initiatives from brand strategy and demand generation to customer retention and advocacy. Connect with Caroline on LinkedIn.

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Source

1. HR Budget and Investment Trends for 2024, Gartner

Methodology and buyer demographics

*Software buyers analysis 

Findings are based on data from conversations that our advisor team has daily with software buyers seeking guidance on purchase decisions. The data used to create this report is based on interactions with small-to-midsize businesses seeking HR tools. For this report, we analyzed approximately 8,300+ phone interactions from June 20, 2023 to June 21, 2024.

The findings of this report represent buyers who contacted Gartner Digital Markets and may not be indicative of the market as a whole. Data points are rounded to the nearest whole number.

The buyers we interacted with are largely small businesses representing a growing majority of HR software purchases. Below you’ll find the demographics of the buyers so you can see the size and type of businesses, from annual revenue to industry.

**User reviews analysis 

Feature ratings are based on 1,954 user reviews from June 20, 2023 to June 21, 2024, categorized on a scale of “low importance” to “critical.”