Employee Engagement and Market Share: The $74 Billion Question

 

After a couple of weeks in the wild, The Starr Conspiracy’s Employee Engagement Brandscape Report™ has prompted lots of questions. Probably the most frequently asked is this one: “Seventy-four billion dollars? Really? That number seems way too big and impossibly huge.”Well, the $74 billion Total Addressable Market (TAM) in Employee Engagement is a big number, but if anything, it’s too small.

Without getting into the deep dive behind how we constructed the TAM for Employee Engagement, we believe that it’s easiest to consider it within the context of what everyone else is saying. What are the general consensus numbers around TAMs for recognition, wellness, measurement, and talent management from other analysts, researchers, and investors? Let’s pull some other numbers:

  • Recognition: There’s a range here. IDC predicted in 2013 that the 2016 market size would be $32 billion in 2016, with an 8 percent CAGR. In 2012, Josh Bersin pegged the market at $46 billion. Assuming a modest 4 percent CAGR would put the 2016 market at $54 billion in 2016, using Bersin’s numbers.
  • Wellness: For 2016, IBISWorld research put the TAM at $7.8 billion.
  • Measurement: This category is harder to pin down, but after speaking to several CEOs in the space, $750 million in 2016 is a consensus figure.
  • Talent Management: According to the investment bankers at William Blair, $13.2 billion is the 2016 TAM.
  • Total: On the low end, TAM for these three categories is $53.75 billion. On the high end, the TAM is $75.75 billion. Even if we are toward the high end of some of these other entities, we feel secure about our numbers.

However, what we believe is getting lost in all of the number crunching is this single core truth: Market share in HR technology is incredibly fluid right now. Simply put, Employee Engagement has become a stand-alone category that most observers are still more comfortable seeing as multiple discrete categories. We believe that the future leaders in the Employee Engagement category will rapidly shift their thinking. They will see Employee Engagement as the category and recognition, wellness, measurement, and talent management as subcategories that will become increasingly less relevant as time goes by and feature sets begin to look more similar than different.

There are really only two types of companies in the new Employee Engagement category today — the quick and the dead. Which group do you want to be in? It behooves you to be vigilant, because someone is coming for your customers, and that someone is not who you think it is. If you’re in talent management, solutions in recognition, wellness, and measurement are going to take customers from you in 2017 — especially in the midmarket. And everyone should be concerned about the measurement category. You should expect upstart solutions in this category to push this space’s comparatively small TAM into a much, much larger number.