How Economic Uncertainty Is Reshaping Talent Acquisition Technology Investment

Downstream Effects of Economic Uncertainty

Now or soon, if current financial and economic conditions persist, corporations across many industries but particularly those industries reliant on certain foreign goods in the supply chain will start to reevaluate their inputs. They have a few options: they can cut back on the purchase of supplies—and in turn reduce their outputs and increase prices on fewer goods sold—find new sources for those inputs likely at a higher cost, or maintain the status quo and pass the cost increases down to consumers. But they’re still at the mercy of consumers, who will simply buy less at higher prices. They’ll have to cut back on costs in other ways, and talent acquisition is a likely target.

HR leaders and practitioners can already attest that their TA teams are running lean and have been for years. From what we’ve heard from our clients, there simply has not been much backfill for the cutbacks from several years ago. However, corporations will likely put a pause on new hiring, and they might even look to avoid backfilling some of their own departures across the business. With low demand for new hires, leaders will pull back on investment in talent acquisition—both labor and tools like technology.

What might this look like for investment in TA tech? There might be cutbacks among many types of tools, but some technologies or technology-forward recruitment services might actually benefit.

Negative Effects on TA Technology Investment

With a potential drop in hiring due to freezes or even layoffs, corporations will likely look to the core system of record—the ATS—for potential cost-savings. No one will stop using the ATS, but organizations may reconsider putting money toward investing in a replacement ATS or introducing a new ATS for certain business lines alongside their existing one or others. They could look to substitute their existing ATS with a more affordable option, but there is a substantial cost in time and money to make a switch, so we shouldn’t expect to see affordable solutions get much of a benefit even as corporations tighten their TA tech budgets.

We should expect the same types of pullbacks in investments in candidate engagement technologies, like the CRM. With fewer candidates to manage, there will be less of a need to spend on technologies that engage candidates at scale, though the benefits of a CRM are enough that we shouldn’t expect many corporations to go back toward more manual sorts of candidate engagement.

Tools like the ATS and CRM are easy targets for cutbacks, because of their high costs of use. But more affordable TA tools might be more at risk due to their low ROI when there are fewer jobs to hire for. Corporations might look to cut back on spending on external sourcing technologies, like social search platforms, which find passive candidates across the web, or programmatic advertising/job distribution platforms, which target job ads on harder-to-reach candidates.

Employer branding investment might be among the most at risk in a downturn. Large corporations can leverage their existing consumer status to continue to attract candidates. Smaller corporations will have a harder time justifying employer branding when they’re doing much less hiring overall and have more candidates applying per open role.

Today’s environment is already harsh for DEI-related TA technologies—at least in the United States—but these technologies might be more at risk in the event of an economic downturn. Corporations might pull back on spending on tools that help write non-biased job descriptions when there are cheaper or free tools like Generative AI that might be able to do the work reasonably well.

Not surprisingly, corporations would look to cut back spending on interview management tools, as well. Interview scheduling and the growing area of interview intelligence tools might also get displaced by cheaper or less specialized alternatives. Generative AI, once again, might be able to do at least some of the job at a lower price point.

We can expect large enterprises to cut back on TA technology investments at some level, but their hiring needs are less sensitive to business cycles than smaller businesses overall. Retailers, for instance, will always need new employees due to high turnover. SMBs might have the toughest time managing TA during a downturn, and budget constraints make them more likely to cut back on TA technology investments. We expect that in a downturn, SMB-focused TA tools might be at the greatest risk, and we could see more vendor consolidation as these tools get absorbed by larger vendors.

Positive Effects on TA Tech Investment

Even in more difficult times, corporations might see an opportunity to increase their investments in certain areas of talent acquisition. Rather than invest in a new or replacement ATS, corporations might look to invest more in internal or external support to better optimize the existing ATS to better identify great candidates—either external candidates, through better candidate rediscovery, or internal candidates across the business. Corporations might also invest in resources to consolidate different candidate systems of record under one hood—whether through a single ATS or multiple systems of record that are better integrated.

Corporations might also look to invest in internal talent marketplaces, which would better identify internal resources to support project work or to hire internally. Organizations are getting better at identifying the skills and potential of the existing workforce, but these tools become critical in the event of a hiring freeze.

Corporations might also increase their investments in RPOs—not a technology, obviously, but a service that heavily leverages TA tech. It might seem wasteful to hand off hiring to an outsourced team with internal resources available, but the cost per hire through an RPO could be a good deal cheaper than through an internal team. Like we discussed above with respect to Generative AI, depending on a business’s circumstances, its leaders might be willing to accept a reasonably good quality of hire—if not as good as an experienced internal team might manage—if it comes at a much lower cost.

Speaking of Generative AI, we would expect corporations to make a big push toward substituting existing TA tools for those that offer more automation or AI. A downturn could prove to be an opportunity for corporations to make a move toward a more fully automated TA process that leverages versatile technologies like Generative AI that come at a fairly low price point for most work and can serve many different needs—even if they do not do the job as well as a more expensive point solution. Tools like Gemini, Claude, and ChatGPT are making significant upgrades several times a year. They can help with hiring analytics, job descriptions, interview questions and interview summaries, and various other manual TA tasks. We expect that AI and other automation tools will soon be able to take on much of the work of candidate screening, interview scheduling, and candidate engagement, among other areas at a low price point, as automation technology has been scaling quickly and, in many cases, affordably.

Ideally none of these tech transformations happen amid a downturn, and, in fact, many of them are opportunity areas for corporations right now. Your organization might consider whether to prepare its TA tech stack for more difficult hiring ahead, with the hope that business might soon be able to continue as usual.

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