Are Applicant Tracking Systems becoming a Commodity?

We just released our new research on the talent acquisition systems market, and things are really changing. The core market for large scale applicant tracking systems grew by around 11% last year (despite the recession) and is now nearing $1 billion.  If you include the dozens of smaller players and industry specific companies, the market is probably 25% greater.

This market, which is more than 20 years old, has significantly changed and is in the middle of a revolution.  The original ATS was designed as a workflow and document management system for resumes, and the user was an HR administrator.  Over time these systems became recruiter tools, and slowly became easier to use in the filtering, management, and analysis of candidates.  Today, now that more and more resumes are shifting toward LinkedIn or other social network profiles, one needs to ask “what is the future of the ATS?”

Well, as in the other HR software markets we study, the applicant tracking systems market is being transformed.  Today’s ATS is really an “integration platform,” which not only is used to track incoming resumes, but also connect to sourcing tools and services, assessment tools and services, video interviewing platforms, background checking, job boards, and recruitment outsourcing companies.  All these business areas are like planets in the solar system of Talent Acquisition, and to some degree the talent acquisition system is the sun.

But as our research shows, nearly half the companies we surveyed are considering replacing their ATS.  This is taking place because so many of these other tools have applicant-tracking features, and many of the older ATS systems are not keeping up.  And if we truly consider where the world of recruiting is going, one might even say that the ATS itself is becoming somewhat of a commodity.

Consider the following.  In the “borderless workplace” we now live in (theme of IMPACT 2011, coming up soon), recruitment takes place through the use of tools like LinkedIn, recruitment advertising, employment branding, twitter, and Facebook.  These sourcing tools cost money – and in many cases far more than the cost of the ATS itself.  So if your ATS has hooks to all these important sourcing and related services, how much money can you afford to spend on the ATS itself?  And if the ATS comes bundled with your talent management system (which is what companies would ultimately like), why wouldn’t it not become just a standard feature of the infrastructure?

Our research clearly shows that the traditional ATS marketplace is going through a revolution, and while these systems are certainly not going away, they are becoming more like integration platforms and less like “total solutions.”  We talked with the head of recruiting from a major consulting firm and this individual is paying more than $800,000 per year to use a sourcing system like LinkedIn.  Given the tremendous importance of this dynamic database of candidates and all the related tools they offer, how much would this company justify to spend on their ATS?

This market is undergoing transformational change.  Thanks to the power of these tools, there is a new arms race to build, buy, and craft the best employment brand, sourcing, and recruiting solution.  Don’t expect the applicant tracking market to go away, but vendors have to continue to innovate to keep their role as the integration platform of choice.