What is driving skillstech growth - and what do L&D leaders need to know?

Skillstech has rarely been out of the headlines over the past couple of years, living up to the reputation of “one of the hottest markets in HR tech” that was bestowed upon it by Josh Bersin in 2021.

Broadly defined as a set of tools that help HR and L&D leaders to categorise, assess, manage and improve skills at work, skillstech has become a massive space in a relatively short amount of time.

And with RedThread Research currently valuing the skillstech market at $1.3 billion, with 97% of skillstech vendors reporting revenue rises, it is little surprise that the field continues to gather momentum.

In recent months, software giants such as Workday, Microsoft and SAP have incorporated skillstech into their platforms; world-renowned entrepreneur and media mogul Ariana Huffington joined the Board of Directors of skills marketplace Gloat; and investment has continued to roll in despite the challenging investing landscape, with skills-based WFM platform provider Spotted Zebra recently announcing it had raised £7.7 million in Series A funding.

“There has been a lot of hype around it,” notes Caroline Ford, a Learning Leader and Performance Consultant, and Former Global Head of Skills Management at Novartis Learning Institute. “And it’s certainly getting to the point where you can’t ignore it any more.” 

What is driving the growth in skillstech?

“Skeptics of the recent skills hype will say ‘we’ve always been talking about skills!’ and that is true - even before the World Economic Forum warned about skills shortages because of aging populations and increased rates of technological advances, skills has been in important conversations,” acknowledges Betsy Summers, Principal Analyst, Future of Work and Human Capital Management at Forrester. 

“But the catalyst for recent interest is the increasing rate of skills shortages and broader talent shortages and the availability of technology that can help manage skills in a way that technology could not before.”

Skills shortages are indeed a growing concern, to the extent that the World Economic Forum has described it as “one of the most important challenges of our time”. The ManPower Group estimates that over three-quarters of organisations around the world are now experiencing difficulty finding the skilled talent they need, 

“The skills crisis threatens to have a devastating impact on commercial growth,” warns Nick Shaw, Chief Customer Officer of Spotted Zebra. “Across G20 countries, failing to close the skills gap could put at risk $11.5 trillion in potential GDP growth according to Accenture.

“And the skills shortage is an existential danger for many organisations - three-quarters of those polled by PwC have said that finding the right skills is a threat to their business.”

But the skills challenges facing businesses aren’t confined to just the scarcity of skills.

As Summers notes: “Beyond the common cry, ‘we can't find people with the skills we need,’ organisations are having trouble even knowing what skills they need, especially with emerging technology or transformation projects.

“They also don't know what types of talent to source with those skills to fill those skill gaps like should we hire this talent or should we upskill people internally or should we rely on on-demand labour like freelancers or contingent gig workers or should we rely on consultancies? These are workforce planning conversations used to happen in a corner of HR or in the business functions themselves, that now need to come together.”

How does skillstech help L&D and HR? 

Fortunately, skillstech has emerged and evolved in recent years to the point where there are now solutions available to support HR and L&D leaders with their skills struggles.

While the category of skillstech has become large and varied, with no one vendor able to offer all variations, the ecosystem means that there is now support available to help organisations with:

• Auditing and measuring current workforce skills.
• Discovering skills in the labour market (such as what are competitors hiring for, what are the emerging skills in jobs and what the cost and availability of those skills is).
• Mapping out upskilling and reskilling paths.
• Matching people (whether that be external job candidates or internal employees) to opportunities (jobs or projects) based on skills.
• Identifying talent in the organisation.
• Linking learning experiences to the skills to be learned.
• Improving and updating job descriptions with skills.
• Providing career paths for people based on their skills and interests.

“Skills has always been a concern, but only now do we have technology that can manage it dynamically,” says Summers.

“The old tools in HR tech were static and relied on people to update them, which never happened. AI, especially natural language processing and using large language models, can help maintain a dynamic skills ontology that helps organisations and individuals keep up with the fact that humans are always learning and growing their skill sets over time.”

Broadly speaking, two distinct categories of skillstech have emerged - platforms and data providers. Skills data providers cover vendors such as assessment companies, delivering skills intelligence about workforces or candidates.

Skills platforms, meanwhile, provide a more sophisticated service, including:

• Human capital management (HCM) vendors that have embedded skills intelligence inside them, aiming to infuse all their HCM use cases with it eventually.
• Platform solutions, non-HCM, that offer insights and analytics about organisational skills.
• Point solutions and platforms that deliver skillstech attached to a use case, such as talent mobility or recruiting or learning.

But the rapid growth in this field has also made for a complex market.

“The technology market is burgeoning,” observes Ford. “It’s very crowded. When Josh Bersin did his Top Companies To Watch presentation recently, I was expecting there to be about five in this space, but there were 16. It is very rare to get past 10 usually.”

Despite this complexity, Summers believes that skillstech is a category with strong value for today’s companies, rather than being distorted by hype.

“While the initial shiny object syndrome may wear off, it will stay as a necessary component of an adaptive people strategy,” she predicts. “It’s a challenge, though, because skillstech is a new budget line item for organisations.”

In light of this and the complexity of the current skillstech market, Ford concludes with the following pieces of advice for businesses earmarking investment in this field.

“Make sure you've got a good team behind you and make your decisions really carefully. Make sure you've got an AI and ML specialist in the team, 100%. Don't buy anything without due diligence,” she says.

“And most importantly, know what problem you're solving. Some companies spend a lot of money implementing the skills infrastructure and hope something interesting might emerge through its usage. But you should pick off a really well-defined business problem and try to solve that with a prototype.”

By Neil Davey, Senior Content Manager at Spotted Zebra