Aug 31, 2021 10 min read
Pandemic provided the tailwind to HR technology sector
Darwinbox is a leading provider of cloud-based Human Resources Management Software (HRMS). With a new-age enterprise-focused HR Technology suite, Darwinbox engages and empowers employees across the entire lifecycle (hire-to-retire) with a smarter, simpler & mobile-first HR Tech experience powered by AI and Machine Learning.
Founded in 2015 by three techies Chaitanya Peddi, Jayant Paleti and Rohit Chennamaneni, the product has been making waves in the past few years with 550+ global enterprises as its customers including Asia's largest conglomerates and fast-growing technology unicorns like Adani, Mahindra, Kotak, TVS, Arvind, JSW and more.
An IIM Lucknow Alumnus and Ex- Googler and McKinsey, Co-founder Mr. Rohit Chennamaneni shares his start-up journey and his thoughts on HR technology landscape in India for the readers of HR Vista.
In conversation with Ritu Mathur and Naveli Singh
The past few months have been nothing short of unprecedented turmoil for employers. Do you feel things have changed in the field of HR technology post pandemic? Have you witnessed any major shifts?
In my experience, despite some obviously challenging times, both HR leaders and the HR technology providers remained focused on building new or enhancing existing solutions post pandemic. The reality of hybrid work, online processes and work from home forced a lot more companies to look at HR technology upfront. Their focus shifted to automation of time-consuming tasks, smooth information sharing and simplification of processes to support the workforce in unprecedented times. Thus, the Pandemic provided the tailwind to HR technology sector and it continues to transform the world of work.
Technology solution providers like us in turn saw accelerated sales during the period. The biggest change we saw was the increase in number of inbound requests from customers we never thought to be our target market in first place. For example, we acquired 7 customers from the real estate sector in the last one year, up from zero the year before.
So, the sector as a whole has benefitted because of the upended dependence on HR technology. But to be able to make the most of this opportunity, organizations had to constantly adapt and evaluate their business models for the current business environment. For instance, features like visitor management, virtual id cards etc. gained a lot of importance and urgency in this period.
There were in fact products and Human Capital Management System features available in the market which had a dismal demand before pandemic but gained a lot of traction with the remote work setting in. For example, Onboarding was one feature that became extremely popular post pandemic for engaging newly joined employees in absence of any physical connect.
Rohit like your product most of the technology providers today are cloud based. Has the security aspect of HR technology kept pace with the sudden proliferation of solutions available in market? This also brings us to the debate of which is better- Cloud Vs. On-Premise. What are your views?
The advancement that has happened with security features on cloud is way ahead of the security available in onsite software in any organization. It’s like no matter how much safety you ensure for your valuables at home, the steps taken for protection at Bank will always be a step ahead. It is also because the amount of international exposure that the cloud hosting providers have, lets them stay updated in terms of knowing the latest risks and attacks and be prepared against them. The cloud providers like Microsoft, Google or Amazon are also quite advanced in building the layers of protection to ensure security of data.
The second level of security is ensured at the product level. Certifications like ISO, SOC1, SOC2 ensure effective safeguard of the privacy and security of customer and client data. Product developers also conduct robust security assessments to better understand areas in which security protocols are lacking. For instance, we invite hackers every quarter to test and hack the system. Other than that Vulnerability Assessment and Penetration Testing (VAPT) testing is carried out both internally & externally.
The understanding and awareness around HR data privacy has increased a lot over the past few years. Security has become a part of product development roadmap itself. HR Leaders in turn should ensure that that their vendors have best-practice data security and privacy protocols in place in addition to passing an external Service Organization Control or SOC 2 audit which confirms their compliance with recommended practices for data security.
Do you see acceptance in the Indian market in general and Indian Public sector in particular for cloud-based software services?
For organizations with in-house data centres, there is always a business case to examine. Depending on the investment, the usage of data centres, number of people deployed, the ROI has to be calculated. Generally, when organizations invest in data centres, they do it with a long-term scenario in mind. If the organization is past that time horizon, it is always better to switch to cloud due to multiple security measures in place. In fact, several banks today are using cloud services.
The second part of this whole switch to cloud conversation is trust. Organizations which have been using on premise softwares for a while will take some time to migrate. This trend of migration has been uniform across the world. For example, in US and Europe, the migration to cloud services first happened in the Internet sector, then the broad private sector, then the banking sector and finally the government sector. All countries go through that cycle. However, our migration cycle is expected to be crunched as compared to our western counterparts. Whereas they took over 30 years for the complete migration, we might take just 10 years. This is again because of the benefit of hindsight. There is a lot more information and insights available today than it was before.
In an era where “every company is a technology company”, what do you think triggers the setting up of dedicated technology startups like yours? What has been the vision behind Darwinbox?
I think it is triggered through experience. My journey started with two other friends Jayant Paleti and Chaitanya Peddi, who like me, were working with large organizations as counterparties. I was a Strategic consultant; Jayant was a banker and Chaitanya was a HR consultant. Through the years we realized that although a lot was happening on the technology front outside HR, the pace of development of technology in HR was very slow. On one hand start-ups like Ola, Uber, Flipkart were leveraging technology in unique ways and flourishing, HR was still limited to using the archaic forms of tools & technology.
Intrigued, we started researching about the reasons behind this lag. We spoke to several big and small stakeholders in the market to understand their point of view. Surprisingly most of them had similar views. For them, the existing players such as SAP and Oracle were the only options available in the market. Organizations, even if they wanted to switch, had no other alternatives.
The existing players were not solving for India. Their products along with their functionalities were labeled as best practices. And these best practices were in turn were coming from the US. As a result, Indian companies had to change their process to keep using the products.
The irony here is that HR is the function where culture matters a lot more than it does in other functions. The culture of any organization is more influenced by our families and our cities in comparison to how it is done in some other part of the world. I feel functions like Finance or Supply Chain can still have best practices. But there are different aspects of what we have as a culture in Asia which drives itself to a certain set of practices. These practices in turn needed a system to automate.
We realized that there was nothing solving the issues of Asia based enterprises.
We realized that there is a huge opportunity and that is why we exist. We believe we have come some way in doing that and but still have a long way to go.
Our dream is to be in every employees’ hands in Asia.
So this Asian flavor has been your USP. After realizing the gap, how did you go ahead and solve the issues of the Asian clientele?
There are two things that make our product stand out in the region. First is the usability aspect. While most of the existing HR systems were built for laptops, most of the field force especially in sectors like manufacturing do not own one. They use technology directly on mobile. With Darwinbox we provide a modern & disruptive mobile-first HRMS platform that helps nurture talent. With now a million consumers, the percentage of people using it only on mobile is 30%!
Power in the form of accessibility is what we provide to our users.
The second unique aspect of Darwinbox’s technology is its configurability. When we started in 2015, we brought the core essence of HR and the configurability of a no code platform. Thus, instead of telling a customer that this is the best practice, we rendered the product flexible to provide the customers ways to create their own workflows. So, whereas the product provides the basic framework of an HR function, it also provides the flexibility to configure it according to an organization’s processes.
You have recently debuted on the Gartner Magic Quadrant for Cloud HCM Suites for 1K+ Employees as the youngest and only Asian player. Were there any challenges that you had to overcome on your way to becoming one of the most successful startups of India?
As they say, all beginnings are difficult. As a startup there was no dearth of challenges for us. But fundamentally the biggest challenge that we can build an HCM for Asia or keeping the belief that we can take on giant organizations like SAP and Oracle. When we decided to enter this space, it was a 20-year-old market. Giant corporations with large workforces were already flourishing. All our friends, investors, well-wishers or anyone who heard of our business plan warned us about the risks.
The initial one to one and half years were especially tough. Our goal was to sell to large enterprises. But like with any startup the skepticism around our stability was a big question.
The first set of customers, the first set of replacements and the first feedbacks from happy customers gave us the confidence to keep moving ahead.
The second phase of challenge came for us when suddenly all our employees started getting lucrative offers from our competitors such as blanket 40 % increment. The task at hand was to develop a workforce who believed in our vision and shared our passion to question the status quo. The journey of building an 800 + organization which is agile, creative and passionate about growth was definitely an uphill task.
Our third biggest challenge came in dealing with our largest customer at any point of time. The scale of serviceability was something we needed a little time to get accustomed to. For example, when the shift came from serving a 10K employee to a 30k employee organization, there were always a new set of things to be taken care of. As the scale of operation increased, so did the complexity of issues to be dealt with.
But through all these challenges, our belief that we were working towards serving a real problem in the market motivated us to improve our product. We strongly believe that more than anything else, we are here because of our customers. Learning from every customer and incorporating that into the product helped us serve better.
Oil & Gas is a traditional sector dominated by PSUs who have been in existence for a long time, long before all these systems came into place. Is technology ticking horizons of such organizations or the focus is more on service oriented or the new age organizations that are more in sync with what you have to offer.
The new age products cater to both the public and private sector alike. Government sector forms a huge part of the Asian market. So, any company hoping to succeed in this market must focus on the needs of government organizations as well.
This is where the configurability of a product comes in. For instance, for certain processes the controls or the number of approvals may be more in a PSU as compared to a private sector company. The new age HCMS allows for both audit and control of the processes. Some of our customers such as banks, RBI, stock exchange are very regulated. These products can eliminate a lot more paperwork, streamline HR processes and improve the turnaround in a regulated environment. The Digital footprint for all these processes on the other hand enables audit and control.
New age products also provide the users with a creator platform to develop from front end- workflows, forms, surveys, learning content, learning paths etc as per need. This is a natural progression and more sophisticated features will come along as the industry grows.
And how adaptable or customizable do you think the replacement HCMS are? Do they provide integration with the existing standalone systems that organizations have acquired or developed in-house?
There are two realities of the market. Companies with 500 + employees are already using some form of HCMS. So, any replacement product like ours has to offer migration from existing system. After all we are offering the customer a better experience from a lesser experience.
Secondly, we always exist in an ecosystem. It could be a Microsoft dynamic ecosystem, Oracle ecosystem and so on. With appropriate levels of control and permissions, any information can come into or go out of a product like Darwinbox to the existing systems. Examples may be the CRM system, Supply chain or Finance modules of the existing HCMS. Thus, migration from previous system and connection to existing system both can be done.
For example, when Covid came, we came across a small platform that was doing seat management for organizations. Now this is something that we may not build ourselves, but we brought it in as a plug in.
In an established category like HR Technology, what does it take for an organization like yours to stay ahead of competition?
It’s a question that doesn’t give us sleep sometimes!
Our aim is to succeed in both short and long term. We don’t want our product to be obsolete or replaceable at any point of time, so we need to stay ahead of our competitors. Right amount of investment needs to happen in product engineering because if we have the product right, we can always solve for distribution.
We divide our product strategy into one year, two year and three-year time frames. There are different teams working on these strategies simultaneously.
The one-year strategy is generally about some features that are relevant to what is happening in the world currently like hybrid workforce, skill-based mapping, focus on engagement etc.
The two-year strategy focusses on subjects like security, analytics, next great insight, use of Artificial Intelligence.
The three-year strategy is on trends like blockchain which would become a reality in 1-1.5-year span, but our endeavor is be ready for those trends.
We prefer to stay fit for survival in the long run.
Given your rich experience in the field of HR Technology, what according to you are the areas of HR Technology that are ripe for innovation? What is next for Darwinbox?
I see two three things happening in the near future as far as HR technology is concerned.
First, a lot of focus will be on making technology seamless. Second, the focus is going to strengthen on the use of analytics, machine learning and data to predict the future trends. Although a lot of organizations have imbibed the culture of analytics, there is still a long way to go as far as predictive analytics is concerned.
And finally, a big move is expected to happen on blockchain. One use case for blockchain could be employment contracts. Blockchain technology may be used to verify, validate, capture and enforce agreed-upon terms between multiple parties thus reducing the need of multiple agencies.
As far as Darwinbox is concerned our dream is to build a great global product company. As of now there are no great technology product companies from India. Going global is a priority for us while staying ahead on the product curve. We are already present in Middle East and South East Asia. Our expansion plans include moving into US, Europe and Australia.
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