The HR technology market in 2025 was defined by pragmatism.

The initial hype and experimentation of AI has given way to widespread adoption and a heightened focus on ROI; it’s now about impact over innovation.

Meanwhile, consolidation among technology providers has continued where 2024 left off. Industry tech powerhouses have continued to spend as client organizations move away from fragmented HR stacks towards integrated platforms.

We sat down with Drake Star Managing Partner & Co-Founder, Ralf Hofmann, for a Q&A to get a top-down view of the major trends in the HR technology market over the last 12 months, as well as where it is going in 2026. 

UNLEASH: What trends have encapsulated the HR technology market in 2025?

Ralf Hoffman: “We see various different clear and prevalent trends.

“One is the rapid adoption of AI and cross HR functions with generative, but also, applied AI. That is being embedded in various solutions, such as recruiting and onboarding, but also L&D and even in workforce planning. This is becoming more and more prevalent, which is very important. 

“Other trends we see is the shift from point solutions to platforms, and the resulting consolidation based on that movement, as well as a growing focus on measurable ROI on HR technology and workforce outcomes.”

Was there anything surprising or unexpected about this year?

“This massive consolidation that we’ve seen recently with huge transactions – that was quite surprising, but also where you could see strategic players taking the opportunity of market conditions, perhaps related to a certain pressure on the primary fundraising market.” 

Will this technology market consolidation continue in 2026?

“I believe it will absolutely continue like that, and that will be true for strategic buyers being active, but also financial sponsors. A lot will be related to AI-enabled capabilities, but also particularly in the area of workforce analytics.”

What areas of the startup space are particularly interesting in 2025?

“There are various segments where you see new and interesting products – talent acquisition, talent management, analytics.

“While consolidation will be pinging, there will be new products with new use cases, things we haven’t been talking about before. 

“When you look at the history of HR technology it all sorted with payroll; look where we are today in terms of product offering. So there will be new products in areas we don’t talk about much today.” 

Is a bubble forming in the HR technology market?

“I don’t really see an emerging bubble here, because when we look at certain deals they haven’t all taken place at the same valuation level.

“It’s really differentiation subject to the individual transaction, and I think they reflect the growth trajectory and KPIs of the underlying businesses. 

“I find that pretty reasonable and I see no over valuation here, which is also pretty much consistent with what we see in the market as part of our transactions.”

Will the alignment trend between HR and organizational strategy continue?

“There’s an increasing alignment here. It’s also a matter of perception among HR leaders, that they also want to be a profit center rather than just a cost item. That is a very important aspect. HR is becoming more aligned with global group strategies.

There is still a continued trend that CHRO roles and other HR leaders are playing a more important role in organizations. Because it’s not only a matter of global growth and talent acquisition, it’s also a matter of efficient and effective processes creating value inside organizations.”