Consolidation in the HR technology market has increased over the past year, and that trend is going to continue, according to a panel of industry analysts at the HR Technology Conference & Exposition in Chicago.

Conference Co-Chairman Bill Kutik, right, questions the analysts panel, from left to right, Jim Holincheck, Lisa Rowan, Paul Hamerman, and Naomi Lee Bloom.

One reason for the trend is the growing popularity of talent management suites, said Jim Holincheck, vice president of research at Gartner. "One of the ways to provide an integrated talent management suite is through acquisition," he said, adding that when looking at potential vendors, organizations may want to check to see whether they are "acquirers" or "acquirees."

Paul Hamerman, vice president of enterprise applications for Forrester Research, added that an increase in "vertical consolidation" also is likely, with some companies consolidating not for the technologies, but for the customers.

Lisa Rowan, program manager of HR and talent management services research at IDC, and Naomi Lee Bloom, managing partner of Bloom & Wallace, both said that more consolidation in the HR technology market is needed.

Bloom said there are 740 background-checking firms, of which five are large, publicly traded companies, with another half-dozen that are modest in size but professionally managed. That leaves a "zillion ma-and-pa firms" in the business.

"If you use a ma-and-pa firm and end up in litigation, you're not going to get the same level of protection," Bloom said.

The analysts panel, moderated by conference Co-Chairman Bill Kutik, is a regular feature of the HR technology conference, sponsored by Human Resource Executive® magazine. A possible reason for the panel's popularity was revealed during an electronic poll of the audience: More than 40 percent of audience members said they plan to purchase or implement new HR management systems over the next 18 months.

A major topic addressed by the panel was the status and future of business process outsourcing (BPO). While there was general agreement that BPO (loosely defined as the outsourcing of two or more HR functions) will continue to grow, panelists also agreed that BPO is struggling to find profitability.

One reason, said Bloom, is the lack of standardization and "rationalization" of internal and cross-company HR business practices. "We can't expect [BPO companies] to run 100 years of mess for less money than we could do it," she said.