People Analytics Market Matures as AI Reshapes Technology

The people analytics technology market is entering a new phase. After years of rapid expansion fueled by pandemic-era workforce disruption and digital transformation, the sector is settling into steadier growth, while vendors reshape their products, pricing models, and AI strategies to meet changing customer expectations, according to a new report from RedThread Research.

For HR leaders, the report suggests that people analytics platforms are becoming more capable and reliable, but evaluating vendors now requires greater attention to issues such as pricing, long-term product stability, AI governance, and integration capabilities.

Market Growth Slows as Technology Matures

RedThread estimates the people analytics technology market grew 26% between 2024 and 2025, increasing from $9.6 billion to $12.2 billion, its largest size to date. While that represents healthy expansion, it is well below the annual growth rates that characterized earlier years.

“It’s a maturing market, so growth will slow. The growth rates from a decade ago will likely not return,” said Stacia Garr, co-founder and principal analyst at RedThread.

According to Garr, that moderation reflects a market that is becoming more established rather than one losing momentum. At the same time, vendors continue investing aggressively in artificial intelligence, although many are shifting their focus beyond large language models.

“Vendors are continuing to build AI features and adjust their roadmaps to meet revenue goals,” Garr said.

Healthcare and manufacturing are also emerging as significant growth markets for people analytics vendors, while increasing competition is likely to drive additional consolidation.

For employers, Garr said the maturing market offers clear advantages. “These products are a lot better than they were a few years ago,” she said. “More tested and proven. The AI is clearer. Some industries may see more tailored and targeted offerings.”

Specialty Credential: People Analytics

M&A Returns as Vendors Buy Capabilities

After several years of declining acquisition activity, mergers and acquisitions (M&A) rebounded sharply in 2025.

According to the report, 36% of people analytics technology vendors experienced M&A activity, up from just 9% in 2024. Much of that activity centered on HCM, HRIS, and talent management providers, with 86% of vendors in that category involved in acquisitions.

Rather than purchasing competitors simply to gain customers, vendors are increasingly acquiring specialized capabilities to expand their product portfolios more quickly, said Priyanka Mehrotra, senior analyst at RedThread Research.

The trend comes as outside investment funding for people analytics technology continues to decline.

“External investment funding is at a historic low, and has been decreasing steadily in recent years,” Mehrotra said. “It’s not surprising as most investment focus is on AI startups right now,” she said.

At the same time, AI is placing intense competitive pressure on technology providers to add new functionality rapidly. For HR buyers, that changing landscape has practical implications.

“Standalone solutions can become a module within a platform suite, so think about what that means when you are considering purchasing a product,” Mehrotra said. Organizations should also apply greater scrutiny towards long-term stability, she added. In many cases, HR teams “may feel greater pressure to use existing tools and capabilities instead of spending more money on new products,” she said.

Garr expects strategic workforce planning platforms and multi-source analytics solutions —which combine data from multiple systems — to become particularly attractive acquisition targets because many currently offer capabilities beyond those found in traditional HCM suites.

From Dashboards to Decisions

Another notable shift is the industry’s growing emphasis on helping organizations act on analytics rather than simply reporting metrics.

According to Garr, vendors increasingly position their platforms around enabling action, helping leaders build executive narratives, and connecting workforce metrics with broader business outcomes.

While those ambitions are promising, RedThread’s research found that the underlying priorities remain more foundational.

“Most vendors report data integration as the top problem they help customers solve, followed by productivity and efficiency,” Garr said. “I’m excited that data integration is a top priority. Getting the data right is the foundation of all people analytics technology.”

Simply surfacing recommendations is no longer enough to differentiate vendors, she said. Increasingly, organizations want technology that tracks whether recommended actions were taken and measures the resulting business impact.

Garr recommended HR leaders identify who their primary users are and ensure their analytics platform meets those users’ specific needs. As AI increasingly moves organizations from insights to recommended actions, governance, transparency, and auditability of those recommendations will become essential, she said.

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Pricing Models Continue to Evolve

The research also found that purchasing people analytics software looks considerably different than it did just two years ago.

“Most vendors are no longer including consulting and implementation services as part of the subscription,” Mehrotra said. “Today those will be separate line items.”

That rapid unbundling, which has accelerated since 2024, reflects vendors’ efforts to meet revenue targets while offering greater pricing flexibility.

Meanwhile, AI introduces an entirely new category of costs. “AI agents are a new cost line item, but there is no universal approach to pricing,” Mehrotra said. “The majority are charging by employee seat, data volume, or token consumption.”

For HR buyers, that means subscription costs alone no longer reflect the total investment required. “The subscription price is no longer a reliable indicator of what you may spend when purchasing people analytics technology,” Mehrotra said.

AI Remains More Assistant Than Autonomous

Despite widespread marketing around agentic AI, the report suggests most people analytics vendors remain focused on AI assistance rather than autonomous execution.

Nearly 90% of vendors now combine traditional machine learning with generative AI, up from 64% two years ago. However, most deployments use large language models to help users find information or generate insights — not independently complete work.

“Everyone has AI, but few have moved beyond assist mode,” Garr said.

The report found that 70% of vendors prioritize AI copilots, while only 49% are investing primarily in AI agents.

Overall, 41% of vendors have little or no meaningful agentic AI capability. Another 43% have agents that automate selected complex workflows, while only 7% report AI agents working alongside HR professionals in more advanced ways.