Companies are adopting cloud HR technologies as their workforces become increasingly distributed during the pandemic. According to PricewaterhouseCoopers, roughly 44% of talent managers look to cloud solutions to increase efficiency and productivity, while 35% see the cloud as a way to reduce costs. In a recent survey from ISG, a tech research and advisory firm, 46% of companies reported using an HR software-as-a-service (SaaS) platform or hybrid solution (up from the 20% two years ago), with 57% saying that they expect to adopt a subscription-based SaaS or hybrid solution by 2023.
The benefits of cloud HR software include less paperwork and increased access to pay and benefit information, among other day-to-day improvements. A KPMG report notes that cloud HR solutions can also lead to “smarter decision-making” via data analytics, AI, and cognitive computing. Given the market’s potential, it’s not surprising that HR software vendors continue to grow at a rapid clip. PitchBook data shows that HR startups collected more than $9.2 billion in venture capital from January 2021 to October 2021, a 130% increase from 2020.
One of the companies profiting from the windfall is Hyderabad, India-based Darwinbox, which offers HR software designed to help enterprises automate the employee lifecycle. Founded by Chaitanya Peddi, Jayant Paleti, and Rohit Chennamaneni in 2015, Darwinbox today announced that it raised $72 million in a funding round led by Technology Crossover Ventures at an over $1 billion valuation.
Darwinbox’s CEO Chennamaneni was formerly a search quality analyst at Google before joining McKinsey as an engagement manager. Paleti was a consultant at Deloitte and EY, while Peddi previously was a product analyst at Verizon Wireless and a senior consultant at EY.
Darwinbox’s platform hosts an enterprise social network akin to Microsoft’s Yammer, called Vibe, as well as surveys that capture employee feedback and data points for analytics. Through the software, managers can send announcements, notifications, and other broadcasts to everyone in the organization — even those without a corporate email.
“Darwinbox … enables the HR stakeholders to build experiences for employees across their lifecycle,” Chennamaneni told VentureBeat via email. “[The platform] … helps visualize, monitor and control data flow. Integrations are possible across enterprise resource planning, finance, and any other ancillary system via open APIs and over 200 ready-made integrations.”
Darwinbox also features ‘groups’ — which allows employees to find others in the company who have similar interests. The platform also has standard functionalities like time and attendance tracking, payroll and recruitment tools, travel and expense management, employee help desks, onboarding flows, performance management, and people analytics. People analytics, also known as talent analytics or HR analytics, refers to the method of analytics that can help managers and executives make decisions about their employees or workforce.
Darwinbox leans heavily into AI and automation, with features like hands-free voice commands and a prediction engine that aims to “drive the right action at the right time across the employee lifecycle.” The platform uses AI and optical character recognition to process HR documents including bills, expenses, and employee IDs as well as to match job candidates with available roles, evaluating resumes using “multi-format CV parsing” based on a skill taxonomy.
“Darwinbox leverages AI and machine learning across modules to power faster and more streamlined HR process and functions across the entire employee lifecycle,” Chennamaneni added. “‘Darwin,’ Darwinbox’s own voice and chatbot, is built on AI and machine learning. The time and attendance module enables employees with facial recognition that is built on Amazon Web Services’ machine learning-based Rekognition framework. Other use cases include security traffic blockers, load balancers, and more.”
Darwinbox competes with several startups in the cloud HR software market, including Namely, Remote, ChartHop, visor, and Hibob. But the company’s focus on automation is on-trend — and differentiating, somewhat. According to Personnel Today, 38% of enterprises are already using AI in their workplace, with 62% expecting to start using it as early as this year.
There can be a downside to AI technologies, however, if they aren’t implemented thoughtfully. A recent study published in the Journal of Business Ethics found that algorithmic decision-making in HR recruitment and development is “not a panacea for eliminating biases.” Algorithms, the coauthors noted in conclusion, are vulnerable to biases in terms of gender, ethnicity, sexual orientation, or other characteristics if the algorithm builds upon inaccurate, biased, or unrepresentative input and training data.
“[T]here is a need for transparency [in HR automation]; employees and candidates should have the possibility to understand what happens within the process,” the coauthors wrote. “[C]ompanies should not solely rely on the information provided by algorithms or even implement automatic decision-making without any control or auditing by humans. While some biases might be more apparent, implicit discrimination of less apparent personal characteristics might be more problematic, because such implicit biases are more difficult to detect.”
In December 2021, New York City passed a law that will require audits of AI-type HR technology — including technologies used for recruiting, hiring, or promotion — where the technology is applied to residents of New York City. Companies must conduct third-party bias audits each year and provide a public summary of the results, with those failing to comply facing fines of up to $1,500 daily.
We’ve reached out to Darwinbox with questions about its AI ethics practices — including whether it’s taken steps to combat well-known flaws in resume-parsing technology — and will update this article accordingly as further information is provided.
Cloud HR software comes with potential cons of its own, including the need for a consistent internet connection, less control over security, and fewer customization options. But Darwinbox claims that it isn’t struggling to attract new customers. The over-700-employee company — which says it’s grown 200% over the past 12 months — counts over 1.5 million users across more than 650 brands including Starbucks, Dominos, Calvin Klein, and Cigna in its roster.
“With the pandemic and the world going to remote work, companies are left with truly little choice but to rethink their talent strategy and embrace digital transformation,” Chennamaneni continued. “The result is a three to five year forward shift in digital-first thinking for all things talent. HR technology has now become the key driver to people strategy. The pandemic has given us the tailwinds to capture passive markets. In the last one year, Darwinbox has witnessed a 200% growth and much more (300%) in growing markets like Southeast Asia.”
Darwinbox’s latest funding round — a series D — had participation from existing investors including Salesforce Ventures, Sequoia India, Lightspeed India, 3One4Capital, JGDev and SCB10X. It brings the company’s total capital raised to over $112 million following a $15 million round in January 2021.
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