Why Traditional HR Software Is Becoming Vulnerable to AI-Native Startups

For more than two decades, HR software has established itself as the administrative infrastructure of large enterprises. Talent management, performance tracking, payroll, organisational charts, approval workflows: companies such as Workday, SAP SuccessFactors, Oracle HCM and Personio built their dominance on the promise of centralising and structuring human resources data.

But the arrival of generative AI models is changing the equation. Companies are no longer simply looking to store HR data or automate administrative procedures. They now expect software capable of intervening directly in the operational execution of management.

This is precisely the shift that startups such as Fresh People are trying to address. The Spanish company, which recently raised 2.6 million euros notably from Inveready, is developing “Booster”, an AI-powered leadership system designed for managers. The objective is no longer simply to manage employees within an HRIS, but to continuously assist team leaders in their day-to-day decisions: setting objectives, delivering feedback, monitoring performance, managing team dynamics or handling organisational tensions.

This evolution exposes a structural weakness in legacy HR platforms: they were designed as systems of record. Their primary function is to consolidate information, organise processes and ensure administrative compliance. Their logic remains fundamentally transactional.

Generative AI introduces a different logic: the system of action. In this new model, software no longer merely collects data. It intervenes directly within the workflow. It formulates recommendations, generates summaries, identifies weak signals, proposes objectives, prepares feedback or suggests managerial trade-offs.

Value no longer lies solely in HR data itself, but in the ability to transform that data into continuous operational assistance. This transition mechanically weakens incumbent players.

Their technological architectures often rely on legacy software layers designed before the emergence of generative models. Adding AI functionality to these infrastructures frequently amounts to grafting assistants onto existing systems, without fundamentally rethinking how the product operates as a whole.

AI-native startups, by contrast, are starting from a blank sheet. They are designing their products directly around the conversational, contextual and predictive capabilities of new AI models. The interface is no longer a traditional HR dashboard, but a copilot integrated into everyday work tools.

This design difference is becoming strategic because the HR market is undergoing a profound transformation in the managerial role itself. Middle managers are expected to oversee more teams, absorb increasingly complex objectives, manage hybrid work and maintain employee engagement within organisations that are becoming more fragmented. In many companies, managerial overload is becoming a major operational issue.

New entrants are specifically trying to capture this tension. Fresh People, for example, claims that its system improves the achievement of individual and collective objectives by more than 45%, while reducing talent turnover by 23%. Behind these indicators, the startup is primarily attempting to establish a new software category: AI-augmented management platforms.

This repositioning extends far beyond the HR market alone. It reflects a broader evolution in enterprise software. For years, SaaS platforms were primarily designed to structure processes and streamline the circulation of information. Generative AI opens a new phase: software capable of intervening directly in operational decision-making.

The risk for incumbent software vendors is therefore not solely technological, but also economic. If AI assistants become the primary interface between employees and workplace tools, traditional platforms could gradually be relegated to the role of data back-office infrastructure. Value may then migrate toward the conversational and decision-making layers built by new entrants.

In this scenario, incumbent players would retain the administrative infrastructure, while AI-native startups would capture the day-to-day usage of managers and teams. The battle now unfolding in HRTech is therefore no longer limited to talent management itself, but concerns control over the very interface of work in the post-AI enterprise.