Tag: ADP

ADP Makes Moves to “Meet the Minds” of its Clients | Sherpas in Blue Shirts

ADP’s Meeting of the Minds event in late March brought together approximately 1,000 of its clients for three days of networking, continuing education, and showcasing of some of its latest thinking and newest capabilities. In back-to-back sessions throughout the day I was there, I met with leaders across the company’s different offerings to gain insights into how they were addressing important marketplace issues.

Three major areas stood out during these conversations:

  1. Rising expectations: These days, clients are expecting their service providers to deliver benefits extending far beyond cost savings. To address this, ADP is leveraging DataCloud – its big data platform – and taking advantage of millions of employee records to deliver benchmarking and insights through analytics, including those that help its clients gauge the risk of losing valued employees. In the coming months, clients will also be able to pull in data from outside sources, and attend “Benchmarking Bootcamps” to help them understand data and what they can do with it. To provide the “proof in the pudding,” the three-day event featured 25 ADP clients sharing their stories on how ADP was enabling HR to become more involved in their company’s overall business strategy.
  2. Addressing the pay gap: One of ADPs newest capabilities – the Pay Equity Explorer – is aimed at doing away with still rampant pay gaps. (Note: According to the US Census Bureau, the average woman earns 20 percent less than her male counterpart.) This dashboard, backed with analytics, identifies roles and geographies in which potential pay gaps exist, negatively impacting women and minorities. Once a potential pay gap is identified, the tool has drill down capabilities to pinpoint specific people, quantify their pay gap, review their past performance, and mark them as potentially needing corrective action via an off-cycle market adjustment to pay. When you consider the looming talent shortage – there are 6 million fewer resources ages 40 to 49 than there are in the starting-to-retire 50 to 59 age group – not to mention hiring and training costs, retaining resources by ensuring they feel valued and appreciated is critical.
  3. Orchestration over outsourcing: At Everest Group, we believe that the next generation HR service delivery model needs to be focused on a seamless employee experience, often referred to as the “Amazon experience,” rather than the traditional model of siloed HR processes that lead to a poor employee experience. The approach requires all of the components of Human Capital Management (HCM) be brought together, including payroll services, talent management, HR management, time and attendance, and benefits administration, and then delivered as an integrated solution via BPaaS. ADP seems to have grasped the importance of delivering an end-to-end solution that improves the user experience and harvests information across multiple processes from a single platform, making it easier to apply analytics to uncover cause and effect relationships. The company also developed a mobile app via which users can access and print pay, manage their teams, track and approve time, and review their 401K.

My takeaways from the event are that it appears ADP is building upon its strengths to satisfy market requirements, and making strides to improve its consultative approach to HR services and better leverage ADP DataCloud across offerings to provide more insightful and advanced analytics.

The current tumultuous times represent significant opportunities for service providers that continue to invest in end-to-end capabilities and analytical tools that drive insights to enable better business outcomes.

Why Is ADP So Successful? | Sherpas in Blue Shirts

At Everest Group, we’ve been assessing why some service providers are so successful. Using a framework we created that focuses on six characteristics, it’s easy to understand why ADP is so successful. At the heart of their success is the fact that they live up to their promise of being the most trusted firm in payroll services.

As the figure below illustrates, branding, go-to-market approach, and portfolio are three key characteristics in successful companies.

Assessment framework technology service companies

I think what’s remarkable about ADP is that they align their brand of trusted payroll services with all their operational aspects. They go to market in a way that aligns with their brand choices and allows them to dominate or at least serve every geography, both large and small. They design their portfolio of products to be payroll itself and surround the payroll system to reinforce or deliver their complete promise.

They have the most comprehensive ecosystem around the payroll process, connecting with tax jurisdictions and integrating into a wide range of HRIS, financial, and ERP systems. As such, ADP may not at any one point be the leading provider of technology, but they are the most trusted provider. They achieve this through the breadth of their ecosystem, the breadth of their global offerings; there is no jurisdiction in the world in which they don’t keep up with the regulations of tax and payroll.

This allows them to service something very rare – both very large and very small companies. And they are the safest pair of hands in payroll.

Assessing the other characteristics necessary for success, it’s clear that ADP is always relevant in terms of technology. They continue to invest in technology, never allowing their technology to become out of date or antiquated. Staying relevant with technology doesn’t necessitate that they be leading edge; in fact, the leading-edge role would take away from their “most trusted” status.

They largely grow their own talent and don’t rely on large recruitment from outside. Therefore, they are able to deliver a high degree of quality and consistency in their talent. They ensure that ADP is a rewarding place to work and grow a career, which allows them to nurture talent.

ADP’s business model is completely aligned with where the services industry is headed. For example, any way you look at it, ADP was one of the first users of SaaS – before most of us knew what SaaS and BPaaS were.

All of these characteristics make ADP incredibly formidable in all things payroll and able to serve an incredibly wide variety of customers in almost every industry and geography. Bottom line: ADP delivers a nice, steady return to shareholders and trusted services to clients.


Photo credit: Flickr

Did ADP Do the Right Thing with its Acquisition of The RightThing? | Sherpas in Blue Shirts

Oh, yes it did. In fact, it scored big in three important areas with its October 10 acquisition of The RightThing, a privately held company and a major player in the fast growing Recruitment Process Outsourcing (RPO) market.

  • Secured a leading spot within the RPO provider community – ADP already had an RPO technology solution in its Virtual Edge Application Tracking System (ATS). With the addition of The RightThing’s business process services, which well complements ATS, ADP will have a comprehensive, rounded out technology plus services RPO solution. It will also be able to offer a fully bundled, holistic RPO offering that includes its existing talent management products.
  • Ability to tap new mid-market opportunities – Both companies are already strongholds in the mid-market (ADP in HRO, and The RightThing in RPO); ADP will now be able to cross-sell RPO services to its own HRO clients, and offer HRO services to The RightThing clients.
  • Good culture and service model philosophy fit – Operationally, ADP and The RightThing both utilize a highly centralized and standardized delivery model to drive economies of scale and offer an efficient solution to clients, so no significant alternation in delivery model philosophy will be required.

Of course, while this is a very strong match-up of capabilities and opportunities, acquisitions always have their challenges. First, both ADP and The RightThing have their own recruitment technology solutions (VirtualEdge and RecruitPoint, respectively), and ADP will need to select one and transition clients from the other. Second, ADP will need to quickly and carefully integrate the two companies to ensure retention of top talent, as well as ultimate acquisition success. Third, successfully capitalizing on cross-sell opportunities within the two companies’ client bases will depend on its ability to clearly demonstrate a solid value proposition backed by integrated service delivery and technology. Fourth, and probably most importantly, will be ADP’s ability to adapt and succeed with its first real foray in a non-platform-based play. The RightThing has several clients that utilize their own technology solutions, and ADP’s strategy to serve these non-platform RPO clients, as well its approach for new clients, will be closely watched. Only time will tell how successful it will be in this major move.

For more details on the acquisition, including its impact on the RPO and MPHRO industries, please read Everest Group’s Breaking Viewpoint on the topic.

Business Process as a Service (BPaaS): New Houses in Shabby Neighborhoods | Sherpas in Blue Shirts

The BPO industry has long been heralded by McKinsey & Company and NASSCOM as the next growth engine of the global services industry. And for years, McKinsey has pointed to the theoretically huge, unaddressed services space that, in theory, could be open to labor arbitrage. But the reality is that the BPO industry itself is searching for the next big growth driver, as it continues to disappoint investors, providers, and customers as a source of additional value beyond labor arbitrage. This relentless, if misplaced, faith in the segment’s value prospects reminds me of the modern proverb attributed to Yogi Berra, “In theory there is no difference between theory and practice. In practice there is.” 

However, the newly built BPaaS homes and those under construction may help spruce up the increasingly shabby BPO neighborhoods. BPaaS is attractive as it has the potential to substantially reduce a client’s TCO when compared to a traditional BPO model. It also promises a reduced capex and a utility-based opex. But perhaps the biggest benefit is the nirvana state of standardization and process harmonization that it can offer.

So, who’s building? And where?

Capgemini made a significant play in the procurement BPaaS space with its acquisition of IBX last year. And its on-demand platform already boasts several big tickets clients including Kraft, Novozymes, and Hilti.

TCS now has a dedicated platform-based BPO business division that offers clients several platforms across F&A, procurement, HR, and analytics. In fact, analytics could emerge as a major area for BPaaS solutions given the current low install base of legacy technologies in the space and organizations’ increasing yearning to utilize data for smarter decision making. And the exponential rise in unstructured data from social media, mobile users, and others is creating a space ripe for a BPaaS play.

BPaaS is also having a major impact on the HR function with platform-based HRO offerings from firms such as ADP. In fact, nearly 70 percent of all multi-process HRO contracts signed in 2010 had a platform-based solution, and propelled the adoption of HRO in the mid-market. BPaaS solutions catering exclusively to the mid-market, such as TCS’ iON, are also starting to emerge in other business areas.

On the other hand, BPaaS is not the be-all, end-all silver-bullet as most organizations are not looking for disruptive changes to their existing technology landscape. There is no big driver to a BPaaS model if the basic functionality already exists and if the installed base of such technologies is high. F&A BPO is one market in which BPaaS has not really taken off. Hence, the technology play in F&A BPO is largely around plugging gaps with point solutions or improving efficiencies with workflows.

Yes, swanky looking new BPaaS homes are being constructed in shabby BPO neighborhoods. But we still have to wait and watch how many people come and buy them.

The “Waking Giant” Sequel: How Mid-Market HRO is Emerging as a True Growth Platform | Sherpas in Blue Shirts

Is it wrong to plagiarize yourself? In 2008, Everest Group published a report entitled “Understanding the Waking Giant: The Mid-Market and FAO” highlighting how mid-market companies had turned the corner from point solutions in finance and accounting outsourcing (FAO) to adoption of more robust and integrated multi-process FAO solutions. In turning to HR outsourcing (HRO), the mid-market has traditionally been a big consumer of various point solutions including payroll, 401K administration, contingent labor, etc. But today we see clear evidence that mid-market companies have brought the same approach to their HR function, noticeably increasing their adoption of robust and integrated multi-process HR outsourcing (MPHRO) and Benefits Administration Outsourcing (BAO.) In fact, this client segment is quickly becoming the growth platform for many of the market leading HR service providers.

In our ongoing research into both the HRO and BAO spaces, the share of new contracts signed by mid-market companies (3,000-15,000 employees) continues to grow. In fact, mid-market MPHRO deals represented roughly 61 percent of all the deals inked in 2010. We saw the same upward tick in the BAO market, with 71 percent of all BAO deals involving mid-market clients. As a result, service providers are really taking notice and making moves specifically to target this growing opportunity.

What’s driving the mid-market in this direction? Take your pick of factors:

  1. By consolidating with fewer service providers, companies can reduce the cost of managing their HR processes and gain benefits from increased integration and analytics
  2. Regulatory changes affecting health and welfare (H&W) benefits are driving many companies to seek support in figuring out what needs to be done and how to do it
  3. HR technology isn’t a strategic investment area for most firms. Leveraging technology owned or developed by service providers is seen as a plus for both short- and long-term cost savings and business impact
  4. The choice of mid-market MPHRO and BAO solutions are more attractive now than ever before

Two important delivery model changes have also increased the appeal of MPHRO and BAO for mid-market companies. In both areas, use of global sourcing has gained traction. First, and not surprisingly, this has come at a time when mid-market companies continue to be under immense pressures to further reduce operating costs while simultaneously optimizing the overall effectiveness of their HR operations. Centralization and integration through offshore delivery centers align with such drivers.

Second, many service providers’ increasing focus around building leveraged and repeatable technology-driven components to their HR offerings, be it SaaS, Cloud, or platforms, is proving to be a justifiable investment. In 2010, about 70 percent of all new MPHRO deals signed involved some type of platform solution, and 71 percent of those involved mid-market buyers.

The strategy to focus on mid-market clients is paying off for some service providers. Three of Everest Group’s five MPHRO 2011 Star Performers – ADP, NorthgateArinso, and Infosys – drive significant portions of their MPHRO business from mid-market clients. Further, each of these providers grew their share of the overall MPHRO market in 2009-2010.

Both ADP and Mercer, major players in the MPHRO and BAO markets respectively, have successfully deployed mid-market strategies, although they are very different in nature. In fact, each firm, as we heard during their recent annual analyst events, continue to invest in sales programs, service offerings, and relationship models specifically targeting this growth opportunity. Mercer leveraged its acquisition of IPA to open doors with mid-market clients, and to align its delivery model with the specific needs of this segment. ADP, which has always had significant payroll offering success in the mid-market, has successfully expanded its footprint with some of these clients into the MPHRO space.

To successfully tap into this segment, HR service providers will need to be on top of the rapidly changing mid-market competitive landscape, delivery requirements, technology solutions, and sales engagement models. With all this going on, dare I say the mid-market will prove to be the “Waking Giant” for the evolving MPHRO and BAO markets?

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