Catching Up with ADP

Linda Merritt, HRO Research Analyst, NelsonHall

The recent passing of long-term U.S. Senator Frank Lautenberg reminds us of his early role in the formation of what became ADP, a founding member of HR outsourcing. In the early 1950s he was engaged in selling insurance and sold a policy to two young New Jersey businessmen, Henry and Joseph Taub. The Taub’s were pioneering a then new concept; payroll outsourcing. The brothers knew payroll processing and Lautenberg knew sales and marketing. Lautenberg took a risk and joined the Taub brothers and together they created a new industry.

Establish Operating Principles

By the time the company incorporated in 1961 the three leaders established principles that still guide the company some 60 years later. Following are a few of the principles they put in place.

Focus on Business Markets that Offer Significant Growth Opportunities

ADP has always pursued growth through new market opportunities, both by expanding it service lines and by entering new geographies. Much of the early growth was through acquisitions, as well as organic growth. Lautenberg retired as CEO from ADP in 1982 having made over 100 acquisitions!

Over time, ADP became a global player. An early acquisition was GSI, a large payroll and HR services company in Europe. The latest 2013 acquisition is Payroll S.A. to expand LATAM payroll capabilities to Chile, Argentina, and Peru. In the last few years major acquisitions included Workscape (benefits), The RightThing (RPO) and SHPS (benefits).

Embrace Technological Change to Enhance Product and Service Offerings

By the early 1960s ADP had moved from manual operations to the pre-computer punch cards and on to leasing its first computer: an IBM 1401 mainframe. That willingness to continue to embrace the new is seen in ADP’s successful launch of a series of cloud-based SaaS HR technology and BPO service platforms, including Workforce Now (1k-20K employees), Vantage HCM (50-3k employees), and GlobalView for multi-nationals. Together, the three services support more than 40k clients.

The company has also launched extensive mobility options, including RUN powered by ADP for small business mobile payroll and ADP Mobile Solutions for access to a broad range of information and transactions spanning time and attendance to benefits and pay cards.

Attract and Retain Motivated and Talented People

ADP has grown into a $10bn global outsourcing business with one of only four remaining AAA credit ratings in the U.S. With ~570k clients across 125 countries, we know customers support its line-up of services and proprietary developed technologies. What about people? A few recent awards tell the story:

• Ranked second on Fortune’s 2012 list of America’s Most Admired Companies in Financial Data Service
• Ranked in the Top 50 on IDG’s Computerworld 2012 list of the 100 Best Places to Work in Information Technology (IT)
• Named to the 2012 Working Mother 100 Best Companies, for the third time.

We therefore need to ask the question of prospective purchasers: does your prospective or current HRO service provider have long-term guiding principles and can you see evidence of them in action? Because ADP does.

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HRO SaaS for the Small Business Employer

Linda Merritt, HRO Research Analyst, NelsonHall

SaaS systems for HR administration and payroll have opened up the small business market to the benefits of web-based HR systems with self-service and easier implementations. The rapid uptake by clients is testimony that a ‘sweet spot’ has been reached in cost, ease and value.

MoorepayHR

I followed up with Anne Fitzpatrick, Moorepay managing director, for an update on how MoorepayHR, a cloud-based SaaS payroll and HR administration platform with BPO services, is doing one year after its launch in the U.K. small business market.

Moorepay, a NorthgateArinso (NGA) subsidiary, is already “large” in the U.K. small business market with >10,000 clients. However, past success does not guarantee future success. The company saw the need for an integrated HR and payroll platform and wanted to achieve this in its own way by combining new technology with its existing BPO managed payroll and HR services, including on-hand subject-matter experts for guidance on employee issues, into a business process as a service (BPaaS) service.

At first there was some concern if the market was ready for a SaaS multitenant cloud service. Moorepay quickly found that buyers understand the cloud based on their own experiences as consumers and were actually eager for the new service. By the end of April, MoorepayHR had signed its 1,000^th customer, and this week the entire company is holding a company-wide celebration!

The client base is 80% new and 20% from existing clients.57% of clients add on payroll, and even more select one or more of the BPO options, led by compliance support for employment law and health and safety advisory.

Moorepay will be adding more offerings to the system, including a newly-released ‘lite’ version. Next for the company is the rolling-out of an advanced version that adds functionality for recruiting, performance management and learning. Targeted at businesses with up to 500 employees, MoorepayHR will be expanded to up to 1,000 employees in the near future.

RUN Powered by ADP

ADP first introduced its RUN system nationally in the U.S. in 2010 for the very small market (1-49 employees). More HR features and payroll functionality have been added to the SaaS cloud-based mobile platform on a regular basis. In addition to ease-of-use, RUN offers a 24×7 help desk with certified HR professionals and an online HR library. RUN added its 200,000^th customer in April 2013.

Two Vendors, One Success Story

Both Moorepay and ADP understands that clients of any size have similar needs. As Anish Rajparia, president of ADP’s small business services division, commented: “Small business owners demand flexible tools and resources tailored for them to help manage the risks associated with running their business.”

There are already a variety of options in the market for the small business owner and I am sure we will see many more. One size never fits all, and I am pleased to see that this class of buyer now has HRO choice.

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Update on Shared Services and HRO

I am on the Human Resources Outsourcing Association (HROA) Publications and Practices Committee and for the November meeting our hot topic was an update on shared services and HRO.

Linda Merritt, HRO Research Analyst, NelsonHall

Value Delivered

All three guest speakers agreed that HR shared services organizations (SSO) remain one of the core transformation trends in HR. Colin Brennan, Aon Hewitt product management and strategy VP, sees that the movement to SSOs and HRO is focusing more on value delivered and less on pure cost.  Clients want to improve both the cost and quality of services like talent management, recruiting, and learning. Clients also want to measure and manage HR issues across the enterprise, whether it is various operating divisions or regions of the world.

Tech Talks

Maribeth Sivak, a principal consultant with ISG, also sees an uptick in interest in SSOs and HRO, but as a follow on to HR technology decisions.  Many companies are facing major and costly upgrades in core HR technology systems, which create the opportunity to consider consolidation into shared services including HRO. Cost is a key driver, of course, but so is a desire to improve the employee experience with mobile and social capabilities as well as improve HR with access to more HR analytics.

Major technology costs also open the door for considering new vendor-provided systems and even SaaS. As SaaS offerings move “up stack” there is and will be a call for BPO service support.

The Chicken or the Egg

What comes first, shared services or HRO? Some start with HRO and others create SSOs first. Either way, clients usually want to get their arms around what they can do first and then look to optimize and increase velocity, often ending up with a blend of both.

At KellyOCG, Kathleen Bienkowski, global shared services VP, sees some organizations that start with shared services continue to evolve into multi-functional general business services as they mature. KellyOCG has its own showcase that demonstrates many of the aspects of a mature SSO: delivery centers, transaction processing, recruitment sourcing, and a knowledge center for global mobility. The contact center is outsourced to another division, Kelly Connect.

What Doesn’t Change

Each of our speakers commented on the continued need to manage major change including:

• A strong internal sponsor / champion to drive the change
• A clear vision that articulates the benefits and defines the future state delivery model
• Change management  in transition and implementation plans
• A governance structure for performance and issues management.

As both shared services and HRO reach a level of maturity, they are reaching a level of acceptance with less perceived risk in the decision, value is balancing the focus on cost, and pent up technology needs will be opening the door to opportunity. All in all, a great update with plenty of good news!

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