Beyond Payroll? Strodders puts ADP under the glass

Keith Strodtman, HfS Research Fellow, was in the Big Apple to attend ADPs’ analyst day.  And for the very few of you who don’t know Keith, he was recently running Ceridian’s HRO business for many years, until joining the HfS Research family… so picture the dynamic :)

Here’s his report as the firm tries to move beyond payroll. Take it away, Strodders…

Strodtman puts ADP under the glass. Click to read the HfS RAPIDInsight.

ADP Analyst Day Report Out

Fresh off of its solid third quarter earnings release, ADP hosted its annual Analyst Day meeting on May 4 in New York City.  The event was held at the New York Hilton, the traditional site of the former HRO World conference that for many years served as an annual “reunion” for those of us in the HRO industry (R.I.P. HRO World).  ADP executives, including CEO, Gary Butler, Regina Lee, President of Major Accounts and Small Business, Carlos Rodriguez, President of National Accounts and Employer Services International, Mike Capone, Corporate Vice President and CIO, Jan Siegmund, Chief Strategy Officer and President of Added Value Services and several other senior executives delivered an information packed day full of product updates, market updates, and key initiative overviews.  In this post, I will provide a few of the key observations from the event.  For a comprehensive report of the day’s information please read my HfS Research Rapid Insight report found at hfsresearch dot com.

Most people are familiar with ADP as a payroll processor, but few providers can claim the broad range of other HR services that ADP has to offer.  It HR services include:

  • Payroll
  • Benefits administration
  • Talent management (recruiting and pre-employment screening, performance and succession, learning, and compensation)
  • Time and labor management
  • Retirement services
  • Professional Employer Organization (PEO) services for smaller organizations
  • Small employer health insurance services
  • Employer tax services

Most of these services can be delivered in a traditional service bureau model, SaaS, or business process outsourcing (BPO) model.

Keith Strodtman, HfS Research Fellow

Keith Strodtman, HfS Research Fellow (click for bio)

A big part of the analyst day was devoted to providing updates on ADP’s key technology initiatives.  The company has been investing heavily in a technology refresh over the past several years and they had a lot to show.  Product managers demonstrated Workforce Now HCM, the Workscape compensation module, Vantage HCM, and ADP Mobile.

Workforce Now was originally released 18 months ago and already has over 10,000 customers using it.  It was originally targeted at companies with less than 1,000 employees.  Since then, ADP has refined its target for the product to focus on less complex customers some of which may have more than 1,000 employees.  In fact, the company reported that it has more than 70 customers with more than 1,000 employees on the product.  Product managers did demonstrations of version 3.0 of the product and it was clear that a number of user enhancements have been made since the initial release.

Vantage HCM is ADP’s new solution targeted at the complex domestic customer market.  Like Workforce Now, the product is an integrated suite of HR, benefits, payroll, talent, and time and labor functionality.  The product represents a pretty significant leap forward from its predecessor product, ADP Enterprise.  Vantage HCM is about to enter pilot customer implementations, launch is planned in the fall, and general availability is targeted for the first quarter of 2012.  The company has plans to introduce a global system of record capability in 2012 or 2013, specifics were not provided.

Both Workforce Now 3.0 and Vantage HCM sport ADP’s new Revolution Interface, a rich Web 2.0 interface that provides a user experience that is more like a consumer web experience.  A new integrated database, new talent management capabilities, improved search, enhanced workflow, social media integration, and built in business intelligence are some of the new capabilities that should be appealing to customers.

ADP Mobile is the company’s new mobile application that works with both Workforce Now and Vantage HCM.  It is evident that ADP has learned a lot from its first mobile solution, ADP RUN, which is targeted at small businesses.  I had a chance to play around with the mobile application and found it to be intuitive and functional.  ADP Mobile will be available natively on the iPhone and iPad and as a mobile web application for other hand-held devises such as Blackberry and Android.

I was surprised by the speed with which ADP is refreshing its technology platforms.  We have come to expect rapid development from smaller technology companies who don’t have a lot of legacy systems and customers but it is a new experience to see a company with such a large legacy base move with such relative speed.  It should be interesting to monitor market reaction as the refresh moves into the larger market segments with Vantage HCM.

The HR BPO business is going strong at ADP.  They now have over 160 customers live on the large market BPO offerings: Comprehensive Outsourcing Solutions (COS) and GlobalView, with over 80 customers each.  The lower mid-market offering, Workforce Now COS, has over 500 customers.  A recent ADP/PwC total cost of ownership studies show that COS customer save on average 40% over the cost of performing the same HR processes in-house.  Look for the company to continue to invest in broadening the global reach of its BPO service, now available in about 70 countries.

ADP is clearly not the company it was a decade ago.  Now with a broad range of HR solutions beyond payroll and technology that can compete well with so called “best of breed” solutions, it will be hard to ignore Big Red in the HR service market.

For more details, please read the HfS Research RAPIDInsight on the ADP Analyst Day.

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8 Comments

  1. Kevin McDonald
    Posted May 12, 2011 at 4:00 pm | Permalink

    Great recap, Keith. Thanks!

  2. Posted May 13, 2011 at 4:28 am | Permalink

    I agree – great recap Keith though I’m not sure I would write off ADP as quickly!

  3. Paul Jarvis
    Posted May 13, 2011 at 7:18 am | Permalink

    Keith – excellent write-up.

    Do you see ADP expanding beyond HR areas, such as accounting, procurement etc?

    It certainly has the infrastructure in place to compete effectively in other BPO areas,

    Paul

  4. Keith Strodtman
    Posted May 13, 2011 at 9:35 am | Permalink

    Paul,

    Yes. ADP has already entered the accounts payable processing space. It was not highlighted much during the analyst day so I think we will need to stay tuned to see how big it becomes.

    Keith

  5. Keith Strodtman
    Posted May 13, 2011 at 9:39 am | Permalink

    Kreiron,

    I hope you didn’t get the impression I was writing ADP off. Quite the opposite, they are growing at a nice clip given their size and the economy.
    Keith

  6. Mkumar
    Posted May 18, 2011 at 9:25 am | Permalink

    ADP is heading big way on the Cloud computing space..and yet Ceridian is struggling to come up with a integrated solution for all HR needs..namely payroll, benefits, recruiting, lifeworks etc….Which give ADP a clear headway to make a larger impact in the market.

  7. Keith Strodtman
    Posted May 18, 2011 at 10:05 am | Permalink

    M Kumar,

    I’m sorry but I am not able to comment on Ceridian’s solution status at this time because of my recent employment with the firm. I will cover them once the required waiting period has expired.

    Keith

  8. Francisco Pina
    Posted May 19, 2011 at 11:55 am | Permalink

    ADP is heading in the right direction, they have implemented a strong cloud-computing database plus have expanded the scope of their services to gain new customers and expand their market reach. After you start your business you have to keep a good eye on, yours accounts payable department as it can lend itself to fraud. I came across an article that talks about the vulnerability of that department and how it can be exploited into fraud: http://www.openforum.com/articles/accounts-payable-fraud-can-fool-anybody

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