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Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday at 8AM Pacific – 11AM Eastern, or catch up on full episodes here.

HR Tech Weekly

Episode: 40
Air Date: October 1, 2015

 

This Week

This week John and Stacey discuss:

  • ADP Analyst Day, at their NY Innovation Lab
  • Workday Rising Users Conference

About HR Tech Weekly

Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday at 8AM Pacific – 11AM Eastern, or catch up on full episodes here.

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Transcript

Begin transcript

John Sumser:                       Good morning and welcome to HR Tech Weekly, one step closer with Stacey Harris and John Sumser. It’s our 40th show. How are you this morning, Stacey? Stacey? Oh my goodness, Stacey is somewhere out in the hinterlands and we’re going to see if we can trace Stacey down. Meanwhile what we’ve started to think about talking about here today is that the … Hang on one second, let me see if I can pull Stacey in here. Stacey, are you there?

Stacey Harris:                      I’m there, John. Can you hear me now?

John Sumser:                       I can hear you now. Yeah, you were lost.

Stacey Harris:                      All right.

John Sumser:                       You went someplace strange. Where are you?

Stacey Harris:                      Welcome to cyber net. I’m at home today which should be I have less technical problems but we’ll see about that. Yes, I was actually just saying that 40, I can’t believe that we hit the big 4-0 so that means we’re getting better at this except for maybe the technical issues now.

John Sumser:                       It may be that there’s always technical issues, we are getting better at this. You have been traveling a lot. Where have you been in your adventures?

Stacey Harris:                      I have been a little all over the place. September, I think, has been not only a month for a lot of announcements but a lot of events for the vendors this year. I had the opportunity the last week right before our last HR Tech Weekly update, I was heading off to New York to see ADP so I’ve got some updates from the ADP analyst event there, that was an analyst-only event that was in New York at their innovations lab. I also just got back today from Workday Rising which is their users conference and I have some analyst updates from that too because they gave us both an executive briefing but we also got a lot of big announcements from Workday Rising and that was in Las Vegas again, the beautiful Mandalay Bay. Yeah, I’ve been back and forth across the country this week and last week, but home today, thank heavens.

John Sumser:                       That’s great. What are you seeing out there?

Stacey Harris:                      I have to say I didn’t even get a chance to go through all the news articles this week that I normally get to go through so I really just wanted to see a little bit of update what’s going on with ADP and what’s going on with Workday. There’s a couple of news articles about some acquisitions of some service companies so maybe we’ll talk a little about that because it fits into the Workday conversation. I’m sure that there’s a couple of updates you might have, John. It’s been a busy week. There’s been a lot of information and stuff flowing.

Maybe we’ll start off with ADP because I think ADP’s event was last Thursday and Friday. It was just a half-day analyst event which actually was really when I was in their innovation lab … I had not had the opportunity before to go to their innovation lab in New York which was very nice. It’s a nice very large room with a couple of offices opposite but done up in the whole Silicon Valley open format with lots of really good food and lots of really good snacks all around. For me, coming from my little house here in North Carolina, it was very nice.

The other thing that we got an opportunity to do while we were there was meet with some of ADP’s less often trotted out, I guess is a good way to put it, representatives, people who work on their science and IT division, people who work in their security area were there which was really nice. Their head of data security, those were really, really interesting conversations to have because we don’t usually get to meet them when we go to any of the shows and stuff.

A couple of big announcements from ADP and these are the things I think, John, that I would love to get your thoughts on because they’re … I was a little surprised by how much ADP has grown in some of the areas. They announced that they’re really focusing on global and I thought it was an interesting conversation. Their president basically said that he expects that in the next maybe 5 to 10 years, that’s a long way thinking down the road for a technology organization, but he expects that they will see a bulk of their revenues start to come from global entities versus US entities, and that wouldn’t be surprising. They’re really hitting a global market pretty hard. Currently they have solutions in 104 countries with 99% of their service representatives. The first line of calls you make being with ADP employees and that they’re also seeing big uptakes in the professional employment service industry right which is about 13% more bookings they had last year which is basically the outsourcing model for payroll, so that was 13% higher and that’s $1.6 billion of their overall revenue, and that was a really interesting number.

John, in the past, have you done a lot of looking at PEOs or outsourcing from a payroll perspective because that’s something I haven’t spent a lot of great deal of time in but they were really focusing on that as a big focus for ADP right now?

John Sumser:                       What’s happening in and around payroll is that the complexities and legal risks associated with giving it a right are becoming overwhelming to people who just want to be in business. Whether you agree with it or not, this is where a small business people start to get really bent out of shape about government regulation. When it takes so much to understand how to get the basic simple thing of paying the people who work for you, when that gets so complicated because of government regulation, small business people get very Republican very quickly, and that creates an opportunity for companies like ADP to come in and own the entire problem.

They own the entire problem, the PEO model, they own the entire model by becoming the employer of record for a party. Because they have sufficiently mastered the HR problem, they’re able to take control of the employee base and move the risks of the employment contract off of the employer’s table and put it on their table. It’s a great business model that thrives when the economy is really happening and legislation is changing. When that happens, it seems to be that when the economy is happening, legislation is always changing.

Stacey Harris:                      We know that the whole approach to what is an employee is changing so this definitely is a time when it makes probably more sense almost outsource your employees, right? Their average employee number was 363,000 and I thought was huge for this PEO. Every place I’ve always heard it was around a very, very small organizations.

John Sumser:                       Yeah, except the complexity has become so great that it’s becoming attractive. Do you really want to be an expert in regulatory compliance in order to pay your people? Probably not, probably not, probably not. You probably don’t want open a Washington lobbying off this because you have to do payroll. It’s a right business opportunity. It’s a very right business opportunity. It’s hard to understand how long that business opportunity lasts with the contingent part of the workforce also growing very rapidly. There are no places that I know of that do both.

Stacey Harris:                      That’s interesting per se. [crosstalk 00:08:14] the whole lot at ADP but that’s an interesting perspective on it, that’s very true, yeah. I think it’s almost going a little bit against [inaudible 00:08:22] in different ways. Not only that but they’re heavily investing at RND inside ADP. We talked last week about a lot of organizations doing corporate venture capital investments as a way of to do RND without taking their eye off the ball inside the organizations. ADP, their investment and their RND internally is up 11% from last year to about $767 million. Can you imagine how many small organizations have $767 million just in RND alone?

John Sumser:                       It’s really a mistake, I think, to even to compare ADP to anybody. What are the weird things about trends and forecasting in HR technology is it’s easy to be an armchair person and behave as if all companies are the same, and they’re going to solve everything with the same formula but ADP is so big. I think I started to [ [mention 00:09:30] the other day, I have a quarter million clients, a quarter million business clients. The only other company in the world that has that level of business client is very quiet about it, that’s Intuit, and they have a less robust relationship from ADP does because ADP salespeople are in those quarter a billion accounts physically. They’ve got to know because ADP was for a decade the company that everybody loved to hate. They’ve got the greatest vulnerability is customer satisfaction, and the customer satisfaction can be addressed technically. I think that what they’re doing is amazing, it’s amazing what they’re doing.

Stacey Harris:                      Yeah, there was no doubt that they were hit a little bit by the analysts on the customer satisfaction and the services. All of those analysts went step back a little bit because with as many clients that they have on each of their product lines, when you think about compared to other organizations just 10% of their clients being unhappy is a huge amount of organization. The customer satisfaction is a big issue for them, and I think the services side of it is something that they pride themselves in but it also becomes a challenge when you’re dealing with this many organizations.

The numbers that they have gave us at the event which I thought were really, really telling is that their RUN product alone has 440,000 clients with the average size of 10 employees. 440,000 clients with just somewhere in the range of about average 10 employees, that’s their RUN product. The Workforce Now product is up to 60,000 clients, average size being 200, but I did ask about what the percentage of that was under the 50-employee size, and they give me a range of about 48% was under 50 employees. We’re still talking fairly smaller organizations in that product.

The interesting one I thought was Vantage. Vantage which is their new flagship product that’s really coming out, the focus for their larger client base because what’s generally happened with ADP is that particularly if they’re doing it for [LMS 00:11:46] talent management, any non-payroll solutions that as organizations grew in size, they started to drop ADP and pick other solutions rather than stay with ADP for their talent management [LMS 00:12:00] workforce management needs. They would keep their payroll solutions which is how they end up with some very large clients on the payroll side.

Vantage now is up to 240 clients which is a pretty rapid growth for them. Like I said they showed up, at least in our report, last year on the talent management just after two years of offering talent management in that space. They also said that they have 1,100 what they call multinational solution clients. These are the big guys. These are organizations over 5,000, 6,000, 7,000 employees and mostly this is some form of payroll what it seems to be in payroll, both with their [streamlined 00:12:40] product or their multinational enterprise payroll products. As you said, it’s a very a large organization, John.

John Sumser:                       One thing that’s worth putting in perspective, the average company size in the United States is about 50 people because there’s only 35,000 companies that are bigger than 5,000, it’s a small group. If you have everyone of it in your 440,000 clients, if you had every one of those 35,000 people over a thousand employees in your client base, your average client size would still be in the 50s, so that’s a really deceptive number and then we should have a show about how to make sense of the statistics like that because they have a significant share of big clients. They have a significant share of big clients.

It’s almost irresponsible to look at it as one business because it is so big. They have one brand but they have all these subordinate businesses under it. It’s astonishing to see a service to this company devote that percentage of its profit to research and development. It’s going to be 6% or 7% of those profit, that’s a hefty investment in research and development. While certainly smaller companies would love to have that company, bigger companies are not stepping up that way. Bigger companies are doing the Oracle, SAP, Workday, IBM view of the world is that this is a problem you solve through acquisition.

Stacey Harris:                      Yes, very much.

John Sumser:                       It’s a courageous thing for ADP to be saying it can reinvent itself internally, that’s astonishing. What I’m seeing from the outside is that it works.

Stacey Harris:                      I think they’re making a headway, yeah. I would have to say the same. It’s turning a very big ship, right? There’s no doubt about it and they think that if they don’t move it fast enough, it could be a challenge but I do think at least from what we’re hearing from their clients and what we’re hearing from organizations who are parting from them is that they are becoming a much easier to work with organization, and that they are differentiating enough to level. Your comment about the fact that the number of organizations that are in the Fortune 100, I think, I have to go back to my notes on this but I think they said they literally have 100% or 99% or something in the Fortune, not 101,000 somewhere in there that are their clients because they’re using them for payroll at a particularly global level.

John Sumser:                       Right.

Stacey Harris:                      To your point, it’s almost like two different businesses that they’re running, the mid, small, smaller and then what they have to do with their large organizations. All of them are important in their overall picture which oftentimes is not what you hear from some of the other vendors. The other thing I think that’s important to note about what we saw this week is that they’re launching some new products and new onboarding solutions. They’ve got the new marketplace which I think is actually really, really good and we could talk a little bit about that in a minute, but I think the one thing that they’re very, very focused on is the fact that with this grasp on a much larger audience, both here in the States and globally, that their benchmarking data is going to become at some level the record for the industry, that’s what they’re hoping both benchmarking and metrics.

They were basically rolling out numbers, some of them they have 363 metrics that they can track through their benchmarking data. I’m not sure if they’re using all of that and all of that is HR. They’re starting to beta test within their benchmarking solution tool now that you can bring business data into their benchmarking tools. Now I have heard a lot of organizations that would be very, very hesitant to bring business data into their HR benchmarking tools but they are starting to get at the problem though of doing operation level HR from a metrics perspective, and so that was a very big push they were talking about this year. I thought it was valid and we’re still commenting on that they might be one of the fewer organizations that has enough data to really actually do some good benchmarks at least for the mid market and smaller organizations.

John Sumser:                       I wonder, one of the things I’ve been hearing about a little bit is insight overload, and that is the phenomenon that when everybody is delivering benchmarking data, it doesn’t make any sense anymore. Benchmarking data made sense when it was something unusual.

Stacey Harris:                      Yup.

John Sumser:                       Now you can get it from 45 different sources then you actually have to be an articulate consumer, articulate consumer, I wondered about that. You have to be a competent consumer to be able to tell which of the data applies to you.

Stacey Harris:                      Yes.

John Sumser:                       That’s an opportunity that arises with things like this. They have an amazing access to data. The question is how does it compare to other variants of that and who’s doing that comparison.

Stacey Harris:                      Now I think is really the big conversation right now about benchmarking data metrics, right? It is through the context of it. You are saying looking at what ADP has, they did put a lot of their data in, I’d say, some level of context because it’s [inaudible 00:18:44], which not a lot of if you look at what other dashboards are being put out other various vendors who have some benchmarking in the analytics and data that they’re still pulling from their databases is that it may not always be [inaudible 00:18:58] because they wouldn’t be able to get it that granular. Because of the size and scope of what ADP has, they definitely have the ability to put, I think, more context around it than some others that I’ve seen, so I think that’s valid.

Now the other part of any kind of benchmarking is that how clean is the data, right? This is a challenge for any HR vendor, any HR organization is that what organizations might have it might make sense in their business and their business context, but whether or not that is applicable or apples to apples in your business depends a lot on how you think about regions or how you think about an employee, or how you think about the role someone plays, surface director role versus in one organization versus another, so I think those are big issues too.

John Sumser:                       I think part of what you’re saying is that the more data you have, the more you understand what the drivers of that data are. It turns out that business model and financial health actually drive a good deal of HR decision making. When you go and compare it to equal sized businesses, whether or not they are both publicly held, whether or not they’re having high margin years or low margin years, whether or not they’re in growing or declining industries, those issues are the benchmark issues, right? What the economy is doing is the benchmark issue and it’s really hard to see that sometimes. HR varies with stages of the economy and the focus of the entire HR industry in various stages of the economy. The problem with benchmarking is understanding what you have. The more benchmarking data that’s available, the better you have to understand yourself.

Stacey Harris:                      That’s a very insightful comment, how well do you know yourself and your organization. I’m always amazed by organizations about their business practices that some of the HR business leaders are still struggling to understand, and by no fault of their own, sometimes the business itself hasn’t made it clear what their approach is what they’re doing, right?

John Sumser:                       Right.

Stacey Harris:                      The other that ADP mentioned, I just want one final thing here and then we’ll jump into, I think, some of the stuff that we got out of workday this week, but I think this is well worth mentioning is that they have their chief security officer there doing a presentation, and I was absolutely blown away by their approach to security, granted they have to, right? They’re managing some of the most critical issues for a lot of large global organizations. They walked through their data center, and their security center. They have a crisis center with all of the … That they’re literally pre-watching what’s happening across all of their data. They have a predictive analytics tool that’s running in all of their security to get a sense of what hacks could happen or where they could be coming from, and get in front of those types of things, and then they’re negotiating relationships with a lot of governments around this independently and in context or in conjunction with the other associations and governments as well. I thought that was fascinating to learn the amount of investment they have to make and the security alone, and that they’re very, very stringent about it.

The one thing that we got into on the security side was some of the data privacy issues going on. It was interesting to hear their take on how they’re handling the Russian data location issue that came out on September 15th. They’re handling it and they have no issues with it right now the way their products work because none of their data that they do from a global perspective, although it’s still brought in to a single location to be analyzed. It begins and ends within the region, and in many cases in a non-premise environment in some cases. They haven’t really run into any issues with that but they’ve done a lot of regulation checking to make sure that’s the case. John, you’ve seen some other organizations, security setups, can you see other organizations doing predictive analytics on their security environments at this point yet?

John Sumser:                       I’ll tell you I went yesterday to the grocery store. On the way into the grocery store, we passed a cvs, a pharmacy and in front of the pharmacy was a trash can. On the trash can was a big red bumper sticker sized label that says, “Please do not throw any trash from the pharmacy in this trash can because it puts your personal data at risk.” It blew me away. This is just some grocery store. It’s not a heavy crime area. It’s an apple in a little suburb. The last thing I would imagine is thinking about whether or not to put my receipt in the trash can at the grocery store. Apparently that trash can has been hit by people who did identity theft.

The degree to which the privacy problem is vastly larger than we think on a moment to moment basis, I don’t think you can overstate that. I’m going to be surprised if there aren’t any security predictive analytics packages being developed by the big iron players Oracle, [inaudible 00:24:51], AP, Workday, Ceridian because security of the data is critical. Our definitions of what constitutes data that needs to be secured are in flux, so we don’t currently protect the pictures of the picnic with our security but we should protective in the pictures of the picnic because the pictures of the picnic will be searchable by facial recognition software. If you have pictures of the slightest bit of ethical compromise which happens at parties, it’s a vulnerability that you’re sitting on. People are going to start encrypting and attending to the security of pretty mundane data because you can’t always tell where the risk is in your data.

Stacey Harris:                      Very much so. Yeah, so those are the big updates from ADP. The last one which I think will lead into the what we’re seeing from Workday is they did give some updates on their ADP marketplace, and their ADP marketplace came out, I think, last October, I think, is when it came out. They now have 60 applications in the ADP marketplace but they have 350 organizations leading in the pipeline.

I think the ADP marketplace is really interesting. This is similar to other marketplaces but I think they have made it really very simple to use. It’s very similar to anything you’re going to see on any of the app stores, right? Some of the things that you can click on and it’ll go to please get more information. You’ll get some stuff sent to you. Some of the things that you’re going to click and be able to go right in through and pay for things with your credit card automatically and get them added to your ADP environments, right? They’ve made it very simple where they can. They’re also going to start putting into their environment preferred service providers and integrators and consultants and so I think it’s really-

John Sumser:                       Hold it. Preferred service preventer, I like that.

Stacey Harris:                      Provider, provider, provider. There could be some preferred service preventers.

John Sumser:                       I’ve heard of preferred service preventer. I know of a number of people who are unhappy with their preferred service provider.

Stacey Harris:                      Exactly. I think what you’re seeing with ADP and it was very clearly through their marketplace is this idea that we want to play friendly with everybody. Their relationships with all the various vendors, all the various service providers in the market, and all the various consulting agencies in the market, they were really emphasizing that they are trying to … As long as it follows some level of certification and some level of analysis because they’re vetting everybody. I think this was a bit of a commentary although they never mentioned any of its name. Their big commentary on effect that all of their preferred clients and vendors and organizations they’re working with have to be vetted to make sure that their data is safe, and so that was their biggest comment on that. We saw very similar conversations taking place at Workday as well at the Workday event. Before I jump into Workday updates, John, does that surprise you that this workplace concept, work market concept is growing from a marketplace perspective both for ADP and who else is saying it was Workday?

John Sumser:                       This may [have 00:28:24] the entire half hour conversation. The reality is that every company is a software company. Not every company needs to do all of the work that’s required to build software system. Some companies will be more like a [pathwork 00:28:42], some companies will be more like apps. We’re seeing that happen in companies that have large followings, that’s a really smart adaptation. These are companies who are threatened with disruption by the smaller companies. Figuring out how to give the smaller companies access to customers while maintaining supremacy as the overall architect of the environment, the guarantor of the environment, that’s a predictable next step. It makes a large question about what’s the HR technology industry really look 5 years from now.

Stacey Harris:                      No, I would agree.

John Sumser:                       Lots of marketplaces and then it’s going to have … Because only half a people buy their tools from inside of a suite, so you’re going to have lots of marketplaces and then the 50% of the market doesn’t use the marketplace and be fascinated.

Stacey Harris:                      I can’t believe we’ve almost run out of time now. We were talking so much about ADP. Let me get through a couple, I think, of big updates on Workday that are important. We’re seeing about 5,000 people in attendance. I’ve gone to 2 Workday Rising in the last year and this year, and I will say it is definitely much larger this year than it was last year. They gave a number of about 3,500 clients, I think, and the rest were prospects and employees at the event, but still it was a pretty large number.

Their event has definitely outstripped some of the other APCM events that I’ve seen in the market these days. They’re saying they’re now up to 1,062 HCM clients, 116 in financials so we’re a little bit behind there, and 24 students at this point rolled out big, big names, Coca Cola, IBM, HP, MGM, all recent acquisitions, and people who are actually live on the system at this point. Now the 1,062, I think, they had 760 was the actual live clients. I think that’s all well worth noting that just because that they have the same thing to deal does not mean they are live on the product.

John Sumser:                       Hold on, that’s almost they’ve got 760 live and 1,100ish total which means that the number of people who are signed but not live is half of the size of the existing customer market, that’s huge, that also sounds like things are not going very fast.

Stacey Harris:                      I think when you look at the numbers even with our implementation, yes, they’re less than what we were seeing with them on premises but you’re still seeing at least a year, sometimes maybe a little longer for implementations of particularly with LMS involved and payroll involved or anything that has to do with that. You really just don’t go any faster than that if you’re at least a mid market and large organization. I think that the idea that we’re going to cut down to a couple of months of implementation time frame is just not realistic in any sense. What we are seeing … The other announcements they made which I think are very worth noting is that in their 27, they have unreleased 25 right now, but in their 27 release they planned to launch learning. Now they’re learning right out of the gate. I did ask directly will it be score compliant, I was given a wishy washy answer on that, but that’s okay because they think knowing who they are, what they basically said is that they have every expectation of creating a compliance based LMS which means that eventually it will be score compliant to all of the features built into it which is different than I got from other large vendors who are rolling out learning products right now is that yes, it’s going to start probably more video, pulse surveys, see a lot of the really cool learning stuff.

I think Workday has every intention of becoming a replacement LMS. They do not expect their clients to have any other LMSs in place and they’re using LMS. The other big announcement, I think, which I don’t think it got as much news or traction is that they have created a cloud connector tool which they’ve had in place. They’ve really done some real update to it and specifically it’s created to do a relationship with SAP so that they could do effective dating transfer of information per payroll particularly those large multinational organizations. They were struggling with their relationship, I think, with SAP in particular from a payroll perspective but other payrolls as well, and so now this new cloud connector tool which goes along with what we’re talking about really is all about them being able to get data from and feed data to various payroll solutions that are not Workdays. This I think is going to open up the relationship with Workday a great deal for many other vendors who are on the payroll side of things. Those are some of the really big announcements, John. Any comment on those that surprise you?

John Sumser:                       Workday is a tremendous juggernaut and I think we should probably spend a whole bunch of time on what you learned there next week.

Stacey Harris:                      Okay, let’s plan to do that. Yeah because there’s a lot of other things that are definitely well worth the conversation.

John Sumser:                       Yup, it’s a busy and exciting time. I’m so glad that you could take time out of your busy schedule to be here today. Same for everybody who’s listening, thanks for taking the time to listen to our conversation. We’re out of time and so we’re going to sign off. Thanks, Stacey for being here.

Stacey Harris:                      Thanks, John. Thanks, everyone.

John Sumser:                       Thanks everybody for listening.

Stacey Harris:                      Yup. Bye.

John Sumser:                       This is HR Tech Weekly, one step closer with Stacey Harris and John Sumser. Have a great day.

End transcript

 



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