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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: 46
Air Date: November 12, 2015


This Week

This week John and Stacey discuss:

  • ADP drops lawsuit against former partner, rival Zenefits SF Business Times
  • Namely raises $12 million Fortune
  • OneSource Virtual

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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Begin transcript

John Sumser:                        (music) Good morning and welcome to HR Tech Weekly, One Step Closer with Stacey Harris and John Sumser. I’m sitting in downtown San Francisco watching the sun rise, where are you Stacey?

Stacey Harris:                        John, I’m in Philadelphia, it’s a little bit grey and rainy here today, but it was a nice time coming into Philadelphia. I forgot how nice it is to actually do events on the East Coast because I can fly in, be there in an hour and be home the next day. I’m enjoying my time here in Philadelphia.

John Sumser:                        That’s great, that’s great, and what are you there for?

Stacey Harris:                        I’m at an a event for ASUG which is the SAP users group. They put on a small conference, not too large, I think maybe there might be 100 – 150 people here total. That is primarily for the local, regional as well as a few people have flown in from elsewhere. Called Recharge HR, and I think it’s just an opportunity to have myself, [Ray Wang 00:01:14] is here, [Luke Marison 00:01:15] is here. I got a chance to meet in person a couple other people that we also know [inaudible 00:01:18]. As well as a lot of executives from other companies, speaking about what they’re doing in the HR space at more thought leadership level. It’s put on by the SAP user group function, but the topic is about thought leadership in the HR space, and technology. It’s a fun event I’m looking forward to it. I just got here today.

John Sumser:                        That’s great, so what did you see in the news this week?

Stacey Harris:                        Wow, what did I see in the news this week? Well, you’ve been traveling so there’s a lot of stuff I know you that you’ve got to talk about events that have gone on, because I know we had HR Evolution and OneSource, so we should definitely … one source is an analyst event, so we should definitely take some time to talk about that today. The other things, I think, that we might want to spend a little bit of time on is, we probably could have mentioned it last week but I didn’t have all the articles pulled together yet. Was the fact that if anybody’s been following the ADP Zenefits battle, both in the courtroom and on paper as far as what they’ve been saying about each other. I think that has all gotten settled now. At least the last time I read all the articles. The actual court cases were dismissed and I think they’ve now come to some agreement about how they will work with each other. Which is a big win for their clients and for both of them.

There’s also some interesting news about Namely, which is another newer player in the HR technology space. Who is often times thrown around as a competitor for Zenefits. Namely raising 12 million dollars in funding. Then there were some interesting articles, if we get a little bit of time today talking about Alcatel Lucent. This was a press article, but I thought it was a really great conversation that came out of HR Tech World’s conference about how they moved to the Cloud and reduced their costs by 30%. I think that is well worth having a conversation about. Is the Cloud a cost cutting conversation or is it a modernization conversation? We’ve had both talks before, but I thought it was a good article around it. Then just a couple small things, if we get time to talk about Goldman Sachs, is changing how they retain their junior brokers and bankers. That’s all about the millennial generation wanting to step up more quickly. I think there’s some great conversations there. If we get time, there’s a lot to talk about.

John Sumser:                        Cool. Cool. Let’s start with ADP and Zenefits. You couldn’t have engineered a more cost effective public relations campaign than Zenefits got out of getting into a legal tangle with ADP. They got name recognition like you couldn’t get any other way. They are mentioned routinely in the same breath as ADP. The investors must be giddy.

Stacey Harris:                        Yeah. My understanding is that when the legal thing was dismissed both sides basically had to say they were wrong about the other side. In the approach, or the apology that they had to each other, if you want to call it, is that they both put out the statements saying, we can’t say ‘this” about Zenefits and we can’t say ‘this’ about ADP. ADP had some commentary out there about Zenefits not safely managing people’s data. Zenefits had some data out there about ADP targeting them and their clients. I think both of those organizations had to pull back from their statements, in their own ways. I think they are working together now is my understanding at least from the news articles and from the announcements that we’ve seen. It will be interesting seeing if Zenefits also, around the same time, cut a pretty strong deal in their marketplace agreement with a competitor to Zenefits, which is with Flock. Flock is another benefits solution, that doesn’t do all the things that Zenefits do. I think there, ADP is making a strong partnership with them in that context of this is an option to go beyond Zenefits. It will be interesting to watch and see how that plays out I think.

John Sumser:                        I think you have a questions about whether or not these small payroll and benefits companies are disrupting the market. What do you think? Is there market disruption happening here or is it just more of the same?

Stacey Harris:                        Yeah, I think you have to bring Namely into that with them raising $12 million. They’re one of the names that are often thrown around at the same time that some of the other ones that are safe. I think part of what we’re seeing in this payroll benefits roll is that, part of why this came up for me is I actually have 3 journalist all within a week all send me email questions about this particular topic. I had to do a little bit of research on my own to seriously make sure that I understand what was happening in this. I don’t think as far as technology goes that many of these organizations have big innovations over what we’re seeing in the other traditional HRMS solutions. I think the big innovations that I’m seeing … Talking to somebody that [inaudible 00:06:40] many performance areas in this.

The indications that I’m seeing is really in their approach to pricing and making money, to be honest. Their approach to automating anything that you could possibly touch on the vendors side of this. The service and support get brought down to very little, but their automating things then often times are done manually and through other vendors. They’re making money more off of their benefits licensing. As we all know the health care and the insurance base is huge, so they’re basically giving away on some level their products for free to somewhere in the range of $10-$11 per employee. That’s a huge cost savings to small businesses. For many organizations who are spending somewhere around in the range of $100 – $200 for HRMS type technology if they’re going with some of the traditional vendors. I think the big innovations are those. Do you agree with that though John?

John Sumser:                        You’re describing, I would not have said this is a disruptive play until I listened to you describe it. Disruptive plays always look like they’re cheap first. Then they look like they’re technical innovations. Sometimes they’re not technical innovations at all and they’re simply financial innovations. The idea, I think embedded in some of these plays that you can make money on the treasury manipulation of the cash flow for benefits and stock. Would you have that money in your accounts for a day or two or a week? That’s where the real gain can be played. That said, ADP has 500,000 customers.

Stacey Harris:                        Yeah.

John Sumser:                        500,000 business customers use ADP. Mostly for payroll, but for lots and lots of services. That’s a market, the replacement cycle for that software is once every 10 years. It’s a market that is very, very slow to change. With good reason, because if you screw up payroll, everybody in your company is mad at you. I don’t know if it’s having the market place impact of a disruption, but it’s the classic structure of a disrupter.

Stacey Harris:                        Yeah. I think it’s definitely a space to watch. I think the payroll conversations is a bigger conversations than we’ve given ourselves credit to. Right now it seems to be a conversation for small and mid-market businesses. I just got off … One of the people that I get opportunity to speak to here today when I was riding into this Recharge HR was [Luke Marison 00:09:49]. He works as an SAP advisor consultant, but he’s also on [inaudible 00:09:53]. We were having this conversation about what’s happening with payroll and the Cloud. The largest payroll vendors are still struggling to get their technologies working effectively in a Cloud technology way. All these mid-market and small solutions are working effectively in a Cloud environment. Of course they’re not global in any space generally. I think that’s going to be the real conversation. Can you move, be very stable on premise solutions? Even ADP has an on premise model on some level, as far as their large global Cloud solutions. Can you move those to a truly modern Cloud technology and still keep them as stable as they have been?

John Sumser:                        Yeah. It’s going to be interesting to see how this shakes out. You mentioned Namely as a competitor and their funding. These guys are smart about media and advertising. They dominated the visual landscape at HR Tech.

Stacey Harris:                        I haven’t had an opportunity to see the Namely product. I have talked [inaudible 00:11:06] Bamboo HR as well, and I’ve seen Bamboo HR’s product. I think all of these newer guys are doing 2 things that I think a lot of the other organizations, the traditional organizations are struggling with. They’re really capturing the social and the media side of, I would say the brand management that needs to be done right now in the market. They’re really taking ownership of the user experience. I think those 2 things together, you really can’t beat that from right now at this point. Now, will they get the same numbers? Can they go to the scale and global capacity as some of these large organizations? They may not ever want to. It just might be the business is just a small company play for a long time.

John Sumser:                        I think the world wants innovation in that space, so maybe it will come. Maybe it will come. What else is in the grab bag Stacey?

Stacey Harris:                        You went to 2 events this week. Do we maybe want to touch base before we dive into those. OneSource which is a work day implementer, correct? You went to their analyst event. Is there anything interesting that came out of that. Because I know they’ve just recently gone into [inaudible 00:12:24][crosstalk 00:12:24] finances.

John Sumser:                        Holy moly, I came away from that event less clear about what the financing thing meant. I believe they were essentially purchased by a private equity company and I understood initially that they’re financing was more venture based then that.

Stacey Harris:                        Uh hum. (affirmative)

John Sumser:                        What remains interesting is that OneSource Virtual is treading the ground that interests me. They are doing implementation and maintenance and customer relations with 35% of the work day install base.

Stacey Harris:                        Uh Hum. (affirmative)

John Sumser:                        They’re the larges work day implementer and what they do is largely automated. They are a typical 1990’s implementation shop with a very large log of automation what they’ve generated as the way that they keep their prices in line and keep their customer service levels up. They look kind of like a software company and kind of like an implementation company. I don’t think the market place has seen that. Although that’s what RPOs look like these days too.

Stacey Harris:                        Uh Hum. (affirmative)

John Sumser:                        The idea is, is this process outsourcing, but with a heavily automated layer of operations?

Stacey Harris:                        Is that really the next … Is that really the big innovation that’s taking place? When we talked about the next system extent was that mainly or also doing …  They’re automating things that general used to be more fact and call and you had to have a lot of people involved. I just talked to [Enrique Lorenzo 00:14:30] Human Resource as well. They’re doing a similar concept, automating a lot of spaces that traditionally would have never been automated. They’re dealing with the SAP platform more like a [inaudible 00:14:40] then they did with other areas. Is that really the new layer of innovation, automating the services side of what used to be outsourcing models?

John Sumser:                        I think so, although I think it’s a slightly different thing. I think we’re in a large, long conversation about what software is and isn’t. You’ve got this, at the heart, the work day model is that they perfect business processes. They provide automation of those business processes in the most generic way possible. What you get from a large enterprise provider now is software that’s wrapped around somebody’s idea of the perfect business process and then you have these other guys come in and lay their software on top of it so you can … I got the sense that there’s a lot of talk about the difference between configuration and customization. I got the sense that there’s an automation you can do that modifies the configuration on the fly. You can unleash more of the core capabilities of the software and that automation behaves in some ways like customization but its more dynamic then that. I don’t even know what I’m talking about here, but it seems to me that’s what they’re saying.

Stacey Harris:                        I know that recently the … It was interesting when we did our research, I think you did similar, but basically found that, large organizations are still taking 6 weeks on average to do, to manage the updates of any of these Cloud solutions. That’s a long time to put a full amount of resources on doing things like testing, make sure updates are being done appropriately. Making sure they’re not going to break any integration links. If this organization is taking on that ownership and automating it on some level, along with automating the configuration so that people don’t really have to sit down and think about every toggle that needs to be switched, I could see how that could save a lot of time for organizations.

John Sumser:                        It’s an interesting idea. I believe this is where software is really evolving, because that function that is, ‘What do customers want? What do they need? How do they use it?’ Used to be the heart of research and development in enterprise software and it doesn’t appear that that’s the case any longer. That people who are in this, I don’t want to call it middle ware, because there are too many people involved. It’s something like a human machine middle something or other. That they’re doing, that’s pretty interesting. Where … If it’s not where innovation is happening now, it’s where innovation is going to happen, as its closest to the client.

Stacey Harris:                        I think it’s going to have … It’s interesting in the Alcatel Lucent story that I told, part of the reason I told is wasn’t because they basically said they had moved to a Cloud, I think we’ve got a lot of stories like that now. Alcatel Lucent was told to cut costs. They turned that cutting costs conversation into a modernizing HR conversation. Which I think is a fabulous … Of course you really get what’s happening in the HR world right now. What they did was not just move their solutions, consolidate all their solutions, move them to a single platform in a Cloud model. They also outsourced 50% of their HR workforce. The conversation from the head of HR there in the article, which I thought was well worth paying attention to was that he said “I think it was hard for us a first.” Keep in mind this an European organization. Outsourcing and getting [inaudible 00:19:00] off your payroll is a much bigger deal here than it is in the [inaudible 00:19:05]. It’s very hard to outsource 50% of their HR functions but he said “At the end of the day we felt that much like our Cloud technology, the people and the function that we were outsourcing could be better kept up-to-date by someone else, then we could keep their skill sets and capabilities up to date.”

It was an interesting take on outsourcing which was not about cost cutting, but was about the idea that another organization could do a better job of keeping their skill sets up and keeping their capabilities up. Do you think that’s a reality?

John Sumser:                        You have to be good at something. In order to be good at something you have to choose not to be good at other things. That’s the way it goes, you can’t be good at everything. If you look at, in the pure core HR automation world, you hear a lot of people sarcastically say ‘they wish Obama could have a third term because he’s been so good for business’. What they mean is that the volume of regulation has exploded. Any company that tries to tackle regulation for its clients has a ready market. Because nobody can stay on top of all that stuff. There are now in the United States, 400 observable governmental entities that offer payroll regulation, that you have to comply with, if you’re in the circumstances where you have to comply with it. Many businesses don’t even know what they are missing. If you’re in HR and the job is to manage risk, well that’s a sure risk. I think the expansion of regulations is probably part of the story.

Stacey Harris:                        Okay. That makes a lot of sense. The number one thing that people are looking for from their workforce management solution today is compliance and help with the legal side of things. Services not the technology as much. That completely makes sense. It was interesting, one of the other articles that I pulled, which I think fits along with this. You actually posted this on Facebook too. Textio, I think that’s how you pronounce it. This organization had actually analyzed all the technical jobs. The job descriptions that were posted in the last, I think it was in the last year, compared to the five years before. They looked at the words that were more likely to be in a job posting that got more successful job applicants applying to it. More job applicants applying to it. The words that were coming out on top were things like ‘artificial intelligence’, ‘real time data’, ‘high availability’, ‘well versed’ and ‘scalable’ and ‘inclusive’. Compared to words which were losing, which are no longer in favor and were getting less people applying to them which were ‘big data’, ‘virtual teams’, ‘troubleshooting’, ‘subject matter expert’ and ‘drug free workplace’, which I thought was funny.

I think, to what you were just talking about. As we’re shifting with markets, and are thinking more about the services side and the skill set side, and the fact that people have to be good at certain things and not good at other things. The people that we want to hire inside our companies are really more specialists in the ability to change. The ability to look at things diversely. The people who we are going to outsource are those people who are very focused in a particular job area. Does that make sense?

John Sumser:                        What you say makes sense. I’m not sure I followed the entire thread there, but specialization is a piece of it. The ability to adapt rapidly is a piece of it. What Textio does, what I find is so interesting about this application that you’re talking about is that they can take performance data, who gets hired, and match it up with job ad data. What does it say? Generate a list of things that are more likely to attract a candidate versus things that are less likely to attract a candidate. Part of that shows the way the story is changing in the work place. Part of that shows that there are automated ways to become better at communicating. I think that’s new. I think that the idea that you can get real time market based feedback that says, if you say ‘this’ you will get this result, and you say ‘that’ you will get that result, brings presidential style polling onto the recruiters desktop.

Stacey Harris:                        I was really impressed by this. When I looked at this in front of me, I went “this is interesting and full of style.” What really shocked me was that some of things that I would have thought, like something under expertise, I thought that would be something people were looking for. If you’re creating an environment where you want to try and keep a very focused workforce. Those were on the losing end versus the things like robust and saleable, was on the high end of high performers.

John Sumser:                        You would have to look really hard at what their data set was.

Stacey Harris:                        Uh hum. (affirmative)

John Sumser:                        Because the story that they’re telling doesn’t sound like they looked at many job descriptions in the Mid-West. Those are high skill, technology oriented. I think the companies in Seattle that has clients in that Microsoft technology ecosystem in Seattle and they come down to San Francisco to try and build clients in San Francisco. I somehow doubt that Hormel is one of their clients, or Purina, or Altoa, or Smuckers or even Marriott.

Stacey Harris:                        Yeah.

John Sumser:                        That’s not language you would find in the hospitality, retail, health care sector, its technology specific language.

Stacey Harris:                        It was interesting that you could do that. That you could run that on those types of organizations.

John Sumser:                        Holy moly.

Stacey Harris:                        Yeah.

John Sumser:                        If you go look at their web site they will evaluate a chunk of writing for you and tell you how sexist your tone is.

Stacey Harris:                        I think there would be a couple of organizations that would be highly surprised by that. There is a lot more than they realize in those particular organizations.

John Sumser:                        Yes, yes, exactly. Particularly in technology. I spent some time with [Keran 00:27:13] and his last name is going to escape me, on the phone. They are really bright people who enjoy being able to turn language into something that’s a more real time functions. There’s another piece of this, which is as soon as everybody knows what works, what works stops working.

Stacey Harris:                        Yes. (laughter)

John Sumser:                        Because then everybody does it. It’s like Google Adwords, or email without spam, or LinkedIn Mail. All these things that as soon as everybody finds out about them they don’t work anymore. That’s what they’re proposing to do with language. You could imagine that when people get the list of 5 things that really sell in job ads, why wouldn’t you use those things. As soon as everybody starts using them they won’t differentiate any longer so they won’t work.

Stacey Harris:                        It sounds like this, they should make their findings to the highest bidder, almost.

John Sumser:                        Publish things like this, I think this is what they’re doing by the way, publish things like this for people like us to talk about, while giving customers real time info.

Stacey Harris:                        Exactly. Yeah.

John Sumser:                        People who aren’t customers get the list and people will be using that list a year from now, and people who are customers get, this is how its changing.

Stacey Harris:                        Yes.

John Sumser:                        They can give away these bench marks all the time, this is the interesting thing that’s happening to benchmarking. You give away benchmarks all the time, because the benchmark is constantly changing.

Stacey Harris:                        Yeah. It’s actually an interesting this with the whole [inaudible 00:29:07] thing and research base, one on the presentations this morning here was 90% of journalism by 2030 could be done by a robot. I was not surprised by that at all. The Communications Major in me from back in the early 90s was cringing, but we’ve all seen it coming. Is that not … [crosstalk 00:29:29]

John Sumser:                        I don’t know. I’ve been trying to read stuff lately, I think maybe 90% of its already done by robots.

Stacey Harris:                        It could be. We don’t know who’s behind the screen most of the time. John, we have whipped through our 30 minutes. I think we have got through most of the interesting conversations today. There’s definitely a lot more that we can always be talking about. I think you were still on the road this week. Next week will … I will be home next week, we will hopefully be able to bring everyone some fun updates next week.

John Sumser:                        Next week will be great. Home again, home again. Thanks Stacey, it has been great as usual. Thanks everybody for tuning in. You’ve been listening to HR Tech Weekly, One Step Closer with Stacey Harris and John Sumser. This was our 46th show and we will see you again next week. Bye bye.

Stacey Harris:                        Thanks everyone bye. (music)

End Transcript

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