CEO Goldfield aims to roll out more industry-specific service in the provider’s play to grow revenues.
by Andy Teng
If Burton Goldfield is right about how the U.S. economy will recover, he may be overseeing a potential goldmine. The CEO of HRO provider TriNet, a vendor catering to small and mid-size businesses (SMB), firmly believes that it will be the mom-and-pop shops and not the GMs of the world that will help fuel economic growth and job creation in the nation’s road to recovery. And if his prognostication is accurate, it will mean lots of potential customers for his San Leandro, CA-based company.
Goldfield is so convinced that this will be the way to prosperity that he’s persuaded his shareholders to spend nearly $100 million to acquire a competitor, Bradenton, FL-based Gevity HR, in one of the largest mergers in small-market HRO. The company announced the signing of a definitive $98 million agreement in March and expects to close the sale in the second quarter. For TriNet, which has been one of the fastest-growing vendors in the overall HRO market, the buyout will give it a true national footprint by marrying its West Coast heritage with Gevity’s East Coast presence. More importantly, it broadens the company’s customer base, allowing it to reach higher up in the mid-market while leveraging its own momentum to capture more market share.
“I think the timing is right and the opportunity is huge,” said Goldfield, a former vice president at IBM who joined TriNet as CEO last year. Citing the company’s explosive revenue growth during the past three years, in which TriNet has posted a 74-percent rise in cumulative revenue increases, he said that the company will be better positioned to tap into pent-up demand for outsourced HR services. “We felt the timing was perfect to leverage that momentum by bringing in this acquisition and addressing a broader base of customers.”
Goldfield said the companies will benefit from synergies created from each other’s strengths. In TriNet’s case, it has built a strong model for companies with anywhere from 5 to 500 employees, with its average customer size around the mid-20 number of workers. Gevity, he noted, targets the same range of employers, although it has some larger customers as well. He added that the company in recent months has seen a rise in engagements with larger employers.
However, the company will not solely focus on company size in its marketing strategy. Goldfield said employers are looking for greater value when it comes to outsourcing HR, and they are more interested in acquiring domain and subject matter expertise these days. He said TriNet will differentiate itself by offering more industry-specific solutions and offering expert advice to CEOs who want more than just a processor of payroll. “My goal is to fundamentally change the playing field,” he added, pointing out that the company plans to roll out industry-specific products every three months.
How will these products differ from what others currently offer in the professional employer organization (PEO) or the administrative services organization (ASO) markets? Goldfield explained that specific industry needs will be addressed within each release; for example, for emerging and startup technologies companies that make stock options a cornerstone of compensation and key piece to attracting top talent, a TriNet product with enhanced options capabilities might be rolled out. Similarly, other vertical-specific requirements may also be built in.
Will such an approach work in this price-sensitive economy? After all, although small employers want greater functionality from their HR services providers, can they really afford to engage in customized solutions? Goldfield, who has a degree in biomedical engineering and an MBA, added that his vision is for solutions to be affordable and targeted. TriNet will offer industry-specific solutions through an on-demand model, so clients can pick and choose the most appropriate ones.
Only by giving them truly useful solutions can a greater portion of the SMB segment be coaxed into outsourcing services. He estimated that only five percent of the market outsources any HR services, but by developing deeper capabilities, providers can raise that share.
Whether Goldfield can achieve his goal remains to be seen. SMB employers traditionally based their outsourcing decisions—whether to outsource, what to outsource, and the selection of vendor—on mostly price. But if he can shift the thinking of small employers to focus on value, TriNet will indeed be able to shift the playing field for this segment.