Enabling Technology

ADP’s Employease Mid-market Move

Payroll giant further validates this growing segment with acquisition. Company executive cites growth outlook in SaaS as one reason for the buyout.

by Andy Teng

As HRO continues to mature, all eyes are no longer fixed just on large, enterprise-wide deals. These days, the mid-market has come into its own, and buyers and providers in this sizable segment are discovering a thriving market full of new prospects and HR solutions.

But despite a rosy outlook, the mid-market remains hazy, with buyer demands, product offerings, and provider positioning fuzzily defined. As vendors jostle for leadership here, one well-recognized player has clearly set goals to stake a greater share of this emerging segment. With its recent acquisition of Employease, Roseland, NJ-based ADP appears to be positioning itself to cover the vast footprint of the mid-market, which has been defined as companies with as few as 50 to as many as 15,000. A former reseller of Employease’s hosted HR services, ADP is hoping the acquisition will aid its goal of dominating the mid-market.

“It’s a perfect marriage of two organizations,” said Rich Watson, division vice president of marketing for ADP’s Major Account Services. He insisted that the buyout was a natural extension of the companies’ existing relationship, which began in October of 2004 when ADP began marketing Employease’s services under ADP HR/Benefits Solutions. Leveraging Employease’s technological platform through its own distribution channels, ADP said it will continue to drive software as a service (SaaS) solutions to a whole new batch of buyers.

Watson said a robust hosted service is essential to ADP’s strategy. Citing studies by the Gartner Group, he pointed out that by 2008, more than half of the human resource management systems (HRMS) purchased by mid-market buyers will be the hosted kind. If ADP can continue to drive what he described as “strong” demand for Employease’s offerings, it stands to win a significant share of the hosted HRMS market.

With mid-market buyers demanding HRO services and functionality parallel to those available to large, enterprise counterparts, the thorny task of tending to their needs is no cakewalk. In this segment of the market, Watson noted, pricing is paramount, and providers such as Employease with its standardized solutions and platform stand the best chance to meet the demand. Watson said the company is currently considering how to further expand and integrate services.

Targeting organizations with 50 to 1,000 employees, Employease serves 1,500 clients and has more than one million employee records. While its target is the mid-market, Employease also serves one client with 25,000 workers and other buyers with more than 1,000 lives. The Norcross, GA-based company was started 10 years ago and became profitable in 2003, Watson noted. 

“What we’re seeing is with SaaS, we’re able to bring cost-effective solutions to the mid-market, which may not have been able to be delivered in the past. With Employease, it expands our reach in providing a competitive advantage,” he added.

Watson added that the buyout is consistent with a strategy recently mapped out by ADP CEO Gary Butler, who said the company’s acquisition strategy is to include businesses that leverage existing capabilities; offer new distribution, growth initiatives, and international expansion; and allows the company to enter adjacent markets. “We’re committed to the space, and we have a lot of experience in the space,” he added. “For us, it’s natural to partner that expertise with a company such as Employease.”   

Whether ADP emerges as the leader in the mid-market HRO space remains to be seen. One thing is certain, with many vendors now eying the segment—including from the enterprise side companies such as Convergys and IBM and from the PEO side firms such as Advantec and Gevity—the mid-market is quickly becoming crowded. But even with so many players joining the fray, there appears to be plenty of pickings for now to go around.

Tags: Enabling Technology

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