From large global firms to small businesses, every company needs a way to manage its human capital. Payroll and human resources are critical to any successful enterprise that employs people. To make it work, most companies purchase human capital management systems (HCMS) to help them keep track of their employees’ needs.

Competition among service providers is stiff, and there’s a vast array of choices for companies looking for help. Recently, GLG’s Sterling Wong hosted a teleconference about the topic with Bob Schiff, GLG Network Member and CEO and president of Cyberlitica, a digital threat intelligence company that works with all the major vendors in this space. Below is an edited excerpt from that teleconference.

Who are the key players in the HCM marketplace, and what do they do?

For software and services providers working in HCM, everyone’s a prospect. If a company has one or a million employees, it needs payroll, and it doesn’t matter if it’s in the U.S., Asia, or any other part of the world.

There is no shortage of HCM providers. Each provider has its pros and cons. Some work better for large corporations; others are tailored more toward small businesses. As far as the key selling propositions go, they’ve covered all the niches.

Large businesses tend to choose from among HCM providers like Workday, Oracle, and SAP, three of the largest players in the HCM space. These providers have a full suite of end-to-end offerings and can handle scale. They excel both on the domestic and global side of the HCM software business. They can sell to any part of the world and be successful in those markets. These providers offer a lot of integration and robust programs that help their clients manage large workforces.

Midmarket companies often look to providers like Ceridian, or ADP, or Ultimate Software, which primarily focus on that segment. These providers thrive on targeting domestic companies with about 5,000 and under employees and offer some good products and lots of APIs.

On the small business side of it, Paychex and Paycom lead the way. Bamboo and Gusto are also in the mix at the top of the food chain here, but there are a lot of other smaller players targeting this space. Their unique selling propositions are very similar. They just offer payroll and HR benefits and don’t include robust product suites like the larger companies. They tend to be more affordable.

Could you share more about the key differences among offerings in the industry on factors such as ease of use, breadth of offering, and typical pricing?

There are not many key differentiators among HCM providers. Payroll is payroll, and if people get paid, they’re happy.

Human capital management systems are more comprehensive. Some products are stronger than others. The region of the world, the type and size of company could distinguish what’s different among HCMS providers.

All providers offer mobile, and that’s a change that happened over the last few years. From an app point of view, Workdays, Oracle, and SAP have big advantages because they can offer more. They have a whole enterprise resource planning (ERP) system at their disposal.

So a company looking for ERP or accounts receivable, or a good general ledger system, may want to go with a large player because they have integrated systems.

Smaller companies like Ultimate Software, Ceridian, and ADP, as well as Bamboo and Gusto, don’t offer a comprehensive suite and rely on bolt-ons. Those are single-point solutions that provide only payroll, HR, and benefits. That means they don’t offer the ERP systems that Workday and Oracles do.

As far as the pricing, it’s very competitive. Most charge on a per-employee per-month plan. It’s a fee depending on what the client wants. Typically for an HCM that includes payroll benefits, the price ranges from around $20 to $35 per person per month. The larger companies like Workday cost as much as $70 per person per month.

What kind of companies look for end-to-end HCM solutions versus best-of-breed point solutions focused on specific HCM functions?

Right now, there’s a lot of cost-cutting on the small business side. Companies are extremely price sensitive.

As far as the type of provider that companies gravitate toward, it depends on their size and needs. A company that needs a complete ERP system will go with one of the big guys because they have true ERP capabilities.

They interface with every possible program, including manufacturing and distribution software, plus the big HCM providers have their own systems. If the client is focused on a complete integration with its distribution systems, with its manufacturing systems, then the client will go with one of the bigger names.

If not, if it’s a midsized company with a couple of hundred employees, even a couple of thousand employees, end-to-end functionality may not mean all that much. They can work with a smaller provider because a single point gives them what they need.

---

About Bob Schiff

Bob Schiff has a proven track record and more than 20 years of experience defining and implementing transformational business development initiatives for dynamic companies. Bob is CEO and President of Cyberlitica, a digital threat intelligence company that works with all the major vendors in this space. Bob is also a partner in Miller+Schiff HR Consulting, where they advise companies on HRMS systems such as Workday, Ultimate Kronos, Ceridian, and others. Bob was Senior Director of Sales at Ultimate Software, where he was instrumental in launching Ultimate Software (Kronos) almost 28 years ago.

---

This technology industry article was adapted from the GLG Teleconference “Deep Dive into the HCM Software Market.” If you would like access to events like this or would like to speak with technology industry experts like Bob Schiff or any of our approximately 1 million industry experts, please contact us.

---

Questions Asked During the Teleconference:

• Could you give us a rundown of the competitive landscape of the HCM software industry? Who are the key players in this market? What services do they offer, and what are each of their unique selling propositions?
• Could you share more about the industry’s key differences in factors such as ease of use, breadth of offering, and typical pricing?
• Could you share your perspective on customer preference for end-to-end HCM solutions versus best-of-breed point solutions focused on specific HCM functions? Which types of companies or businesses gravitate to the former, which to the latter, and why?
• Could you discuss the typical RFP or purchasing decision process and key selection criteria when choosing an HCM software vendor?
• What are the typical contract terms for HCM software?
• In terms of implementation, what is the typical timeline for such solutions?
• What are the reasons that customers would change an HCM software provider?
• What are the barriers to entry for this industry, and how easy is it to enter this business?
• What has industry growth historically been like, and what do you think is the outlook going forward?
• What are some of the key growth drivers for this HCM software space, and what are some of the key challenges?
• In terms of M&A, what are you seeing in this space? Should we be expecting consolidation? Why or why not? And if so, who might be the acquirers and who might be potential targets?