Solving The Value Equation

The Business Case for Targeting Mid-Market Buyer’s of Outsourcing Solutions

Historically, outsourcing, from payroll to benefits to taxes, has focused on large companies with multiple locations. It makes cents and sense; as the more locations, pay grades, and complexities, the higher the ROI from outsourcing.

With SaaS adoption making the user experience much improved, plus, the growing challenges and complexities of doing business, many small and middle-market executives are looking to offload administrative and back-office work off to specialists who can do it cheaper and better while ensuring less fixed costs.

The most compelling reason for targeting the mid-market is the size and revenue potential as the middle-market demand for outsourcing is significant.

The market potential by number (#) of businesses with 50+ full-time W-2 employees available on LinkedIn is highlighted in the table below.

Europe	Americas	India & Middle East	Asia
100,000	100,000	10,000	25,000

Not only are companies challenged with becoming more efficient to maintain the status quo, competition is eroding margins, globalization is causing changes in cost structures, and technology is either a hindrance or a helper.

According to our annual primary research of small and middle market buyers, the majority of businesses are already outsourcing at least two processes.

Landscape	Mid-Market Target Companies in the USA Outsourcing
Staffing	1,493
Call Centers	500
Security	899
Healthcare	4,524
Accounting	800
Telecom	2,084
Financial	3,424
Energy Services	1,310
Non-Profits	3,087
Insurance	2,084
Technology	9,806
Real Estate	3,726
Holding Company, Institutional Investor	975
Advertising, Media, Marketing	2,913

The majority of businesses consider themselves mid-market enterprises. They have multiple vendors complicated by changing business demands and evolving landscape, and lack efficient and effective processes and expertise to adequately fit their needs.

Buyers of outsourcing technology and solutions buy to simplify their business, while valuing a solutions based approach coupled with industry vertical specific domain expertise. What will satisfy the needs of the SME middle-market is simplifying the technology and functional processes with a business-centric mindset.

By making the buying process easy, the long-term profitability potential is significant.

Do you have the right revenue model?

Despite the economic uncertainty, there is a clear difference between market leaders and laggards in terms of sales performance, human capital productivity, and revenue growth.

In fact, the best run organizations are outpacing rivals in financial performance as well as creating long-term assets in several key areas such as quantity of revenue sources, quality of distribution channels, global reach, and brand market share (i.e. awareness and recognition by top buyers and influencers within key industry segments and communities).

You’ve heard this one before…the sales team wants leads. business leaders want revenue growth….and when these objectives aren’t achieved at the desired, and typically unrealistic  pace, marketing takes the brunt of the blame.

Too bad too, because marketing cannot fix a revenue model. However, marketing does often take the fall; as according to numerous surveys from MarketingSherpa, AmericanMarketingAssociation, SpencerStuart, and our own middle-market research; marketing executives have the shortest tenure of any senior executives, barely two years on average and even less for many technology and outsourcing firms.

 

So, do you have the right revenue model?

Unless your company is outperforming the competition and owners are satisfied with the earnings and valuation then the answer is : “NO.”

 

If you haven’t been approached for strategic alliances, and/or acquisition in this economy, then there is a high probability you don’t have the best revenue model.

Despite the recent economic uncertainty, M&A corporate development in the USA through the first three quarters of 2011 was 41 percent higher than in the first three quarters of 2010 and already ahead of the full-year 2010 total of $796 billion.

 

Of course, depending on the maturity stage of your organization; the complexity of the revenue model builds upon itself creating predictability based on overlapping constructs (multiple players, multiple distribution channels from both direct and indirect channels, multiple verticals, a portfolio of products and solutions, and client lifecycle management).

In summation, marketing cannot fix a product, revenue model, nor a company.

Here’s a quick test we do when interviewing companies or conducting due diligence.   Is your revenue model more efficient that your direct competition as well as your potential strategic alliances and channel partners?

The Business Case for SaaS Financial Management (FAO) for Employees, Managers, and Executives

The move to a SaaS financial management system and/or FAO outsourcing solution platform is occurring according to numerous analyst reports and thought-leaders due the the benefits of the SaaS model (enables every user to benefit from the vendor’s latest technological features without disruption or additional cost) and the utility being derived by employees, managers, and executives.

SaaS Adoption:

SaaS Market Share Forecast:

Benefits of SaaS Model:

Beyond the IT and corporate benefits associated with the SaaS model; the benefits of SaaS service in the hands of employees is powerful.

Self-Service Utility & Benefits based on Operational Efficiency and Personnel Productivity

Lower Total Cost of Ownership (TCO), utility based pay-as-you-go model, on-demand

Controls supported by Business Rules Engine, Workflow, and Alert Notifications

24x7 Access, Worldwide from the road, remote locations, or anywhere with mobile access

Employees have self-guided access to training, development, and their careers

Employee Consumerism (employees take accountability for their health, welfare, career)

Illustrative Self-Service Dashboard:

Self-service in the hands of employees providers consumerism, drives engagement and accountability, and productivity.

The benefits of SaaS financial management platform for managers and executives includes significant resource savings. More and more organizations are opting to leverage technology to automate and streamline their operations so that employees can focus on their core activities and so that managers have more time as well. Time savings and resource savings enabled by a SaaS FAO and financial management platform include:

• Simplify the process of proposals and contracts.
• Automation of 80% of bill invoicing, collection, and reporting.
• Reduces employee requests of managers and executives by up to 60 to 80% as majority of inquiries / communications can be handled by the seeker without direct communication.
• Provide managers with intelligence: alert notifications trigger email communications and reports related to any of the following:
  • Variances in spending, expenses, collections, forecasts, and cash.
  • Threshold and benchmark reports based on employee productivity, operational key performance indicators, and budget ratios.
• SaaS FAO enterprise capabilities include automation / streamlining of complex tasks:
  • Cash Forecast for Cash Management
  • Revenue Recognition
  • Total Compensation (Sales Performance Management and Bonus, Commission)
  • Partner Revenue Recognition
  • Multi-state, multi-country or global payroll and HR requirements
  • Data management, data reporting, data governance

Further saving managers and executives significant time is SaaS’ ability to support today’s work and today’s workforce. Today and in the future SaaS is a better fit as the following trends will become common:

1. Tablets will be the dominant work tool and communication device for many workers.
2. Mobile communications are a requirement for professionals as well as remote workers.
3. Contingent workers will be a primary component of the workforce.
4. Global requirements.

Today’s technology has advanced to the point that a mobile iPad tablet can offer managers all the financial controls and intelligence needed be used to run a multi-location enterprise from the business from the road, or the beach.

Are you evaluating moving to SaaS and/or a better financial management, ERP, or business management system?

Email us for our “Getting Started Playbook” which includes an evaluation and selection checklist, scorecard, and short-list of vendors, providers, and implementation firms.

Findings from the HR Technology Conference 2011

At the world’s largest HR Technology conference last week, there were  product announcements from a plethora of providers, best practices shared on implementation from all perspectives, and updates from industry experts like Naomi Bloom and Jason Averbook as well as forecasts from prominent analysts on the future of work technology (Welcome to “Face-Linked”).

Below find a brief recap summary including a few takeaways regarding the current state of HR technology as well as future workforce technology drivers.

Primary challenges (priorities) for HR technology providers today to overcome:

1. HR’s ability to impact/solve/support the business.  As HR continues to move from “HR centric” to a “worker centric model tied to business outcomes”; the demands placed upon professionals and systems evolve.  The admin and strategic functions of HR are intrinsically intertwined and cannot be separated and have to be performed durably well.   Essentially, HR’s job is to create jobs.  If sweepers are viewed as unimportant then they can be outsourced, but if HR finds sweepers that are customer service oriented, sweepers become an integral part of operations in the above pictorial example.
2. Vendor Definition. The current fragmented landscape continues to evolve as the major players consolidate and race to keep pace with the advancements in technology and the demands of consumers.  First and foremost, providers have to decide whether they are Business Management Platform (ERP) or an HR Platform (Talent Management suite + core HRIS-HRMS) or simply an application that integrates into the aforementioned platforms?  Today, the HR solutions landscape is littered with hundreds of providers that have meaningful client bases, but there are only a few players that have the majority of the market share by segment and region.
• Suites exasperate the vendor definition problem as companies need to deploy processes and not modules (illustrative list of processes here).
3. Data Management Sludge. According to Naomi Bloom, data management is a big problem not only in HR but is actually preventing the US economy from tHRiving because the ability to effectively and efficiently manage requires usable, actionable, secure data.
4. Customers are moving towards demanding Solutions and not software.  The emergence of HROs servicing a broader scope as well as the mid-market continues to grow.  These outsourced human resource providers are filling a needed role of performing transactions for companies, providing back-office shared services, and providing expertise across the HR and human capital management spectrum.  But also, software providers have to change their thinking and approach to fit consumers’ demands.  Software providers must think of user adoption and measurement of outputs as the end goal versus “go-live.”  Software systems have for too long rewarded the wrong goals.  Adopting enterprises and organizations have exasperated the problem as well by implementing technology to solve the business problem when technology is only a tool. Organizations are best served by starting with strategy and desired business outcomes and then defining their requirements for architecture and their users (defining wow user experiences before deployment).

Did you know?

· 1 in 5 enterprises are seeking to replace HRMS in 2011 up from 9% over the previous two years.

· 25% of firms looking to upgrade their HRMS.

· The top 3 initiatives regarding HR tech spending in 2011 include::

1. Business process improvement/innovation (approximately 2/3)
2. Implement/automate talent management processes (more than half)
3. Tie: Implement self-service and Support Business Strategy from HR by nearly half the responses

 

The overall state of technology continues to evolve as consumer technology evolves.  Today, SaaS deployments are taking over, as evidenced by Workday’s market share growth, and the shift towards truly integrated  platforms has become the adopted standard (although it will take years to filter to everyone).  Additional big ideas for the future of HR technology include:

1. Voice capabilities will end usability issues. As Apple and others pioneer voice capabilities coupled with advanced interfaces and embedded intelligence into end-user systems such as Workday, end-users will be able to use HR technology to its fullest utility and only limited by the maturity of the organization’s knowledge/skills/capabilities (KSAOCs).
2. Communities. Social collaboration is in demand.
   • Did you know that by 2013 80% of enterprises will support tablets, 40% will support mobile phone and wireless.
   • Check out this forecast from Gartner’s Jim Holincheck that predicts grand change: Welcome to “Face-Linked”.
   • The future workforce is notably different than the current workforce including:
   1. Large global and virtual “outside the firewall” workforce along with a mobile workforce.  Do you have integrated language translation services embedded in your systems?  Providers need to embed global into everything from data standards to analytics to systems blueprints to processes.
   2. Contingent workforces will represent a significant portion of the workforce.
   3. Younger generations are driven by “meaningful work” not money and other changes in work.
   4. Matrix and team organizations will be more prevalent.
   5. Total Compensation prevalent based on the new workforce demographics and attributes. 
3. Consumerization requires re-thinking about Usability, Usefulness and Utility. 
   1. Users expect the same experiences at home as they do at work. Software systems will need to be so easy that anyone can start using right away (No more form driven, tabbed, menu driven solutions that require manuals).
   2. “Gamificaiton” = Engagement. The fastest growing application is games. Games have already been adopted by numerous Global 2000 companies as well as non-profits for training and development with outstanding ROI. 

 

Historically, the majority of HR technology systems were implemented for either “payroll+” reasons or to solve a specific human resource pain.  Coupled with advancements in technology, and demand from consumers, many organizations are facing re-implementation.  Lots of  roadmaps exist (email us for a list of options).  Beyond defining your  multi-generational tech savvy requirements (SaaS architecture for the future), processes (KSAOCs), and creating your organization’s YBR ("the “Yellow Brick Road”), having the right game-plan & mantra is key. 

As the buyer of HR technology has shifted towards the end-user; the future of HR technology will certainly be work centric, workforce driven, and people performance-oriented.