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HR Technology Column

ADP Changes Strategy for Integrated Talent Management Suite

ADP had an integrated set of SaaS HCM talent management products from partner Cornerstone OnDemand, but is now finishing building a second one called ADP Talent to compete with its partner. How ADP got to this juncture is an illuminating story of how the software industry has always worked.

Tuesday, May 29, 2012
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You may know that both Ceridian and ADP are racing to re-invent themselves for the new era in computing by each creating a single set of integrated HCM products in the cloud. Or to state it more clearly: to be delivered via SaaS (Software as a Service).

Both companies have long sold HR applications and services for a lot more than payroll.

While this is a major change for our most well-known payroll service bureaus, what startled me, frankly, wasn't the integration or delivery method but the goal of a single set of products.

That's because during my 23 years of watching, their sales forces have always enjoyed offering multiple products that do much the same thing to their prospective and current customers.

So, I've been most impressed by their efforts to change that after decades of doing business that way.

Until its recent Analyst Day, when ADP made it clear that -- in at least one way -- it was still the same ol' ADP.

It announced that ADP Vantage HCM -- its integrated HCM product set ballyhooed for nearly two years -- will come in many flavors and "bundles" with its new talent management application suite (called ADP Talent) -- and it will compete directly against its partner's, Cornerstone OnDemand. So, no single set of products.

It's not that big a deal, really, except for the really interesting history (and precedent) behind this, illuminating how the software industry -- and particularly ADP -- has always worked with partners.

As I said, ADP has long sold various HRMSes plus benefits, time and attendance, and payroll.

It got into the talent management suite business in May 2009 by signing a three-year "reseller" agreement with Cornerstone, the only large company vendor to have written all the applications itself. Under this agreement, the ADP sales force sold Cornerstone directly to its customers, did all the business and paperwork, and supported and serviced any problems with Cornerstone's software.

That type of agreement is different from the other common arrangement among software vendors: a "referral" partnership, which would have the ADP sales force only recommend the partner's software to the customer and then let Cornerstone step in to sell it, close the deal and service it.

In either arrangement, both sides obviously agree on the split in revenue in advance and never tell anyone else what it is. Since the agreement was signed, about 100 ADP customers bought Cornerstone products, which Cornerstone CEO Adam Miller says represents about 10 percent of his company's revenue. The companies signed a new five-year agreement this May.

Like any other reseller deal, Cornerstone's required substantial investment in training ADP's sales force and managing the relationship between the two companies. You don't want to know how many times salespeople on each side of any reseller deal say, "That was my client first, buster!"

Cornerstone had five full-time people managing the ADP relationship last year.

 

The two fit together particularly well during much of the first contract because Cornerstone lacked recruiting (now released in an early version) and ADP owns one of the former independent stars of that function: VirtualEdge.

Historically, ADP's standard reseller agreement includes the right to buy a piece of the partner and eventually the entire company, if the relationship works out.

That's how ADP acquired UK-based BMS Ltd. that became its former HR Perspective HRMS and Atlanta's Employease, which became its former HR and Benefits (HRB) HRMS.

But Miller had other plans -- taking his company public -- which he did before re-signing. So like another ADP partner, Steven Singh, CEO of travel and expense vendor Concur, Miller negotiated the acquisition clause out of his agreement.

Until recently, ADP never really functioned as a software company: All of its products had been purchased from other parties.

In fact, no one at ADP disputes that, until five years ago, ADP had never sold a software product it created itself except for AutoPay, its payroll engine.

Most famously, its big company HRMS -- which has been sold under many names, but is now called Enterprise -- started with the purchase of source code for PeopleSoft Version 4.0 nearly two decades ago.

Then, more than a year later, ADP acquired Workscape (without partnering first) in August 2010, with its world-famous compensation application, but also with early versions of performance and succession management applications.

Analysts saw a preview of ADP Vantage HCM for the first time at the 2010 HR Technology® Conference, with HR, benefits, time and payroll -- and featuring Cornerstone as an option.

ADP started getting pilot customers for Vantage nearly a year later in September 2011, eventually gathering 12 from its southeast region. All big software companies do that -- SAP calls it "ramp up" -- testing new software with carefully chosen clients. It used to be called "beta."

In October, ADP unveiled Vantage to the general public, again at HR Technology®. Of course, I didn't see it -- running around as I do -- so I don't know exactly what was included. In November 2011, ADP started building out the Workscape applications on their original technical platform.

Subsequently in 2012, ADP bought source code for a learning management system (Cornerstone's first and most successful product) from an unnamed company. It also took the SourcePoint candidate relationship management and sourcing applications from AIRS, which it acquired by buying its new owner, The RightThing, and integrated them with VirtualEdge.

I trust you remember the second you hear a vendor talk about integrating applications from different sources, it's time to reread: "A Cynic's Six Steps to Application Integration."

Like most vendors, ADP CIO Mike Capone well remembers the five-year-old column. When I asked which step the new learning application was on, he immediately said "Portal Integration." Which if you don't bother to click on the column means:

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"All the applications appear together on one portal page, can all be accessed from that one place, maybe even with a single sign-on, but look wildly different when you click on them."

In short, there's no common UI yet, not on the Workscape technical platform, but eventually both, I'm sure.

Still to be decided is which applicant tracking system to integrate into ADP Talent. The company has two available: VirtualEdge, which is very robust, and RightThingRecruit from The RightThing, of course, which unlike most recruiting-process outsourcers offers clients its own applicant tracking software to use rather than using theirs.

Although all this is announced to be "Generally Available" in June, it will clearly not yet be integrated in the way Cornerstone's applications are, which brings us back to competing products.

"We are committed to the talent management software we own," ADP's new CEO, Carlos Rodriguez, says. "We will lead with ADP Talent, but not exclude Cornerstone and still sell it." Evidently there will be a packaged integration for both to Vantage.

Fair enough, but I think the analogy he went on to make to Workforce Management vendor Kronos, ADP's most successful partner, is not completely on point.

In some ways, that precedent for Cornerstone is stunningly similar: After signing a referral partnership with Kronos, ADP got its own time and attendance system (known as ADP Time) which it continues to sell directly against its own white labeled Kronos product known as Enterprise Time or e-Time.

ADP sells about half of each. The technically sophisticated Kronos is more popular among companies larger than 1,000 employees, while smaller companies opt for ADPTime.

In explaining the advantages of that situation, one ADP executive says, "We're never going to spend the millions of dollars Kronos does to advance its product capabilities. Our own time product is pretty basic but meets clients' needs."

This is precisely where the situation with Cornerstone diverges. ADP makes it clear that it intends to make ADP Talent competitive with the best talent management suites on the market. While it certainly won't be going up against SuccessFactors for 10,000-employee deals -- instead selling to its own installed base -- it wants to be good enough to do that.

Which means to me that in a year or two, the only place to buy Cornerstone in the United States will be from Cornerstone, and ADP will indeed have a single integrated product suite for sale. Just like it said.

HR Technology Columnist Bill Kutik is co-chairman of the 15th Annual HR Technology® Conference & Exposition, returning to Chicago for one year, Oct. 8-11, 2012. The new program is now available at the website. You can comment on this column at the Conference LinkedIn Group, which does not require prior or future conference attendance to join. He is also host of The Bill Kutik Radio Show®. He can be reached at bkutik@earthlink.net.

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