Mike Gioja's Second Act in HCM -- at Paychex
Mike Gioja has made a major impact in HCM. First at SAP and PeopleSoft and now, after a comparative lull at smaller companies, at our third big payroll provider, Paychex. Remarkable similarities at what he's done at each of the three, and now he's transforming Paychex (like ADP and Ceridian) into a technology company.
By Bill Kutik
There are many executives in HR technology, some even below the level of CEO, who have made extraordinary contributions to our world. Mike Gioja is one of them.
Mike Gioja was already an experienced IT executive when we first meet at SAP's user conference SAPPHIRE in 1998. He had already spent 12 years at IBM as a senior R&D manager,directly responsible for delivering IBM's first release of UNIX on the mainframe.
After that, he worked at Fidelity for three years on its very early (and still on-going) HCM outsourcing efforts.
But his SAPPHIRE appearance was his very public debut in HCM after spending four years closeted in Germany turning SAP's R/3 HCM product into something respectable that could -- and successfully did -- finally compete with PeopleSoft.
Trust me, the American version SAP first showed in 1993 could never have reached the huge installed based it enjoys today without Mike's insights and hard work.
We knew we were brothers under the skin (both from New York City) when during a briefing in his hotel suite, we both reached for the gift basket on the table and simultaneously grabbed for the pistachio nuts!
Beyond shared tastes, Mike had an extraordinary ability to explain tech to business people and explain business to the technical people he usually managed. Everyone who worked for him or alongside him always had the most admiring things to say about Mike -- at least to me.
From SAP, he went to a greater triumph: managing 2,200 developers at PeopleSoft and creating the first web-based applications for Version 8.0. He arrived and found a lot of cleaning up to do: merging three separate application development organizations -- the PeopleSoft Business Network, the "Disruptors" and the main organization.
Moreover, in their rush to market, the PBN people were using off-the-the-shelf tools that would guarantee their first web-based self-service apps would not integrate easily into the main PeopleSoft HRMS. There, Mike made the hard decision that those apps had to be rewritten using PeopleTools, which didn't yet have that ability and had to be extended! Long delays ensued, but the version was better for it.
Mike left PeopleSoft before absolute final delivery of 8.0 could be reached, following an executive dispute with CEO Craig Conway, the former Oracle exec who replaced founder Dave Duffield for a short time. Thus began his eight years of wandering among smaller, less ambitious companies than SAP or PeopleSoft.
Serially, Mike was CTO & VP of operations of the Internet Capital Group, a high-flying dot.com incubator during the bubble years that quickly fell back to earth; president of BrassRing, the pioneering ATS vendor now owned by Kenexa; EVP of products & services for Workscape, now owned by ADP; and CIO, EVP of products & services for Workstream, the HR application software aggregator now renamed HR Soft.
But now he is back on top as SVP IT, Product Management & Development at Paychex, where after four years of cleaning up a different kind of mess, the CEO wisely decided Mike should be the voice and face of the company.
So naturally he went to Florida to visit Naomi Lee Bloom and to lovely Newburyport, Mass. to visit IDC's Lisa Rowan. And then came to see me. We both looked for pistachios ahead of time but failed to find any!
Truth be told, I've never followed Paychex, despite it being the third big payroll service bureau after ADP and Ceridian, believing it served a market of companies so small that it couldn't be doing anything interesting. Mike explained otherwise.
The background is Paychex started about 40 years ago with a distributed brick-and-mortar model of 100 franchised offices. Each franchise built its own processing system, offering service bureau payroll to companies with two to 10 employees. Much as all the bureaus did at the time, clients phoned in (or later faxed) their weekly payroll information.
Later it added services for tax filing, 401(k), recurring payments, ASO (administrative service organization) and PEO (professional service organization), time and labor, and, of course, HR.
Before going public under the ticker PAYX, Paychex consolidated all the franchises and their applications "on a big box with 100 partitions," Mike says. It now has 12,000 employees and 2,400 sales reps, no small operation.
The company has three target markets: about 500,000 clients with 1-49 employees, which Paychex calls "core," and may have more than the number of ADP's identically sized Small Business Service (SBS) clients. It claims to be No. 1 in that market.
Paychex's new sweet spot is its 50,000 clients with 50-250 employees. And, of course, it has aspirations to service companies with 1,000 employees. Rounding out its application suite, the company has made five acquisitions in the last two years, including the recently announced myStaffingPro for recruiting.
Like ADP, it runs an insurance brokerage with 107,000 clients and many partners providing the actual coverage.
Mike is writing a new payroll system, enlarging the size companies that the app can service from a less ambitious effort that was already underway and integrating payroll with HR on a SaaS platform. He declares (just like ADP with Vantage and Ceridian with Dayforce) that it is the company's "next generation and will turn Paychex into a technology company, ready for the new world."
There will be one code line for U.S. payroll and tax, and a second one for global. Clients are already receiving the standard three SaaS updates per year.
As Naomi sees it, "Mike convinced management that they had to rebuild their foundations [and] led that painful/expensive/time-consuming work successfully with much of it now accomplished, and Paychex is now reaping the benefits of that big bet. I believe it's saving Paychex by enabling them to ramp up their technology capabilities in the nick of time. It's the kind of foundational work that is rarely seen or understood by customers, investors, even analysts."
So erase the term "payroll service bureau" from your forebrain. Thanks to Mike's "second act" (and David Ossip at Ceridian and Mike Capone at ADP), there just aren't any big ones anymore.
HR Technology Columnist Bill Kutik is founding co-chairman of the 16th Annual HR Technology® Conference & Exposition, returning to Las Vegas, Oct. 7-9, 2013. This year's conference program is online or download the brochure. You can comment on this column at the Conference LinkedIn Group, which doesn't require prior or future conference attendance to join. He is also host of The Bill Kutik Radio Show®. He can be reached at email@example.com.