What’s new in 2022 for HR? The winds of change point clearly in one direction – down market.
Cloud HCM has come full circle in its pursuit for the right-sized customer. Those who have grown up in HR will recall cloud pioneer Workday had its earliest success with mid-market customers and faced intense scrutiny as a platform for the largest global customers until Flextronics came along in 2012 with 200,000 employees and 30 countries. Just eight years later, Forbes confirmed Workday bragging rights to more than 60% of the Fortune 50 as active HCM users and 45% of the Fortune 500 companies.
Average employee size is still a hefty 35,000 employees for Fortune 1000 companies. Fiercest competition for these and other well-known customers has come from Oracle Cloud, SAP SuccessFactors, each with a share of the jumbo logos that demonstrate its ability to serve large, complex customers across a variety of industries. Since many of the largest U.S. companies have already chosen their HCM platform of the future, the battlegrounds are shifting to the next tier of potential customerss.
According to the NAICS[1] there are 23,865 U.S. companies with 1,000+ employees as of October 2021. Ironically, the time has come for Workday and others to prove anew that they can serve the needs of smaller customers. To do so will require them to match the cost efficiency and payroll best-of-breed solutions from well-established rivals ADP, Ceridian, and UKG. Each of them has made major acquisitions to reinforce its cloud technology foundations, paired with their long-recognized superpowers in payroll and timekeeping services in North America and internationally. Their brands are well-known and are selling a familiar value proposition with an established presence.
The tipping point is now. Below are five trends that will bring momentum to the race to the cloud by companies between 1,000 and 20,000 employees.
- Providers are targeting this market size. Established salesforce continues to grow, hungry to find, win, and transform HR organizations that want updated technology and standard HR processes. New entrants use social media to amplify their brand. At this size, there are thousands of U.S. companies to fill the sales pipelines.
- Experienced talent heads down-market. As part of the Great Resignation, people with large market skills and experience are choosing roles in small companies. Senior leaders accustomed to a single modern system of record recognize the value of technology-enabled HR. Likewise, managers and employees have come to expect the automation and experience of a cloud HCM solution.
- Post-pandemic funding is freer flowing. One component of any good business case includes the efficiencies to be gained with self-service, automated workflow and intuitive experience. Once dismissed as soft-savings, sudden and prolonged work-from-home has made a believer of many steering committees now willing to fund cloud HCM solutions.
- Availability of payroll and time services. The market for outsourced payroll and time solutions has matured and is rich with alternatives. Not only do the best-of-breed providers offer their own very competitive cloud HCM modules, but they have also gained experience integrating their pay and time engines to the leading cloud HCM solutions. Stand-alone payroll administration on Workday is available; other platforms have fewer options.
- Aiming for affordability. Success down-market requires a fresh look at price points in a new competitive line-up. Mid-market buyers are more likely to balance robust feature-functionality with cost constraints. They lean more on internal resources, seeking more targeted third-party scope in areas like benefits open enrollment, post-payroll and complex configuration changes.
As 2022 ushers in the great race to mid-market adoption of cloud HCM solutions, expect to see more providers than ever throwing their hat in the ring. Paycom, Paycor, Paychex, Paylocity – all with origins as payroll systems and services now bring a broader HR suite to their subscription services. Newer cloud platforms like BambooHR, Cornerstone, bob, Papaya Global, and Zalaris garner attention through advertising and appearance in “best of” lists anxious to call out the up-and-comers.
Caution to those inclined to do-it-yourself. What is low-cost and works best for companies with hundreds of employees is often inadequate for companies with thousands of employees. As the search for talent extends beyond typical locations and borders, the ability to handle international employees at smaller scale can be a differentiator or an important next conversation.
It’s a buyer’s market for HR leaders seeking new technology and innovation. Providers have taken their marks with some fantastic offerings to help HR organizations of all size leap forward with technology enablement, fresh user experience and a transformed operating model.
[1] US Business Firmographics as of October 2021. Note that another 10% of registered businesses did not provide the Employee Count, making the count for 1,000+ employees a conservative estimate.
