ADP Rewrites Payroll, Everything!

Thanks to my friendship with ADP’s first female vice president, Zena Brand, I have followed the company’s fortunes for 27 years. Longer than anyone who has worked there, I thought. So I was actually disappointed recently to learn that Ed Flynn, now president of global enterprise solutions, has an actual tenure that’s two years longer.

I remember watching and sometimes talking to four CEOs: Josh Weston, Art Weinbach, Gary Butler and now Carlos Rodriguez.

During the first 20 years, I saw ADP write only one software product itself, a connector called “PC Payroll for Windows” (a product Zena was responsible for) and acquire lots of other software vendors and use their products as primary offerings in various company divisions.

Many people know ADP licensed the source code for PeopleSoft, Ver. 3 or 4, in the early ‘90s to create what’s now called Enterprise, its HCM largely for companies with 1,000 or more employees sold by National Accounts.

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Probably fewer remember Employease. Major Accounts — the ADP division widely recognized as its money machine, serving customers with 50 to 999 employees — bought that vendor in 2006, renamed the software “HR and Benefits” and sold it as its HCM. (Jasen Williams, the most senior Employease executive to stay at ADP, recently moved on.)

Just two examples of acquisitions, among many.

Payroll is the one area in which ADP, true to its heritage, always built the software itself. In fact, until recently, the largest percentage of ADP’s R&D budget was for patching, fixing, updating and maintaining Autopay, the mainframe software used now to pay one in six employees in the U.S.: a staggering 27 million in all. Autopay’s been doing it for about 50 years!

As they say about payroll: If it’s not broken, don’t fix it.

So I was gob-smacked at its recent Analyst Day in New York, when Stuart Sackman, head of global product and technology, revealed that ADP has been building an Autopay replacement (NextGen Payroll + Tax) from scratch since 2013 and planned to pay its first customer with it this month!

This new gross-to-net payroll engine will be remarkably configurable by clients. By choosing various “policies,” employees can individually be paid twice a week or even daily, important flexibility given the changing nature of work, which is incidentally eliminating the need for payroll batch processing.

On the user side, the mobile payroll experience will offer — I think for the first time anywhere — transparency into the math that goes into every payroll deduction, such as 401(k), or details for aggregated categories like federal taxes. It even breaks down the always enigmatic FICA (who outside HR even knows that means Federal Insurance Contributions Act?) into its component parts: Social Security and Medicare taxes. This results in a truly wondrously useful pay stub.

Maksim Ovsyannikov, who designed the current stub, will be heart-broken with the replacement but pleased with the improvement.

Considering the future of work, ADP even hopes to combine an individual’s income from a second gig or side business into its reporting of W-2 salaried income to offer suggestions for modifying savings or withholdings to cover taxes eventually due!

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The announced changes in the other applications are, for the moment, more subtle.

ADP HCM software will move beyond the traditional org chart so HR and business leaders can model teams or any other organizational structure used to get work done. Once that’s created, “embedded insights” will allow various queries to be run directly against it, such as “attrition today.”

ADP has created a notion of “HR Your Way,” which may or may not be the best migration path for its mostly larger clients still not in the cloud. ADP has already created 30 “mini-apps.” More will be done by 2019, when all the mini-apps become generally available and can be chosen and linked together by clients to meet the needs of their vertical industry, such as retailing. After all, does a law office need shift scheduling?

The concept is that clients can get innovation and new functionality without replacing their whole system. Given how relatively slowly SAP SuccessFactors, Workday and Oracle have been convincing prospects and customers to “rip and replace” their on-premise systems and move to the cloud (see my steeplechase feature), this may be a great idea. But on the face of it, I worry it might confuse customers. My bet is that eventually ADP will offer pre-selected bundles of mini-apps to existing clients (and prospects) that constitute offering them a new system.

Of course, all this is supported by a NextGen platform for these new applications with agile development, maybe even object-oriented programming, and use of the public cloud, first AWS and probably others.

CEO Carlos Rodriguez is justifiably proud that ADP already has 570,000 of its customers in the cloud –40,000 new last year — even though 500,000 have 49 or fewer employees. Carlos reports 61,000 HCM clients in the cloud, including 5,200 with more than 500 employees. That could be “the highest of any tech vendor,” he adds.

ADP is growing in three other areas. Professional Employment Organization (PEO), a business Carlos started and ADP acquired, has 20,000 clients in this country and is “the largest in the U.S.,” he says.

As a company, ADP got a late start expanding globally. For a time, it seemed stuck at 1,500 clients for GlobalView, its multi-national partnership with SAP. Now it has broken out with its own product, Streamline, plus nearly 30 of its own payroll packages for various counties with 64,000 international clients using them to pay 13 million people.

Like nearly every large vendor, ADP has a marketplace for partners’ products, but it seems to be doing better than most. ADP reports more than 200 applications in the marketplace with 6,000 subscriptions and 4,000 downloads.

Plus the company is reaching beyond its transactional heritage with the acquisition of The Marcus Buckingham Company and its software StandOut for actual performance management and engagement, not just ratings. It recently launched Compass, a leadership and coaching tool.

Later, remind me to tell you about ADP Global Cloud Connect and ADP Data Cloud. Needless to say, this is no longer the ADP I spent my middle age watching. Just in time before my attention wanders.

Bill Kutik
HR Technology columnist Bill Kutik, as chairman emeritus, is at the 22nd Annual HR Technology Conference & Exposition® in Las Vegas, Oct. 1-4, 2019. Watch Kim Billeter, the new Americas Lead for EY HR advisory group (PAS), discuss the question: Why is Cloud adoption taking so long? Just six minutes for the current video episode of Firing Line with Bill Kutik®. Bill can be reached at [email protected].