Saturday, April 21, 2012

The Next Tipping Point in Payroll Software

Within the sphere of influence in which a serious small to mid-sized payroll service bureau operates, there is a limited number of software providers from which you can purchase the engine for your business to build upon.

Why am I writing about this? Well, it’s what I do… But, also because I believe that the game is about to shift again...

Over time we've seen a number of changes take place within the industry. The last major shift took place when the big vendors left DOS behind and moved into the Windows space. This was a massive undertaking and required a great leap of faith and investment on the part of the software developers. They had to step beyond the old flat file databases and move to relational databases which at that time were a diverse bunch. No core player had come to the top yet (e.g., Microsoft's SQL which dominates today). This shift brought Execupay, Inc., M-Pay, and iSystems to the head of the pack, leaving a few bigger players in the dust along with many smaller players. A few are still trying to get their Windows app launched after 10+ years of off and on development.

Today's shift began when small startups with team members from within the industry began developing new online payroll solutions. Exciting? Sure! Do they work? I suppose they do.

Why my lack of enthusiasm? Well, it's much like the "dot-bomb" in the late 90’s ... lots of flash, but hollow inside (should have used the chocolate bunny reference here eh?).

The single greatest failure of the recent wave of upstart 'online' payroll systems is the fact that their engines are infantile. They suffer from scalability issues and incomplete support for features that have been bread and butter for the big engines for years. This could be anything from multi-EINs, or multi-state support to local taxes to GL export options for Quickbooks or other popular accounting packages among other things. Also, if you ‘start up’ on an online package, just how easy would it be to upgrade to an enterprise level solution later on?

Speaking of Quickbooks, awhile back while working for Intuit, I started getting excited. This was because they had utilized the mature engine behind their acquisition (CBS Payroll) to drive the new front end they were developing for the small business customer. This is where the magic would happen! They would have all of those years of development experience driving the flashy front end put together by the young whipper snappers... Old School + New School = Mature & Cool. Best of both worlds right?

Well, many know the story... they sold the payrolls off to ADP, put a dust cover on CBS Payroll, and acquired PayCycle. The end.

Why are these upstarts important?  They were a wakeup call to the large providers, some of which have already been making inroads into planning and executing on their 'next big thing'.

What is important today is to watch the remaining (independently owned) 'mature' players in the Payroll Software development arena. Watch Execupay Software, M-Pay, and i-Systems to see who breaks free of the pack and skips forward, ahead of the others.

Now is the time to watch for the one who brings their mature system in to the 21st century. Who is willing to take the risk required to re-tool? Who is looking to make the investment? Who is in this game for the long term?

Bottom line – I believe that this is the year that a market leader will appear. This year, the leader will emerge

Disclaimer: Yes, I work for one of the three companies, and as far as I'm concerned, we will be the one on top. Should I think or say any less?

If you have comments, feel free to post them.  I publish pretty much everything that isn't deragatory, and some things that are... keeps it interesting.

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