The giants awakeBig HR system providers are waking up to SMEs, says Aaron Alburey
In terms of HR systems, the SME market in the UK has – up until now – been the preserve of smaller technology companies. However, the large software providers are now entering into sthis market to a degree never seen before.
The large software providers have been concentrating on reducing costs, providing multi-tenant environments and delivering quick, repeatable implementations. All this means that price of the likes of SAP, Oracle or Workday will soon be well within the reach of small and medium-sized enterprises.
Why would you want to?
This market is packed with new providers, start-ups and exciting new software companies – there are hundreds in the UK alone.
However, HR is a function with a broad remit. It’s also one that requires regular updates and regulatory upgrades. Large software houses entering the market can cope with these – their offerings include experience of operating at scale and massive coding capabilities. These mean significant advancements in software can be delivered quickly and accurately.
Interesting, they also often have the financial backing to acquire those smaller innovators in the market. All in all, I suspect this market will see the next revolution in HR software development – particularly in terms of consolidation.
Who are the players?
So the SME market will become a battleground between software giants and the smaller companies. Lining up against the giants are three categories of software providers:
- Payroll providers, many of which have expanded their services over the years (such as ADP, Ceridian, Midland Software, and CloudPay). These are the largest providers with the greatest penetration in this market.
- Mid-market Talent Software providers, who have for some time been picking up clients at the larger end of the SME market, offering full service HR systems. These are companies such as PeopleFluent, Lumesse and Cornerstone.
- New providers specifically targeting this market with simple, repeatable low cost solutions – companies such as BreatheHR, People HR and Octopus HR.
What isn’t yet clear is how quickly competition in this market will emerge and how quickly consolidation will occur. However, one thing is clear: within the next two to three years, many of the organisations currently delivering services in this space simply won’t exist.
So in the future, there’ll be a lot of change and many new options available to customers. All this will mean great deals on price – but there will be risks.
These are the likely risks of all this change:
- Accelerated market consolidation. A market full of providers will always face the possibility of consolidation. So, some operators will be acquired. Many others will be driven out of business as prices become lower and lower.
- Industry Verticals. One side effect may be the emergence of industry specific offerings, maybe via alignment with the governing and education bodies of those industries. Will we see the emergence of a provider with a clear focus on, say, construction or haulage?
- Movement of employee data. How will you react when your provider is bought by someone else, and along with it, the hosting of your employee data? Do you know who they are? Can you vet them as carefully as you did your original provider?
- Diversification/Innovation. One way to protect share of market is to broaden your offering, perhaps into areas such as collaboration, employee centric applications, or related areas such as Health and Safety, or Finance.
So, a number of questions arise from this changing marketplace, the most obvious being who will survive and who will fall by the wayside. Whether or not you believe this is good for customers, one thing is certain – it will be good for investors.