Working as a manager and consultant for so many years in the HR industry, we were able to gain many valuable experiences and insights. We have reviewed and published some of our experiences in specialized articles. We are pleased to share our knowledge with you. Perhaps you even recognize some of your own business situations in these articles.
Digitization of HR - To manage the resolution of a dilemma
At the very beginning of all considerations, a management question is vital, which the HR bosses in this country know too well:
What is the contribution of HR to success and growth of the company ?
Of course there is not just one answer. However, one classic variant is the following: “As a HR department, we ensure that the appropriate employees with the required skills are made available to the managers of the company at the desired time.”
A dilemma for HR managers
So far, so clear. But not enough with it. In times of strong growth, it is already becoming increasingly difficult to fulfill this promise. There is another dimension in many companies to increase the challenge for HR departments: the pressure on costs to secure the future profitability of the company, and ultimately the jobs. To top this tense situation, the company’s digitization manager is calling on the departments to contribute to the adaptation of the business model and processes – including HR. This brief description is just a small excerpt from the multi-faceted demands that human resources departments face. It shows, however, that the answer to the question posed above on the contribution of HR to the company’s success is not an easy one to answer.
The solution: Digitization of Administration
Strategic HR processes such as recruiting, employee development and also employer branding In many HR departments, these are certainly the supreme disciplines with a corresponding weighting in day-to-day business. That must and should be so, depends decisively on the business success of the future. Saving there would be counterproductive. On the contrary. Often, the available budget is not sufficient to fully meet the complex requirements of the organization.
So, how can HR managers manage at the same time the requirements of “digitizing HR processes” concentrate on “strategic HR” and “control cost” as much as possible?
Let’s take a look over the fence of the administrative processes in an HR department. By far the most complex and thus most expensive process is the preparation and distribution of payroll accounting. An absolute must, because the employees want to be rewarded for their commitment of course.
With closer analysis, these processes have some promising starting points to resolve the above triad, without investing additional money and on top of that also massively save costs.
In this context, the frequently discussed topic is the outsourcing of internal payroll accounting to external service providers. The answer to the question of the organizational and business benefits of this HR process optimization is as clear as it is different: it depends on the individual situation of the company.
More accurate and easier to answer is the question on the benefit in considering the administrative process of distribution.
Minor Cause – Large Impact
Still, in more than 90% of all companies in Germany, this analogous process has always been as follows:
- Execution of payroll
- printout of all documents
- Enveloping the documents
- Shipping by mail or manual distribution by departments
For the process outlined above, costs of 1.00 € – 1.50 € per employee per month are incurred today. The planned increase in postage costs by Deutsche Post in the coming year 2019 is not even included in this calculation.
Most payroll accounting systems in the market already issue digital documents as PDF files. However, these documents are then converted back to analogue documents by printout.
The company’s digitization strategy is thus not positively supported by HR in this way. So far, so unsatisfactory. And now?
There’s an easy, secure and easy-to-implement solution to the problem.
By fully digitizing the process of distributing all payroll documents across a system-independent web portal, HR supports the digital business strategy while delivering significant cost savings.
To illustrate, let´s have a brief look on a company with 2,000 employees in this context:
It is clear that there are promising, cost-effective, and easy-to-implement solutions to solving the dilemma of the HR requirements triad.
The digitization of HR processes while saving costs and creating additional freedom for strategic HR work is no longer an illusion today.
Find out more about this exciting topic at https://epayslip.de
Author: Oliver Zoll
How HR & Payroll software and service providers can grow smartly
Learn more about the most effective and less expensive strategy for your organic growth.
After all, just about all IT companies place “growth” at the top of their corporate goals. And especially those working in the HR industry,.
If you take a closer look at this fact you will notice, that there are very similar ideas about the source of “growth” in the individual companies.
New customers as fuel for growth?
Today, the formulated growth targets of companies in the HR industry can be classified in the majority of cases into the following subcategories:
- win new clients
- Gain market share
- Open up new market segments
The main growth-strategy though, is primarily all about selling existing products or services to new customers.
However, we also know from many years of experience in sales and business development at well-known software companies in the HR industry: this strategy is by far the most tedious, complex and expensive option for generating sustainable corporate growth.
You know for sure what the reasons are, because you are facing them day by day.
- The intensity of competition in the market is rising rapidly
- You therefore need a highly professional sales team and managers
- In addition to hiring the right people, “keeping” them is crutial to your growth
- Good sales people are also opportunists: they try to maximize their salary – and also get offers from the competition.
- Sales also need constant training to ensure success – that costs money
- To attract new customers to your business and products, you need to invest in marketing and PR
- Does your traditional business model still fit the needs of new customers? (Keyword: cloud).
This list is not exhaustive. However, it confirms the aforementioned thesis of the high costs of a new customer growth strategy.
This does not mean that it would not make sense to pursue this strategy with great commitment in the future. But it is quite possible to ask, whether there are no other, smarter or more efficient ways to boost business growth.
Why going the hard way when a smart growth option is close at hand?
This question touches the core of what we would like to convey to you.
Our longterm experience in growth-advisory and business development for IT companies in the HR industry has taught us, that a relatively easy-to-grasp source for growth in this regard is not always seriously and strategically addressed: existing customers
It sounds almost absurd, but it’s fact.
Once you have signed a new customer, the sales department duly celebrated its success and you successfully completed the onboarding project, the new exisiting client disappeares from the “growth radar”.
The customer changes sides, as it were: from acquisition to ongoing customer support.
You do not want to drown the delicate little plant with too much (new) water (read more offers).
As far as right and good.
But, how do you strategically manage the vast majority of your long-standing existing customers? What growth plan do companies have for this huge Potential?
As to our experience, many providers are quite unspecific and vague in this respect.
Although existing customers finance growth with new customers through their current revenues so to speak, there is often no strategic plan for them as a source of growth.
Of course vendors try to keep existing customers up to date with newsletters, customer events, seminars, etc. and introduce them to other products and offerings.
Maybe even the current maintenance fees have to be adjusted to market prices. Oh yes … when did we do that last time?
If you take it serious to work strategically on your customer base, the following topics should be addressed, worked on and poured into a business-plan:
- Customer structure analysis (segmentation by size, turnover, age)
- Product structure analysis (which customer uses which product)
- Business Model Analysis (Market Trends: OnPremise vs. Cloud)
- Product pipeline (existing, planed, revenue contribution / product)
- Maintenance / Service Cost Analysis ( revenue contribution / customer)
- Account Management / Sales (who, how, what, when)
- Development cost analysis (make or buy or partner)
- Quick-Wins for short-term growth acceleration
You do not need to develop every product for growth by your own
It’s a truism, but it has stood the test of time and lost none of its validity:
You should not reinvent the wheel when it already exists.
Especially in the context of points 7 and 8 of the previous list, we would like to use a client showcase to present to you, what a smart and efficient offer strategy can look like for HR / Payroll software vendors and service providers.
One of our clients is a Microsoft Dynamics NAV partner with more than 500 existing customers.
This Client is deploying their own HR/Payroll software, developped long time ago as an add-on to MS Dynamics NAV. Due to several customer requests, they where looking for a way to provide their customers with an offer for archiving digital HR & payroll documents and making them retrievable for their customers via a web portal.
A self-development was out of scope due to cost and time reasons (time-to-market).
Finally, we supported them by finding a very cost-effective and extremely fast to implement cloud solution. This product could be integrated in the clients own offering by “white-labeling”.
Existing customers perceived it as a separate but dedicated service in the Portal of the client. (www.epayslip.de / www.haveldata.de / www.mein-napa3.de)
Our client benefits in many ways from this smart strategy:
- Great value add for existing customers
- Very low implementation costs
- Very fast “time-to-market”
- Own “look & feel” by “white-labeling”-ability of the product
- No development costs
- No maintenance effort
- Higher sales
- Improvement of customer loyalty
- Innovation leader for MS Dynamics NAV Customers in the HR environment
There are many other examples we could mention with respect to strategic growth projects in the existing client base of HR & Payroll providers.
However, since we do not want to spend too much of your valuable time we conclude our article here.
If you would like to find out more about growth options and innovative strategies to boost your business, especially with your existing customer base, please contact us directly.
HR software vendors on their way to the cloud - the 6 biggest challenges and how they can be overcome
It will not go any further, like before!
The classic business model of many IT companies has always been the direct or indirect sale of software licenses, corresponding maintenance contracts, as well as the associated consulting projects for installing and setting up the software sold at the customer’s premises.
For the customer, this means the provision of appropriate IT infrastructure such as hardware, operating system, databases, IT personnel etc. This scenario is becoming increasingly important. High costs, lack of flexibility, and great dependency on the software provider lead to a rethinking of customers. This rethinking means that the sale of licenses is stagnating or even declining. With corresponding, negative results in maintenance contracts and consulting projects.
The way in which customer companies today and in the future themselves will use business-critical applications such as ERP or CRM solutions is undergoing a major change.
The pioneers in the field of cloud-based application systems have anticipated this change at a very early stage and aligned their business model to the changing customer requirements right from the start. (e.g., Salesforce, Successfactors, Cornerstone).
Classic software manufacturers are trying to expand their business models to the cloud / software-as-a-service (or SAP) as a whole.
From our many years of consulting practice, we know that many IT companies are in such a change phase of their business model so far and have often already taken some important steps on the way to the cloud.
At the same time, however, a closer look reveals that the fundamental change or expansion of its business model poses major challenges for the majority of companies.
What challenges are these and how they can be successfully addressed
we would like to present our practical experience in the form of 6 theses.
Strategic Planning – “Yes, we have to do something!”
It is not that the vast majority of software companies have not realized that their business is under pressure or no longer have the growth rates of the past.
And for many, software-as-a-service, “cloud” or “old-German data center solutions” are no longer foreign words. The market, the employees, the management, the customers and the relevant media do the rest. So something must happen to put the company on a sustainable footing and secure jobs. Just what – and what exactly?
The basic knowledge usually follows a strategy, a strategic plan or a business plan to be implemented as quickly as possible. So far so good.
However, as a rule, it is always exciting when it comes to implementing the coherent plan, which has been adopted by all relevant persons, in the operational reality. For a plan is the one side – the operational implementation a completely different. And this is precisely where the real challenges for the companies begin. The following questions should therefore be taken into account and already answered in the planning for business model expansion in the direction of “service” to ensure speedy implementation:
What is our target market, how is demand, the potential?
Which product should be offered?
What is the investment?
How do we integrate the new business into the organization / portfolio?
How and who sells the new offer?
Which staff is needed for the project and the business?
What know-how is available / what is needed?
Who is the responsible manager in the management?
How do we deal with our existing customers? The list does not claim to be complete. But it shows very clearly that it is not done with a “Yes, we have to do something!” Approach alone.
Organization – “lost by project leaders”
A very fundamental issue in connection with the establishment of new branches of business is its organizational integration into the operative business. This sounds logical and simple – and it is perhaps precisely for this reason that it is often neglected and underestimated.
The majority of people are not positively opposed to changes. In addition, the employees are usually more than fully utilized with the daily challenges of the established business. There are therefore a few essential questions:
Who is, and can, be responsible for the new business, anchoring it and anchoring it in the organization in the medium term?
On which hierarchical level is the person responsible?
Who should, who must work for him?
What is the organizational structure of the project manager?
Which organizational units are affected by the expansion?
Should we possibly establish a whole project team, we often encounter similar situations in our consulting projects: the impact of the new business sector on organizational and organizational aspects is not adequately assessed and is rarely planned from the outset.
This generally leads to misunderstandings, unclear responsibilities, and sometimes even subconscious or open rejection of the project by separate employees and managers. The prerequisites for a successful project implementation and a smooth establishment in the operative business are conceivable in this situation.
A clear, continuous communication strategy of the initiator of the business expansion (usually the management) signals to all stakeholders and coworkers that the project is supported by “very high” accordingly.
So the project leader is not lost.
Management – “we already have enough problems”
No man can know anything. Also no manager. For this reason, it is particularly important to plan the future expansion of the business by means of a new, additional business model.
A cloud, SaaS or BPO business model follows completely different rules than a software business model. Customers have different expectations regarding price, availability, support and scope of services. The operating model of the IT environment is not comparable. An efficient data center operation allows the highest possible scale effects and cost-effective “production” is to be installed. If the company does not want to operate its own data center, a suitable partner is to be found.
In short, companies are changing from the software manufacturer to the service provider with the new business model. The resulting changing requirements for the employees, the product, the processes and the organization are a major challenge for the management of the company. From our consulting practice, we know that the core business of a company always has top priority. This is, of course, completely understandable and correct.
But it is also true that such massive changes as the transition to a new business model, the building of a cloud-based business, without the necessary, massive support from the management can not be successfully implemented.
In addition to the corresponding dedication of sufficient management time and resources, this support also includes corresponding know-how and do-how regarding the new service business. If this is not sufficiently available in the company, it is advisable to purchase the necessary knowledge, e.g. through specialized consulting companies or interim managers.
This approach is not a revelation. On the contrary, it saves considerable costs and shortens the learning curve in one’s company enormously.
As I said: no man can know everything – even no manager. But in the case of such a decision of central, strategic importance, a “we get it somehow” approach is, as a matter of experience, only the second best solution.
Product – “What does not fit is made fit”
To get it straight to the point. The fewest software products originally developed for the customer at the customer site are suitable for a cloud business model. Why is that?
An original cloud or SaaS business model is based on the division of existing resources by many customers. This means that all customers use one and the same software on a single physical instance (hardware, operating system, database). Your data and users are only logically separated from one another by means of the user and rights management of the software. The advantages of such a business model result from the comparatively low IT costs / users, the monthly recurring revenue streams and the high scale effects in the service provision. In addition to changing customer demand, this attractiveness also contributes to the fact that more and more software manufacturers are dealing with the topic of cloud. But unfortunately, the existing software product is not designed for the parallel operation of many customers on one instance. Multi-tenancy is not given. What now?
There are, as so often, “many ways to Rome”. The development of the cloud capability of applications originally developed as 1-to-1 software (1 software license = 1 customer) has allowed a small, new industry branch to grow in the IT market.
The list of all options offered today in order to reach the stated goal would be beyond the scope of this contribution. At this point, we then ask the following question in our consulting and interim mandates: If the strategic goal is the establishment of a prosperous cloud or SaaS business and the in-house system is only very suitable for this – why not even for alternatives Keeping an eye out? Partner software? Cooperate? To buy? The frequent answer: “we can not do that, because we lose our independence”.
Unfortunately, the “not invented here” syndrome is still very widespread.
In our view, however, this is markedly too short and chances are lost. In order to break new ground, the company has to open up. Also for the good ideas of other market leaders. It will not be possible to expand your own horizons only in your own soup pot, and the promising new business model will move far into the future.
Sales – “directly or indirectly: this is the question”
Now we have a strategy, the organization is involved, management is fully behind the plans, the product is cloudable – everything is ready. At least almost.
What is missing now is the answer to the question: who is to market the new offer in which way?
If there is a direct sales channel, one could be inclined to put the service offer into the software vendors into the portfolio, quoting and rewarding them accordingly. To the point: this is the worst of all ideas. During our many years of business development and sales, we have experienced many such scenarios. It never went well.
Why then? The simple answer is that software licenses are sold differently than services and the target market follows other rules.
Software is sold through features and features in the hope that the customer will find this for good or even really needed. If something is missing, it may be necessary. can be configured via Customizing. This is expensive, but the customer gets the feeling that HIS requirements are covered. The high costs (or revenues from the company’s perspective) justify the use of the direct sales model.
A service like SaaS or cloud software lives from standardization, high scalability, low costs and thus also attractive prices for customers. The target market is more SMEs than corporations. For these SMEs an effective cost management is necessary. They are therefore more willing to admit standardized solutions. The argumentation in the sales process is a completely different one than in the case of software sales. In this case, it is very difficult for a salesperson to adapt himself to these different requirements in an irregular sequence. So now the final question: who then sells the new cloud solution?
It has proved its worth to establish a dedicated sales force for the service business. Be it direct or indirect. The support of the Internet as a distribution channel is also on the rise. A 100% success recipe nevertheless does not exist. For this, the initial situations of the software companies are too different.
Customers – “the bait must taste the fish, not the angler”
The most important thing comes last. What is the best option if you do not find any customers?
Of course, the software producers have been thinking about which target market should be supplied with the offer, how many customers would like to win per year, what they will pay, etc.
The question about the target market segment, however, has its pitfalls.
How do I explain to my existing customers the expansion of my strategy?
Are they at all part of the target market? Better first not, right? Too complicated.
So new customers. Good. But our company is still not related to the market (yet) with Cloud or Saas or even BPO. You know us only as a software producer. Will we be taken seriously at all or will we eventually water down our brand?
All justified questions and objections. They should show how important it is to discuss in advance how the customers are to be structured for the new offer and to which target groups are to be sold. (Keyword: idealkunde). What we often notice in transition projects with software producers is that the sales potentials of new service offerings are underestimated among the existing customers.
A small anecdote from the practice is to illustrate this.
A customer wanted to present a business plan for a new offer for which we wanted to get the approval from the management. Unfortunately, the day was already well advanced, we were the last in the series of topics and the attention of the panel was no longer at its peak. However, when we made the claim and at the same time calculated how the new offer could at least double the sales / customer without a single new customer, the attention was abruptly cut back – and the business plan was blessed.
About the author:
Oliver Zoll is a consultant for business development in the HR industry and owner of ZOLL & COMPANY
The 7 growth parameters for HR and payroll providers
The market for HR / Payroll software and services in Germany is attractive and therefore highly competitive.
With more than 30 million employees subject to social insurance in more than 2.0 million companies, the German HR / payroll market is by far the largest and most interesting market for providers of corresponding solutions in Europe.
As a result, a large number of HR / payroll providers of various sizes and experience are bustling here – from the local 3-man company to the global group.
However, this market is also highly fragmented. Viewed from a few large vendors, e.g. DATEV or SAP once, can hardly a provider more than max. 2-3% market share unite.
The market is ripe and has already been saturated in some areas for some time.
Today, more than 95% of all companies in Germany use certified payroll software to calculate wages and salaries for their employees and comply with the legal requirements of tax and social insurance law.
A vendor will only be able to win a new customer if another vendor loses this customer. So there is pure competition for repression.
The situation in the market for HR systems looks a little different, since there is still a lot of catching up to be done on the softwaresided support of the corresponding processes in the company.
This essay examines the most important parameters for a growth-oriented corporate strategy in the German market and is based on the author’s 20 years of experience in the market for HR and payroll systems.
The following key questions will be answered:
Which success factors are decisive for predictable and sustainable growth?
What distinguishes high-growth companies from their competitors?
Why do some companies grow in saturated markets while others are stagnating or even shrinking?
These are the following 7 tasks that successful and growing companies in the HR / Payroll market have often solved better than their competitors.
2 Market segmentation
3 Customer behavior
4 Offer portfolio
5 Sales Excellence
6 Change Competency
7 Implementation competence
The above-mentioned tasks are discussed in more detail below.
Admittedly – many HR / Payroll companies have now found their position in the market.
However, if you look more closely you will notice that this positioning has grown over the years and is often not really actively planned. “We have grown so pure …” the author then hears of his customers. This does not have to be bad and often it has also worked for years. However, if an entrepreneur wants to plan his future business growth in a targeted manner, it is very helpful to think about his own positioning.
Markets, competition and customers are changing over time.
These changes have an impact on their own position in the market.
So what should an entrepreneur do?
Within a so-called SWOT analysis of the company and its environment, the most important parameters of strengths, weaknesses, opportunities and risks can be compared.
This is followed by a definition and revision of the “unique” strengths or the USP’s or even the unique characteristics of the company. According to experience, a task that can not be solved very easily – especially if one takes meaningfully different business areas into the definition phase.
Finally, a strategic analysis of the market, the competitors as well as the trends (today and tomorrow, local and global) will be carried out.
In addition, future potentials and defined growth areas are of importance for the positioning of the company.
It has proven to be very effective in practice to describe the markets on which you want to be successful.
Sounds trivial – but it is not.
By segmenting the market according to suitable criteria, reliable information about the market potential, the growth opportunities and the associated, potential objectives for the individual market segments are obtained.
This is so important because different market segments may be a single market, e.g. for HR / Payroll “- that is, the needs, the behavior and the economic parameters of the customers can differ from segment to segment in such a way that an independent processing strategy is necessary for each market segment.
This can affect both processes (for example, sales) and products. In the market for HR / Payroll solutions, a segmentation of the market by company size (number of employees) has proven itself. It should be somewhat more precise than “small, medium, large”.
In successful segmentation In general, companies of similar size are grouped with comparable requirements or similar purchasing behavior with regard to the solutions offered. Market segmentation gives the entrepreneur a very simple but well-founded overview of where and with whom he is doing his business today. However, it also helps to identify potentially interesting, adjacent market segments and to show growth potentials. A good basis for the introduction of market segmentation results, for example, from a detailed inventory analysis of the structure.Customer behavior It is almost embarrassing to lose a word at all because it should be self-evident: the knowledge about the problems, challenges and wishes of the customers regarding their own product or the offered service.Our experience from consulting practice shows that providers love their product portfolios, while customers and, above all, interested parties often have a different perception. “The worm has to taste the fish – not the angler”, researches growth-intensive companies in the HR market for covert or obvious customer requirements to develop or expand their range of products. Sometimes, there are only small nuances that make the difference between success and failure. For example, strategic partnerships are a popular tool in the HR market to expand their portfolio of products quickly and cost-effectively s. The technical and technical challenges are often at the forefront and are done with meticulousness and diligence. The fact that the resulting new product actually corresponds to the current and future customer requirements is comparatively little time is used on the important topic, however, which seems clear anyway. So you start with a very good feeling and much euphoria in the partnership and the distribution of the new product. The sales succession is only slow and the planned targets are not being achieved. Well, the product is still new and little known – so you have to give the thing a little more time. A phenomenon, according to our experience, frequently occurs in the market introduction of new offers.Spät then however, even if after several years hardly succeeded are deeper considerations. In some cases, even the entire strategy is questioned. So what went wrong? Why do we sell our product so sluggishly during the competition seemingly successful with the supposedly same offer? So the demand is there or does not? This leads directly to the decisive question of all questions: How does the demand (the customer presentation) with regard to the offer look in detail? What exactly does the customer expect? What would he rather avoid? What deterrents him? The deep analysis of this customer behavior is the key to successful product launch in a highly competitive market environment. This can be used to create distinctive features that are on a non-functional level and are therefore more difficult to copy from the competition. (such as payroll or HRM systems), which is also your core competency, and often your core brand. The providers are known and appreciated on the market. They generate the largest sales and have the most customers. However, in some product segments the growth potentials are rather limited, since there is a pure displacement competition and the innovations take place within a narrow framework. A good example of such a market is the market for payroll software.What should such a provider do to create new growth options? He could extend his offer eg in the direction of “service”: offering ASP / SAAS solutions or BPO for payroll accounting. Or develop an HR product for strategic personnel tasks. Perhaps also in adjoining specialist areas, e.g. (A) a well-developed understanding of the markets, trends and business models (b) strategic and operational aspects of the company’s business processes experienced employees c) exact knowledge of one’s own strengths and weaknessesExperience with these requirements is already very difficult in the definition phase to find and set the right course. For the later implementation phase of the product strategy and the go-to-market of the offers are moreover Sales excellence, a high degree of change and implementation competence. In addition, we will be looking at the next issues.Experience Excitement The new product strategy stands. The offers are defined, the products are developed or purchased. The corresponding marketing plan for the launch is also finished. The new customers and additional sales streams can therefore come. It is a good thing that you can rely on a distribution system that has always proved its worth in the past. Yes …… so far. But markets are changing. The purchasing behavior and the preferences of customers are changing. The contact person at the customer are u.U. others for the new product. Questions that have so far only played a marginal role are now of key importance since the products influence other processes in the customer company. The “buying center” at the customer is also differently occupied. To meet these challenges, growth-oriented HR providers rely on structured sales processes and support them with corresponding sales CRM systems for opportunity and funnel management as well as reporting whether the direct or indirect form of distribution is practiced, or which form of organization has been chosen for distribution. The uniformly comprehensible approach and the process-supporting measures have proved to be decisive for the success. In addition, the introduction of a lead generation process has proven to be extremely helpful. Competence Competence The competence of employees and managers of a company to permanently change the status quo and to adapt to new conditions is of central importance for company growth. In two respects, on the one hand, a high degree of competence and willingness to change makes it possible to develop new fields of business. On the other hand, a corresponding resistance to changes can lead to a failure of any potentially promising strategy. This brief summary already shows how important the change competence in the company is to achieve growth goals. When, however, are people ready for change and promote this even through their doing? What can the company’s management do to promote and expand employee change capacities? These questions are far from easy to answer. There are no patent recipes for this. However, our experience from many years of business development shows that open and direct communication helps to reduce fears and concerns from the very beginning. When it is possible to present the benefits and benefits of the growth strategy to the company and the employees plausibly and comprehensibly, it is more important Step. Sustainability of communication and progress reports are further, helpful measures to eliminate resistance. Implementation competence Even if this is the last point on the list of the 7 most important competences of high-growth HR companies, its importance is not to be underestimated.Simple, all preparatory work for the growth project are successfully completed. The workforce and management are also convinced that this path should be pursued. All of the traffic lights are set to “green.” Now the crucial question is: Who is the responsible project manager who ensures the timely and correct implementation of this important project? But if this is not the case, then it becomes much more difficult: Who has the necessary time and competence, who shows the willingness and the willingness, Is there any person in the company that is capable of this task? Experience? ……… Even on the alleged goal line a project can still fail. This is why HR companies with growth ambitions are already taking care in advance of which employees should implement the next project and plan accordingly. In case of doubt, however, there is still the possibility to resort to experienced, external experts.
About the author: Oliver Zoll is a consultant for Business development and owner of ZOLL & COMPANY
phone: 06021 130 6172
adress: Kaiselsbergstrasse 21, 63808 Haibach
Innovation as a driver for growth for HR software and service providers
The competition is tough
The market for software solutions and services in the HR industry is highly competitive.
Many manufacturers of HR software and a complex army of HR service companies make it difficult for the IT and specialist departments of small and medium-sized companies to find the right solutions.
The selection is great – the advertising promises interchangeable – the struggle for new customers accordingly hard. Pressure on prices and providers is growing.
Challenges for suppliers
The responses of the HR providers to the changing market conditions are very different. However, the challenges and the related questions are the same for all market participants:
How do I get my competitiveness?
How can I increase my effectiveness in marketing my offers?
How can I secure the growth and profitability of my company?
Is my current business model future-proof?
How do I extend my offer portfolio?
Are there new business areas worth investing in?
Should I do everything myself or look for partnerships?
What new functionalities or services will be
future of my customers?
How do I open up new customer groups and growth potentials?
With such or similar questions, the managers of HR or wage and salary providers face almost every day.
It is almost unimportant whether companies offer software or services as a SaaS, Cloud or BPO model.
It is also of secondary importance whether the companies are part of a group or operate as an independent, owner-managed organization on the market
The central questions of the strategic direction of the own business model on upcoming challenges often follow very similar patterns for all suppliers.
Interplay between market and growth
It is now known from market research that the market for HR and payroll systems will grow only moderately. IDC and Gardner forecast an average growth of 4% in the market for HR systems over the coming years. In the case of pay systems, it is even weaker: 2% growth per year.
How can it be that market participants are able to achieve the above-average growth rates in a supposedly saturated market over longer periods?
Is there a magic formula that few companies have?
So much to say in advance: no, they do not exist. But to understand this phenomenon, we need to analyze the situation in the market more closely.
The German market for HR and payroll systems is by far the largest in a European comparison. More than 29 million employees subject to social insurance work in more than 2.1 million companies. If you look at all private enterprises with more than 50 employees, the Bundesanstalt für Arbeit counts almost 94,000 companies with 17.2 million employees subject to social insurance.
In the further analysis, we deliberately ignore the market segment among 50 employees, since this is a factually closed area in Germany, at least with regard to payroll. There, tax consultants and IT service providers, such as, for example, the DATEV market with more than 11 million invoiced employees per month. This corresponds to a total market share of approx. 38%.
Over the years, some vendors have been able to observe how they have made several attempts to push into this particular market segment. Really no visible results were achieved. Many initiatives were discontinued. The main reasons for this were difficulties in breaking up the structures that had grown over many years.
The potential is great.
The potential market for HR and wage and salary providers is therefore large. Suppliers from other European countries or the USA can not look beyond the borders to Germany without envy.
If, however, the image is subjected to further important influencing factors, e.g. the high number of competitors and systems, the special eco-systems such as DATEV or SAP, the large market segments, and the high complexity of e.g. of a wage / salary bill, the euphoria of foreign providers is significantly dampened.
There are more than 150 ITSG-certified wage and salary systems in Germany. The exact number of HR systems is difficult to determine because the term is defined differently and not every provider covers all HR processes with its solution. According to relevant market surveys, there are about 20-30 smaller and larger providers of software to support HR processes.
The strong fragmentation of the market means that e.g. hardly a wage provider has more than 2-3% market share related to the overall market.
Exceptions are only DATEV and SAP in their market segments. At the same time there is a strong competition on prices and margins of the providers. It is also known from the market research that companies exchange their wages and salaries on average only every 10-12 years. Is there a consolidation in the market? A market situation of this kind with many suppliers, enormous price pressure and margin pressure, high complexity and low willingness to intervene – in the medium term, a consolidation in the vendor landscape and thus a certain relaxation in the market lead. A look back to the past years, however, little reason to this presumption. Surely there was the one or other remarkable acquisition in the market. (SAP Successfactors, ORACLE-Taleo, IBM-Kenexa). The most interesting “deals” were hardly perceived and had no decisive influence on the market. An interesting detail: An analysis of the number of ITSG certified pay systems in the 10-year comparison from 2003 to 2013 shows a difference of exactly 5 systems. And more, not less.From a consolidation in the market you can not speak against this background.There is therefore probably the cardinal problem of the German market for HR and wage and salary systems: many vendors are wooing the favor of customers at least the market for wage and salary settlements has been saturated for a long time. Core HR applications such as employee management, reporting and job planning are already widely used in the target groups of the medium to large companies (500+ employees), which have so far been addressed by the HR providers.Megatrends in the HR worldThe 5 global HR Megatrends Globalization, demographic change, skilled labor deficit, digitization, value change), more and more HR processes are increasingly under pressure recruiting, advanced training and skill management. In summary, these HR processes are often subsumed under the umbrella of “Talenmanagement”. If the market is closely followed, it is clear that providers who have aligned their solutions with respect to the above-mentioned fields of application achieve significantly higher growth rates than their competitors In the beginning of this article we asked the following question: Why do some HR companies grow well above the branch average even in an allegedly saturated market? The answer is: They are more innovative and adapt market requirements faster than other providers Pay and salary systems. For example, the sale of software to handle billing-related processes at the customer’s home is becoming increasingly difficult. Many customers today do not accept high initial investments for an administrative software. Transaction-based payment models such as “pay per use” or subscription are on the rise. This trend has nothing to do with the operating model (local, software as a service, ASP or cloud) that is ultimately used by the customer. This rather technical issue is just another dimension in the evaluation of the customers and thus the innovation management of the providers. Even in the service and outsourcing market segment there are significantly more growth-oriented companies which have recognized the trends at an early stage and adapted accordingly.Recommendations for HR vendorsWelche recommendations can so you have to give the providers, in order not only to survive as a developer and marketer of HR and / or wage and salary systems in this shark pool, but also to be successful tomorrow. “The following 5 fields of action have a critical influence on the success of a company in the HR / payroll market of tomorrow. This means for entrepreneurs that you have to find answers to the questions arising from the fields of action mentioned below. Innovation Competence (Can) Are we willing and able to constantly reinvent ourselves? Fashions of trends? To launch and drive innovations in a short time? Do we have the necessary resources and perseverance? Strategic & operational intelligence and excellence (knowledge) Are we planning our business in the medium term or only our annual budget? What data do we need and how do we get it? Are we able to implement new approaches or business models with the existing team? Market- and sales-oriented organization (competence) Are all functional areas in the company aligned with sales success? How do we break the silo? Is the sale the right place? How do we sell? Where do we sell? What do we sell tomorrow? Change competence (willingness)
my employees willing to make changes not only to contribute but also to shape? Do you have the necessary competences and the will? Do you have the time? Implementation competence (doing) The all-important and very exciting question remains in the end, however, whether all the good ideas and plans can actually be translated into reality. Many HR companies fail proverbially on the target line. The reasons are often the same. They have too little time for innovation because of the ongoing, operational business. The personnel capacities, which can deal with an innovation project are limited. In part, the innovation targets are in conflict with the current business planning. In addition, the experience and know-how for the practical implementation of the innovation project is simply lacking. And last but not least, many good approaches fail early on in the absence of the necessary change competence and acceptance in the company. Free according to the motto: “We have (or other) tried everything before. This has not worked. “Often, it is simple excitations which can act as a catalyst in such situations, e.g. already existing strategies provide the decisive kick. You have to be ready and ready to question your actions so far.Practice examples HR companies cover an important part of their own software portfolio through a strategic partnership. It was sensible to decide not to develop this software by yourself. Despite good personal relationships between the partners and market-driven products, it is not possible to win more than a handful of common customers over a longer period of time. What has happened? An important trend in the customers’ buying behavior has been overlooked. Customers in the middle class are increasingly inclined to “one-stop shopping”. You would like to refer to related solutions (eg wage & HR) from a software partner. In this way, you get a contract, a contact person, no interface problems in the communication and thus promise less friction losses and a higher efficiency. Interestingly, it is not important to customers whether the solutions are seamlessly connected or even technically integrated – the main thing is there is a responsible place for all products. The solution was easy to find, almost cost neutral and implemented within a few weeks Partnering with a software producer, the company has integrated the software into its own product portfolio and is selling it under its own name. The demand for existing and new customers has surprised all stakeholders very positively.
To the author: Oliver Zoll is a consultant for business development and owner of ZOLL & COMPANY
Why strategic planning for HR companies is vital to survive
Introduction of a strategic planning process for the company development of an HR / Payroll company
“If you do not know the harbor you want to sail, there is no wind for you.”
Lucius Annaeus Seneca
According to our perception, many HR companies often have no defined process for the generation, evaluation and selection of strategic options, measures and objectives for medium to long-term company development.
In most HR companies, there is also often no formulated strategy plan, which could be viewed by managers, employees or investors.
However, a written strategy plan forms the foundation for targeted business management and development.
Without this plan, it will be very difficult in the medium to long term to ensure the future viability and sustainable success of the HR company.
This document is based on our experience of over 10 years of strategic business planning and presents the benefits and a possible planning process for HR companies in a compact manner.
We are convinced that the instrument of the strategic plan can, in the present form, also be applied to other sectors.
Benefits of formalized, strategic planning:
A strategic company plan forms the basis for the derivation of operational objectives and measures. The annual budget planning should be derived from this plan. It includes both qualitative and quantitative business planning.
Typically, one assumes a 5-year planning horizon.
The usefulness of a strategy plan is very diverse.
First and foremost, it is about formalizing the medium to long-term planning of the company’s goals against the background of internal (group specifications) and external factors of influence (eg market development, competition).
Furthermore, a formulated strategic plan is the prerequisite for the transparency and traceability of management decisions and promotes the understanding of the employees for necessary changes.
Even if it seems impossible to foresee the future, one should be able to deal with it at times and develop strategic scenarios in order to adapt to changes in the market environment or with customers.
The strategy plan is de facto a “roadmap” which should ensure that at the “stop” where we are today or tomorrow is really a bus passing by and takes us. (figuratively!)
It is intended to help reduce the uncertainty in order to optimize the targeted action. It ensures and increases the effectiveness of the company and serves the risk assessment.
Last but not least, the development of the strategic plan is based on an annual, rolling plan of continuous improvement and review of the company strategy and its planning process.
Content and structure of the strategic plan
The structure of a strategic plan for HR companies should look like this in our experience:
1) The concrete, strategic statement on the intended orientation and development of the company within the planning horizon of 5 years forms the core and the introduction of the plan. It can and should also include the vision / mission statement
2) Analysis of the environment (industry, market, competition, current trends, opportunities / risks, etc.)
3) analysis of the company (customers, offers, products, organization, personnel, strengths / weaknesses, etc.)
4) In the context of the vision and the 5-year financial planning (where should the HR company be in sales and profit for 5 years?), The concrete strategies and the short- – medium- and long-term measures.
5) A core element of the HR enterprise strategy is often “growth”. This qualitative term must be defined in concrete terms in figures and facts. In addition, it is necessary to determine which initiatives and projects are to be initiated in order to achieve the desired growth. (eg new business segments (BPO / SaaS / Cloud), acquisitions, expansion of existing business segments)
6) If the growth initiatives are defined, they must be concretized and numbered (for example by a business case). It is also important to determine the prerequisites and the likely costs for the individual growth initiatives.
7) Other important aspects of strategic planning and derived from the company strategy over 5 years are:
Definition of target markets (today / tomorrow)
Definition of market segments (today / tomorrow)
Definition of the sales targets (derived from the overall strategy and the growth initiatives)
Definition of product strategy (software, service, add-ons, partnerships etc.)
Organizational development (HR / personnel, organization structure, process optimization) Financial planning (turnover, costs, profit) and acquisition strategy Process and timing for the creation of the strategic plan The process of compiling the strategic plan before a budget planning for the future is meaningful and logical (planning horizon: 5 years) at the same time as budget planning for the coming financial year. Experience has shown that this approach to planning leads to a logical, concise, short-term and medium-term planning with regard to all operational and strategic components relevant to the company. The management is equipped with a clear, comprehensible and verifiable plan for the future development of the company. As a rule, the planning process will be repeated annually, rolling process. This will update the five-year planning of the previous year in the following year by one year. The advantage of this approach is an ongoing review of the planning with the IST and the timely detection of deviations or (the classic licensing business is replaced by SaaS, Cloud, BPO models). These changes have a variety of implications for the organization and its employees. It is therefore important to plan and monitor these changes strategically and transparently. Added value for the organization, which can not be underestimated, can be the long-term commitment of the key employees as well as an increased motivation for employees and applicants through a clear, clear and comprehensible communication of the company strategy which we support in this process with HR companies support the management with many years of experience in strategic business planning.
To the author: Oliver Zoll is a consultant for business development and owner of ZOLL & COMPANY