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 By Micah Fairchild

Payroll Vendors Continue to Look to the Cloud

We have written rather extensively over the past several months about the potential and pitfalls that cloud payroll holds, but recent developments indicate that 2013 may well be the year that this method of deployment comes fully into view. With nearly all vendors within the Payroll and HCM landscape eyeing the economies of scale that can be harnessed using these latest technologies, it’s only a matter of time until payroll is completely conducted in the cloud. For instance, Ceridian’s Dayforce is making major waves with their novel combination of payroll and time/attendance into a single, multi-tenant cloud solution. Likewise, this past July, SAP and SuccessFactors rather quietly started beta testing their cloud payroll solution for a rather expansive set of initial geographies. Still, the cloud payroll market remains incredibly fragmented and majority market share is far from a given for any one provider.

This concerted effort on the part of vendors to enter into the Software-as-a-Service (SaaS) payroll realm has created an interesting dynamic; whereby older, stalwart solutions such as ADP and Oracle are being forced to compete more heavily than ever before. And as is often the case within the business technology world when competition heats up, smaller companies are starting to make some undeniably compelling pitches to would-be customers and businesses seeking more payroll bang-for-their-buck. In fact, just recently two of these smaller vendors (CloudPay and ZenPayroll) have made funding announcements that indicate their respective solutions are setting the stage to be forces to be reckoned with in the coming payroll evolution.

Cloud Payroll Announcement #1: CloudPay Raises Series B Funding

For those in the know, you may recall that earlier this year, payroll industry stalwart Patersons rebranded itself as CloudPay—a strategy securely aimed at ridding itself from its on-premises reputation by adopting the moniker of their highly successful multi-national SaaS payroll offering. When asked why this was done, CEO Andrew Pearson simply responded that “The name CloudPay better describes our pioneering product and better purports the ambition of our company”. And that word “ambition” in turn is the probably the best way to describe what CloudPay is up to.

As are a host of other smaller vendors, CloudPay is looking to capitalize on the growing movement away from traditional on-premises payroll operations—raising over $50M since the company’s inception and taking on the likes of payroll industry giants like ADP by delivering solutions for 160 countries in 26 languages. And these aren’t small companies either; they’re multi-nationals like Siemens, SMX, and ADB. Still, CloudPay hasn’t been satisfied with fulfilling only those ambitions; and has actually secured one of the payroll software industry’s only ISO 27001attestations on top of its SSAE16 and IASE 3402 certifications.

The latest news involving the company revolves around funding; with CloudPay just recently completing a $16M Series B financing round from Rho Ventures (who had already previously given $6.45M in mezzanine funding) and Pinnacle Investment Partners among others. On top of what has already been accomplished thus far in the company’s 16 year history, this money has been earmarked to help CloudPay extend its service and sales capabilities and further push the development of their SaaS payroll product line. And given the fragmented nature of the payroll technologies market, this funding has been almost perfectly timed for CloudPay to be able to seize the opportunity of carving out a sizeable stake in the emerging cloud payroll paradigm. However, CloudPay isn’t alone in these ambitions, with smaller start-up providers and industry veteran vendors looking to cash in on the cloud as well. For instance, Ceridian’s Dayforce has been building out similar capabilities; and has a much bigger prospective customer base to see to. Nevertheless, as Rho Ventures’ Paul Bartlett recently remarked, "[CloudPay] is perfectly positioned for the next stage of growth, with a market leading SaaS technology platform, a long-term vision, and a durable business model”.

Cloud Payroll Announcement #2: ZenPayroll Finds Significant Financial Backing

Though less than the major funding that CloudPay was recently able to net, cloud payroll provider ZenPayroll was able to secure significant financing for its latest venture as well. Specifically, ZenPayroll brought in $6.1 million in seed funding from the likes of Google Ventures, Yammer, Dropbox, SugarCRM,, and Zuora. Still, while certainly impressive for a Y Combinator company, that cash only tells one side of the story for this latest entrant into the cloud payroll market.

ZenPayroll is looking to take on the small business market that has been largely ignored by the larger vendors within the space—offering a cloud payroll option for SMBs that (once up and going) starts at $25/month (plus $4/month for each employee). The product is actually free to use as of right now—operating on an "invitation only" model which has been accepted by over 50 businesses to date. Although sights are set on the larger U.S. market, for now the company is only operating out of California—in a purported bid to nail down the regulatory aspects of the state’s complex legislative environment before moving on. Aside from that hurdle though, the rest of what has been built out is fairly comprehensive for what smaller businesses will likely need; with feature sets including built-in dashboards; automated tax payment/filing capabilities; payroll calculators; employee self-service functionality; benefits management; PTO tracking; basic reporting options; and flexible configuration features. Unfortunately, although payroll processing for both full and part-time employees is currently supported, contractors are decidedly absent—a deficiency that the company intends on remedying in early 2013.

Concluding Thoughts on Cloud Payroll

In the same vein as cloud payroll, increasingly the number of businesses seeking out global solutions is also on the rise—a fact that could well put CloudPay into an enviable position for 2013 and beyond. Indeed, with the ever-mounting number of HRMS, talent management, and HR point solution vendors that are seeking partnerships to be able to provide global payroll capabilities, there can be no doubt that the payroll technologies market will continue to heat up—made even hotter by the pressure that start-ups like ZenPayroll are putting on. The issue that these vendors all face though when cloud applications are added to the mix is one of integration.

Payroll software buyers are beginning to understand that partnerships do not equal "seamless integration" and platforms are just as (if not more) important than having functionality for a particular geography. As such, it is crucial that organizations clearly understand the capabilities of any given payroll solution; the complexity of integrating it with other applications; and the implications of cloud payroll provider "fit" before signing on the proverbial "dotted line". End

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 Filed In Categories: Payroll In The Cloud
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 Tags Tags: CloudPay, ZenPayroll, Payroll Industry News
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Author  Author: Micah Fairchild
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This concerted effort on the part of vendors to enter into the Software-as-a-Service (SaaS) payroll realm has created an interesting dynamic; whereby older, stalwart solutions such as ADP and Oracle are being forced to compete more heavily than ever before."



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