What really happens with the fabled friendship between the lion and the mouse is anyone’s guess, but last week’s announcement that payroll behemoth ADP has acquired Celergo, a small-but-nimble global payroll competitor, may give us a chance to see.
Global payroll providers (the mice in this story) have had success aligning themselves with the demand for HR cloud technology offerings because they have focused on being the single point of integration with human capital management software like Workday, SAP SuccessFactors and others. However, when it comes to partnering with the largest and most powerful creatures in HR service delivery (HRO and Shared Services firms), they have done little more than test short-lived partnerships. Those that have gone by the wayside include the likes of IBM and Adam4, Aon Hewitt (now Alight) with SafeguardWorld International (now Safeguard Global), HP with Acrede (no longer exists) and NGA HR with both BDO and TMF Group. Other global payroll alliances remain little-known flings or fleeting social media blasts until someone makes headlines for catching the eye of a private equity firm or trading favors to spur consolidation within a region.
The ADP-Celergo announcement will come as a surprise to many. Since there are so many failed or in-name-only partnerships in the global payroll market, what exactly can we expect to see out of a combination of these two organizations?
- Celergo approach + ADP scale: Celergo’s DNA is different by nature than ADP’s, and it seems clear the smaller company will benefit immensely from the ADP investment – giving it the ability to drive scale in a whole new way. Celergo’s delivery model has many components that we expect ADP to capitalize on – particularly, the structure and processes within its partner network, sometimes called the “last mile” activity. ADP will be wise to consider the efficiency and rigor with which Celergo manages data and relationships between the clients’ own local payroll, the in-country payroll partners and its regional/central governance teams. Applying ADP muscle to this model is exactly what other global payroll companies have sought from private equity investors.
- Expat markets: Celergo began as an expatriate administration software solution for multinational companies when it was founded in 2003. Although it quickly evolved to include global payroll managed services, its heritage has given it a unique focus on complex global payment solutions and international compliance. Adding Celergo to its mix will give ADP a new capability to address expatriate payroll for both home and host countries, where it was formerly limited to processing home country payroll as instructed by the client’s mobility team or a specialized third-party tax service. Celergo’s existing customer base of more than 200 global clients is approximately 10 percent of ADP’s estimated 2,000 global payroll clients.
- Compliance: As a heritage expat provider, Celergo’s culture of service delivery has a particularly hands-on approach to compliance across countries as well as within local markets. ADP will now be able to leverage Celergo’s model for central dispositioning and managing key compliance activities in local markets. Today, ADP’s reliance on a distributed network of local payroll operations (including their own ADP local solutions) includes a self-service data hub and local eyes and ears rather than a highly centralized and integrated monitoring function driving both visibility and actions.
As the two parties step back to determine how to create synergy in this acquisition, there will be many other angles to watch with interest. Especially for those companies working with or evaluating one provider or the other. Though both are Workday partners and have experience connecting to other leading HCMs, buyers are already speculating. What will become of Celergo’s privileged go-to-market relationship with Ultimate Software. Ulti is contracted separately, so there is a clean division of services for clients that prefer to part ways; however, competing technology platforms could mean “fr-enemies” at best. Likewise, both Celergo and ADP have systems that are core to managing and executing payroll, which raises questions about how Celergo Global Connect (CGC) will fit in the ADP global payroll ecosystem, where Streamline is the existing solution for bringing multi-country payroll solutions to tail countries. Is there room for both in the managed payroll jungle?
ISG will continue to reach out to help companies as they evaluate their global payroll solution or need help understanding the terms, impacts and opportunities of this latest news in the global payroll market. Please contact us to discuss further.
