Ventana Research Analyst Perspectives

I am happy to share some insights from our latest Value Index research, which rates how well vendors’ offerings meet buyers’ performance requirements in seven categories, five relevant to the product (adaptability, capability, manageability, reliability and usability) and two related to the vendor (TCO/ROI and vendor validation). The Ventana Research Value Index on Payroll Software 2020 is the distillation of a year of market and product research efforts by Ventana Research. Drawing on our benchmark research and expertise, this research-based index is the first such evaluation to assess the full business value of payroll software. You can learn more about our Value Index as an effective vendor selection and RFI/RFP tool here and participating vendors can learn more about how to use the Value Index here. Unlike many IT analyst firms that rank vendors from an IT-only perspective or consider future plans or vision over what is available in the products today, Ventana Research has designed the Value Index to provide a balanced perspective of vendors and products that is rooted in an understanding of business drivers and needs. This approach not only reduces cost and time but also minimizes the risk of making a decision that is bad for the business. Using the Value Index will enable your organization to achieve the levels of efficiency and effectiveness needed to optimize payroll management. This Value Index report evaluates eight vendors that offer products that deliver payroll software as we define it: ADP, Ceridian, Kronos, Oracle, Paychex, SAP SuccessFactors, Ultimate Software Group and Workday. In our view the technology-mediated shift to a new style of payroll management that these products represent is well worth the effort. The Value Index for Payroll Software finds ADP top-most on the list of performers with Oracle in second place and Ultimate Software Group in third. Companies that rank in the top three in any category earn the designation Value Index Leader. ADP, Ceridian and Oracle have done so in four of the seven evaluation categories; Ultimate Software is a Value Index Leader in three categories; and Kronos, SAP and Workday are leaders in two categories. The overall Value Index scores span a relatively narrow range. Payroll processing capabilities have been comparable across vendors for decades, so differentiation largely involves system usability, configurability and interoperability with other HCM software tools. However, opportunities for differentiation among payroll vendors are increasing with the emergence of new capabilities designed to enrich the employee experience as well as the availability of new payroll-related data and analytics tools that can better guide business decisions. The Value Index for Payroll Software uses the Ventana Research methodology, a framework that evaluates vendors and their products in seven categories of requirements. Five are product-related while two assess customer assurance. The product categories are Capability, Usability, Adaptability, Manageability and Reliability; taking these five product categories together, the vendors ranking highest are Value Index Leaders ADP, Ceridian and Oracle. The Capability category makes up 20 percent of this Value Index rating. This relatively significant weighting reflects the emphasis that our research shows payroll customers in their selection process place on product functionality. This category includes all aspects of the gross-to-net calculation process; compliance support related to overtime processing; tax withholding, reporting and remittances; payroll-related reporting and decision support; auditing and historical data capture; and whether the software uses machine learning and artificial intelligence to reduce the need for manual processing. It also assesses the support for mobile devices and for collaboration across roles and processes. It examines ease of integration between the platform and applications and the rest of the enterprise, as the product needs to operate seamlessly with general ledgers and compensation systems such as commissions tools, time and absence management platforms and benefits administration systems. We examined specific support for the following roles: payroll management, professional and support staff, business analysts, system administrators and IT support, regulatory agencies and of course the workforce at large. In this category ADP, Ceridian and Oracle are Value Index Leaders. An analysis of a product’s Usability is also important to evaluate how it addresses a wide range of business needs related to accurate and timely payroll processing and effectively responding to the questions and issues of employees and managers. The weighting for this category is 20 percent of the Value Index rating; SAP SuccessFactors, ADP and Ceridian are the top three vendors. In this category we evaluated vendors’ products on the user experience provided for the range of roles involved with payroll. The research examined the quality of the user experience, including notifications and the use of AI and machine learning. It also examined the accessibility of the user experience across a range of channels and devices including mobile, web and conversational experiences via voice and chat. Adaptability is weighted at 10 percent. This category assesses the degree to which the application can respond to enterprise requirements for configurability, customization and integration. This evaluation considers how seamlessly the platform and applications integrate across the people, business processes, application and data needs of the organization. Adaptability also involves the ability to readily integrate with other systems — for example, commission and incentives processes need to easily connect with payroll and accounting processes and systems. Oracle, Workday and Ultimate Software are the highest-rated vendors in this category. Manageability, which encompasses administration, privacy, security and licensing, is weighted at 15 percent of this Value Index. The vendor rankings in this evaluation category are tightly grouped together, reflecting vendors’ emphasis on investment in this aspect of the technology. This category is essential for modern payroll management in the cloud given the breadth of processes and activities these systems must reliably support. Ceridian, SAP SuccessFactors and ADP are the Value Index Leaders in this category. For the payroll function to operate efficiently and for operations staff, management and the entire workforce to engage with the applications, the software on which it runs must be able to scale and perform reliably to support an array of processes, including a high volume of daily calculations and audits, key business analyses related to employee costs and real-time access to payroll by anyone at any level. This is the Reliability category and it is weighted at 15 percent of this Value Index. Workday, ADP and Oracle are the Value Index Leaders in this category. The success of a vendor’s offering is about not just technology but also the vendor’s relationship with the customer and the overall experience it provides to those considering, acquiring and deploying the product. Thus we also examine Customer Assurance, which is comprised of scores in Validation, weighted at 10 percent, and TCO-ROI, also weighted at 10 percent. The vendors that rank the highest overall in the aggregated Customer Assurance categories are Value Index Leaders Ultimate Software, Oracle and Kronos. These organizations provided an impressive level of customer assurance support, collateral and tools designed to educate buyers. In our analysis of Validation, we find the leaders to be Oracle, Ultimate Software and Kronos. In contrast to the tight clustering we found in some product categories, here our assessment finds wide variation in the level of detail that vendors provide regarding many areas including the product roadmap, customer success references and case studies as well as business case and ROI services and support. TCO/ROI, a category that addresses vendor support for a buyer’s investment evaluation by providing information, tools and services to help with the business case (including the benefits and costs) makes up 10 percent of the Value Index rating. Value Index Leaders Oracle, Kronos and Ceridian currently do the best job providing potential prospects and customers with this information along with services to help organizations effectively get funding for payroll management. As noted above, this Ventana Research Value Index evaluates the software in seven key categories. The chart below places the product-related and customer assurance ratings on the X and Y axes respectively to provide a visual representation of our Value Index evaluation. Vendors whose products performed higher in aggregate in the five product categories place farther to the right; the combination of ratings for the two customer assurance categories determines their placement on the vertical axis. In short, vendors that place closer to the upper-right on this chart rated higher than those closer to the lower-left. The vendors that rank the highest overall on the aggregated product axis, which has a maximum value of 80 percent, are Value Index Leaders ADP, Ceridian and Oracle. The vendors that rank the highest overall on the customer assurance axis, which has a maximum value of 20 percent, are Value Index Leaders Ultimate Software, Oracle and Kronos. These vendors represent best-in-class approaches to payroll management in these aggregated categories of product and customer assurance. We warn that close vendor performance ratings should not be taken to imply that the packages evaluated are functionally identical or equally well suited for use by every organization or for a specific process. Although there is a high degree of commonality in how organizations handle the payroll process, there are various idiosyncrasies and differences in how they do these functions, including how they enable a great employee experience, that can make one vendor’s offering a better fit than another’s with a particular organization’s needs. After more than a decade of technology advances, all the products we evaluated are feature-rich, but not all the capabilities they offer are equally valuable to users. Moreover, the existence of too many capabilities may be a negative factor for an organization if it introduces unnecessary complexity. Nonetheless, one company may decide that a larger number of options is a plus, especially if some of them match its established practices or better support a new initiative that is driving the purchase of new software. Other factors besides features and functions or assessments about the vendor can turn out to be a deciding factor. For example, a company may face budget constraints such that the TCO evaluation can tip the balance to one vendor or another. This is where the Value Index methodology and the appropriate weighting can be applied to determine the best fit of vendors and products to your specific needs. All eight suppliers responded to our requests for information, although there was a range of value we derived from the responses due to the extent to which the submission and product information was complete. Material that was generally available was used for the analysis along with briefings and information provided. To organizations evaluating payroll software vendors, we recommend extra scrutiny be given to product demonstration use cases provided by the vendor that are meaningful to your business and to customer references where the company profile is similar to yours. We also encourage you to engage with prospective vendors around RFI answers that are incomplete, inconsistent or otherwise confusing as this could be an indication that certain support aspects will lack quality control. You can get more details as well as the full Payroll Software Value Index Market Report on our website.

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