Next Generation Payroll Services - cloudfront.net

© NelsonHall 2019 1 April 2019

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NEAT EVALUATION FOR RAMCO SYSTEMS:

Next Generation Payroll Services

Market Segment: APAC Focus

Introduction

This is a custom report for Ramco Systems (Ramco) presenting the findings of the NelsonHall NEAT vendor evaluation for Next Generation Payroll Services in the APAC Focus market segment. It contains the NEAT graph of vendor performance, a summary vendor analysis of Ramco for payroll services, and the latest market analysis summary for payroll services.

This NelsonHall Vendor Evaluation & Assessment Tool (NEAT) analyzes the performance of vendors offering next generation payroll services. The NEAT tool allows strategic sourcing managers to assess the capability of vendors across a range of criteria and business situations and identify the best performing vendors overall, and with a specific focus on multi-country payroll services, payroll services in Asia Pacific (APAC), and the small to medium business (SMB) market in N. America.

Evaluating vendors on both their ‘ability to deliver immediate benefit’ and their ‘ability to meet client future requirements’, vendors are identified in one of four categories: Leaders, High Achievers, Innovators, and Major Players.

Vendors evaluated for this NEAT are: ADP, activpayroll, Immedis, Kronos, OneView HR, OneSource Virtual, Ascender, NGA HR, Neeyamo, Excelity Global, Accountor, BDO, AscentHR, Alight Solutions, Ceridian, ADAM HCM, CloudPay, Infosys, Paychex, Zalaris, SD Worx, Safeguard Global, Ramco Systems, and WNS Global Services.

Further explanation of the NEAT methodology is included at the end of the report.

NEAT Evaluation for Ramco Systems: Next Generation Payroll Services



NEAT Evaluation: Next Generation Payroll Services

(APAC Focus)

NelsonHall has identified Ramco as a Leader in the APAC Focus market segment, as shown in the NEAT graph. This market segment reflects Ramco’s ability to meet future client requirements as well as delivering immediate benefits to payroll services clients in the Asia Pacific region.

Leaders are vendors that exhibit both a high ability relative to their peers to deliver immediate benefit and a high capability relative to their peers to meet client future requirements.

Buy-side organizations can access the Next Generation Payroll Services NEAT tool (APAC Focus) here.

https://research.nelson-hall.com/sourcing-expertise/neat-reports/?avpage-views=neat&avpage-views=neat&NEATaction=viewProject&project=200&weightingGroup=817#neatProjectPage




Vendor Analysis Summary for Ramco Systems

Overview

Ramco Systems, part of the Ramco Group of companies, which collectively represent ~$1bn in revenues, and headquartered in Chennai, India, is a provider of multi-tenant and mobile-based ERP software and services, including:

• HR and global payroll software and services

• Enterprise Resource Planning (ERP) systems

• Aviation software

• Logistics software

• Asset management software.

Ramco Systems formed in 1992 as the R&D division of Ramco Industries Limited. Established as an independent company in 1997, Ramco began delivering payroll software and services using client-server architecture. In 2008, it began investing in cloud technologies as part of a company-wide strategy to move all proprietary software to a cloud architecture and launched the cloud version of Ramco HCM as part of its cloud ERP offering. Ramco added its first cloud HCM client in 2009, and in 2013 Ramco HCM on cloud, a standalone product (the current offering), was released.

Ramco has over 25 years' experience delivering payroll services, and today supports 486 clients, producing ~2m pay slips monthly through its proprietary cloud payroll platform which is currently configured to support 45 countries (extended to ~110 countries through partners). The company is working towards infusing intelligent technologies throughout its enterprise applications by leveraging artificial intelligence and machine learning by design.

Ramco offers both partial (software only) and fully managed payroll services, including the following:

• Partial services (SaaS), for ~80% of clients:

− Leverages Ramco Global Payroll, which can be deployed on private, public cloud, or on-premise, and supports:

− Self-service for leave, reimbursement, time, and pay-slip as well as offering mail-based and Chatbot driven transaction option

− Gross and net pay calculation and country-specific compliance on a single platform

− Pay-slips on mobile and self-service

− Standard connectors to other third-party systems including Workday, SuccessFactors, and Oracle.

• Fully managed payroll services, for ~20% of clients:

− Payroll administration and management: including reconciliations, submitting tax filings, GL file, statutory calculations and reports, processing payments and reporting, gross and net pay calculations, retroactive pay and increments, direct deposit automation, and country-specific compliance reporting and filing




− Managing bank files and HR and manager contact center: the client is responsible for data input and SPOC inputs

− Employee contact center: for queries and payroll data entry (voice support is in English), provided to ~10% of total client employees serviced.

− Salary-based reimbursement processing including remittance in line with statutory and organization defined policies

− Year-end activities comprising of social security and taxation, remittance and return-filing

− Payroll processing for on cycle (e.g., monthly, fortnightly, weekly); scheduled and unscheduled off-cycle processing

− Electronic payment enabled

− Expat shadow payroll processing

− Last mile statutory lodgment services.

Pricing for Ramco's Payroll services is on a PEPM (per employee, per month) model. Contract terms average three to five years.

Payroll services timelines for implementation depend on the size and scope of the contract. A single region payroll-only deal typically takes approximately four to six months to implement, while a multi-country, multi-region deal takes approximately eight to twelve months and are implemented on a staggered basis.

Ramco exclusively leverages its proprietary Global Payroll platform in the delivery of its managed payroll services. Its payroll module has been configured to support 45 countries across APAC, Europe, and the Middle East, with plans to expand this to 60 countries through its roadmap and investments, over the next 24 months.

Its cloud-based (SaaS) platform has been built organically on a single database and single code line, and modules are integrated across the platform. It offers its cloud solution as a multitenant offering and can provide both public and private cloud options. ~53% of clients have selected the on-premise version. However, this is gradually shrinking as more clients are moving toward the cloud solution. Clients selecting the on-premise solution tend to be larger enterprise clients with >10k employees.

~40% of its payroll clients also leverage the wider capability of the Ramco HCM platform which includes modules and features to support the full employee lifecycle (hire to retire), including: core HR, recruiting, benefits, talent management (goals, competencies, performance, learning, succession, etc.), time and attendance, chatbot enabled mobile ESS/MSS and analytic reporting.

Ramco’s time and attendance module comes fully integrated with its payroll module and supports multiple types of time entry mechanism including swipe cards, biodevices, NFC based online data input, and attendance tracking by facial recognition.

Ramco HCM is enabled with prebuilt connectors and integrations, to other enterprise applications like Workday, Oracle, and SuccessFactors. Ramco HCM can also integrate with a client’s finance and time and attendance systems. Additional integrations can be developed based on client demand.

Ramco has established a dedicated Integration factory which builds integrations with global HCM products to Ramco’s payroll platform. As a part of this initiative, Ramco Payroll is now




capable of integrating with Workday, with certified integrations for >20 countries, and able to support all Workday formats (e.g. PECI, PECOF, API and core connectors).

Ramco aims to achieve ~95% automation within its managed services, using machines to detect errors and anomalies in data and to identify suspect transactions. It leverages bots in the delivery of its payroll services delivery model, with its current capability focused on automating the repeatable processes and activities of payroll management and has automated its end to end payroll processing with manual intervention only needed for error correction and final authorization.

Ramco has ~1.6k employees of which ~400 are dedicated to its HCM & payroll services business unit, with ~120 focused on delivering payroll services to Ramco's 486 clients and ~1.5m client employees, producing ~2m pay slips monthly.

Ramco leverages a mix of offshore (~70%) and nearshore/onshore (~20%) centers in the delivery of its payroll implementation services, with the remaining ~10% of its resources embedded with its clients on site.

While Ramco's HCM platform offers the capability to support 45 countries natively, it also partners with other payroll services providers to provide payroll capability in regions where it does not currently operate (currently ~110 countries). However, the build to gross calculation is performed on the Ramco platforms (Ramco leverages its partners only for gross-to-net calculations where necessary to supplement its global coverage). Ramco also has partners to manage last-mile filing activities for the countries where Ramco does not have a physical presence (absence of an office).

Ramco's payroll services clients are derived across a diverse set of geographies, industries, and sizes.

While it primarily targets multinational organizations in the middle market (those with >500 to 15k employees), its offering is capable of scaling down market as well as to the upper middle and large markets; its smallest HCM client has ~250 employees while its largest has ~37k employees.

Financials

Ramco is a publicly traded company on the NSE (National Stock Exchange of India) under the ticker RAMCOSYS; its fiscal year ends on 31 March. Although Ramco is a publicly traded company and does make its revenues available to the public, it does not report its revenues at the services level.

NelsonHall estimates Ramco's calendar year (CY) 18 revenues were ~$79.2m, with ~$23.8m derived from HCM (~30%), and ~$19m derived from payroll services (~80% of HCM revenues).

Strengths

• Ramco is the largest payroll platform provider in APAC, with native gross to net payroll configuration to cover 45 countries across APAC and EMEA on a single platform, with an established partner network extending its multi-country payroll coverage to ~110 countries

• Able to offer a comprehensive cloud-based HR solution spanning the employee lifecycle. It is organically developed, built on a single database and code line, and integrated across modules, with pre-built API's for connecting leading HR, time and attendance, and finance systems




• Ability to offer its payroll platform as either SaaS (public or private cloud) or an on-premise, including an integrated time and attendance solution for total workforce management capability

• Ramco's Payroll Bureau, a dedicated compliance team that closely monitors the regulatory environment for changes and ensures Ramco's Payroll platform is compliant to all the changing statutory needs

• Commitment to HR product development and innovation, including incorporating digital transformation enabling features like chatbots, AI/ML, NLP, facial recognition, predictive analytics, and service delivery enablers like Mail It, Hub It, Prompt It, etc.

• Strong brand presence and client base throughout the Asia Pacific region, and the middle east, and increasing in the U.S. and U.K. with recent new client additions

• Well established network of resellers for the Ramco platform, provides a solid pipeline for new client opportunities, with payroll as a gateway module/service for wider platform adoption over time.

Challenges

• While Ramco HR is widely known in APAC and the Middle East and Africa, it lacks strong brand awareness in U.S. & Europe, which may exclude it from RFPs. However, its global presence, continued expansion, partnerships (e.g., Microsoft Dynamics), have led to increasing adoption and client wins in these geographies

• Ramco is more commonly recognized as an HR software provider as opposed to being known for its managed payroll services. However, increasing wins and adoption for its payroll services is shifting this perception

• Because of its competitive position in the HCM space, Ramco lacks formal partnerships with other cloud HCM providers (e.g., SuccessFactors, or Workday) which limits its exposure with buyers of these platforms seeking integrated global payroll solutions. However, it does maintain pre-built connectors to these platforms and supports clients of each with integrated payroll services. Further, in 2018 Ramco expanded its partnership and integration to include Microsoft Dynamics

• High offshore delivery model with a lack of onshore or nearshore delivery centers to support the competitive U.S. and U.K. markets. Targeting these countries and regions and very mature markets, the lack of local delivery may deter buyers who are opposed to a heavy offshore delivery model, compared to established regional providers.

Strategic Direction

Ramco will continue its targeting of midsized multinational organizations seeking a next-generation cloud HR solution that can support end to end processing of key HR activities. While Ramco will continue to primarily target the middle market segment for its software and services, its capability to scale up market will help in supporting the trending demand which it is seeing from larger clients.

It will drive platform adoption through a continued commitment, roadmap and ongoing investments in HR and payroll technology innovation, including incorporating more digital enablers AI/ML/NLP, chatbots, and predictive analytics into the platform as it drives toward a "zero UI" experience.




Payroll remains a central element of the Ramco HCM platform, and to its overall growth strategy, thus Ramco will grow the adoption of its payroll services by continuing to develop global payroll capability, seeking to cover 60 countries with native gross to net capability by the end of 2020.

While it will continue targeting MNC organizations headquartered in APAC and the Middle East, it is increasingly targeting U.S. and European headquartered firms seeking Asia and Middle East payroll capability, where the demand for integrated cloud HR, payroll, and time solutions are rapidly increasing.

Further, to grow its adoption for the platform and its services will look to leverage its partner network, which are implementing, reselling, and delivering services on the Ramco HCM platform, to expand its reach and market presence. It will also seek to engage existing clients to offer HR transformation through the deployment of its HCM and extend its relationship and contracts to include its managed payroll services offering.

Outlook

Over the past year, Ramco has seen solid uptake and growth from its global payroll platform and services, adding ~350k new employees to its managed services offering in 2018. With multicounty cloud payroll solutions in high demand, NelsonHall expects this strong growth to continue in 2019.

Ramco will continue to see its payroll services contracts derived heavily from APAC and the Middle East, its recent wins and active targeting of the U.S. and European headquartered firms seeking Asia and Middle East payroll capability, will provide a strong pipeline of potential payroll services contract opportunities. This will be driven by both middle market HCM platform adopters seeking an integrated payroll and time solution, as well as growing MNC buyers seeking global payroll solutions.

With its continued investments in digital enablers like chatbots, AI, NLP, predictive analytics, etc., Ramco will continue to attract larger more sophisticated buyers seeking advanced cloud HCM solutions which will inherently drive its payroll services opportunities as well. With many leading HCM's in the marketplace lacking a global payroll capability, Ramco HCM will differentiate itself with native global payroll capability supported by a fully managed service offering. NelsonHall expects Ramco will achieve revenue growth for its payroll services in the range of 25-30% in CY 2019.




Next Generation Payroll Services Market Summary

Overview

Organizations today continue to invest in HR transformation enablers in an effort to attract, develop, and retain top talent, and thus require modern, integrated, consumer grade platform technologies, that can support the “future of work” and align to the overall digital transformation strategy of the business.

With many organizations commonly expanding operations to new international locations, pared with a lack of skilled payroll expertise in the workforce, and an underestimation for the skills and effort required in maintaining modern cloud platforms, has led many to seek 3rd party solutions and expertise for ensuring accurate, timely, and compliant payroll execution.

Global payroll transformation has become a critical priority as many buyers have moved to (or selected) a cloud HCM solution, and now are seeking to futureproof payroll operations by consolidating payroll to a single global platform and vendor governance model. As a result, companies are commonly prioritizing payroll transformation as a key element and enabler to broader HR transformation.

Buy-Side Dynamics

Buyers of payroll services are keenly focused on technology capability when selecting a payroll vendor, with integration a critical factor in global payroll transformation. Further, buyers are seeking flexible payroll solutions that deliver reliable, consistent outcomes while creating value for the organization beyond a simple cost play.

Top drivers for payroll outsourcing include:

• Demand for modern cloud payroll platforms with seamless integration across the HCM technology landscape

• Consolidation of payroll vendors and systems globally, to a single platform and vendor governance model

• Reliability of payroll accuracy, timeliness, and consistent results

• A lack of skilled payroll professionals available to support payroll operations internally

• Improved compliance to control and manage risk of payroll operations globally

• Visibility into the global workforce and payroll landscape through real time reporting and predictive analytics.

Top inhibitors for payroll outsourcing include:

• While payroll outsourcing isn’t always less expensive, the solution must provide buyers tangible value beyond cost reductions in back office processing; the solution must enable transformation and align to the strategic direction of HR and the business to deliver value beyond traditional bureau style services

• Buyers are commonly being limited to pursue transformation by their own lack of maturity and strategic vision for payroll. Orgs. that continue to see payroll as a simple




cost center vs. a strategic element of HR transformation generally fail to see the value in transforming payroll globally and thus fail to outsource payroll

• Apprehension for wholesale change across the payroll landscape often deters buyers from moving forward (despite the need futureproof their current payroll model). This can be a derived from concerns such as: a cultural aversion to outsourcing, a fear of losing control over payroll, wanting to hold on to legacy solutions, or drain ROI out of past investments

• While buyers of cloud HCM platforms are commonly addressing payroll transformation within ~12 months of an HCM deployment, many buyers assume a modern cloud solution must be in place for HR first in order to undertake a payroll transformation initiative.

Market Size & Growth

• In 2018, the global payroll services market was estimated at ~$19.9bn, with partial services accounting for >3/4 of the market

• The global standalone payroll services market is led by North America with ~63% of the market, with all major geographies experiencing steady growth

• Full payroll services (~25% of the overall market) are growing slightly faster than partial services, as organizations seek a single modern global payroll solution to support growing international footprints

• Middle market buyers remain the largest adopters of managed payroll services (~48%), with demand increasing in both the small (~35%) and large market (~17%) segments driven by the demand for modern cloud platforms and globally consolidated solutions

• Multi-country payroll services are rapidly increasing in demand and continue to grow at more than 2x the overall market, representing >18% of the total standalone payroll services market

• Multi-country payroll demand is being driven by the need to: improve payroll consistency, consolidate vendors and solutions globally, improve compliance, and access to globally consolidated analytic reporting

• Payroll services adoption is steady across all major sectors and is expected to continue as HR and payroll transformation has become a key priority in line with broader digital transformation efforts.

Challenges & Success Factors

• The inability of buyers to satisfy a business case for change and gain consensus internally remains the biggest challenge for vendors. Engaging buyers in the business case process early on, educating the client on how to find the true costs of the current payroll model, both obvious costs as well as “hidden costs” (e.g. payroll leakage, productivity loss, etc.) are key

• Client readiness and the ability to support a payroll transformation initiative are important. Payroll transformation success requires clients to dedicate fully engaged resources throughout the project. Providers need to work closely with clients to educate and prepare them for the journey ahead, by leveraging and sharing past learnings from other implementations to guide the client toward best practices and away from common missteps




• Guiding clients through the change associated with payroll transformation by providing a comprehensive governance model is key. This helps in addressing overlooked requirements that create change impacts to specific employee populations

• Differentiating their solutions remains a key challenge for payroll vendors in a crowded and growing marketplace: vendor offerings must be able to deliver transformational outcomes at a competitive price, while demonstrating a cultural alignment and the ability to grow with the clients as an essential partner.

Outlook

Over the next few years:

• The global payroll services market is predicted to grow at 4.4% CAAGR and will reach ~$24.6bn by 2023

• While middle market buyers will remain the largest buyer segment for payroll services globally, adoption by small market and large market buyers will be steadily increase as solutions are scaled to accommodate the unique needs of these market segments

• Multi-country payroll will grow at nearly 5x the rate of single country services, with a ~24% share of the overall market by 2023

• Multi-country payroll adoption will continue to be driven by demand for modernized, globally consolidated, compliant, and consistent payroll, with vendors differentiating through digital transformation enablers (e.g. breadth of integrations offered, use of RPA, AI/ML, predictive analytics

• Platform integrations and the range of API’s offered by vendors will become a key element in payroll solution differentiation, with vendors leveraging platform app marketplaces to reach and target buyers outside of traditional methods

• Digital transformation enablers like RPA, AI, ML, predictive and prescriptive analytics, and deep mobile capability (full platform) will be standard offerings and key differentiators for solutions, with vendors seeking to commoditize capabilities around these capabilities longer term

• Buyers of payroll services will increasingly adopt onshore payroll delivery models over offshoring, seeking in country payroll expertise and capability that can enable a best in class employee and user experience

• Vendors will continue to innovate with tools and solutions that drive costs down and make global payroll transformation faster and less impactful, to enable a positive business case and faster ROI realization.




NEAT Methodology for Next Generation Payroll

Services

NelsonHall’s (vendor) Evaluation & Assessment Tool (NEAT) is a method by which strategic sourcing managers can evaluate outsourcing vendors and is part of NelsonHall's Speed-to-Source initiative. The NEAT tool sits at the front-end of the vendor screening process and consists of a two-axis model: assessing vendors against their ‘ability to deliver immediate benefit’ to buy-side organizations and their ‘ability to meet client future requirements’. The latter axis is a pragmatic assessment of the vendor's ability to take clients on an innovation journey over the lifetime of their next contract.

The ‘ability to deliver immediate benefit’ assessment is based on the criteria shown in Exhibit 1, typically reflecting the current maturity of the vendor’s offerings, delivery capability, benefits achievement on behalf of clients, and customer presence.

The ‘ability to meet client future requirements’ assessment is based on the criteria shown in Exhibit 2, and provides a measure of the extent to which the supplier is well-positioned to support the customer journey over the life of a contract. This includes criteria such as the level of partnership established with clients, the mechanisms in place to drive innovation, the level of investment in the service, and the financial stability of the vendor.

The vendors covered in NelsonHall NEAT projects are typically the leaders in their fields. However, within this context, the categorization of vendors within NelsonHall NEAT projects is as follows:

• Leaders: vendors that exhibit both a high ability relative to their peers to deliver immediate benefit and a high capability relative to their peers to meet client future requirements

• High Achievers: vendors that exhibit a high ability relative to their peers to deliver immediate benefit but have scope to enhance their ability to meet client future requirements

• Innovators: vendors that exhibit a high capability relative to their peers to meet client future requirements but have scope to enhance their ability to deliver immediate benefit

• Major Players: other significant vendors for this service type.

The scoring of the vendors is based on a combination of analyst assessment, principally around measurements of the ability to deliver immediate benefit; and feedback from interviewing of vendor clients, principally in support of measurements of levels of partnership and ability to meet future client requirements.




Exhibit 1

‘Ability to deliver immediate benefit’: Assessment criteria

Assessment Category Assessment Criteria

Offerings

Cloud (SaaS) payroll platform capability and adoption

Managed payroll services capability

Scope of managed payroll processes offered

Scalability of payroll technology

Adaptability of payroll technology to support client specific configuration

Scope of digital channels offered in support of payroll delivery

Level of integration with cloud HCM platforms

Application of payroll reporting and analytics (globally)

Payroll technology plus cloud HCM

Managed payroll services capability leveraging major cloud HR platforms

Scope of HR services beyond payroll

Delivery

Delivery capability - U.S.

Delivery capability - U.K.

Delivery capability - Continental Europe

Delivery capability – Rest of EMEA

Delivery capability - APAC

Delivery capability - LATAM

Multi-country payroll offering coverage

Multi-country payroll execution

Payroll compliance delivery maturity

Leveraging of intelligent technologies in payroll delivery

Presence

Overall client presence

Large company presence (>15K employees)

Mid company presence (500 -15K employees)

Small company presence (< 500 employees)

U.S. presence

U.K. presence

Continental Europe presence

Rest of EMEA

APAC presence

LATAM presence

Benefits Achieved

Improved harmonization and standardization of payroll processes globally

Improved accuracy and timeliness

Improved compliance with legislative and statutory requirements and changes

Improved payroll integration globally Continued…




Improved user experience

Improved global payroll analytic reporting (consolidated across countries)

Improved payroll operating costs

Improved use of mobile payroll self-service capability

Exhibit 2

‘Ability to meet client future requirements’: Assessment criteria

Assessment Category Assessment Criteria

Service Culture

Perceived suitability to meet future client needs

Mechanisms in place to deliver innovation

Partnership approach

Ability to deliver payroll digitalization

Ability to proactively reimagine service delivery/process delivery

Commitment & Investments in Payroll Services

Level of focus/investment on payroll technology development

Level of investment on payroll operations development

Level of focus/investment payroll integration

Level of focus/investment in developing combined proprietary payroll services and HR cloud capability

Level of focus on analytics and multi country payroll reporting

Investments in multi-country payroll capability

Investments in payroll digitalization enablers

Market Momentum Payroll market momentum

For more information on other NelsonHall NEAT evaluations, please contact the NelsonHall relationship manager listed below.

research.nelson-hall.com

Sales Enquiries NelsonHall will be pleased to discuss how we can bring benefit to your organization. You can contact us via the following relationship manager:

Guy Saunders at [email protected]

Important Notice

Copyright © 2019 by NelsonHall. All rights reserved. NelsonHall exercises its best efforts in preparation of the information provided in this report and believes the information contained herein to be accurate. However, NelsonHall shall have no liability for any loss or expense that may result from incompleteness or inaccuracy of the information provided.

http://www.nelson-hall.com/

Next Generation Payroll Services - cloudfront.net

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