Competitive Analysis September 2008

Transcription

1 Ultimate Software Competitive Analysis September 2008 Prepared for

2 Contents Ultimate Software Company Overview Sales Channel Mix Section A: Licensed Software Offering UltiPro Pricing Structure Software Core Product Implementation Fees Pricing for What is Not Included in the Implementation 7 Services Included in Implementation Fees 7 Configuration Activities 7 History Data Loading by Ultimate 7 Pricing Structure for Software Support Discounting Managed Hosting Option Software Positioning Relative Competitive Strengths Perceived Key Competition Section B: Subscription SaaS Offering Overall SaaS Pricing Model/Structure HR and Payroll 12 Minimum Contract Terms 12 Software Implementation Fees Install, Set-up, Configuration, and Customization Process 15 Implementation Pricing SaaS Products 17 What is Included/Not Included 17 Pricing for Items Not Included 17 Services Included in Implementation Fees 18 Configuration Activities 18 History Data Loading by Ultimate 19 Customer Support for Workplace / Intersourcing Product Charging for the Addition of Employees 19 Frequency of Billing 19 Minimum Customer Size and/or Monthly Revenue 19 Discounting

3 Typical SaaS Contract Terms Termination Penalty 20 Access to Data Once SaaS Term Ends 20 Positioning of SaaS Software Products Perceived Relative Competitive Strengths Section C: Other Product/Service/Price Information Mix of Customers Customers using Licensed Software 22 Customers Using SaaS Software 22 Customers of Each Type and Size Being Sold To 22 Payroll Tax Management Service Ultimate Software responsibilities 23 Customer s responsibilities 24 Benefits Carrier Connection Service Types of Software Support Services Maintenance Support 25 Technical Support Representatives 25 Authorization for Calling In 25 Training Services Section D: Company Information Markets Targeted Number of Customers

4 Ultimate Software Company Overview Ultimate Software has been in business since 1990 and has been publicly traded for 10 years (NASDAQ: ULTI). The company realized revenue of $151 million in 2007 and has approximately 850 employees. Ultimate provides strategic HR, payroll, and talent management solutions for organizations of all sizes. The company serves approximately 1,600 customers representing more than 3 million employees. The company feels it offers both the best software and support. Among their proposed product differentiators is the fact that Ultimate has joined all the product functions onto a single database, while competing products typically have a database for each separate function, such as payroll, HR, recruiting, performance management, succession planning, onboarding, salary planning, and time and attendance. Ultimate feels it is very different from other organizations. The President and CEO came from ADP in 1990 and designed the application to address ADP s shortcomings. Ultimate voluntarily compares itself to ADP in pre-sales discussions. The company continues to invest heavily in research & development and customer service. This analysis will focus on Ultimate s UltiPro solution, which is offered as both a software license and an SaaS model, which the company refers to as Intersourcing. Details of both these offerings are contained in this analysis. Sales Channel Mix Ultimate Software markets and sells its products and services primarily through its direct sales force. Currently, only Epicor is a reseller for software licensing. Ultimate also has a few existing OEM customers but no longer takes on new ones. The CEO feels that using OEMs is supporting potential competitors. In addition, Ultimate uses PEOs (Professional Employer Organizations) for outsourcing workers compensation insurance and other items for its Intersourcing customers. 4

5 Section A: Licensed Software Offering UltiPro Pricing Structure The core software licensed product includes the following functionality: Payroll Administration Human Resources Benefits Administration Recruiting & Staffing Training Programs Standard Reports Library eadministration esystem Administration COBRA Compliance FMLA Tracking Performance Tracking Health & Wellness Tracking OSHA/Worker s Compensation Enterprise Integration Tools etime Entry estandard Reports eemployee Self-Service emanagement ebenefits Enrollment etraining Schedules & Enrollment Compensation Management Training Management Rapid Pay Cognos Catalogue UltiPro is offered as a licensed purchase for larger organizations (typically >1,000ee). Software license pricing for the core product is approximately $70,000 at the 500ee level, and $110,000 at the 1,000ee level. *Pricing includes five UltiPro concurrent users and five Congnos Impromptu named users. Salary, Budgeting, Recruiting, Time and Attendance, and Onboarding are add-on modules. Of those, only Time and Attendance is licensed; Onboarding, Performance, and Recruiting must be purchased as a hosted solution. Software license pricing for the Time and Attendance module is approximately $55,000 at 500ee and $85,000 at the 1,000ee level. Software license pricing for the Hosted Add-on modules are approximately $5ee as a one time set-up fee and $1ee monthly fee for recruiting, performance and on-boarding. As clarification, Ultimate offers two different recruiting tools: Recruiting & Staffing, contained in the core solution; and a Recruiting add-on module. The big difference is functionality. The recruiting and performance section in the core product is just for tracking purposes. For example, there is no applicant interface. Applicants can be tracked, but they have to be keyed into UltiPro core. The same is true with Performance Management. The core solution is only able to track when a performance was given and when the next one is due. 5

6 However, with the add-on modules, a full package is delivered including full applicant tracking, and an on-line application. Key features of the Performance Management add-on module, include 360-degree peer review and on-line performance appraisals. With a software license sale, the contract terms typically include a license agreement for the product, an annual maintenance agreement, per-day training rates, and hourly charges for implementation. Typical payment terms include a deposit at the time the contract is signed and additional payments on specific payment dates designated in the contract. Payment for implementation and training services under the contract is typically made as such services are provided. Ultimate offers a Time and Attendance add-on module through a strategic partnership with Infor Corporation (formerly Workbrain Corporation). Ultimate has the right to market and distribute Infor s Time and Attendance product as part of the UltiPro solution. Ultimate Software has rebranded Infor Express as UltiPro Time and Attendance. Software license pricing for the Time and Attendance module is approximately $55,000 at 500ee and $85,000 at the 1,000ee level. Time clocks are available for $680 to $2,600, per clock, depending on type.other talent management modules such as Recruitment, Performance Management, and On-boarding are offered as add-ons, but are only offered as a hosted solution. These are each priced at $1 PEPM (per employee per month), plus a one time set up fee of $5 per employee, per module. Software license pricing for the core product is approximately $70,000 at the 500ee level and $110,000 at the 1,000ee level. Software Core Product Implementation Fees Implementation costs are based on company profile. Ultimate claims it needs to have a potential customer complete a survey in order to provide accurate implementation pricing. However, the company provided general estimates of implementation pricing. The implementation might be as little as $30,000 or as much as $100,000. The variables would be the number of employees and the amount of history. In terms of what exactly is included, Ultimate allows customers to decide what tasks they need help with and what tasks they can do themselves or do not need. Ultimate then works up a price based on the exact needs of each customer. There is no standard set of included (or not included) items as everything is specific for each customer. Ultimate prefers not to use the Big Bang method of implementation (i.e. everything implemented at once). Ultimate puts together a Project Plan based on what it feels will be needed for implementations, but if along the way modifications are needed (e.g. the client doing the conversion by itself), Ultimate is open to that. The company prefers to use a phased approach that usually takes three or four months. Implementation begins with a kickoff meeting. Customers fill out the client analysis tool and Ultimate then spends several days digesting the information. Ultimate says it employs best practices and expertise derived from former payroll managers and consultants. Configuring the product properly from the ground up ensures that it works well out of the gate. Because of this, Ultimate claims that its customers are usually willing to serve as a reference on the first day they run a payroll. The product is configurable to meet customer requirements while remaining in compliance. A standard implementation includes connecting the customer to its insurance and benefits carriers through Ultimate s Benefits Carrier Connection Service. 6

7 Ultimate assumes there will be three to five benefit carriers it will need to connect to. More than likely, Ultimate will already have connected to those carriers in the past and will simply have to modify the fields. The 401(k) provider, benefits, and insurance providers are the most difficult ones, but for the most part, Ultimate has already worked with them. The bottom line is that the standard implementation includes the interfaces to those providers. Pricing for What is Not Included in the Core Product Implementation Activating employee and manager self-service is an additional cost. As a side note, many clients self-implement manager and employee self-service to lower their cost. Time and Attendance is very unique, and is really dependent on how many pay policies and overtime rules that a customer may have. For up to about 500 employees, Time and Attendance implementation is estimated to be approximately $40,000. Performance, Recruiting, and On-boarding implementation also depend on the company s specific requirements, and typically cost between $12,000 and $18,000 for each module. Training is always a separate fee on top of implementation. Ultimate does offer Web classes (some fee-based and some free). It also has user conferences that have very detailed training. But, on average a customer will spend 12 to 18 days in training at a rate of $595 per day. On the low end, training costs are about $7,000. It is usually the Administrator that needs to be trained and he then uses the Train the Trainer method to educate everyone else. People that run reports may want to also take a class directly from Ultimate. Any additional items would be priced at Ultimate s hourly rate of $165 per hour. Services Included in Implementation Fees The details of any implementation plan are fully discussed beforehand, but in general, functions such as setting up employee benefit plans, attendance plans, and loading balances are all included in a regular implementation. The plan might include 80 hours or 600 hours, depending on how much work the customer s team will undertake. Balances can then be imported from other applications. Data can be imported and cleaned up. Some organizations prefer to do that on their own to reduce implementation time. Ultimate can provide a turnkey implementation following a detailed analysis, or rely on the customer for some aspects of the project. Configuration Activities In terms of matching the Ultimate configuration to a particular customer s organizational set up, Ultimate claims it can readily do this. First, it maps the company s organizational structure into divisions, units, or whatever system the company uses. Customers can then run reports on divisions, units, or even a particular manager. All of that is built into the UltiPro system. Ultimate claims it has yet to see a configuration that it could not manage. History Data Loading by Ultimate Loading history data, which is included in standard implementations, is billed at the company s standard hourly rate of $165 per hour. Ultimate will load as much history as the customer wants. Some customers have Ultimate load upwards of five or seven years history, which obviously requires more hours of Ultimate s time. It is not so much a case of simply importing historical data, but rather getting rid of the garbage. What customers reportedly love about Ultimate is that they start clean and then build everything from there, as opposed to having to deal with the old inefficiencies from their previous solution. Ultimate points out that implementation may prove to be a great time to change processes that the customer previously used. 7

8 Pricing Structure for Software Support The 20-percent maintenance fee for software licensing includes all updates, upgrades, and patches, as well as customer support. Pager support is available 24/7. Ultimate offers only a single support level. However, there are critical levels that generate a faster customer support response time. For example, payroll is considered a critical function, so if a customer cannot run payroll, Ultimate will try to respond within 10 or 20 minutes. Two hours is the maximum response time for any call ticket. Discounting The software license pricing provided above is what Ultimate considers to be heavily discounted. For example, the standard list price for 1,000 employees using UltiPro is $149,750. The discounted price is $110,000, which represents a 27 percent discount off of list price. Ultimate considers this as a fairly lean margin for the company, and it reminds customers that there have been times when Ultimate has had to walk away from deals where the margins were too lean. Heavier discounts begin at the 5,000 employee level for software licensing. With regard to discounting for Time and Attendance, Ultimate states that it has to pay a royalty to Infor (Workbrain) for each sale. Therefore, the price does not go much below $85 per employee at higher employee levels. Ultimate does not typically sell Time and Attendance to companies under the 500 employee level. That is why the price per employee is so high at the lower levels: $283 per employee for 150 employees, and $110 per employee for 500 employees. Ultimate salespeople are not afraid to take anything to their managers. However, this only happens when the customer is showing serious purchase interest. At the end of fiscal quarters it becomes a bit more competitive. Ultimate does not have additional flexibility, though, when it comes to additional modules, such as the dollar-per-employee, per month for Performance and Recruiting. Those are fairly firm prices. Ultimate feels it has an unbelievable service/support model. The company will not compromise this model simply to get a big-name customer. In order to support all of this, discounts are capped. Managed Hosting Option A second model, whereby a customer purchases the software and Ultimate hosts it, is also available. This method makes sense for customers wanting to make a capital purchase with the possibility of eventually bringing the application in-house. The pricing for this option is as follows: Managed Hosting Option Pricing Setup Fee Host Fee Implementation and Professional Services Education Services and End-User Training $25/employee $2.50/PEPM $165/hour $595/person/day The $2.50 PEPM charge is for Payroll and HR only. Benefits, Self Service, Self Service Manager, Time and Attendance, and so forth, would be additional. 8

9 There are infrastructure costs (setup fees) associated with hosting. Ultimate goes and buys the hardware and tools itself, and then refreshes that hardware every two years. In order to cover these costs, hosting customers pay a one-time initial set up fee of $25 per employee for infrastructure setup. Were new employees to be added (say from 1,000 to 1,020), an invoice would be sent at the end of the quarter for those new 20 employees being added to the baseline. Customers do not pay for replacement employees except for when the total number of employees increases above the baseline. Applications are hosted in Ultimate s hosting centers in Atlanta and Miami, and both hosting centers have strong redundancy backup. There is a two-year commitment on the hosting option at Ultimate. No discounts are typically given for longer contracts, but reps may be willing to take the issue to Ultimate management for further discussion on a case-by-case basis. Ultimate boasts a very high client retention rate of 98 percent, so it is willing to go far to keep their clients happy. Software Positioning Ultimate would find it difficult to be competitive at levels below 500 employees for software licensing. The sweet spot is at about 2,000 employees. The company typically refers small companies to its Intersourcing solution, which it calls its small business model. With regard to ADP and Ceridian, Ultimate feels they are great for small employers, but for any company with more than 1,000 employees, cost issues start being encountered. Additionally, the issue of service enters the picture when dealing with ADP. Relative Competitive Strengths Ultimate s key differentiator is that everything is fully integrated. The company claims that the extent of this integration is unique. Competitors speak of integration, but in reality only offer interfaces. Ultimate claims to be the only vendor with a truly integrated solution. Ultimate s data resides in a single table. If HR is touched, Payroll is automatically updated, and vice versa. Multiple users can work in the same database and record. Anything saved is immediately made available to all other users. In other words, Ultimate claims that its application is truly integrated by offering real-time information rather than serving as an interface that must be run after hours or every couple of hours before updates can be made. In terms of other facets supposedly making it unique, Ultimate has the best of both worlds: a great product with many awards and a superior service model. The company has been voted the number-one place to work among organizations with fewer than 1,000 employees. Ultimate says this is a statement of how well the company founder treats employees. The company s vision is that if good employees take care of customers, the customers will remain and the company will prosper. The company has a 98 percent client retention rate and a 99 percent employee retention rate. Ultimate can easily find reference customers. Other competitive strengths include: Reporting. Customers can run real-time reports anytime or can schedule them to automatically run and be delivered Flexibility. Customers have complete control of their data Payroll. UltiPro states it is the most powerful and flexible payroll engine on the market 9

10 Perceived Key Competition Among the key competitors named by Ultimate Software staff are ADP, Paychex, Lawson, SAP, and PeopleSoft/Oracle. The company s annual report also names Ceridian and Kronos as primary competitors. About 60 percent of Ultimate s 2007 business came from ADP. The company also has success against Ceridian. Larger players such as PeopleSoft, Oracle, and SAP may beat Ultimate, but only because they have international and financial capabilities. Ultimate concentrates on Payroll and HR in the United States and Canada. When faced with head to-head competition, Ultimate invites customers to visit its hosting center in Miami. The company contends that customers that visit the Miami center are more likely to purchase the product. Prospective customers are advised to listen to expert third-parties rather than salespeople. The company uses a 2006 Forrester report in its sales presentations to show potential customers how Ultimate compares to competitors, such as ADP and Lawson. 10

11 Section B: Subscription SaaS Offering Overall SaaS Pricing Model/Structure SaaS product is the same software as the licensed product. There are two SaaS packages: Workplace for ee and full Intersourcing for >1000ee. UltiPro Core Intersourcing includes the following functionality for a base list price of $12 PEPM: UltiPro s Business/Employee Portal Benefits Administration UltiPro Business Intelligence Payroll Processing Employee Self-Service Administration Tax Filing & Wage Garnishment Processing PC Timesheet Entry New Hire Reporting General Ledger Reporting Human Resource Management Standard and Ad-hoc Reports Library Cognos 8 Report Writer Unlimited Document Archiving W-2 Print Services Data Exchange Services for 4 File Transfers (Health &Welfare Benefit Carrier, 401k, Tax filing, and Direct Deposit.) The employee portal included in the core package allows employees to type in their own information, upload photos, and fill out any required forms for insurance or Social Security. Ultimate explains that the portal is just a way for employees to get information. Employees can choose their preferred language, such as English, Spanish, or French, and that language will be displayed during every session. Typical pricing for the core solutions Intersourcing monthly subscription is $11 at the 150 and 500ee levels and $10 at the 1,000ee level. Add-ons to the UltiPro Core include the following: Time and Labor Management. $4 PEPM. UltiPro Time and Attendance tracks time and attendance labor metrics and supports a variety of time-capture mechanisms. Performance Management. $1 PEPM. With this component, users can have 360-degree reviews, 180-reviews, and client-facing reviews. Employees that work with clients are rated by those clients, and users can align it with corporate goals to drive revenues. For instance, a plan could be put together to encourage an employee to read certain books. The employee could complete a journal on what is being done each day, week, month, or quarter. The goal would be to reward employees who are doing well and driving revenue to the organization. The employee grading scale is completely customizable. 11

12 Recruitment Management. $1 PEPM. This option, also referred to occasionally as erecruitment, is essentially a job page. If users enter information into Monster, Ultimate can set up a link on Career Builder. Users can click on it and it displays in their job page. Career Builder and Monster charge for resume management and it can be quite expensive. This way, it is the user s data. Ultimate states they might as well have it rather than storing it on Career Builder. Manager Self Service. $1 PEPM. This option gives managers access to employee information. As authorized through UltiPro s roles-based security, managers can view and change staff data independently. Manager Self-Service must be included if the customer wants a Time and Attendance system. Customers must be able to view employee schedules. If Time and Attendance is not needed, Manager Self-Service would not be included. Benefits Enrollment. $1 PEPM. UltiPro Benefits Enrollment allows employees to review their benefit choices and make selections on the Web. Benefits administrators have tools to monitor enrollment progress. Compensation Management (Salary Planning & Budgeting). $1 PEPM. This often replaces the Excel spreadsheets used to track employee raises. The entire process is automated. Ultimate claims that HR and finance love the capability because it replaces paperwork. Time Clocks. One-time purchase cost varies based on type of clock. Barcode, Proximity, Fingerprint Scanner from $680 to $2,600 per clock. HR and Payroll HR and Payroll are both part of the core solution under the Intersourcing model. These two modules are not bundled together as a pair, but rather are bundled with other modules as part of the core solution. HR and Payroll are only available as part of the core solution for Intersourcing and cannot be purchased separately. Minimum Contract Terms The minimum contract term for Ultimate is 24 months. Initial contracts are for two years 99.9 percent of the time, but upon expiration, contracts renew for one year intervals. No price breaks are available for longer term contracts. However, the company says it will renegotiate fees at each renewal. Software Implementation Fees Install, Set-up, Configuration, and Customization Process Ultimate claims to have a unique implementation process. In terms of the general features included in a SaaS implementation, Ultimate outlines the following: The employee master file information is loaded into the system Employees are trained on their specific tasks Ultimate sets up a week-to-week chart that shows what Ultimate and the customer are expected to deliver. Most customers prefer weekly meetings to review progress The implementation staff has a limited workload and is paid according to the customer s evaluation. All of the requested functionality is made available at the same time. Ultimate prefers to get everything up and running at one time so the implementation of the additional capabilities does not extend for six or eight months. 12 Ultimate Intersourcing implementations average between six and ten weeks, depending on the amount of assistance the customer can provide. Some implementations take as little as two weeks. As an example, if someone wanted to go live by the middle of December 2008 they would need to make a decision by the end of September 2008.

13 Ultimate s implementation process is designed to allow customers to quickly begin use of UltiPro core payroll, benefits, and human resources functionality. The up-front implementation fee provides one complete implementation phase. Any subsequent phases are an additional cost on a time-andmaterials basis. The implementation occurs virtually and is divided into seven phases. Below is a list of services, deliverables, and customer responsibilities associated with each phase of the process. The typical timeframe for each phase is indicated in parentheses. Note that this timing is based on a six-week implementation cycle from start to live date. Individual customer live dates may impact these timeframes. The implementation process easily accommodates live dates at the start of any month. Planning (Weeks 1 and 2) Ultimate Software Services Deliverables Customer Responsibilities Welcome call with customer project leader Send implementation informational documents Schedule UltiPro Basic Employee Administration and UltiPro Basic Payroll Processing training Implementation overview with customer project team Establish project milestone dates Provision customer s UltiPro environment Implementation documentation * Intersourcing system Services manual * Workplace training offering * Implementatiozn Methodology and responsibilities Project milestone dates chart Customer s UltiPro environment Assign project leader and project team members Participate in a welcome call (Project Leader) Review implementation informational documents Participate in implementation overview (project team) Review project milestone dates Analysis (Week 2) Ultimate Software Services Deliverables Customer Responsibilities Request and review analysis supporting documentation (interface layouts, sample checks, calculation rules, etc.) Facilitate analysis meeting(s) to survey and compile business rule requirements Coordinate data conversion analysis meeting Help customer assess reporting requirements Participant in meetings with customer and third-party interface vendors to discuss interface setup & testing Request for analysis supporting documents Standard workplace project plan Participate in analysis meeting(s) Provide requested supporting documents Work with Ultimate Software to assess reporting requirements Initiate contact with third party interface vendors to determine and coordinate next steps for setup and testing 13

14 Configuration (Weeks 2 and 3; Security built in Week 4) Ultimate Software Services Deliverables Customer Responsibilities Configure core business rules in UltiPro Provide customer guidance on setup of ancillary UltiPro tables (if applicable) Setup interface templates and automation Build UltiPro security (post-data conversion) Configuration phase acceptance form completion and signoff Business rules for core HR/ payroll functionality One of each of the following interface files, using standard UltiPro functionality: * 401(k) export * Health & Welfare export * General Ledger export * Time and Attendance import and Master File export * ACH/direct deposit export Automation of the ACH/ direct deposit interface via FTP with PGP encryption or SFTP Customer access to UltiPro (post-data conversion) Review and approve system configuration Configure ancillary UltiPro tables (if applicable) Create ad-hoc reports in Cognos Query Studio Assign employee roles and qualifiers after UltiPro security is established Additional portal configuration if applicable (creation of links, attach documents, and so forth) Attend UltiPro Basic Employee Administration and UltiPro Basic Payroll Processing training Configuration phase acceptance form signoff Data Conversion (Week 3) Ultimate Software Services Deliverables Customer Responsibilities Create data mapping instructions Convert master file (i.e. current employee setup information) and opening balance (i.e. summary year-to-date numbers by earning/deduction/tax code) data for active employees and current year terminations Run tax reconciliation on opening balances Convert final opening balances (just before live processing, after last payroll in current system is posted) Master file data conversion acceptance form completion and sign-off Opening balance data conversion acceptance form completion and sign-off Converted master file data from one source file Converted opening balance data from one source file, reconciled to source data Issues and assumptions document for master file and opening balance data conversion Customer access to UltiPro Remit employee data in standard template format provided by Ultimate Software Provide opening balance reports for reconciliation Perform dual maintenance of employee master file data in UltiPro and current system through last payroll prior to live date Review converted data for accuracy Master file data conversion acceptance form sign-off Opening balance data conversion acceptance form sign-off 14

15 Testing (Weeks 4 and 5) Ultimate Software Services Deliverables Customer Responsibilities Run parallel test Work with customer to resolve testing/data discrepancies Test interface content and structure Test workflow and security Parallel testing acceptance form completion and sign-off Tested and verified data Tested and verified paychecks Tested and verified interfaces Tested and verified reports Tested and verified workflow and security Run parallel test Work with Ultimate Software to address testing/data discrepancies Coordinate interface testing with vendors Test workflow and security Attend applicable elearning courses Parallel testing acceptance form sign-off Production (Week 6) Ultimate Software Services Deliverables Customer Responsibilities Initialize UltiPro for live processing Support live processing Production processing acceptance form completion and sign-off Checks and direct deposit advices Customer-selected standard interfaces Customer-selected standard reports Process first live payroll Production processing acceptance form sign-off Support Transition (Week 7) Ultimate Software Services Deliverables Customer Responsibilities Submit Transition Package to Support team Coordinate formal transition call with Support team and client Participate in support transition call Outstanding action items list Participate in support transition call 15

16 The activation process for Recruitment is as follows: Activation Process for Recruitment Ultimate Software Services Deliverables Customer Responsibilities Coordinate UltiPro recruitment site creation, which includes predefined setup for the following: * Candidate application dispositions * Candidate/Application Source o Interview types * Offer statuses * Expense categories * Work hours * Task priorities * Task statuses * Requisition Reason * Approval template 1. * Approval Template 2 * Contact types * Form letter Template * Assessments * Assessment detail Configure recruitment roles in UltiPro Welcome call with customer to discuss * Log on procedures * Training * Client analysis tool (CAT) to assist customer with implementation * System testing checklist * Data integration with core UltiPro and review of imported data * Support contact information Performance management to UltiPro integration procedures Review of imported data Support contact information Customer UltiPro recruitment environment Implementation documentation * Recruitment training information * Client analysis tool (CAT) * System testing checklist Support contact information Participate in welcome call (Project Leader) Review integrated data from UltiPro for accuracy Attend recruitment training Complete client analysis tool (CAT) to aid in Recruitment configuration Complete recruitment implementation process: * Complete customerspecific assessment information * Complete modifications of predefined tables (if applicable) * Create requisition templates * Coordinate job board cross-posting testing with vendors * Perform testing per system testing checklist * Open requisitions and post on job board * Initialize UltiPro recruitment for live processing Live processing 16

17 Implementation Pricing SaaS Products Implementation budgets essentially one-time setup fees are based on the number of active employees at the time of implementation. A typical range is between $50 and $100 per employee. Of that, the core is $50. Time and Attendance is $20, and the other add-ons are $5 per active employee. Ultimate charges this flat fee regardless of the number of hours required to complete the implementation. Rather than billing according to the number of hours needed for the implementation, Ultimate charges the flat fee and then works until the customer is satisfied. Although this is the company s claim, there are clearly items that are not included in the core implementation for which the customer must pay additional fees. What is Included/Not Included As discussed in detail for software license implementation, the implementation of Ultimate s Intersourcing product includes planning, analysis, configuration, data conversion, testing, production, and transition services. The company maintains that the implementation fee includes everything needed to get the job done and will work until the customer is satisfied, regardless of the number of hours. However, the company did identify several tasks that customers must pay extra for: Loading employee history in excess of one year Printing direct deposit advices (DDAs) Data conversions Creation of interfaces in excess of the four included Set-up for data exchange services with third parties Training in excess of first three occurrences Pricing for Items Not Included Implementation or other consulting services which are outside the scope of services outlined in the purchase order are billed at the rate of $160 per hour for remote services. Onsite services are billed at the rate of $1,600 per day. With regard to training, Ultimate offers a Web-based, instructor-led training for no charge for the first three occurrences of each training class. Additional training above the three occurrences is $295 per class. elearning courseware is available for unlimited use at no charge. One of each of the following four interface files is included at no extra charge (creation of additional interfaces files is $2,000 per interface file format): Standard 834 Health & Welfare 401(k) General Ledger Time and Attendance import/master File data export Ultimate offers data exchange services, essentially automated file transfers to third-party vendors. The price is $1,000 per file setup. Customers can opt to have Ultimate print the direct deposit advices (DDAs) at the rate of $.50/DDA. 17

18 Ultimate estimates the following hours per task (charged at the rates mentioned on the previous page) for data conversion activities: Estimated Hours for Various Data Conversions Date Type to Convert Hours (estimated) Beneficiaries 2 Contacts 2 Dependents 5 Employee Status History 3 Job History (up to 7 years) 8 Job History (7 years and greater) 10 Review History 3 The above estimates are based on the following assumptions: All data files will be provided in Ultimate Software s standard load table format. Hours are per conversion file (i.e. if more than one file is supplied for any type of data, hours should be applied to each file). Customer will provide all code translations of source code to UltiPro code. Any code in historical data not currently used (i.e. not in current UltiPro setup) will be provided and set up prior to conversion of data; missing codes will not display. For job history, one system generated record exists per employee in the Master File data that cannot be removed/replaced. All data converted as is without validation. Services Included in Implementation Fees Each new customer at Ultimate is assigned a Project Manager. Ultimate meets with the customer to plan the entire process and works backward from the start date. Each party s responsibilities for each week are agreed upon and meetings are conducted each week to discuss progress. In short, every step is planned to hit the deadline. As Ultimate points out, any vendor can make promises, but delivery is the tough part. Ultimate claims it delivers better than anyone else in the marketplace. Configuration Activities With regard to configuration activities that need to be done to match the customer s organizational/ division setup, at Ultimate the limit for organization levels is four, but there are breakdowns within each level such as jobs, location, and so forth. The application does not support more than four organization levels; additional levels are not available, even for a fee. However, any of the four evels can be renamed as desired. The company says that most organizations use two or three main levels. 18

19 History Data Loading by Ultimate Ultimate will load new customers history for one year as long as it is provided in a flat file of information. This is included in the core implementation fee. Extra charges estimated at $150 or $160 per hour do apply to working on and loading a customer s historical data going back more than one year. However, the typical amount of time required for this is small. Even large organizations with up to 20 years history typically require only several hours work. A new customer provides an Excel sheet and Ultimate loads it and maps everything over. It does not matter if there is one employee history or 35,000 employee histories; it is all part of the mapping process and uploading into the software. Customer Support for Workplace / Intersourcing Product Support is included in the monthly subscription cost for Intersourcing customers. There is no additional charge for maintenance and no other fees associated with any other support types. Customer service is available 24/7. During regular business hours in any U.S. time zone, customers can call their named service representative for immediate access to a support professional who can help resolve issues. For issues arising after regular business hours, customers can dial an afterhours support paging system for quick response. However, Ultimate claims that if a customer needs to speak with the Director of Client Services at 2 a.m. on a Saturday, for example, that they ll make it happen to ensure that the customer is happy. Ultimate Software s support services also include: Web site to submit service requests, check the status of requests in progress, find product information, and access training Direct access telephone support through the National Support Center Access to support representatives through an emergency after-hours pager Charging for the Addition of Employees New employees are brought into the system as part of the new-hire process, and are added to the HR, Payroll, and Time and Attendance systems. No setup fees are incurred as new employees are added. New employees are added to the employee count for the next billing cycle. Frequency of Billing Customers are billed quarterly for the number of employees on record for the most recent quarter. The purchase order specifically states: The Subscription Fees are due quarterly and invoiced 30 days in advance of the quarter based on the number of active employees during the month two months prior to the start of the Quarter. The amount due upon the effective date of the purchase order is payment for the quarter commencing on the first live date. Minimum Customer Size and/or Monthly Revenue The minimum number of employees, or minimum monthly investment to get started, is 200 employees. On occasion, Ultimate will permit smaller companies that are indicating a strong likelihood of solid growth to start at 150 employees. Although a new customer could conceivably start even at the one employee level, everything would be at the 200 level pricing structure. In fact, several current Ultimate customers have 130 employees and are being billed for 200 employees. As they add more employees, their costs per employee will go down. Those organizations pay a flat fee of, say, $2,200 per month. 19

20 Discounting Representatives indicate that they would rather be upfront and honest: here is the price and here is what it is going to be for the future. That being said, special discounts are often made at the end of fiscal quarters. One caveat is that Ultimate typically does not discount the setup costs or ongoing processing costs. As shown previously, the list price for the core Intersourcing solution is $12 PEPM. The company will discount that slightly ($1) right off the bat, so most customers start at $11 PEPM. The next tiered discount does not come until the customer reaches 1,000 employees, at which point the price drops to $10 PEPM (17% discount off list). While a Workplace sales representatives claimed that companies who grow to 2,000, 3,000, or 5,000 employees are not offered an additional discount (most likely because Workplace sales representatives do not sell to companies of that size), enterprise sales representatives claim that the PEPM drops by about 50% at those levels. Typical SaaS Contract Terms Termination Penalty According to the Ultimate SaaS contract, customers cannot cancel the agreement during the initial 24-month contract term. After the initial term, the customer may terminate the agreement by giving Ultimate written notice at least 90 days prior to the next renewal period. In the event of cancellation, the customer must compensate Ultimate for any hours worked as well as outstanding expenses. The agreement does not require an additional penalty for termination. Access to Data Once SaaS Term Ends Customers who do not renew their contract with Ultimate are able to obtain a report containing their historical data. This process includes creating a report called an end file containing all of the employee master file information. Ultimate creates this file for the customer, who then can import it into a new system. Generally, Ultimate includes just the last year of data based on this being all the customer generally needs. However, Ultimate can upload the customer s entire history upon request. Positioning of SaaS Software Products Even though Ultimate s Annual Report distinguishes between UltiPro Intersourcing and Workplace, neither the company Web site nor Ultimate sales reps discuss these as being two separate products offerings. The difference is positioned more as two separate target markets for essentially the same offering rather than two separate products. Ultimate positions its SaaS solution as a total business solution. In fact, the portal shows the close integration between HR, payroll, benefits administration, and other HR activities. UltiPro serves as a company s one-stop workplace portal the center of company-related activities. Ultimate claims it gives customers total control over their payroll and HR processes, which is said to improve efficiencies and reduce administrative costs. In addition, roles-based security gives everyone in the organization access to exactly what they need to get their jobs done. Ultimate uses a single integrated database and single sign-on. This is the most commonly presented positioning message. Ultimate handles the entire backend in a single database, from the time the prospective employee fills out an application through the end of the employee s lifecycle. Data needs to be entered only one time. In representative practical terms, this means that the user can get HR and Time and Attendance reports with a single logon from a single system. Moreover, everything occurs in real time. Applicants are in the database immediately and subject to reporting. Competing products require uploads that typically occur daily or weekly. 20

21 Perceived Relative Competitive Strengths In terms of relative strengths of Ultimate s SaaS offering, the company first points to its integration. UltiPro is a single database solution, meaning there is no synchronizing. It includes Payroll, HRIS, Self Service, Recruiting, Benefits Administration, Performance Management, and Time and Labor management. Secondly, Ultimate claims that its reporting is a key differentiator as it has the ability to run hundreds of pre-authored reports or create new reports in seconds. Ultimate claims its reporting is superior to any competitor. Instead of just being data, reporting can be strategic information useful in decision-making for HR and payroll. UltiPro s report writer is built into the solution and reports off of any of the fields in any of the areas mentioned above, with true point-in-time and historical reporting. UltiPro stores all of the customer s historical data, pay history, online statements, W2s, job history, and so forth, for as long as the customer is using the solution. The company also sees performance management as one of its major differentiators. Employees are able to list accomplishments in a journal throughout the year. Managers can establish goals for each employee that matche the corporate goals. Ultimate Software claims to be the only HR and payroll provider that dedicates all of its resources to human resources and payroll research and development, because HR, payroll, and talent management solutions are all that it sells. It has the flexibility to process payroll and print checks on-demand, according to the customer s schedule. Ultimate also claims it is unique in the way that it handles terminated employees. UltiPro does not archive terminated employees and does not bill the customer to store them. Ultimate leaves this data there for as long as the customer needs it for full reporting. Ultimate received ISO certification which means that it cannot be hacked. Only 60 companies in the United States have received that particular ISO certification. In addition, the company hires organizations to attempt to hack into the system. The bottom line is that all the information is secure. Ultimate takes security very seriously and strives to make the information 100 percent secure. Finally, Ultimate touts its customer service. The company boasts a 99 percent client retention rate. Customers have access to dedicated support specialists who are Certified Payroll Professionals (CPPs), certified for quality customer service from the Service & Support Professionals Association, and have an average of 11 years industry experience. In terms of pricing, the company offers PEPM pricing with no hidden charges. 21

22 Section C: Other Product/Service/Price Information Mix of Customers Customers Using Licensed Software Ultimate reports that 30 percent of its 1,600 customers (480 customers) use its licensed software. According to customer size, the following percentages apply to licensed software: None of the company s small customers use licensed software 15 percent of midsized companies use licensed software 52 percent of large customers use licensed software Ultimate s client/server application is rarely sold to organizations with fewer than 1,000 employees. Customers are increasingly moving toward the Web-based application to avoid hardware and IT management expenses. Certain customers want to avoid application support and management as much as possible and prefer to reduce IT costs. Some customers find that the hosted model is somewhat more cost-effective than an in-house implementation. Customers Using SaaS Software The majority (70 percent or 1,120 customers) of Ultimate s customers use Intersourcing. Virtually all of Ultimate s customers with fewer than 1,000 employees purchase the software as a service, with a few noted exceptions. Most larger customers are moving to the Webbased application as well. A few customers prefer to retain control, but according to Ultimate, nearly all are comfortable with software as a service. A major reason for this is security, which was addressed above in the section concerning relative competitive strengths. According to customer size, the following percentages apply to SaaS: 100 percent of small customers use Intersourcing 85 percent of midsized companies use Intersourcing 48 percent of large customers use Intersourcing Customers of Each Type and Size Being Sold To Ultimate claims that 85 percent of all new customers choose Intersourcing, compared to 80 percent in As shown above, customers who choose the software license model tend to be larger companies, and to a lesser extent, midsized companies. Ultimate has recently developed a separate sales force targeting companies with 200 to 700 employees. The company has set goals of increasing its 2008 annual recurring revenues by 30 percent over 2007 and by another 30 percent in Based on December 2007 market data from Dun & Bradstreet, Ultimate Software estimates that its approximate market share to be 3 percent of the 15,000-and-larger employee space; 6 percent in the 700 to 15,000 employee space; and less than 2 percent in the 200 to 700 employee space. 22