We’ve got to talk about something you’re probably a little uncomfortable about. You’ve probably had questions about it but didn’t want to ask because you felt a little embarrassed or you didn’t want to insult anyone. So, it’s R-E-C-E-I-P-T. The “PT” makes a “T” sound like in pterodactyl and it’s an exception to the “‘I’ before ‘E’” rule—okay, no. Just kidding (but that is how you spell “receipt” for those who needed the assist).
No, the real reason we’re here is to talk about what the deal is with your payroll manager using a software you may have not heard about before. Here’s what’s up: some big companies like ADP and Gusto use proprietary software for human capital management responsibilities like onboarding, time and attendance, learning management, or payroll. Others (and by “others”, we mean “most payroll managers”) license out a third-party software.
Think of it like how your accountant licenses out software like QuickBooks or Xero. Could you go in there, file your taxes, and apply for tax credits and incentives yourself? Sure. But the software has a learning curve you can’t summit without supplemental oxygen and, in what can only be described as an act of mercy, your accountant probably limited your access to the features you need. They’re your sherpa, helping you up that learning curve.
So we accept that there is an intermediary or “middleman”. At this point, your entrepreneurial spidey senses are kicking in. You might be looking for ways to remove that go-between, perhaps with a weed whacker or propane torch. In this article, we’re going to talk about why you shouldn’t; the benefits of a service provider licensing software over a proprietary solution. Ultimately, we hope to leave you with a better idea of whether finding a provider who licenses third-party software to facilitate their services is the best option for your business.
Benefit #1: There’s No Incentive to Push Out Your Current Providers
One thing we see a lot with clients who came to us from providers who use proprietary solutions is that the bigger companies tried to push their other service providers out of the relationship. An accountant or benefits provider would refer the client to ADP or Paylocity to handle their payroll. Before long, the client would start getting emails marketing services facilitated through the proprietary software over the accounting or benefits services of their initial provider.
This is what happens when the provider with proprietary software tries to cut out the middleman. Cutting out the middleman means severing ties with providers whose services you may want to keep. These may be providers with whom you may have established years of trust and goodwill; who know your business inside and out. Software that’s built to be licensed out by service provider is typically developed with a focus on adding value for the provider as opposed to adding services to pass off to their own in-house teams.
Benefit #2: Your Tools Are Unified By Design
The proprietary software of some major providers is only proprietary by way of acquisition. When one company acquires another for the purposes of cannibalizing their software, the additional features are often introduced to clients before they’ve been fully integrated into the new ecosystem. This has lead to clients maintaining multiple sets of login credentials to access the full suite of services united (“united”) under the umbrella of a single service provider. Software that’s designed to be licensed out to providers only has value once it helps that provider deliver services to their clients (i.e. you). Disjointed software leads to disjointed services. That is, in part, why it’s less common to see features added via a merger or acquisition rushed out to users of software licensed out to managed services providers.
Benefit #3: Your Point of Contact is an Expert Trained for the Industry; Not the Software
Providers who use proprietary tools save money by hiring representatives (often right out of college) and training them to use their software. It’s not that their representatives can’t provide you with value; they can. But they’re not going to provide you with the same value as a specialist trained in and seasoned by the industry. On the other hand, it’s more common for providers who license out third-party software to hire experts with a track record of success in their respective fields and train them to use that particular set of tools.
Benefit #4: You’re More Likely to Keep a Consistent Point of Contact
What happens when the company managing your payroll hires account reps right out of college? You get a point of contact who’s just learning the ropes of the software they rely on to manage your services and after a year or so on the job they leave to pursue their next great adventure. This doesn’t happen every single time, but it happens a lot. A lot of the clients who come to Lift HCM from providers with proprietary software have been passed around to different reps before they ever had a chance of forming the kind of relationship that breeds an understanding of your company and your unique needs that would allow them to work proactively to provide the kind of added value you’d get from companies that retain their reps for several years.
Those are the kind of relationships you’re more likely to see with vendors who license out third-party software. They’re far more likely to attract industry veterans with specialized knowledge and skills and train them on the third-party platform. They’re far more likely to be hiring and retaining staff for the long haul; for the duration of a client’s relationship with the company.
Decide if a Provider Using Proprietary Software is Right for You
Opting for the services of a provider who uses proprietary software isn’t the end of the world and we won’t pretend like it is. The major players like ADP or Gusto are both the best options for a specific subset of the market. If you’re looking for services are facilitated by a unified technological ecosystem and carried out by an industry expert with specialized knowledge who’s going to build a relationship with you over the course of several years and learn your unique business needs without pressuring you away from relationships with your existing service providers, you’re more likely to get them from a provider who licenses out third-party software.
We hope this article has given you enough information to decide between providers who use proprietary software and those who license out a third-party solution. If you’re in the market for a payroll manager and are interested in learning more about the latter, diving into the benefits of midsize payroll providers can be a great way to narrow in your search.
