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ZIFFPAGE TITLEPromises, Promises

By Michael Fitzgerald  |  Posted 05-05-2005 Print

Promises, Promises

Web services has been a long time coming, and not just at ADP. Web services was absurdly hyped in 2000 and 2001, when an acronym soup of technologies based around Extensible Markup Language (XML) began to emerge. The various tools promised to help companies easily and quickly pull together disparate applications from both inside and outside the corporate firewall.

As with most new technology, Web services did not take off as easily, or as quickly, as promised. Jason Bloomberg, an analyst with ZapThink LLC, a Waltham, Mass. research firm, acknowledges that the market for Web services software "hasn't grown as fast as analysts such as ourselves had predicted." In part, that's because companies realized they could build their own services using software they already had, such as Microsoft Corp.'s .NET tools, IBM Corp.'s WebSphere or BEA Systems Inc.'s WebLogic, rather than by buying expensive new software.

While Web services technology is reaching maturity, Bloomberg says the bigger issues are those involving development organization. "The technology is relatively straightforward. But organizational issues are not." He cites problems such as how to organize the IT department to support shared services that can be accessed from different departments, or even from companies outside the organization, or how to fund a services-oriented architecture (SOA) initiative when services are shared across departments.

Those problems are familiar to Bongiorno at ADP, even though he is relatively new at the company, having joined in October of 2002, after he left the ailing airline industry in the wake of Sept. 11. Bongiorno had been United Airlines's managing director of IS, customer satisfaction and planning, and though his previous job had glamour, it offered something less than job security: United has been operating under bankruptcy protection since 2002. But that doesn't mean that Bongiorno is without new challenges at ADP.

The major problem in tying together the business units within ES through the Web is that each division has been independent in its approach to software design, sales and marketing. That inherent disunity presented itself to customers as well. If an ADP payroll customer decided it wanted to add benefits administration services from ADP, it would be required to buy a separate product that had a different look and feel, training process, and authentication and password screens. You couldn't move from one ADP product to another without logging out of one and then onto the other. As a result, there was no incentive for a customer to sign up for multiple ADP services.

But that is now changing. Enter technology, in the form of a Web services-oriented architecture, which ADP is using to create a Web portal that can work with all its products. Each of its current customer offerings will become a "portlet" that fits within the master portal. Each will have a similar look and feel, thus saving ADP customers time and money spent training employees to use them. And customers with multiple ADP products will be able to access any of them by signing in to one of them, once.

The transformation is underway. ADP rolled out the first set of Web-enabled portlets in September 2004. The company also created a strategic marketing position to oversee its business unit marketing groups, and then moved longtime executive Stuart Sackman into the job. Sackman is developing an overall sales strategy to help ADP's salespeople sell the portal, and shift from selling one product to multiple ones. "This technology really is critical to enabling us to achieve our long-term growth goals," says Sackman. "It is a strategic shift, and we think it'll help significantly in new sales. We have very broad product sets versus our competitors, but haven't gotten as much mileage out of them as we would have liked. Salespeople never sold them together because then they'd have to tell the customer how different each product is." He's already having some success: During ADP's most recent quarterly conference call, he told analysts that more than 300 clients had signed up for the portal.

Meanwhile, ADP is using Web services to support its Comprehensive Outsourcing Services strategy, which is ADP's effort to compete for human resources business-process-outsourcing contracts from large companies. The COS was launched in June 2004, and already has more than 30 customers and $40 million in annual revenues (as well as a $45 million revenue backlog).

Wall Street has taken note of ADP's still nascent Web services strategy, but remains skeptical. "The model is intended to help them extend their addressable market, and it seems like a pretty common sense use of a new technology," says Craig Peckham, an equity research analyst at New York City-based Jefferies & Co. "Three hundred portal customers is relatively impressive, but it's hard to see how this is going to move the needle in terms of growth. And this kind of heavy spending on product investment does put pressure on margins."


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