The company's new wrinkle on HR outsourcing, believed to be the first of its kind, is an option for companies that lack adequate staff to run systems in-house.
To make it easier for resource-strapped small and midsized companies to set-up HR systems, Namely Inc. is borrowing from the past and selling its existing cloud-based HR technology platform as a managed service.
The New York-based company on Aug. 9 said it is offering a managed version of its HR technology platform called Managed Services, including core functions such as payroll, benefits and compliance along with features such as time keeping. Customers will have dedicated account managers who can do everything from run payroll to track benefits. Existing customers “frankly were asking for additional support,” said Namely founder and chief executive Matt Straz.
Straz said he is unaware of another company that runs payroll, benefits and compliance through managed services, which places Namely as the first to make such an offering. “There are companies like TriNet that run it through a professional employer organization, or PEO. And companies like Workday, Oracle and SAP” target much larger customers, Straz said. “As far as I know, we’re the only one that’s brought this type of offering to the market.”
Namely hopes its first-mover status will steer prospective customers toward it and away from competitors such as BambooHR.
Startups and fast-growth companies have been averse to adding sufficient HR systems, policies and personnel early in their life cycles. Whether by choice or accident, they wait too long and then develop serious people management problems, as a string of recent high-profile incidents at companies such as Uber, Tesla, Thinkx and Skip the Dishes have shown.
HR technology alone won’t stop sexual harassment and other illegal or unethical behaviors from happening, especially if a company’s upper management, board and financial backers condone it or turn a blind eye.
But a service with templates for compliance and other HR systems can save companies from building everything from scratch, which could make them more amendable to adopting the systems in the first place, Straz said. “I’ve founded three companies, and we had to build it as we went. It would have been nice to have been handed this stuff,” he said.
Managed services are a throwback to the HR outsourcing of previous decades, when major HR technology players offered to “lift and shift” large enterprises’ entire HR back-office operations. The transitions proved to be more problematic than anticipated, and thanks to the emergence of cloud-based services, HR outsourcing never grew as big as expected.
Regardless of size, any type of HR outsourcing might be a good short-term solution but bad in the long run because it encourages top management to view people as expenses not assets, said Bernie Aller, an HR industry veteran who now helps companies vet people-management systems.
“Would they consider outsourcing management of financial assets? That would never happen,” said Aller, who ran and sold an HCM and payroll processing business to Ceridian in 2000 before consulting. “As companies grow, at some point they recognize it’s their people who determine their performance” and are motivated to do better at managing them, Aller said. “Outsourcing it to a third party will never get you there.”
Managed services aren’t the only alternative for smaller organizations that can’t handle HR in-house. Technology vendors have offered comparable services through service bureaus. Small and midsized employers still use professional employment organizations for HR and recruitment process outsourcing for hiring.
HR technology integrators also fill the role of go-between for HR departments and vendors. Derrick Ware, founder and principal at Atriad in the Raleigh-Durham area of North Carolina, provides such services for his clients. At small companies, “The HR function is always overlooked,” said Ware, who got his start in HR technology working as vice president of global technology operations at PeopleFluent. “Or they bring someone in and call them an HR generalist and they don’t have the right background to keep the business out of trouble.”
Namely has been testing the service with an undisclosed number of customers. Managed services customers will pay a fee over and above the $12 per-employee, per-month subscription cost for the company’s technology platform. Target users for both the managed services and the platform are companies with 20 to 2,000 employees, with a sweet spot of 180 to 200 employees, Straz said.
Namely will run the managed service division from a year-old office in Austin, Texas, where it expects to add to a staff of 20 that’s already there. The company is using some of the $50 million in venture money it raised in December 2016 to fund the expansion.