From single to multiple vendors

How times change. A few years ago, one of the common questions asked in the multi-country payroll field was: is there one global vendor who can manage your payroll in every country you operate in? Today, a more useful question to ask is: do you actually want a single provider?

When Webster Buchanan Research first started researching the multi-country payroll sector more than a decade ago, the idea that a single vendor could provide services in every country around the world was a distant dream. At that time, attention was focused on much more prosaic technicalities – such as the fundamental question of how one payroll system could physically cater for the unique legislative requirements of different countries.

Several large software vendors had already started tackling the problem by grouping together the core activities that are common to any payroll operation in one central system, then layering country-specific rules on top. Over time, different flavours of the aggregator model also emerged to tackle the problem from a different angle, with vendors building a network of national payroll providers to carry out calculations on their behalf.

One advantage of the aggregator approach was that it allowed for relatively rapid expansion of an outsourcer’s international capability (in some cases, too rapid – but that’s another story). As a result, attention gradually started shifting from ‘how do you do multi-country payroll?’ to ‘where do you do it?’. While some leading international payroll providers stopped when they reached 50-odd countries, others continued to expand their reach right around the globe – and a few of them weren’t exactly modest about celebrating their capabilities. I’m pretty confident no vendor ever claimed to cover more countries than actually exist in the world (there’s a little fewer than 200, depending on how you count them), but some of the more ambitious assertions over the years definitely suggested a degree of digital illiteracy.

This was the point when Webster Buchanan started to distinguish between countries where aggregators have a national payroll provider signed up in their network, and countries where partners are actually processing payroll for real customers. At times, the disparity was, well, big enough to fill a continent or two. I recall a ‘capability-versus-customer’ gap of well over 50 countries for one vendor, and even then I suspect there was a bit of creative accounting in their numbers.

Today, thankfully, there’s much more transparency about geographical coverage. Some vendors have live customers in 100-odd countries – and several have expanded their coverage to the point where they can deliver services in most places that a multinational is likely to operate in. But that still doesn’t mean a single vendor approach is always possible – or even necessarily desirable.

For one thing, country capability isn’t just a question of which countries a vendor processes in – it’s also about the size of the employee populations they deal with and their scalability. Some of the best-known providers don’t yet scale up to the biggest populations (in the higher thousands) or prefer not to focus on the very smallest. At the same time, others make a living providing services to country populations upwards of one employee.  So there’s something to be said for mixing and matching.

Secondly, while some of the leading providers pursue the goal of near-blanket global coverage, others have opted to specialize in tackling the complexities of specific geographic regions, be it Central Europe or parts of AsiaPac and Latin America. For larger multinationals wary of embarking on unwieldy cross-continent projects, this opens up the possibility of working with a selection of regional specialists as an alternative – or in addition – to global providers.

Third, the goal of working with one global vendor implies shifting all your payroll operations onto a new platform. But in practice there are plenty of reasons, from cost to operational factors, why a multinational might keep some of its existing country populations running on the same software and services as they use today.

Above all, vendor selection is about far more than geographical coverage.  As well as their track record in implementation and the quality of their ongoing service delivery, multiple issues differentiate vendors today, from the breadth of services they offer to their financial stability, growth rates and the profile of their customers.  Once you take those factors into account you start to ask the question – can one vendor really tick all the boxes? 

This article is adapted from a column written by Keith Rodgers that first appeared in Payroll World magazine

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