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Zenefits vs. ADP: The points to ponder

A corporate payroll skirmish over back-end data connections has spilled over into the courtroom. Here's a look at some key points for CXOs to ponder.

Corporate payroll giant ADP and Zenefits, a startup and rival, are escalating their war of words to the courtroom. Mutual customers are in the middle.

Zenefits screamed when ADP cut off its customers. Zenefits was set up within ADP to automate payroll admin. ADP said it cut off Zenefits because of security concerns. Then Zenefits denied those accusations, outlined its traffic logs and said ADP was being anticompetitive.

The startup said in a blog post:

ADP's business model is to offer a bundled solution to customers, and evidently they don't want small businesses using Zenefits for the HR and benefits portion of their business. Instead, we believe ADP is using a tried and true tactic in enterprise software: whenever a new, innovative company enters a market, the incumbent tries to spread fear, uncertainty and doubt about the new market entrant. This tactic is so common it even has an acronym--FUD (Fear, Uncertainty, & Doubt).

ADP then filed a lawsuit against Zenefits over defamation.

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Now if you're a customer of both of these companies you're in a bit of a pickle. Frankly, no one really knows whether ADP is cutting Zenefits off due to a security concern or a competing product. And once you strip away the histrionics you're still not going to know what the real deal is.

Given that reality it's worth pondering a few questions and coming up with alternative plans. A few thoughts to consider:

  • The storyline here is that ADP is cutting Zenefits off for being innovative. If the roles were reversed the press would probably be noting that Zenefits can't build a business on someone else's platform.
  • Before you choose any side think through the strategies of both companies. Are these two about HR administration reinvention or just about payroll?
  • ADP is within its rights to cut off Zenefits. While there's an API economy, there's not some hard rule that all of your tech vendors have to hold hands and sit around the camp fire. Zenefits also connects with Intuit, Paychex and Zenpayroll. What are the chances of those connections being cut too?
  • IT buyers should be asking questions about security. As the cloud proliferates, many companies don't know how data moves, connects and ultimately transmits between key players. In talking with CIOs, the ones that ask the right questions happen to be the folks who have run their own infrastructure. Even if there's no security issue between ADP and Zenefits, you can't take lightly how your employees' Social Security numbers move around.
  • Traditionally speaking, the suite usually wins and you'll have to evaluate vendors accordingly. Ease of use and integration plays a big role in which way you bet.
  • And finally, you can follow Zenefits' advice to make your voice heard on Twitter with the humorous #ADPeeved hashtag, but your time is better spent coming up with a plan. If you run a business you have to pay your people. Should you choose a side, vote with your dollars after doing your homework instead of Tweeting your heart out.