Zoho Enters the HR Software Market. What Does it Mean?

I read an interesting blog posting on CNET about Zoho adding and HR application to its Web suite. The blog by Dan Farber says:
"The latest addition to the [Zoho] suite, which already includes modules for everything from documents and spreadsheets to CRM and wikis, is Zoho People, a human resource management application. Zoho People, currently in beta, includes the usual HR functions for administrators and employees, with modules for organization, recruitment, forms, and checklists (work flow). In addition, Zoho Creator has been integrated within Zoho People, allowing users to customize the application."
AdventNet, the company that owns Zoho, has a tagline "Elegant Software, Affordable Prices, Service with a Smile". Zoho People appears to be the company's first HR software application. It is free during the beta phase and then the fees are in the range of $50/user/month for an HR team and $4/user/month for employees. Please note that the company told me these prices have yet to be firmly established (contact Zoho for details).

Based on this pricing, a company with 500 employees and a four person HR department would pay about $26,000 a year. Affordable.

So how does a company like Zoho with no apparent history or expertise in the HR space launch such an impressive hosted HR software application? And what will it mean to the broader industry?

I have no idea.

But it does remind me of a famous Michael Porter article in the March 2001 issue of Harvard Business Review titled Strategy and the Internet. Mr. Porter wrote:
“once a company establishes a new best practice, rivals tend to copy it quickly [and] the nature of Internet applications makes it even more difficult to sustain operational advantages".
It is reasonable to assume that over the long term, it is unlikely that any major HR software vendor can maintain any significant ongoing operational advantage relative to their competition. In other words, it takes something other than cool new features and bells and whistles to maintain a leadership position over the long run. Some analysts in the HR space have even hinted that many features of leading ATS and Talent Management applications seem to becoming commodities.

This means that for most HR software vendors, increasing economic value will come through charging (and being able to get) a higher price for their services relative to the competition. Positioning or marketing their services with a unique value proposition – being different from the competition - is one way to accomplish this. This could mean better account management, reporting capabilities, or more comprehensive service offerings such as consulting and training. A related strategy is to expand and/or up-sell additional services. For example, one company I recently spoke with in the HR software space, TalentQuest, differentiates themselves by offering an integrated model of both human capital "consulting" and talent management "software" applications. They seem to get it.

But you have to get the word out into the marketplace which is why you can never relax your marketing and PR budget. I know this first hand - as we enter our 8th year of business at HRmarketer, we plan to spend more on marketing and PR in 2008 than in any previous year. We have to in order to maintain our leadership position and communicate our "uniqueness" to the marketplace. Bells and whistles only get you so far.

The point is that to win in the long run, HR software vendors must realize that it's not just about the software because it's just a matter of time before someone else has what you have.

Posted by Mark Willaman

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