Zenefits is a cloud-based HR software and benefits brokerage company. It provides a free HR platform that combines HR software and benefits brokerage services. Zenefits disrupts the traditional model by taking over the role of brokers and offering an integrated one-stop solution. It earns revenue through commissions from insurance carriers and fees from other HR services. Zenefits competes against traditional brokers and HR software companies by offering a free comprehensive platform and reducing costs for employers. The HR software market has strong growth potential as many companies lack sophisticated HR technology.
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Zenefits
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A P R E S E N T A T I O N B Y
Cloud-Based
Human Resource Software
2. Agenda
Cloud Computing and Software as a Service (SaaS)
Introduction to Zenefits
Value Proposition
Customer Segmentation and Selection
Scope of Activities
Value Capture and Revenue Model
Competitors
Market Analysis
Strategic Control
Conclusion and Future Developments for Zenefits
Zenefits HRMS / HRIS Model
3. 3
The Emerge of Cloud Computing and Software as a
Service (SaaS)
Mainframes
• Start of
Automation
Phase
• Localized
Infrastructure
1950s
Rise of
the PCs
• Rise in
demand of
personal
computer
• Decentralize
computing
• Birth of IT
Service
industries
1970s
Client-Server
Architecture
• Demand of
high
bandwidth
• Virtual
Private
Network
offered
• Dot Com
revolution
1990s
Hosted
Environment
• IT infra
structure
management
outsourcing
• Increase of
use of
virtualization
2000s
• Emergence of “as-a-
service”
• Delivery of IaaS, PaaS,
SaaS, BaaS
• Collaborative
Computing
• Utility computing
Model
Cloud
Computing
Beyond 2010
4. 4
CLOUD BASED SERVICES
Traditional vs Cloud Service Model
Data
Application
Networking
Storages
Servers
Virtualization
O/S
Middleware
Runtime
Platform
as a Service
(PaaS)
Networking
Storages
Servers
Virtualization
O/S
Middleware
Runtime
Data
Application
Software
as a Service
(SaaS)
O/S
Middleware
Runtime
Data
Application
Networking
Storages
Servers
Virtualization
Infrastructure
as a Service
(IaaS)
Owned and managed
by service provider / outsourced
Networking
Storages
Servers
Virtualization
O/S
Middleware
Runtime
Data
Application
Packaged
Software
Owned and managed
by user
TRADITIONAL ERP
5. 5
SaaS Advantages and Concerns for Users
Advantages
• No or minimal upfront capital cost
on hardware infrastructure and
software ownership and licensing
• No or minimal operating cost on
hardware and software
maintenance and upgrades
• Relatively low subscription-based
fee, sometimes free
Concerns
• Security issues, as data is stored in
cloud
• Dependency on internet
connectivity, where network
availability and latency may
become issues as the quality of
internet connections can vary
between places
• High switching cost between SaaS
providers
6. 6
Cloud Service Model and Providers
Infrastructure-as-a-Service (IaaS)
Platform-as-a-Service (PaaS)
Software
-as-a-Service
(SaaS)
7. 7
Introduction to Zenefits
Zenefits is a Software as a Service (SaaS) company that offers
cloud-based platform to businesses, both big and small, for
managing multiple HR services such as health insurance,
payroll, compliance, paid time off, benefits, employee
onboarding, stock option management, and more.
9. 9
Introduction to Zenefits
One-stop, free cloud-based HR software catering for benefits,
compliance, payroll and other HR functions
Provides compliance management software to facilitate the
automation of compliance
First modern insurance broker in US which liaise with companies of
every size, in every state, and every industry
Connects and integrates multiple HR solutions into a single dashboard
Provides access to service providers and subject matter experts
Eases the access to reports and analytics as HR information is available
and maintained
11. 11
Expertise on multiple
HR functions;
Shift from transactional
HR to Strategic HR; and
Always comply with the
legislation
Minimise repetitive
administration; and
Lower administration
cost and manpower
needs
Transition cost;
Training for employees;
Adaptation and transfer of
information; and
Survivability of the service provider
Value Proposition – Customers’ Needs, Wants and Fears
Customers'
Wants
Customers'
Fears
Customers'
Needs
12. 12
Value Proposition – Customers’ Substitutes
Customers’
Substitutes
Multiple
service
providers
Engage HR
consultancy
or advisory
firms
In-house HR
operations
and advisory
team
In-house
HRIS/HRMS
team and
system
13. 13
Value Proposition – Features and Benefits
HR Services
Payroll & Taxes
Benefits & Insurance
Compliance
Outsourcing
What is offered?
Capture addition or removal of employees
Automate payroll tasks and tax related computations
Provide instantaneous and affordable quotes for health, dental or life
insurance through collaborative efforts of experts and technology
Streamline benefits administration and management
Provide convenience and readily available advice as there are
in-house experts for payroll, benefits, insurance and
compliance matters; collaboration with top payrolls providers
Provide automated updates on compliance and regulations
matters pertaining to taxation and other HR matters to
ensure error-free compliance
14. 14
HR Software
HR Cloud Platform
Reports & Analytics
Onboarding & Exit
Benefits Administration
Time & Attendance
Stock Options
What is offered?
Centralized platform for all HR documents and information
Provide convenient access as information is placed in the cloud
Obtain up-to-date data and reports
Ease the administration for onboarding as information is
captured and updated seamlessly in all systems
Empower employees with own HR portal for benefits and
insurance administration
Track attendance based on any electronic work devices and it
will be synchronised with payroll
Charge a low fee for stock options administration
Value Proposition – Features and Benefits
15. 15
Value Proposition – Features, Benefits and Experience
Experience
Convenient and readily accessible;
Hassle free and easy to setup and use;
Stable and robust system;
Employees can focus on strategic or core business issues;
Outstanding partnership and advisory support; and
Massive savings
Highlights of Features and Benefits
A user friendly and modernised online HR software which covers
majority of the HR matters at almost no cost;
A platform to integrate and synchronise all HR information to avoid
multiple administration;
A team of readily available subject matter experts to provide advice for
cumbersome matters such as insurance or compliance;
Minimise efforts, cost and manpower on HR administration; and
Useful analytics for business development and manpower planning
17. 17
Customer Segmentation and Selection
Entrepreneurship/new
start-up business, as well as
established business which
are based in US with
2 to 1000 employees and
have limited resources to
handle HR related matters
18. 18
• A modern HR system is
an integrated IT-based
system for HR
management
• Designed to increase the
efficiency of HR
dministration and
management tasks, such
as payroll and benefits
activities
• Provide information used
in HR decision making.
Modern HR System
HRIS = Human Resource Information System
HRMS = Human Resource Management System
HRIS/
HRMS
Recruitment
Training and
Development
Personal Self
Service
Leave &
Absence
Payroll
People
Administration
Compensation
and Benefits
Performance
Evaluation
19. 19
Zenefits HRM Core Activities
Benefits
Administration &
Enrollment
Software
Business
Intelligence &
Reporting
Contractor
Management &
1099 Filing
Compliance
Automation
Document Storage
&Management
Employee
Concierge
Employee &
Manager
SelfService Portals
Email Provisioning
Onboarding
Automation
Software
Offboarding
Automation
Software
Online W2's & I-9's
Org Chart &
Employee Directory
Payroll Automation
Paid Time Off &
Vacation Tracking
Workflow Approval
Management
Zenefits is a cloud-based HRIS and HRMS
Personal Self
Service
Leave &
Absence
Payroll
People
Administration
Compensation
and Benefits
20. 20
Traditional HRM and Benefits Model
BENEFIT
INSURANCE
CARRIER
BENEFITS
BROKERS
HR DeptHRIS/HRMS
HR Services
Employees
EMPLOYERS
BENEFITS
PROVIDERS
THIRD PARTY
PAYROLL COMPANY
21. 21
Traditional HRM and Benefits Model
Employers
•Use HRIS/HRMS
(commercial software) for
internal HRM
•Dedicated HR staffs to
cover whole HR activities
•Deal with Brokers to obtain
the most suitable and best
priced group benefits
policy from Insurance
Carrier
•In general, pay the brokers
for the services
Brokers
•Professionals in insurance,
benefits, risk assessment,
and may require license
form authority
•Not an agent of Insurance
Carrier, but receive
commission on the policy
sales.
•Provide assessment,
consultancy, and brokerage
services to Employers to
obtain the best policy
•Negotiate with the
Insurance Carrier on the
policy package
•Generally, should work for
the interest of the client
(Employers) rather than for
the Insurance Carriers, and
may collect fee for
brokerage or consultancy
services from the client.
•Provide personalized
consultancy and support to
the Employers.
Insurance Carrier
•Underwrite and sell group
insurance and employee
benefit policies for
employers
•Form network with
Healthcare providers to
serve the policy holders
•Can either sell policies
direct to employers or
through brokers
•Can offer better pricing to
brokers because brokers
usually have more detailed
risk assessment for their
client
Benefits Providers
•Network of hospitals,
clinics, doctors, dentists
•Participate into the
Insurance Carrier network
and provide healthcare
benefit service to its policy
holders
22. 22
Zenefits Cloud Based HRM Model
BENEFIT
INSURANCE
CARRIER
HRIS/HRMS
HR Core Platform
HR Services
HRD
Employees
EMPLOYERS
HR Software (SaaS)
THIRD PARTY
PAYROLL COMPANY
BENEFITS
PROVIDERS
23. 23
Zenefits Cloud Based HRM Model
Employers
•Use free cloud-based
software from Zenefits to
manage the HR services
•Number of HR staffs could be
reduced as the Zenefits HR
platform can provide most of
the HR services with less user
intervention, including
insurance and benefits
brokerage service
•No longer have to pay for the
software and for the brokers
•Eliminate capital and
operational cost of
implementing HRMS/HRIS
Zenefits
•Essentially is a cloud-based
software-as-a-service
developer and provider,
designed for HRIS and HRMS.
•Offer one stop services for
most HR management,
including health insurance,
other benefits, and payroll
•Get revenue from brokerage
activities, i.e. commission
from insurance carrier, and
also from other third part HR
service company, e.g. payroll
company
Brokers
Zenefits disrupt the
traditional model and
is taking over the
Broker’s role
(and market share)
24. 24
Zenefits Scope of Activities (Value Chain)
Cloud
Infrastructure
Development
Activities
Software
Development
Activities
Sales,
Marketing
and
Partnering
Activities
Brokerage
Operations
Activities
Customer
Support and
Service
Activities
Procurement Management
Firm Infrastructure
Human Resource Management
R&D and Technology Management
Value Capture
PRIMARY
ACTIVITIES
SUPPORTING ACTIVITIES
25. 25
Zenefits In-house and Outsourced Primary Activities
In-house Primary
Activities
• Software
Development
• Marketing and
Partnering
• Brokerage Operations
• Customer Support
(Possible) Out-sourced
Primary Activities
• Cloud Infrastructure
Provisioning,
Operations and
Management (from
IaaS supplier)
26. 26
Zenefits Value Capture Method
• From Insurance Carriers
• From Payroll Companies
• From Other Benefits
Providers
Commission
• From Users using Stock
Option Administration
(Optional)
Fee for
Services
27. 27
Zenefits Value Capture Method (Commission)
Zenefits offers
free HR
software to
companies
Zenefits offer
free publicity
to insurance
companies
(through the
HR software)
When a
company finds
the right
insurance
plan, they pay
to the
insurance
company
The insurance
company pays
Zenefits
commission
Source: http://www.boardofinnovation.com/2015/05/21/how-last-years-hottest-startup-is-making-money-from-their-free-hr-software/
28. 28
Zenefits Revenue Model
Adopted from: http://www.boardofinnovation.com/2015/05/21/how-last-years-hottest-startup-is-making-money-from-their-free-hr-software/
INSURANCE
CARRIER
COMPANY /
EMPLOYERS
ZENEFITS
Insurance Benefits
chosen through
Zenefits
Insurance Premium
Commission Fee
on Premium
Exposure to Companies /
Employers
Free HRM
Software (SaaS)
Fee
for Stock Option
administration
(OPTIONAL)
30. 30
Zenefits vs. Other Cloud-based Benefits Brokers
•The software is completely free to use; they charge
commissions from insurance providers.
Free of charge
•In addition to employee benefits services, Zenefits also provide
on-boarding, compliance, payroll services.
Wide range of services
•The onboarding process to Zenefits is very easy; and users may
not be willing to switch considering Zenefits’ free services
High switching costs
•Zenefits responded quickly to policy or regulation changes. E.g.
Launching free ACA compliance systems in response to
Obamacare policy
Active response to policy change
31. 31
Zenefits vs Other HR Solution Software
( I n t e g r a t e d E R M a n d H R C o m p r e he n s ive )
Zenefits
Comprehensive HR
solution software
Traditional Integrated
ERM Software
Free of charge
Ease of use
Benefit broker services
Basic HR management
solutions
Strategic HR
(performance tracking
etc.)
Compliance
management and
expert support
Product variety
Enterprise
management
32. 32
Zenefits Main Advantages for Users
Combine comprehensive HR
software platform and the
benefits broker services in a
single cloud-based platform
Manage all employees
HR administration from
a single HRIS/HRMS
software
Easy implementation
and intuitive self-service
tools
Run real-time reports
on your entire
workforce, across all HR
systems, in just a few
clicks
Integration with other
major payroll and
health insurance
provider platform
Reduce capital and operating
cost of the employer
No capital and
operating cost needed
for the HR software
Less HR staff required
Compliance Management and
Subject Matter Expert Support
(in U.S)
No need to engage
specialized HR
consultant
Fit into the current
Obamacare policy
34. 34
Industry Description
• More than 300 HR software
systems
• Large companies as well as
start-ups
• No single product is dominating
the market
35. 35
Zenefits Market Projections
• Valuation: $4.5 billion
• Signed up more than 10,000
small to medium size
companies
• Revenue x 20 in 2014 compared
to 2013; expecting 100 million
by 2015.
• Manages over $700 million in
health insurance premiums
36. 36
Market Potentials
• 48.5% of companies lack
sophisticated HR technology that
meets their business needs
• only 19% are currently using a
fully integrated HR software
• Too much manual manipulation
and lack of necessary HR
analytical systems are main
obstacles to achieving HR better
performance
37. 37
Market Potentials
1st half of 2015, there was $812 million venture capital
investment pumped into HR and recruiting tech in US.
38. 38
Benefit Brokerage Market
Source: Employee Benefit Adviser (December 2014 issue)
THE TOP 50 LARGE-GROUP
BROKERAGES IN THE U.S. (2014)
TOTAL REVENUE = $1,699,056,059
39. 39
Threat of
Potential
Entrants
Bargaining
Power of
Buyers
Threat of
Substitutes
Bargaining
Power of
Suppliers/coll
aborators
Competitive Analysis
•Large number of
competitors
•Big competitors exist such
as Oracle, Sage, ADP
•Increasing market demand
Degree of Rivalry
•Low bargaining power on
supplier side
•Vertical integration can
be a threat
•Attractive to new entrants
•Low entry barriers
•High switching cost
•Not highly differentiated services
•One-stop service
•HR professionals
•HR consultancy firm
40. 40
SWOT Analysis
Strength Weakness
ThreatOpportunity
• In-house expertise
• Free of charge software
• Cloud-based service
• Easy to install and use
• Large, active, knowledgeable
sales team
• May not be able to enter
market which are using
integrated ERM software
• Increasing local and overseas
market demand
• Cater for > 1000 employee
• More HR related functions
• Government regulations
• New entrants from local and
overseas market
• Current market player
• Current partners' vertical
integration
• Government regulations
• May be posed to security issues
41. 41
Strategic Control
• Creates entry barriers for switching
and mass adoption
– Automates HR core processes
– Quick and easy
– Free, without any contracts or
disruption of service
– Supports more than 10,000
companies across 48 states, serving
over 100,000 employees
• Continuously delivers new,
enhanced, and integrated HR
features
– Delivering good features and
products
– Innovating faster
42. 42
Strategic Control
• Weak appropriability regime
– Nature of the technology
– Weak ironclad IP protection
– Continually augment the value of the product to achieve scale
• Focus on building in network effects
• Insurance
• Payroll
Service
Providers
Zenefits Customers
43. 43
Strategic Control
• Provides a single interface that
plugs in to the existing providers
• Leverages complementary assets
– Cloud platform
– Very large and active sales
team
– Customer Service
– Continuously develops strong
branding and reputation
44. 44
Summary – What Make Zenefits Successful
The software is free, eliminate user’s capital and operational cost for HRIS/HRMS software
Easy to learn for users to gain the most effective way to provide health insurance and
other benefits for its employees
The software provides a lot of value for users
The software has high switching cost (very sticky)
Zenefits has a very large, active, and knowledgeable sales team
Able to take the opportunity of Obamacare’s complex new health care policy
High potential revenues from benefit brokerage market
45. 45
Future Development for Zenefits
• Performance and
training features
• Recruitment process
• Additional analytics
• Mobile apps (mobility)
• Integrated cloud-based
email services
• Multi languages
• Currency translation
Recruitment
Training and
Development
Performance
Evaluation
Personal Self
Service
Leave &
Absence
Payroll
People
Administration
Compensation
and Benefits
Analytics
Mobility
Multi
Languages
Enterprise
Cloud Based
Email
Currency
Translation