February 28, 2006

A large percentage of companies are already familiar with the on demand model for CRM (customer relationship management) activity. But on demand is a big paradigm, one that can also lend itself to ERP (enterprise resource planning), SCM (supply chain management) and even HR (human resources).

This latter function become clear after our recent talk with Employease, an on demand HR company that has been around for a decade. Employease made us aware not only of on demand HR, an important concept in itself, but also of the complementary nature of the hub and on demand models.

Mike Seckler, the company's CEO, emphasizes that the two resources -- on site software and outsourcing -- classically available to help companies with their HR function have been too expensive for smaller companies and not always efficient even for larger companies.

He offers an example. "Even if you had a system to manage the data in-house, you couldn't communicate beyond your four walls," he says. In this case, picture the termination of an employee and all of the communications (including reaching out to insurers and third-party payroll providers) necessitated by this event.

Employease's approach to this problem is to build digital pipes between companies and their third-party partners. In fact, Employease and healthcare company Pacifacare have co-branded a portal that lets end users feed their data directly into Pacifacare, and there are many other such partnerships across insurance, payroll, and other categories.

Technically, what Seckler's talking about is a hub, which isn't a concept inherent in, or pioneered by, hosted specialists. But the idea is still consistent with what Seckler calls Saas [software as a service] 2.0, in which the major concept is community.

You see, the multi-tenancy model of on demand turns the hosted vendor into a de facto hub anyway. Employease has 1,000 customers who receive upgrades simultaneously and into whose HR processes Employease has a privileged view.

Seckler sees it as only natural that the notion of a community on the customer side be extended into an even larger community incorporating the customers' HR partners. Voila, a hub.

A hub with a difference, of course, because the model isn't to dip into a percentage of transactions (the classic 1990s e-marketplace model) but to offer subscription-based access to HR applications.

When you think about it, the applications lend themselves to the hub model, because they don't take place in a vacuum. HR applications often lead into the systems and process of insurance and payroll partners, after all, so it's a natural idea to complement the functionality itself with a pipe into the partner system.

Employease's pricing model varies, but Seckler says that a typical user might pay $6-$8 per month.

Seckler says that Q4 2005 featured 62 year-over-year growth, and that customer retention is at 89 percent.

Source: Line 56