The Seduction of All-in-One HR Technology

A core premise of tech is the promise of scalability and automation. But in the HR and benefits technology landscape, this promise can feel hollow when it comes to all-in-one HR tech players. The magic and fulfillment just isn’t there yet, and buyers need to be aware of this.

To illustrate my point, let’s look at where most services are on the continuum of “automation.”

It’s not auto-magic

Going through Salesforce implementations at multiple startups, I can tell you from experience that the more complicated, idiosyncratic the workflows, the less automation happens “auto-magically."

I included Wageworks because it’s a common point of frustration in HR circles (anyone who ever tried to run a funding file or get support from their ‘alias’ will know what I’m talking about).

While it’s not a true apples-to-apples to compare something like Wageworks to Facebook or Snapchat, the comparison is still important because companies in the upper left-hand quadrant do tout “automation” as a key value proposition for clients (see Salesforce’s recent acquisition of Mulesoft).

Getting it to “just work” is hard work

It’s important for buyers to really understand what automation means in our HR and Benefits industry. The dirty secret of the HR and benefits technology ecosystem is that it doesn’t “just work”’.

If you’re using any of the vendors on the upper left-hand quadrant, either:

• Your in-house team is doing all the back end work, or
• The vendor is outsourcing complex workflows with offshore operations teams, or
• You've hired professional services

It’s not as simple like as a single Snap or Facebook post, and we sometimes forget that in our desire to reduce our own day-to-day pain. But, ignoring this reality can actually cause more pain later on.

Two painful examples

HR tech companies that get caught up in trying to deliver complete automation are playing a dangerous game--with both their positioning and their ability to fulfill on their promises.

Two examples are highlighted below in Figure 2; one is in the HR tech game and one is on the outside.

Example 1: Zenefits

They were, for a time, the fastest-growing enterprise tech company in history. They discovered a sales and marketing air pocket and took off. But behind the scenes, there was a reason the air pocket was there in the first place.

That air pocket (2-20 employee size companies) was extremely difficult to automate. Even local small brokers shied away from this market. As a result, Zenefits over positioned themselves and fell apart under a simple, arrogant assumption—one that was fueled both by their own sense that technology would solve everything, and their investors’ belief that they had a unicorn with 20x returns in the bag.

Example 2: Tesla

Now, I know this story has yet to play out. (I’ve got a few bets with co-workers on the future of this company). But one thing is indisputable: Tesla over-automated to the detriment of their production.

Elon Musk made a couple of wrong assumptions about technology. Other powerful people with a history of past success have been tripped up by these same faulty assumptions:

1. Technology can find economies of scale. Automation holds the promise of a future where everything just works. Robots and algorithms are smart enough to streamline processes and overcome the inherent weaknesses of humans.
2. Technology and automation can disrupt a staid industry for good. At the heart of disruption lies the fundamental belief that technology is ‘good’, humans are imperfect.

It seems logical, right? Except that it’s just a powerful narrative. That narrative takes longer than most companies have in working capital. Now Musk admits the same. Human beings actually have more utility than he originally gave them credit for. At least for now.

So where does that leave us?

A realistic view of automation is something more like this:

Now the billion-dollar question. When you compare the promise of automation against the “on the ground” reality, what does this portend for business models?

For Zenefits, this didn’t work out so well. For Tesla, it’s TBD; we’re still in a capital rich, even exuberant business cycle.

True Automation Takes Time

The lesson here is that true automation takes more time than we’re willing to accept. It’s not just Tesla and Zenefits that made the erroneous assumption. HR and Benefits Technology buyers are understandably seduced by new 2.0 vendors proclaiming ease and automation (and the ability to solve all day-to-day operational pain points).

The truth is, this day will come. Companies like Lumity are driving this forward with a combination of best-of-breed technology and dedicated professional expertise and support. But we’re not there yet. As it relates to your HR and Benefits administration, be mindful of how you assess “all in one” for this very reason.

Some Parting Thoughts

When you look at your benefits ecosystem, I’m betting that you’ll find your team’s particular flavor of pain is felt for 3 main reasons:

1. Your benefits technology is not truly automated (implementation and setting up EDI can take up to 6 months, even longer)
2. Your broker makes up 5x-10x what your SaaS vendor makes, and yet rarely helps you debug or operate the backend system.
3. “Someone” needs to do all the work—and it’s left to your in-house team to figure it all out. Do you have the resources?

If you’ve made it down here, hopefully something in this post resonates with you. I feel so strongly about the ways HR tech companies (mis)position automation that I’ve been doing ongoing research into the HR tech landscape to uncover the technical limitations and opportunities.

And the same premise holds in this ecosystem. Automation works, except when it doesn’t. And when it doesn’t, the question is—who catches the hot potato?