Employees as the customer — Rippling

It is no secret that the success of SaaS products is because of employees inside of companies adopting products to aid their roles and accomplish more activities inside the company.

Let’s take a typical day in the life of a Product Manager at a tech company, and see the tools they use.

PMs do have a heavy reliance on the above tools, i.e: they may not be able to do their job best if the tools don’t exist. This is an important reason for the stickiness of SaaS products.

While there are several products for each particular division in a company to complete their tasks — Finance, Sales, Engineering, Product, Design, Marketing, Support, there are divisions that will need to serve every employee, i.e HR. Ever since organizations have been structured; HR has been an integral part of companies, and with the advent of computing and digitization, IT has been an ever-evolving division. And yet, the tools that exist for employees to do any tasks with HR are:

1. The most frustrating to use — Not easy to understand workflows

2. Make it time-consuming for the employee to use — Over-reliance on tools not suited for HR tasks (e.g: JIRA, Email)

HR Tech is archaic. Early movers such as Oracle built products that are used widely by small and large enterprises, the only problem is that “they’re built for the customer and not the consumer”, difficult for the end users — employees to use it. The focus should rather be on building for employees and then moving up, this bottom-up approach helps solve pain points and build a superior product.

The bottom-up approach has worked well since the mid-2010s, Slack being the most popular company spoken about. This approach helped slack understand the user deeply and it is time that HR&IT Tech sees the same in the Employee OS space.

Millennials, Gen-Z, and the future have been digital native adopters of products and services, they’ve grown up using apps that have exceeded expectations and it is natural for them to expect the same at their workplace. Slack does the job in communication, Asana for cross-functional teams, Linear for product and engineering teams, well where are we on HR&IT then? Workday, Justworks and others are too big to focus on this area.

Oracle HCM, Service Now, Workday, ADP, etc are still the incumbent but my belief is that bottom-up products solving the employees’ mundane tasks will win this market in the next decade.

Why am I excited about this? It’s because I’ve experienced the pain of using the tools for this. Spent days just trying to update my address in different places for Payroll, trying to get to my insurance and benefits information. Understand my 401(k) — spent time outside of work with co-workers and friends to build band-aid solutions customized at each company.

There are companies that are solving this and setting up their own niche as the Employee OS for both small and big companies.

One interesting company comes to mind Rippling, I like their execution.

They started with employee onboarding, payroll & benefits. They have deep expertise in this space with their background in Zenefits and can solve the hard technical issues at an enterprise-scale (SSO — Identity, RBAC)

Rippling does a good job from a User Experience point(only seeing from their website) but to be honest, the bar for this in this sector has been low. Workday and Oracle suffered as they grew. It is a massive market ripe for disruption — Oracle HCM revenue is up 27% YoY in 2020, in 2019 they reported ERP [enterprise resource planning] and HCM [human capital management] annualized SaaS revenue at ~$3bn.

Given that employee onboarding and identity are not an easy problem, the average cost per hire is upwards of $5000 USD in tech companies today and on top — each team needs different software, devices, level of access, and control, training. New tools/devices come in at different timelines of the company journey — all this is both a time cost and money cost to companies — employees + managers alike. As it turns out this is a good sweet spot for Rippling — and having identity solved can help in this regard. Companies don’t have to spend more and this sets an employee up for success — and has a direct correlation to performance, commitment, etc.

Suggestion: In order to save companies time and money here, Rippling will have to think about being the Identity Provider and integrate with several applications inside of a company and get employees ready quickly so companies can get them comfortable in the job. This will require massive BD efforts but if they wish to beat Oracle, Workday they are poised in this space to do it. Rippling will eventually be a Bamboo + OneLogIn + Jamf App Store.

Payroll & Insurance looks like a solved problem but there are nuances to it — namely taxes in payroll. With remote work getting more adoption culturally across sectors solving payroll and insurance(benefits) across different states and countries will be a major technical problem to think and solve for.

Suggestion: Apart from providing payroll tools for employees, employers, and running transactions there can be a lot of value derived out of Payroll data. Rippling can build partnerships based on payroll information and cross-sell better financial products for employees: there is a case for embedded lending, salary advances to enable new monetization streams. A caveat would be they did try insurance brokerage previously at Zenefits and did pivot so I would not enter this territory again to experiment with respect to insurance.

What will it take to be the employee OS? Here is my take on some areas it would need to focus on in the near term:

1. Build/buy the best in class application tracking system + CRM tool for recruiting. Though Lever, Greenhouse are decent products there is scope for more tactical features for non-referrers, hiring managers, interviewers, other approvers(HR, legal, etc), this helps complete the end to end HR management system for companies using old ATS software.

2. Build/buy or integrate with a good background checking tool — background checks take often too long and are a very manual process, automation here can be beneficial for companies.

3. Immigration SaaS — This may not seem like a big enough opportunity to go after but the fact that TriNet acquired Teleborder an immigration tech firm helping with everything visas and regulations in the US is a testament to the fact that it is a need for many companies. Tech companies often employ STEM workers who are foreign-born and no tool today is built for these employees for documents(needed every travel outside of the US), case management with visas, or even a CRM tool for managing their relationships with attorneys or authorities, most are built for attorneys and law firms. This can be a valuable USP especially up-market to big tech companies.

4. API by each segment — People move several jobs, and the hardest part of transitions is setting up everything again, which is inevitable but the information not so much. Information about payroll, insurance, benefits, documents, immigration-related can all be wrapped in an API and given to employees, employers, and different users in the employers such as the Legal team, Finance team, etc for different use cases. This can be monetized over and above the current offerings.

5. Build a Partner Program — Why I say this is because, Rippling cannot build/buy every tool in the employee OS stack, for example, Lattice. Lattice may be limited in growth with their current GTM because they only sell performance management software, whereas can be strategic partners with Rippling and gain the distribution.
   Partner Programs build trust and mutual understanding, it helps both parties involved grow as companies, Lattice from their leadership and blog seem to be a great cultural fit for Rippling as well. A partner program is also a deal closer when it comes to more mid and upmarket customers.

With the advent of bottom-up SaaS across different areas, I’d love to see how this company grows. HR Tech is a real pain today and there may be a time when Rippling is one of the most valuable SaaS companies.