ADP Begins to Roll Out a Zenefits Competitor

http://blog.zenefits.com/adp-2/

by DavidChouinard • 11 years ago

174 90 11 years ago

blog.zenefits.com

hoopism• 11 years ago

I had never heard of Zenefits but I've read the articles that have come across HN thus far. From the standpoint of a non-customer they come across as more consumed with proving a point than just proving they are better.

I think they ought to adjust their strategy.

infinitone• 11 years ago

And the rabbit hole gets deeper... I'm guessing this Opum product is smoke and mirrors to capitalize on this whole fiasco.

crazypyro• 11 years ago

I think you should give ADP more credit. Even if they don't have the best product, I would assume they would've foreseen competitors in the front-end benefits field and have adjusted their business plans long before this back and forth. Companies that have been in an industry for a long time can often see industry changes coming, even if they don't have the agility to react quickly.

cddotdotslash3• 11 years ago

I admittedly don't know a lot about this situation beyond what I've read in the news the past day or so. However, isn't it the case that Zenefits is simply building an interface on top of ADP's payroll data? And, from what I've read, it seems like they did this without following the proper procedures (did they write some kind of web scraper?). So if that is the case, ADP has every right to block them. If the situation was reversed and a large company was scraping a startup's data to integrate into their own platform, the outrage would be directed quite differently. So Zenefits is plugging into ADP's data, not paying them for access, not following the proper procedures to get access, and selling an interface on top of that data for a 10% fee, and then they complain that ADP blocked them?

EDIT: Also, all of their press releases sound very immature.

ohitsdom2• 11 years ago

Zenefits has their users create an admin ADP user. Then zenefits uses those credentials to pull whatever data they want. They chose this route instead of working with ADP's third party system (without giving any justification as to why). I might sympathize if ADP's API access was severely limited or extremely expensive, but it appears as if Zenefits made no efforts to go this route.

cddotdotslash3• 11 years ago

Exactly. If I found a third-party company that was having users create accounts on my systems for the purposes of pulling data out, I would block it too, probably more quickly than ADP did.

Imagine if a company asked for your Google password instead of using the proper API channels. I don't know many users who would do that.

eropple5• 11 years ago

From having been there, ADP is a tin-plated nightmare to work with for third-party API access. I'd do the exact same thing in Zenefits' shoes; ADP knows that they are eternally your competitors and will screw you at the first opportunity.

Of course, ADP doing that is not doing right by their customers, but who cares, they're just cash cows.

cbzink000• 11 years ago

I'm not speaking for or against Zenefits and their methods, but ADPs API is severely limited and extremely expensive. I worked with their Dealer Services division when I was at a startup in the automotive space and ADP had one of the worst crafted APIs I have ever seen. I made a comment about it on an earlier Zenefits post, but the gist was that the "stable, production API" was a constantly moving target that changed without notice or reason.

I believe we had incurred over $50,000.00 in fees before we ever reached the testing stage or purchased the right to use the API (that license is on a client by client basis, too). That $50M number was fees directly to ADP, and does not include our own payroll and expenses.

We were completely bootstrapped and started with about $70M in the bank, yet we were still able to complete that integration. I can't see how a company with over $500MM in funding[0] couldn't unless they were prohibited by ADP.

https://www.crunchbase.com/organization/zenefits

fweespeech• 11 years ago

As someone who is a customer of ADP [we use them for payroll, etc, etc]

I'd go the Zenefits route too [and we do for our automation in relation to ADP precisely because ADP's API is insufficient]

wvenable3• 11 years ago

It actually works a bit differently; it's not all scraping. People enter data into Zenefits and then it populates that data into ADP.

I don't think the issue is as cut and dried as the typical web scraping situation and I wonder how HN readers feel about this kind of thing. The data belongs to the client. The client chooses to use both services. Should it matter how the client accesses their own information from the service? Are they required to use a web browser? Would you feel the same about them using their own wget script to automate interactions ADP? At what point does it become improper to access a service differently than that service wishes you to access it?

gamblor9562• 11 years ago

Generally, from an ethical perspective, it matters at the point when you choose to build a business on the method of accessing a 3rd party service.

From a legal perspective, the profit-making purpose is irrelevant. Improper access matters when you start using the service.

logn• 11 years ago

Should it matter how the client accesses their own information from the service?

I don't think so either. Would people feel the same if a store banned wheelchairs? You can write a EULA however you want, but I don't think you should be able to enforce arbitrary provisions which harm customers and potentially violate the Americans with Disabilities Act. Probably this has nothing to do in practice with accessibility for disabled people, but it is related to accessibility and user experience for everyone.

(Disclosure: I write web scraping software... nothing related to this. Also I'm speculating about general circumstances, not individual companies, so please no libel lawsuits :)

parkerconrad• 11 years ago

ADP has for years, and still does, allow bookkeepers, accountants, and HR services firms similar to Zenefits to access client accounts via 3rd-party administrative logins that clients themselves set up in their payroll.

The way this works is that you, as an ADP client, call them up and says "hey, I've asked my HR firm, XYZ-HR, to manage my payroll. Can you create an account for them to access my payroll system?" ADP creates this account, and XYZ-HR then handles all the payroll admin work going forward -- adding employee, terming them, inputting hours worked, managing deductions, etc.

This is how this has worked for years, and it's how thousands of companies do this via ADP. Even today, as an ADP RUN client, you can call in and add any third-party person you want as an admin to your payroll system -- as long as it's not Zenefits. ADP has marketing materials that describe this feature, both for companies and HR / bookkeeping / accounting firms. This is how Zenefits was accessing client's payroll, and doing so in order to take on all the administrative work related to payroll that you don't want to handle. We weren't "hacking" anything. We were doing this at our customers' request, with their full knowledge of what we were doing, and ADP set up these accounts with @zenefits.com email addresses, knowing it was Zenefits.

There is nothing improper about how we were doing this.

maratd• 11 years ago

There is nothing improper about how we were doing this.

You were automating it, weren't you?

With bookkeepers, accountants, etc. the login and work done on the system was manual. It was an actual person doing it.

In your case, a computer is doing it instead.

Virtually every site out there, from Facebook to Twitter, prohibits the use of bots and scraping. Not surprising ADP isn't a fan.

What is surprising is that you feel you're entitled to access their system however you want? It's their system. If they want to prohibit bots and allow only people, that's their biz. If you think ADP is full of it, create your own system with a public API and put them out of business.

cddotdotslash3• 11 years ago

you can call in and add any third-party person you want as an admin to your payroll system

So they will create an admin account for a person - a single, human individual.

In addition, Zenefits’ method of extracting data from ADP’s RUN system via “screen-scraping” put excessive demands on ADP’s servers, potentially impacting service delivery to the entire client base.[1]

If you weren't using the API, and instead were having a machine log in to access the data, that is pretty much the definition of scraping. There is a difference between a person using an admin account setup for them to log in and perform a certain set of actions and hundreds of accounts setup for the purposes of continual automated logins.

How many requests did you make? Do you rate-limit your queries to the rate of a human-being (maybe 1 click every couple of seconds)? Do you only login to one or two accounts at a time?

I still don't see a valid reason why any company (big or small) should have to invest resources in supporting a third-party that wants to use its data in an unsupported manner. Of course you can argue that they allowed it in the past, but an entire business shouldn't rely on unsupported access to something without the assumption that it could disappear at any minute.

[1] http://techcrunch.com/2015/06/10/adp-sues-zenefits-for-defam...

healthnetwork• 11 years ago

Parker when are you going to do another ADP post on Zenefits blog that contains more information on the email that was forwarded to you? I think it could be helpful if you included the screen shots and additional materials the ADP sales rep mentioned. If that was not included in the email, than it seems like that rep knew you would get that email, and you were just baited.

acconrad• 11 years ago

This is pretty bad on ADPs part. But after reading the other HN discussion on this topic[1], it seems like this is a company destined for as fast of a fall as it rose. I hate to see big companies muscle out little ones, but I guess if you're going to rustle the feathers of so many, you're bound to make some powerful enemies.

[1] https://news.ycombinator.com/item?id=9692635

olafskyansian• 11 years ago

I highly doubt this is a "new" product. They have offered payroll/HR/benefits for eons. What would be game changing is if it is free...

ohitsdom2• 11 years ago

This is getting ugly. Going against a ruthless goliath should help garner public support, but the way they are doing it is very unattractive to me. And as someone currently evaluating payroll solutions for small businesses, I'll be steering clear of them.

gamblor9562• 11 years ago

Blatant FUD from Zenefits. ADP's new product is an online payroll/HR SaaS that integrates across its entire product line.

Zenefit's product is a glorified remote bookkeeping service in which you enter data into the Zenefits website and they re-enter it manually, and usually incorrectly, into the ADP website and scrape the results, usually incorrectly, so they can post a response several days later to your Zenefits account page.

One is a SaaS (ADP) and the other is a remote data-entry service (Zenefits). Completely different. It's hard to argue that Zenefits should even be considered a tech company, since most of their "integration" functionality is driven by manual human labor and not technology. At best, Zenefits is a data-entry service with a nice, shiny UI.

EDIT: Also...the new product is actually just an offshoot of an existing product that my firm has been using for nearly a year. The new product, Opum, is simply the small-to-medium business version of one of ADP's existing enterprise cloud payroll/benefits products. It even uses the same (new) interface as the enterprise product.

nerdy• 11 years ago

I don't understand the product or companies well, however what you explain is exactly how I felt after reading their post. This kind of thing doesn't even need to be public, let alone posted on the company blog. Calling ADP out about their "corporate value" at the end was unadulterated mud slinging.

It's understandable that they're upset but they should work to keep these problems from spreading outside of their legal team and not get flustered with their competition. From the sound of it they've completely taken their eye off the ball for this distraction and it could easily pave the way for ADP to steamroll them competitively while they sop up their tears.

Dylan168072• 11 years ago

they should work to keep these problems from spreading outside of their legal team

When they've already been cut off, it's a bit too late for that.

I don't mind if part of the company spends a couple days focusing on this. They need to figure out a plan for the customers that got cut off, too.

It doesn't sound to me like they've "completely taken their eye off the ball". What are you basing that on?

jsprogrammer• 11 years ago

What about the email from ADP, directly stating this product is a competitor to Zenefit's offering?

eitally2• 11 years ago

Likely mandated by ADP attorneys under the guise of trademark and/or patent protection.

joshstrange2• 11 years ago

If they are so "completely different" then why would the ADP rep say:

“We are coming out with a product to compete with Zenefits, a full service integrated online payroll and benefits solution.”

I can't seem to argue with Zenefits stance that they are being sued for complaining that their access was cut off in an attempt to kill them off while ADP launches a similar product... On top of that who is ADP to cut off access that their clients are paying for? It doesn't matter if a human logs in or a computer, the cost to ADP is the same. Here they are blocking access for no legitimate reason while launching a competing product. This whole things stinks and I think the smell is coming from ADP....

gknoy• 11 years ago

  >  It doesn't matter if a human logs in or a computer, the cost to ADP is the same

In the response that ADP posted a couple days ago, they said that the traffic from Zenefits was several orders of magnitude higher than what normal customers were using. If that's true, then the cost could well be higher for them.

myth_buster• 11 years ago

A la Meerkat.

On a side note, can we name[0] these strategies just as they do with chess moves so that when someone says "pulled an XXXX", it encapsulates the move and references it. On a long run there could be a website which defines these and references all the previous attempts and responses. I think it would be very useful for founders/team when they are short of time and are brainstorming counter moves. Also perhaps we would internalize these patterns just as a GM does.

[0]: If there is already a resource I would like to know about it.

jasonlotito2• 11 years ago

I can't seem to argue with Zenefits stance that they are being sued for complaining that their access was cut off in an attempt to kill them off while ADP launches a similar product...

That's not their claim. Their claim is that the reason they were cut off was because of this product launch. They haven't presented any proof of this.

Simple fact is, the claim is coming from a company that has already made it clear they are doing things they should not be doing. They have the burden of proof. They have a mountain to climb.

Edit: As mentioned in the GP comment, this claim is also false:

"Within the same hour they filed suit, an ADP sales rep started selling a brand new Zenefits competitive offering — called “Opum” — to our shared clients."

ceejayoz• 11 years ago

In fairness, some sales reps will say anything to make the sale.

untog• 11 years ago

It stinks but this is why you don't form a company based around another company's product. You will either get bought by them or screwed over, and you often won't find out which one it is until it's too late.

It's not a fun bet.

Dylan168072• 11 years ago

It's not FUD to quote the email in context.

thaumaturgy• 11 years ago

Yeah -- I'm having a lot of trouble having much sympathy for Zenefits here, not least because of the really moronic spam I've been getting from them recently. And the ______'s keep sending it via Google, so I can't even reasonably blackhole their mail.

I wish one of the YC tests for "how smart are these founders?" was "do you think spam is a good growth hack?"

MCRed• 11 years ago

A shame you're getting downvoted, as your point is relevant. AirBnB did this in the early days- spamming craigslist users looking for hosts (from female sounding email addresses on gmail-- sounds like the "spam from gmail" tactic is a YC "best practice"????)

To be honest, the obvious first growth hack is spamming... anybody can do it. Finding a way to leverage an existing audience without cheating or engaging in slimy behavior takes real thinking....YC companies doing this at some point starts to reflect on YC (And these are not the only two instances of this, it seems like every YC company does it to some extent.)

ghshephard• 11 years ago

How is what ADP doing (blocking access to their service from Zenefits so they can sell Opum), any different from what twitter does when it blocks services like meerkat from accessing their service when they want to build a business around periscope? I'm not saying that either organization (ADP or Twitter) is acting benevolently (obviously, they are both acting in a competitive manner) - I'm just trying to see if the two are acting in a similar manner.

heynk• 11 years ago

In terms of Twitter blocking Meerkat - it's the same exact situation. What is different, though, is that Twitter didn't then sue Meerkat for defamation, when Meerkat complained after getting blocked.

BinaryIdiot4• 11 years ago

As far as I understand Zenefits is doing both screen scraping and manual entry into the ADP systems and they may have never even talked to ADP. So instead of hitting an API directly where ADP may expect a large amount of requests Zenefits is hitting their normal website requesting hundreds or thousands of users every hour.

I would have blocked them too. It looks far too much like malice from the ADP side of things where it could be bot nets or something else versus a legit company.

noir-york• 11 years ago

I believe that this is called a 'free market'. Also, called 'underestimating your competition'.

This common misconception that big companies are hide-bound dinosaurs is dangerous for any start up to hold. Most large companies are indeed oblivious, but some elephants - if you tweak them hard enough - turn around and stomp you.

Always respect your competition. Some of them may be smarter than you think.

ams61102• 11 years ago

Yep the common idiom is "waking the sleeping giant" as often attributed to Yamamoto after the attack on Pearl Harbor.

beat3• 11 years ago

Something I've noted about the Silicon Valley startup mentality, and I'm seeing in this discussion, is a lack of understanding of just how difficult enterprise projects actually are. The attitude is often that big companies work so hard for so long and spend so much on projects and still have crap, that they must be lazy and stupid. This is not at all the case. The enterprise is full of smart, hardworking, determined people - as good as Silicon Valley - and they still wind up with crap and failure most of the time. That's not a reflection on the enterprise, that's a reflection on the difficulty of the problems the enterprise tackles.

Like I told someone at a Silicon Valley enterprise/health meetup last year... if you saw a startup with $50M annual revenue, you'd think they're huge, right? I've worked on three different projects larger than that, and they're all small potatoes in their enterprises.

catshirt• 11 years ago

i hope ADP finishes this project soon i stop getting solicitations about it from a new recruiter every week

fourstar• 11 years ago

Who gives a fuck? In my opinion they are both competing for the same thing. Why even give either of the companies more publicity than they deserve?

paulhauggis2• 11 years ago

"We call on ADP to stop making life more difficult for small business customers and live up to its corporate value: “integrity is everything.”"

See: Twitter, Facebook, and even Google. All of these companies have destroyed 3rd party companies by basically using them as a test base for new ideas and features and then directly competing (and many times, cutting off the 3rd party completely).

If you are going to base your entire company off of a 3rd party, you better have a plan B if they completely cut you off.

theaccordance2• 11 years ago

This isn't that situation - Zenefits didn't build their entire platform on top of ADP; they simply offered an integration for a portion of their customer base that uses ADP.

paulhauggis2• 11 years ago

It is the situation. They based a portion of their business on someone else's platform and it was pulled out from under them.

If it wasn't such a big deal, it wouldn't be all over the Internet.

wnevets• 11 years ago

zenefits post about ADP is making me dislike them and I've never used their product.

bhouston• 11 years ago

It is likely possible to identify the email address + name that are blacked out email because of its pixel dimension if that is a major concern:

http://snag.gy/DQEAX.jpg

Just figure out the application and OS/browser rendering the email and compare each possible email/name combination with this.

It is like a one-way hash with a fairly small set of possibilities. May be a few hits though, rather than just one.

jtwebman• 11 years ago

I guess it really depends on what ADP's terms of service say. It is their site and service. Clients can choose to stop using them. The Zenefits teams seems very immature, maybe they should pivot and start offering more full services.

phantom_oracle• 11 years ago

Reading this story, the lawsuit story and in trying to keep up with this entire fiasco...

You end up feeling both sorry and a sour taste in your mouth for both companies. They're both obviously very good at "spin" and drumming up PR to win support of their audience.

I previously thought things would get settled amicably, out of court, with Zenefits saying "sorry", ADP saying "its okay" and the 2 companies settling on some decent structure to use ADPs API (or whatever thing they use for 3rd party access).

Now we are dealing with a situation where this is basically corporate-warfare hitting the "lala-land" of Silicon Valley.

Google, Apple, Microsoft and other tech companies generally have this corporate warfare amongst themselves and they also sometimes move in on other industries, catching those players off-guard.

With that in mind, and also the fact that Zenefits can no longer be classified as a startup - with +50 (or is it +100 employees) and a startup valuation of US$+4,5 billion - this is just another case of corporate warfare.

I shall now neither pity or care for either party of this story, because no matter how good the "spin" from each side is, this is just business as usual.

Any wall-street raider using HN may agree.

Edit: I'd also like to see how much longer this "post" stays as link number 1 on this platform, instead of getting "washed away" like yesterdays ADP link. Then we can also know for a fact that YC is actively pushing the agenda with their corporate interest in Zenefits (and proof that not all "good links eventually surface to the top", without someone pulling some admin-user strings at the top)

BinaryIdiot4• 11 years ago

With that in mind, and also the fact that Zenefits can no longer be classified as a startup - with +50 (or is it +100 employees)

Ha, because of all of the manual entry they have to do as of February 2015 Zenefits had over 500 employees. When the CEO went on TWiST just a week or two ago he said they were over 1,000 and hiring 100 new employees a month.

They're burning hard and fast.

pkaye• 11 years ago

Why do they have to do manual entry?

xacaxulu• 11 years ago

I'm gonna bet that ADP wins this one.

univalent• 11 years ago

Zenefits needs much much better Mar-Comm. This is getting embarrassing.

CPLX• 11 years ago

Frankly, the simple fact that there is a headline on the Zenefits site that says "ADP Begins to Roll Out a Zenefits Competitor" shows that they have seriously lost their focus.

BinaryIdiot4• 11 years ago

Yeah if anything they should have "leaked" this story of a news outlet. Putting it on the site is just insanity.

makeitsuckless• 11 years ago

I'm filing Zenefits in under the heading "companies that confuse 'disruptive' with 'douchebag'".

ams61102• 11 years ago

IANAL but I belive the stock advice when you are facing a lawsuit is to shut up about it. "We don't comment on matters under litigation" is the standard line, and for good reason.

tomasien• 11 years ago

I can understand that many people probably don't feel Zenefits is totally in the right in this dispute as a whole, but I struggle to see how you can dispute that ADP is being ridiculously two faced. I'm not sure how thinking ADP is better than Zenefits or that web scraping is bad or whatever people saying about Zenefits is relevant to the fact that ADP filed a lawsuit in federal court saying they're NOT making a Zenefits competitor and then sent out emails to customers saying explicitly that they ARE making a Zenefits competitor. Whatever else you think about this situation, that is obviously pretty screwed up.

beat3• 11 years ago

This strongly suggests that the shutoff AND the defamation lawsuit were part of a planned strategy - that they're deliberately goading Zenefits' notoriously outspoken CEO.

Which does not bode well for their lawsuit, but I don't think they're out to win that anyway.

shaaaaawn• 11 years ago

It's interesting, because if Zenefits had already IPO'd they absolutely would not be able to take this approach. Too much shareholder risk. And this is just as much a David Sacks thing as it is a Parker thing. I have to believe after my 10+ years in Financial Services that David Sacks already disliked ADP from his PayPal days. Zenefits is going to lose this battle, but it's about the war.

jilberish1990• 11 years ago

Couple of points:

1)Zenefits has always known this could happen or at least they should have. You have to play nice with ADP. Because if they don't work with you, you are dead.

2)Zenefits has a super young CEO who doesn't know what he is doing. Where is David Sacks in all of this? Isn't he the adult supervision here? Maybe he hasn't run anything at this scale before? Maybe he and his Yammer gang don't know how benefits and healthcare work?

3)What were the VCs who invested at $4.5B thinking? Any technical due diligence would have brought this up. You had to clear this as a diligence item before you put a dollar into the company.

4)The lawsuit is a shakedown. Its time for ADP to collect its dues. Its nothing more than that. I expect ADP to extract a huge premium and then play nice with Zenefits in an out of court settlement. Everyone will have a face saving PR release after that. But isn't it interesting that this happens after they pick-up their $500M round? I have heard rumors this was going to happen in September last year. ADP waited until now. What a pest.

4)Time for Parker to go and be replaced with someone who has run billion dollar software companies before. And that's not Sacks.

ADP Begins to Roll Out a Zenefits Competitor

Related Stories