Competitive Analysis September 2008 - Sage

1 Ultimate Software Competitive Analysis September 2008 Prepared for2 Ultimate Software Competitive Analysis ContentsUltimate Software ..4 Company Overview .. 4 Sales Channel Mix .. 4 Section A: Licensed Software Offering .. 5 ultipro Pricing Structure .. 5 Software Core Product Implementation Fees .. 6 Pricing for What is Not Included in the Implementation 7 Services Included in Implementation Fees 7 Configuration Activities 7 History Data Loading by Ultimate 7 Pricing Structure for Software Support .. 8 Discounting ..8 Managed Hosting Option .. 8 Software Positioning ..9 Relative Competitive Strengths ..9 Perceived Key Competition .. 10 Section B: Subscription SaaS Offering.

2 11 Overall SaaS Pricing Model/Structure .. 11 HR and Payroll 12 Minimum Contract Terms 12 Software Implementation Fees .. 12 Install, Set-up, Configuration, and Customization Process 15 Implementation Pricing SaaS Products 17 What is Included/Not Included 17 Pricing for Items Not Included 17 Services Included in Implementation Fees 18 Configuration Activities 18 History Data Loading by Ultimate 19 Customer Support for Workplace / Intersourcing Product.

3 19 Charging for the Addition of Employees 19 Frequency of Billing 19 Minimum Customer Size and/or Monthly Revenue 19 Discounting .. 20 Ultimate Software Competitive Analysis 33 Typical SaaS Contract Terms .. 20 Termination Penalty 20 Access to Data Once SaaS Term Ends 20 Positioning of SaaS Software Products .. 20 Perceived Relative Competitive Strengths .. 21 Section C: Other Product/Service/Price Information .. 22 Mix of Customers .. 22 Customers using Licensed Software 22 Customers Using SaaS Software 22 Customers of Each Type and Size Being Sold To 22 Payroll Tax Management Service.

4 23 Ultimate Software responsibilities 23 Customer s responsibilities 24 Benefits Carrier Connection Service .. 24 Types of Software Support Services .. 25 Maintenance Support 25 Technical Support Representatives 25 Authorization for Calling In 25 Training Services .. 26 Section D: Company Information .. 27 Markets Targeted .. 27 Number of Customers .. 274 Ultimate Software Competitive Analysis Ultimate SoftwareCompany OverviewUltimate Software has been in business since 1990 and has been publicly traded for 10 years (NASDAQ.)

5 ULTI) The company realized revenue of $151 million in 2007 and has approximately 850 employees Ultimate provides strategic HR, payroll, and talent management solutions for organizations of all sizes The company serves approximately 1,600 customers representing more than 3 million employees The company feels it offers both the best software and support Among their proposed product differentiators is the fact that Ultimate has joined all the product functions onto a single database, while competing products typically have a database for each separate function, such as payroll, HR, recruiting, performance management, succession planning, onboarding, salary planning, and time and attendance Ultimate feels it is very different from other organizations The President and CEO came from ADP in 1990 and designed the application to address ADP s shortcomings Ultimate voluntarily compares itself to ADP in pre-sales discussions The company continues to invest heavily in research & development and customer service This Analysis will focus on Ultimate s ultipro solution, which is offered as both a software license and an SaaS model, which the company refers to as Intersourcing Details of both these offerings are contained in this Analysis Sales Channel MixUltimate Software markets and sells its products and services primarily through its direct sales force Currently, only Epicor is a reseller for software licensing Ultimate also has a few existing OEM customers but no longer takes on new ones The CEO feels that using OEMs is supporting potential competitors In addition, Ultimate uses PEOs (Professional Employer Organizations)

6 For outsourcing workers compensation insurance and other items for its Intersourcing customers Ultimate Software Competitive Analysis 5 Section A: Licensed Software OfferingUltiPro Pricing StructureThe core software licensed product includes the following functionality:Payroll Administration Human Resources Benefits Administration Recruiting & Staffing Training Programs Standard Reports Library eAdministration eSystem Administration COBRA Compliance FMLA Tracking Performance Tracking Health & Wellness Tracking OSHA/Worker s Compensation Enterprise Integration Tools eTime Entry eStandard Reports eEmployee Self-Service eManagement eBenefits Enrollment eTraining Schedules & Enrollment Compensation Management Training Management Rapid Pay Cognos Catalogue ultipro is offered as a licensed purchase for larger organizations (typically >1,000ee) Software license pricing for the core product is approximately $70,000 at the 500ee level, and $110,000 at the 1,000ee level *Pricing includes five ultipro concurrent users and five Congnos Impromptu named , Budgeting, Recruiting, time and attendance , and Onboarding are add-on modules Of those, only time and attendance is licensed.

7 Onboarding, Performance, and Recruiting must be purchased as a hosted solution Software license pricing for the time and attendance module is approximately $55,000 at 500ee and $85,000 at the 1,000ee level Software license pricing for the Hosted Add-on modules are approximately $5ee as a one time set-up fee and $1ee monthly fee for recruiting, performance and on-boarding As clarification, Ultimate offers two different recruiting tools: Recruiting & Staffing, contained in the core solution; and a Recruiting add-on module The big difference is functionality The recruiting and performance section in the core product is just for tracking purposes For example, there is no applicant interface Applicants can be tracked, but they have to be keyed into ultipro core The same is true with Performance Management The core solution is only able to track when a performance was given and when the next one is due 6 Ultimate Software Competitive Analysis However, with the add-on modules, a full package is delivered including full applicant tracking, and an on-line application Key features of the Performance Management add-on module, include 360-degree peer review and on-line performance appraisals With a software license sale, the contract terms typically include a license agreement for the product, an annual maintenance agreement, per-day training rates.

8 And hourly charges for implementation Typical payment terms include a deposit at the time the contract is signed and additional payments on specific payment dates designated in the contract Payment for implementation and training services under the contract is typically made as such services are provided Ultimate offers a time and attendance add-on module through a strategic partnership with Infor Corporation (formerly Workbrain Corporation) Ultimate has the right to market and distribute Infor s time and attendance product as part of the ultipro solution Ultimate Software has rebranded Infor Express as ultipro time and attendance Software license pricing for the time and attendance module is approximately $55,000 at 500ee and $85,000 at the 1,000ee level time clocks are available for $680 to $2,600, per clock, depending on type Other talent management modules such as Recruitment, Performance Management, and On-boarding are offered as add-ons, but are only offered as a hosted solution These are each priced at $1 PEPM (per employee per month)

9 , plus a one time set up fee of $5 per employee, per module Software license pricing for the core product is approximately $70,000 at the 500ee level and $110,000 at the 1,000ee level Software Core Product Implementation FeesImplementation costs are based on company profile Ultimate claims it needs to have a potential customer complete a survey in order to provide accurate implementation pricing However, the company provided general estimates of implementation pricing The implementation might be as little as $30,000 or as much as $100,000 The variables would be the number of employees and the amount of history In terms of what exactly is included, Ultimate allows customers to decide what tasks they need help with and what tasks they can do themselves or do not need Ultimate then works up a price based on the exact needs of each customer There is no standard set of included (or not included) items as everything is specific for each customer Ultimate prefers not to use the Big Bang method of implementation (i e everything implemented at once) Ultimate puts together a Project Plan based on what it feels will be needed for implementations, but if along the way modifications are needed (e g the client doing the conversion by itself)

10 , Ultimate is open to that The company prefers to use a phased approach that usually takes three or four months Implementation begins with a kickoff meeting Customers fill out the client Analysis tool and Ultimate then spends several days digesting the information Ultimate says it employs best practices and expertise derived from former payroll managers and consultants Configuring the product properly from the ground up ensures that it works well out of the gate Because of this, Ultimate claims that its customers are usually willing to serve as a reference on the first day they run a payroll The product is configurable to meet customer requirements while remaining in compliance A standard implementation includes connecting the customer to its insurance and benefits carriers through Ultimate s Benefits Carrier Connection Service Ultimate Software Competitive Analysis 7 Ultimate assumes there will be three to five benefit carriers it will need to connect to More than likely, Ultimate will already have connected to those carriers in the past and will simply have to modify the fields The 401(k)