Observations on PEOs: customers, partners, vendors, or competitors?

A book came out a while back called “Co-opetition”, the principle point of the book being the application of game theory among competitors to increase their overall market and therefore increase their own revenues (does the term “cartel” come to mind?)  Anyone who read the book – particularly those in sales roles – had to cast aside some traditional thought to embrace the idea of working with their competitors (collude?).  This certainly could make for some strange bedfellows.  Being in the HR market, and HR technology being as “best of breed” as it is, we have the occasion to find ourselves working with many strange bedfellows.

It’s one thing to have another company as a strange bedfellow, but there’s a class of services and technology providers in the HR market that can be bedfellows to us (strange or not) in every way imaginable.  A PEO, or Professional Employer Organization, formerly known as employee leasing, can be our customers, our partner, our competitor, or our vendor, or practically any combination of the four.  A PEO may turn to us to utilize our technology to improve their internal efficiencies to better serve their customers; that PEO would be a customer of ours.  Another PEO may offer our technology to their customers as a differentiating option; that PEO would be a partner.  I’m personally exploring PEO relationships for Emerald Software, and when we select one, they’ll be a vendor to us.  And of course PEOs that engage with our competition or try to write their own technology that is in direct competition to us become our competitors.

I find PEOs to be fascinating companies.  Personally I believe the PEO model is ripe for expansion.  I don’t think any American small business owner with between 5 and 100 employees in their right mind should attempt to assume the mountain of employment related regulatory risk on their own.  It’s bad enough now, but if government regulatory trends continue, you can plan on it getting worse; even more value, then, will be derived from the PEO model.

I’ve sold software and related services for most of my career, and I sympathize with PEO sales people.  It’s got to be a tough job, convincing entrepreneurs that they’d be better off outsourcing their entire HR function, and in fact hiring away all of their employess (themselves included) and “leasing” them back to the entrepreneur (hence the term “co-employment”).  Entrepreneurs (myself included) tend to think we can do it all–so why outsource?–and I suspect also that entrepreneurs tend to feel less successful if they have to turn to a partner like a PEO to handle all the HR compliance stuff.  That makes for a tough sell.  Personally I’d rather sell life insurance than PEO services; I’ll bet it’s easier.

So if you’re a PEO or a sales person for a PEO, and you’re looking for a differentiator to make you more competitive, or you’re looking for technology to improve your operational efficiencies, then give us a shout – we’d like to have you as a partner or customer, respectively.  If you’ve already embraced an onboarding strategy, a requisitioning strategy, or a personnel change management strategy, then perhaps we should read “Co-opetition” and figure out how to increase our market as competitors.

If you’re wanting to sell me PEO services, well, uh, I’ve already made my short list.  But I might be in the market for some life insurance 🙂

Update: Chuck sold Emerald Software Group in 2011. You can learn about his new company by clicking here.