Sramana Mitra: Yes, I understand that the business partners play a part there. I guess my question was going deeper into that scenario and asking if Google App engine is playing a role in that integration scenario.
Klaus-Michael Vogelberg: Yes. There are not many alternatives out there at the moment, are there?
SM: That is exactly what I wanted to reinforce. That was my instinct, and I am trying to get your perspective. So, you are saying that Google App Engine is the fabric that is going to tie all these together in the SME marketplaces, and you are trying to provide as much of that work integration framework to your business partners to do that integration within SMEs.
KMV: I would probably qualify it and say it is a very promising candidate technology.
SM: Promising candidate technology. OK, fair enough.
KMV: Yes, but as I have said, it is unfortunately slightly underutilized at the moment and not fully recognized by Google. Of course there are alternatives; arguably, Ruby on Rails is the other very strong technology in that space, along with vendors who make it easy to get it up and running. If you think of Engine Yard, Heroku or LightSwitch, to all these vendors you are basically saying that you are looking at Ruby on Rails just as you looked at MS Access in the past, developing your solution. and we are going to make sure it is simple to deploy.
SM: Right, got it. Now, I wanted to follow up on what you said earlier. You had interesting things going on in the payroll side of your business in different countries. Would you elaborate on that?
KMV: Yes. Payroll is an interesting area because it is so subject to constant legislative change. It is arguably a bit of a farce to even consider licensing payroll on a perpetual basis. That is something we have always recognized, and that is why we have always been so strong on service.
We have seen among the SME community that there are certainly those who are highly regulated. I am thinking of markets like France, Germany, and Spain, where there is much greater interest in moving those services to the cloud than moving the core accounting function. Of course, there are also elements to consider with availability. For instance, if you have a couple of employees, you need to do the payroll. Actually, even if a service wasn’t available, it wouldn’t be the end of the world. But if you can’t deal with your customers, if you can’t sell them, that is very serious. And SMEs in some markets have shown a much greater interest in that. What comes with that is also a way of how you subscribe to these services and the level of collaboration. A subscription model is interesting because you have other ways of just saying, Here is a monthly subscription. So, for instance you have this notion of a paying per pay slip, and that is what we do in one market, quite successfully. That is what we do in the German market. There is no further commitment: You pay per pay slip and the service is dealing with every sort of filing requirement there is. One of the reasons that has become possible is because a lot of the European countries have moved to electronic filing only, so that has been another driver of this.
The collaborative aspect is that payroll has always been a bit of a specialized area. I appreciate that because usually one deals with all that on a daily basis with one’s own business.
SM: I also cover PayCycle, Intuit, and Paychex. I know that sector pretty well.
KMV: Obviously, as a small business there is only so much you know about payroll; at some point you need support. This has been one of the reasons why the very small business segment in any market has been underpenetrated because what they have done they have just given it to their accountant or to their tax advisor. When you deal with payroll in the United States, for example, ADP would come to mind.
SM: The company that has penetrated the very small business segment in the United States is PayCycle, which Intuit bought a couple of years ago.
KMV: I appreciate that, but that is already the sort of new generation. Isn’t it?
SM: Yes, it is. That is complete SaaS cloud solution.
KMV: Exactly, that is exactly what I am referring to. These are the kinds of services I was describing, but before PayCycle, it was certainly an underserved or underpenetrated market from a software perspective. From a shrink-wrap perspective, it didn’t really work at that level, so it was left to companies like ADP.
SM: Yes, that is very true. Well, Klaus, this has been very interesting, and I enjoyed talking wtih you. Thank you for your time.
KMV: Thank you for your time!