James Haslam, CFO at ELMO Cloud HR & Payroll, discusses resilience, growth and expansion during the COVID-19 pandemic...
Adopting cloud-based software solutions in recent years has become an everyday strategy for companies around the world. The benefits of sourcing external technologies include increased automation, reliability, flexibility, scalability, cost-reduction and efficiency. These benefits dwarf the inefficiencies of manual process or expensive on-premise infrastructure. The case for digital transformation to the cloud as a solution for business challenges is clear.
During the COVID-19 pandemic, businesses at every stage of their digital transformation journey have become increasingly reliant on cloud-based technology solutions to manage operations, remain in close contact with employees, suppliers, and clients, and minimise operating costs. Australia-based ELMO Software is emblematic of a Human Capital Management (HCM) solutions provider that has taken the pandemic’s pressures in its stride, offering seamless service to its clients throughout. An increase in engagement and reliance on the platform through the recent period indicate the tailwinds in the broader adoption of HCM software as businesses seek to accelerate their digital transformation strategies to manage a larger remote workforce. This dynamic is also playing out in the UK market where ELMO is eyeing expansion plans.
James Haslam, Chief Financial Officer (CFO), says the pandemic has been a remarkable indicator of both the benefits and reliability of ELMO’s convergent hire-to-retire suite of people management solutions. “Our convergent solution offers a wide product suite to streamline our clients’ HR and payroll processes, but what really sets it apart is the truly remote nature of the products,” he explains, noting that HCM solutions have now become mission-critical to organisations during lockdown. “COVID-19 is a really good case study in terms of the criticality of having an HCM solution in your toolkit which can be implemented, supported and accessed remotely. If you think about it, things like financials and CRM have had cloud-based solutions for a while.” Cloud-based HCM, meanwhile, is later in the adoption curve, Haslam explains.
“One of our biggest competitors is manual process, and one of the biggest benefits of companies shifting to the cloud comes down to what’s been happening this year,” adds Haslam. “You’ve got companies that are now working remotely on a mass scale; 500+ people working remotely is a huge challenge for the management of performance cycles, payroll, recruitment, onboarding and training of people.”
This reality has been made plain by trends in customer behaviour during the lockdown, with platform engagement rising considerably. “We’ve seen an increase in platform reliance, underscoring the thesis that a cloud-based HCM solution is a critical component for a company’s toolkit.”
Regarding changes in prospective customer purchasing decisions, Haslam and ELMO have noticed some key trends. “In terms of changes in purchasing decisions, we’ve observed a change in the procurement cycle through the pandemic with companies generally working to identify what the pandemic will do to their results, and as a result, we have seen procurement being deferred, creating pent up demand, as company executives look to conserve cash,” he says. “However, pleasingly, we’ve been able to continue to win business throughout, and it’s now a case of monitoring the key indicators for when the procurement cycle will kick back in as businesses return to the office. It’s great to hear that they’re starting to do that.
“We’re expecting that some of the fallout from companies returning to their offices and going through their key learnings will be recognising the criticality of having a cloud-based HCM system in place to support them in case of future mass remote working. The management of people is simpler if companies have an increased level of digital adoption.”
How does ELMO continue to provide a seamless service to their clients? Haslam explains “a key to operating in the cloud-based environment is the relationship that we have with key partners. One of the most significant is Amazon Web Services (AWS). AWS provides the platform to host our customers’ data which can be accessed by our customers anytime and anywhere. The reliability of AWS’ platform is a key component not only to ELMO’s success but to our customers as well”.
Not only has ELMO been able to continue securing new business and supporting its broad customer base, but it also launched a new module during the COVID-19 Pandemic – ELMO Connect. It has also continued with its mergers and acquisitions (M&A) strategy to identify potential acquisition targets in both the Australia/New Zealand (ANZ) and UK market.
“We look at M&A in terms of ‘three pillars’,” says Haslam. “The acquisition of companies with an attractive customer base, which enables cross-sell of additional modules, complementary technology and more recently the geographic expansion to the UK.”
The customer acquisition M&A strategy is focused on leveraging the newly acquired entity’s existing customers to drive market footprint and penetration, as well as increased sales. “The customers we acquire along with the technology are important to us, not only because it widens the product offering but because the acquisitions enable the cross-sell of additional modules into a new sticky customer base,” says Haslam. “By bringing new technologies into the suite, such as remuneration, survey tools and video content, we expand our solution, enhancing the ELMO value proposition providing additional opportunities to cross-sell into a growing customer base. That’s evidenced when you look at our results.
“In our FY20 results, we released a statistic that, of our incremental increase in organic annual recurring revenue, 39% came from existing companies and the remaining 61% came from new customers. That means customers are adding more modules to their solution.” This two-pronged revenue growth from existing customers is also predicated on ELMO’s commitment to continued investment in research and development (R&D). Haslam explains, “We believe the ability to cross-sell additional modules to customers is related to the investment in the platform and individual modules. This investment yields a better customer and user experience which helps support their decision making in expanding their usage into additional HCM areas.”
The company’s eye for growth has recently expanded to international markets, with ELMO targeting entry to the UK market. “We’ve recently raised an additional AU$
73m on the Australian Securities Exchange (ASX) to complement the fundraising we undertook in September 2019, and this recent raise was to secure capital to expand our offering into the UK market,” explains Haslam. “A core component of that expansion is the M&A strategy. We see making an acquisition in the market as a route that de-risks market entry when compared to simply taking office space, hiring a team, and trying to sell a product that’s not yet well-known in the market. Acquiring a company with a customer base and brand within that market enables us to adopt a land and expand strategy through leveraging an established footprint and to cross-sell our existing suite of modules.”
Haslam adds that the UK market represents an interesting business opportunity for ELMO as it has similar dynamics to the ANZ region and the company’s success within it. The UK’s cloud-based HR and payroll service providers are similarly still predominantly manual and fragmented, meaning there is considerable opportunity for ELMO, with its hire to retire convergent solution to step in and provide the full spectrum of HCM products from a single provider. The simplicity of its service offering is bolstered further by the time-to-market the firm is demonstrably capable of delivering.
In addition to the M&A strategy, ELMO has been active in developing the organic side of the business, with the majority of the 25% FY20 revenue growth being generated organically. “We’ve actually launched a module during the pandemic: ELMO Connect,” says Haslam. “In the mid-market space, connectivity is critical. We accelerated the development and release of the module, to bring it to market quickly in response to customer feedback. ELMO Connect allows customers to easily communicate and collaborate remotely with employees and leverages the ability to launch Zoom meetings from within the platform. We’ve offered ELMO Connect to customers free for six months because we could see it’s something they needed during this difficult period of mass remote working.”
None of this would be possible without ELMO’s dedicated staff known as ‘ELMOnians’, the beating heart of an ambitious company that has leveraged its digital maturity, market expertise and agility to turn the COVID-19 crisis into opportunity. Haslam highlights the growth mindset, centricity of performance, collaborative ethos and a commitment to feedback at all levels as the key drivers of the company’s winning culture, and in such trying times their customers have benefitted from services whose necessity has never been clearer.