The original outsourcer, Automatic Data Processing (ADP) has still got it. ADP is one of the largest payroll and tax filing processors in the world, serving about 535,000 clients. Employer services (payroll processing, tax and benefits administration services) account for the majority of the company's sales, and its PEO (professional employer organization) services are provided through ADP TotalSource. ADP also provides inventory and other computing and data services to some 25,000 auto, motorcycle, truck, and recreational vehicle dealers. Other offerings include accounting, auto collision estimates for insurers, employment background checks, desktop support, and business development training services.
Over the years, the data processing giant has been fortifying its core employer services and PEO operations while restructuring and working to cut costs in its dealer services division. Across all segments, ADP has been expanding internationally and extending its services through acquisitions. It also continues to boost its Web-based software offerings and small-business services.
Mergers & Acquisitions
In 2011, ADP enhanced its position in cloud computing when it purchased AdvancedMD Software from private equity firm Francisco Partners. AdvancedMD's offerings give 10,000 physicians in 4,100 practices access to cloud-based practice management, electronic health records, and revenue cycle management services.
ADP improved its dealer services in 2010, when it acquired online car marketing agency The Cobalt Group for about $400 million. Buying Cobalt gave ADP a leg-up in the digital marketing arena, as Cobalt provides website hosting, e-commerce applications, Web-based customer relationship management, and consulting. From 2010 to 2011, ADP's dealer services segment experienced a 24% jump in revenue mainly from the effects of this acquisition.
ADP in 2010 expanded its core HR outsourcing business into Canada with the acquisition of Calgary-based DO2 Technologies. DO2 Technologies provides electronic invoicing software that assists users with integrating purchase orders, processing transactions, and approving payments. The acquisition enabled ADP to specifically target CFOs and other financial executives.
Also in 2010 ADP bought Workscape, a provider of software that performs human resources management and benefits administration functions. The deal upped ADP's ability to provide benefits and administration functions, primarily for larger organizations. Workscape caters to 3.5 million users with services deployed in more than 180 countries.
ADP's employer services segment has proven somewhat resilient in economic hard times as clients outsource more human resource functions. Since 2007, the segment has remained extremely stable, representing roughly 70% of the company's overall sales each year. From 2010 to 2011, ADP experienced an 11% growth in overall revenue (from $8.9 billion to almost $9.9 billion) and a 4% increase in net income ($1.21 billion to $1.25 billion).
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