Over the last year, Zalaris has markedly stepped up its geographic and service expansion journey – first fuelled by the acquisition of Germany-based Sumarum AG and then with the acquisition of U.K.-based ROC Global Solution Consulting.
It’s important to note that Zalaris’ success in the wider Nordic market was also a result of two acquisitions soon after its formation (while its subsequent geographic expansion into Finland, Poland, and the Baltics were all a result of contract expansions with existing clients). These acquisitions provided Zalaris with the foundation and resources it needed to win subsequent business in these countries, including with Teliasonera, SAS and a Swedish multinational networking and telecommunications company and increase its turnover from ~$1.5m in 2001 to ~$21m in 2017, a CAAGR of ~18%.
Here I take a quick look at the geographic and service impacts of the two most recent acquisitions.
The two acquisitions have clearly had a major impact on Zalaris’ European footprint, and Zalaris places an emphasis on establishing a physical presence in each country in which it serves clients. Prior to the acquisitions, Zalaris’ footprint was exclusively concentrated in the Nordics and Baltics, including the following eight countries: Norway, Sweden, Denmark, Finland, Poland, Estonia, Latvia, and Lithuania, with Norway alone accounting for nearly 45% of its revenues. Post-merger, the combined companies will still generate half of its revenues from both Norway and Sweden, but approximately a quarter of its revenues will come from DACH and the U.K.
Both acquisitions add resources across Central and Western Europe, as well as the U.K., to support multinational organizations. ~ 40% of Zalaris’ legacy HR outsourcing clients are served in multiple countries, including Nordea (which is also Zalaris’ largest implementation of SAP SuccessFactors to date), Statoil, and Telenor, and Zalaris is keen to expand its European footprint to enhance its ability to target and serve multi-country European organizations.
Impact on service mix
However, while geographic expansion is important to Zalaris, and these acquisitions have had a major impact in expanding Zalaris’ European footprint, their contribution to enhancing Zalaris’ service mix is equally important. These acquisitions help to facilitate Zalaris’ transformation into a one-stop-HR-shop for large and midmarket European-headquartered organizations by diversifying its service line offerings.
While Zalaris’ legacy business provided HR outsourcing, consulting and cloud services, ~90% of its total revenues were from payroll and transactional HR outsourcing, and the majority of these revenues were generated from a small number of clients. Both the ROC and Sumarum acquisitions support Zalaris’ ambitions to help its clients transform their HR operations by assisting them with SAP SuccessFactors deployment, and cloud conversion by boosting Zalaris’ consulting and advisory capabilities. In particular, the consulting group will be a key catalyst driving increased adoption of Zalaris’ cloud services.
Ultimately, following integration in mid-2018, the combined entities will operate as more of a cohesive and balanced unit, paving the way for Zalaris to be a prominent HR outsourcing and consulting contender in Europe, supporting organizations in a cloud HCM environment leveraging SAP SuccessFactors.
Sumarum & ROC in brief
For the reasons outlined above, both Sumarum and ROC are natural fits with Zalaris, enhancing both its service portfolio and its geographic coverage.
Sumarum, founded in 2001, is a provider of HR consulting and outsourcing services, with revenues of €19.6m (~$24m). Sumarum is a certified SAP partner and is a specialist in implementing and operating SAP HCM systems, with ~60% of its revenues related to consulting services, which extends to both public and private sector entities across Germany, Austria, and Switzerland. Like Zalaris, Sumarum provides cloud-based payroll and HR solutions exclusively on SAP platforms, with the remaining ~40% of its revenues from AMO and HR outsourcing services (serving ~45k employees per month). It has nearly 180 employees throughout five service centers in Germany, and primarily serves organizations with ~3k – 5k employees. The main sectors served include education, government, non-profits, and energy; clients include Germanwings, Goethe Institut, and Nintendo Europe.
ROC, founded in 1998, is a HCM specialist consultancy, with ~100 employees across five locations in the U.K., Germany and Poland, and revenues of NOK 100m (~$12m). Its areas of expertise include time and pay, talent management, shared services, analytics, business transformation, portal solutions, and global support. Key technologies leveraged by ROC include SAP HANA, SAP HCM, and SAP SuccessFactors. ROC is also a SAP silver partner and a verified SuccessFactors partner in the SAP PartnerEdge program. ROC’s clients include Britvic, Hampshire County Council, and Montblanc.
This is a guest post by Amy Gurchensky from global analyst firm NelsonHall and originally published here.