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Chilean human resources software provider PayRoll is growing and expanding its business regionally, using a particular business model that covers not only payroll payment but services related to the recruitment process, offering a 360º HR solution to clients.
Through acquisitions - including a software developing company in Argentina and a recruitment agency in Chile - the company has managed to extend its business.
To find out more about PayRoll's expansion plans and business model, BNamericas spoke to company president Héctor Gómez.
BNamericas: PayRoll is mainly a human resources company. But what's your service differentiator?
Gómez: We offer a service to people and to companies - that's our focus and differentiator. We have both sides - one where we provide a full service for the entire company related to human resources, before they hire the person, when they incorporate the worker and even after they finish. We offer support for the entire cycle, where there are a number of services that can be offered, which ties in directly into the acquisitions we've made. We acquire companies for recruiting, because this process is not only local, but also regional.
BNamericas: So it's not just about software to make salary payments as your name might suggest?
Gómez: No, we don't just provide a payroll software solution. We also offer processes related to human resources. There are companies that provide these [HR] services, and that's where we focus our acquisitions.
For example, we acquired Mando Medio, a Chilean recruitment agency. This is part of the business model because, for example, I can offer recruitment services in Argentina, payroll services in Chile and so on.
This is a complex process, because you always have the option of either opening an office or acquiring a company, and each of these processes is unique. For example, the way agencies recruit in Argentina is very different from how we do it in Chile, or Peru, or Brazil.
Our idea is to offer the same service to all our clients, when possible.
BNamericas: Are your clients mainly big enterprises?
Gómez: Yes, but also SMEs, which is what we're focusing on at the moment. They require more support in payroll services, so we acquired software to administrate salary payments for this group. What we discovered was that with big enterprises, many of the services we cover include employee benefit plans, where people have things like collective health insurance and many other benefits. But you don't see these benefits in SMEs. They normally don't have collective health or life insurance for workers, or the capacity to bring a bank to negotiate loans with their employees.
BNamericas: How many of your clients are SMEs?
Gómez: In Chile we provide services for more than 2,000 SMEs, because we currently provide this service only to Chilean companies.
We're planning to explore more of this business and to look at the possibilities, and become a big hub for the human resources cycle.
The idea is that by having these small enterprises, we can negotiate collectively with the services sector, from health discounts to entertainment. That's how we got into a new area for Payroll, called Payroll Benefit.
BNamericas: Which benefits?
Gómez: We managed to get discounts from eye doctors, pharmacies, etc. In big companies, HR obtains these benefits for the workers. But they don't exist in SMEs, so PayRoll does it - we can provide for everyone.
BNamericas: But wouldn't it look like you are competing with HR?
Gómez: No, because this is still a contract with the company, but it gives people the chance to carry on with their plan if they move to another company, regardless of whether the new place uses Payroll systems to pay salaries. This is a new concept that we're working on.
BNamericas: PayRoll started in Chile, and then moved Argentina and Peru. Is the company expanding in the region?
Gómez: Yes, and the new place for us is Panama, where we're planning to open an office. We're negotiating with one of the main groups of insurance brokers and human resources from Panama. We want to get to Panama so we can target Central America.
BNamericas: Does it include the Caribbean?
Gómez: We don't know yet, but initially we're targeting more than 40mn people who could be a potential market.
Gómez: This year. We're in the first stage of testing connectivity because all our services will be provided from the cloud. We have to be able to implement a subsystem that allows us to pay from anywhere. This solution is the cloud, but the intelligence is provided by each country.
To be able to achieve this, we need to know what the legislation is for each country, the financial regulations of each one, and all of this must be united in a payment motor that can be available regionally.
BNamericas: Apart from Panama, is PayRoll eyeing any other countries?
Gómez: Yes, Colombia. Both countries are our objective for this year. But Colombia has been very difficult because it's a bigger country and this business is already well developed there. We're looking for a formula to get into the country. The same with Brazil, which looks [at foreign companies] as if the rest of the world were unable to provide it with a solution. It's a complicated market.
We currently operate in Chile, Argentina and Peru. We also provide for Uruguay, Ecuador, etc. What we do is take our time to make the company known in the market, and then carry out a campaign to communicate our services.
BNamericas: We talked about a regional expansion. What about farther north?
Gómez: Well, we've looked at the US market, but the amount of capital that we need is too high. PayRoll is at a point where we can open our capital, not publicly but for investors, in order to grow. It's something we are considering among the three partners. But to open to new capital requires planning, because expanding also means opening capital, acquiring new companies.
BNamericas: Technology must be key for your business. What's the company's main demand in this field?
Gómez: Development, software development. That's why we have a software development company in Córdoba, Argentina. The company is trying to get the maximum certification in terms of software quality. We have most of the international standards certificates. This factory currently has more than 30 professional engineers working there, located in a tech hub together with other enterprises such as HP and Oracle.
BNamericas: How much did PayRoll invest in this acquisition?
Gómez: I think around US$3mn. We acquired 50% of a software development factory called In Motion Factory, where we use, reuse and store all the information, because we have people from Argentina sending their requirements, as well as from Peru and Chile.
BNamericas: Why Argentina?
Gómez: Córdoba city is a tech hub. Also, in terms of salaries, it's different. An engineer in Chile is more expensive. Córdoba also offers loads of incentives. Argentina has a software law that allows you to deduct part of the investment from your taxes. Also the price per square meter is very convenient. The software factory is key for our development. The companies that we've acquired are all developing their software there, so the speed and need for development is high.
BNamericas: What is PayRoll's main challenge for the future?
Gómez: The focus of our business is salary payment - that's what we do best. Our challenge is to implement all these other services that we have around the region, from the recruitment process to benefits and salary payments.
Nowadays, a company can contract our services but also request, for example, to move managers from one country to another. This request includes things like relocating, finding a school, etc. Although we're not providing this service yet, that's what the market is demanding.
BNamericas: Who are your competitors?
Gómez: You can find companies for all different areas, but in Chile we're the leader.
About Héctor Gómez
Héctor Gómez was a founding partner of Dicom - a Chilean financial information business, later sold to the multinational Equifax - as well as a founding partner of ORDER, a computer engineering company that, during the 1980s, led the health, insurance and banking systems in different countries around Latin America. ORDER was then sold to Latin American IT firm Sonda, of which Gómez was a board member for five years.
Gómez is also a founding partner and chairman of I-Med, a digital biometrics company focused on electronic transactions in Chile's health sector. And he is president and partner of IT development companies In Motion Group and Tech One Group for Chile, Peru and Colombia.
He has a degree in civil engineering from Chile's Universidad Católica.