Suddenly, Back-Office is Sexy

Back OfficeIn the annals of innovation, inspiration can emerge from frustration.  For David Barrett, it came a few years ago after the “scarring experience” of a clash with vexing, outdated back-office software.

He had just joined Akami after it acquired a startup he had formed with Uber co-founder Travis Kalanick, and Barrett had to use an Oracle system to file his travel expenses for the first time.  He and five co-workers had just returned from a month-long trip to India, and everyone so dreaded filing their expense reports that he bet on an arbitrage:  Barrett bought everyone else’s receipts for 80 cents on the dollar, then sat down to begin entering details from more than a hundred pieces of paper.

Cue obtuse interface, bugs, broken web pages, reloading and starting over, again and again.  “An absolute nightmare,” Barrett says. “I was horrified.” The filing took him over a month, he lost receipts in the interim, and he ended up losing money on the deal. “It was an awful investment for me, but the experience was so scarring. There is no reason this needs to be this bad.”

And a star is born: Expensify.com.  Today it has 8,000 paying corporate accounts and 2.5 million users.  It processes $2 billion a year employee reimbursements.  “Oracle was the inspiration for Expensify,” says Barrett, the CEO.  “Nothing had changed in the industry for, like, 20 years, literally. Since the dawn of the Internet!  That entire space was just as bad as Internet 1.0.”

Expensify is one of half a dozen new players in a back-office revolution that will be one of the big themes at the Montgomery Summit, sponsored by Macquarie Capital and set for March 10-11 in Santa Monica, Calif.

It’s about time. Back-office software, long the neglected backwater of tech, suddenly is sexy.  A new breed of cloud-based upstarts is bringing the back-office into the 21st century, fundamentally altering boring business housekeeping tasks with software that is elegantly designed, consumer-inspired and deceptively easy-to-use.

These back-office boys sound like revolutionaries, outraged by customers’ “underlying pain” and aiming to “free” employers from outdated software, “empower” workers with information and access, and boost small and mid-sized businesses with high-quality, sophisticated tools previously affordable only to Big Business.  “We’ve seen a massive wave in the past few years of ‘Consumerization of the Enterprise,’ and we just happen to be perfectly timed to ride this wave of massive employee empowerment,” Barrett says.  See what I mean?

Expensify does much of what Barrett wanted for himself.  It lets you use your smartphone to click a photo of a receipt and then throw away the slip of paper.  The software does the rest, extracting and entering the dollar sums, comparing them against your corporate credit-card statement and your travel records and hotel reservations, and linking to old back-office software for accounting, sales force, human resources etc.

Hired.com also is presenting at Monty.  It is an online dating site in job search:  Tinder for Techies.  It grew out of horrible experiences its founder, Matthew Mickiewicz, had in hiring engineers via recruiting firms, with their fat fees and deluge of daily pitches.   “Back-office is stuck in the Stone Age, basically,” he says.  “My experience dealing with recruiters was fear-inducing, almost.  It was almost comical.”  At one point in an earlier job, a recruiter sent him an invoice for a $40,000 fee, plus this: “A six-pack of doughnuts as a ‘thank you’ for doing business.” That’s all? “Absolutely ridiculous,” he says. “We can do so much better.”

He turns the recruiting business upside down. Right now, recruiting firms deploy armies of salesmen who peddle programmers to the likes of American Express, Visa, Boeing.  They typically pay $100,000 a year to the software engineer and resell the talent at $145,000, a 45% markup.

“We do the opposite,” Mickiewicz says, and his cut is only 15%.  The worker, not the employer, gets the interview request, matched to his personal skills and carefully culled from some 1,800 companies that use Hired.  Even in the 2008 meltdown, the U.S. had 2.5 million unfilled jobs in science and tech, he says; engineers must be wooed.  On his site, they  can sift through 20 to 40 interview requests in a seven-day period. A hiring manager can easily schedule a week of interviews with, say, eight pre-selected prospects, who get an offer with details on job duties, compensation and company culture even before the interview.

Hired.com’s cut typically is $18,000 to $19,000. When a match is made, instead of doughtnuts, Hired.com sends out a bottle of Dom Perignon to the employer and a bottle of Dom to the new hire—who also gets a $2,000 signing bonus from the site.

“Saying ‘thank you’ for trusting us.  We fundamentally believe that money belongs in the hands of the people who did the work, not in the hands of the middlemen, who are often times charging exorbitant fees for mediocre service,” says Mickiewicz, who is, of course, a middleman. Just a cheaper one, and a more pleasant one.  “In the next few decades it’s all about empowering the workers, not selling to the companies,” he enthuses.

Another presenter at Monty (where I’ll be the MC):  ZenPayroll, which treats the “underlying pain,” as CEO Joshua Reeves calls it, of small companies struggling with 15,000 different tax codes for the states, counties and cities.  Even today 40% of smallbiz owners still do this manually, by phone and spreadsheet, and every year, one-third of the six million U.S. businesses with a payroll get fined by government for doing it incorrectly, Reeves says.

“It doesn’t have to be that way. One of our main goals is we’re gonna fix that, those fines.”

He calls this a revolution for “the rise of the employee, and the rebalancing of power in the back-office.”  ZenPayroll lets workers access to their own data on taxes paid, exemptions, etc., affording them mobility as they cycle through an average of seven companies in their careers. “Payroll is more about people not payments,” says Reeves. “Getting paid is a special moment to be part of, people love to get paid.”

At Bill.com, also at the Montgomery Summit next month, the aim is to disrupt the mundane task of businesses’ paying bills and collecting receivables.  “What PayPal did for P2P, we’re doing for B2B, says CEO Rene LaCerte. He says 65% to 80% of all payments in the U.S. still are paper-based, and it galls him. “This makes no sense, that we still have paper checks all over the place.”

Some 600,000 businesses now use the Bill.com network to make $19 billion a year in payments, and their ranks have been doubling every year.   Now, he says, a customer on QuickBooks “creates an invoice for you on our site, free, it comes straight into your accounting software without your having to enter it, and when you make that payment it goes straight into QuickBooks.” Users like it so much they log in an average of twice a day, and 18% of his customers log in more than a hundred times a month.  It is more flexible and accessible than a bank payment system: At his own company, 45 of the 140 employees have access to the bill-paying system, something a bank wouldn’t support.

Bill.com’s revenue exceeds $10 million a year, almost half of it from accountants that acquire Bill.com services at $40 to $50 a month and resell them to their clients at a markup.  Some 35% of revenue comes from directly from customers, and 20% from banks that resell the service—the institutions that Bill.com is one-upping.

LaCerte visits top-ten banks hoping to partner, showing them he has “X thousand of their customers paying us Y dollars, and they drop their jaws and say, ‘Omigod, that’s fee income we could have had,’” he says.  -v-

A version of this story is at http://www.montgomerysummit.com/suddenly-back-office-sexy/

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