When Partners Break Bad: Lessons from the ADP-Zenefits Fiasco

Think that this can't happen to your company? Think again.


I’ve said it many times: the long term has never been shorter.

You can write a book about that statement and maybe one day I will. For now, suffice it to say that fortunes, plans, and partnerships can change in the blink of an eye.

The recent dustup between unicorn Zenefits and ADP is a fascinating case in point. No doubt that you’ve heard of the latter, a stalwart of American business for more than 60 years. But what about the former?

Not too long after receiving funding valuing the HR software company at an eye-popping $4.5B, Zenefits found itself in a very public kerfuffle with ADP, one of its key partners. It’s no understatement to say that the two are at war. The issues: products, alleged security and privacy violations, and the increasingly critical issue of data ownership.

As expected, lawyers are now involved and the PR battle has begun. Each company has issued public statements on the matter, and plenty of influential folks on social media have chimed in largely against ADP. (This shouldn’t be surprising. Sixty-year-old companies tend not to excel at Twitter and Facebook.) For instance:

Who’s ultimately right here?

Lessons

If pressed, I’d go with Zenefits, not that my opinion holds any water with either party or the courts. In this post, I’m not looking to assess blame or excoriate ADP for its questionable tactics. Rather, I want to look at lessons that other companies can learn from sudden and public partner breakups.

It’s never been easier to copy products.

ADP isn’t oblivious to Zenefits’ success. The former saw that that latter was making inroads. Why forgo that revenue? Why not launch a competing service? Lesson: Change happens faster than ever. 

Increasingly, data access and ownership are at the center of these fights.

As the first tweet above references, key questions today involve data, as in:

  • Who owns this stuff?
  • Is it my data or the provider’s data?
  • Who should be able to access it and how?

Lesson: Make sure that you ask these questions sooner rather than later.

These scrums will wind up on social media.

The question is not whether this will happen; the question is when. Try containing anything these days. Lesson: Good luck with that.

The question is not whether these scrums will wind up on social media. The question is when.

Regardless of who is right, customers will ultimately suffer.

Think about all of the small businesses that have to scramble now to run payroll and send data to insurance carriers. As I wrote in The New Small, smallbiz owners are certainly resourceful and can deal with last-minute fiascos. Still, they would prefer to work on their businesses, not in them. Remember that trusted friends can quickly become enemiesLesson: Be prepared for exactly these types of contingencies.

(For more on this, see When Vendors Attack [Each Other].)

Simon Says: Prepare for the worst.

Hopefully your organization will never come to blows with one of its key partners, providers, and developers. Foolish is the soul, though, who believes that it simply can’t happen.

Feedback

What say you?


This post was brought to you by IBM for MSPs. The opinions expressed here are my own.

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2 hopefully intriguing thoughts:

  1. Doug Laney

    Thanks Phil for sharing this. By way of an epilogue:

    1) you were right, Zenefits won–the court dismissed ADP’s claims that they thought it was a DDOS attack, and that scraping the data would impact service to other customers.

    2) ADP *still* does not have Terms-of-Use language specifying conditions/limitations for 3rd party access to its data. Their lawyers should be sacked. See https://www.adp.com/legal.aspx

    Reply
  2. Phil Simon

    Thanks, Doug.

    Zenefits may have won this battle but, as I’m sure you know, the company faces much bigger challenges. I’ll check out the ADP ToS but it sounds pretty dangerous.

    Reply

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