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SMB HR market heats up with Paycor IPO, Jobvite acquisitions

The HR SMB market is seeing activity, with Paycor planning to file an IPO and Jobvite acquiring two firms that may help it better compete in this market.

Paycor HCM Inc. filed paperwork on Monday for an initial public offering, and Jobvite Inc. acquired two firms, including JazzHR. The moves are unrelated but make clear how important the SMB HR tools market is becoming.

The Paycor IPO makes a case that the SMB HR market opportunity is expanding, as small businesses seek to modernize patchworked HR systems. Jobvite's acquisition of JazzHR and its applicant tracking software will expand the vendor's ability to serve SMB customers, according to an analyst.

Paycor, founded in 1990 and based in Cincinnati, makes a full-featured payroll and HR SaaS system aimed at firms with 10 to 1,000 employees. Last year, this market segment accounted for 81% of its recurring billing, according to Paycor's IPO filing with the U.S. Securities and Exchange Commission.

The vendor has nearly 2,000 employees and serves about 28,200 companies with more than 1.9 million customer employees. Paycor's annual revenue is approximately $338 million, according to documents filed by the company. The vendor said its competitors include Automatic Data Processing, Paychex, NetSuite and Microsoft, among others.

According to the Paycor IPO filing, SMB companies are becoming more sophisticated and want integrated HR tools and better analytics, as the "vast majority of SMBs" rely on legacy products that are difficult to integrate with third-party tools, aren't unified and don't have robust analytics, among other problems.

An IPO will potentially provide Paycor with more investment funds to enable them to grow the SMB market. The number of shares and the price range have not yet been determined, the firm said in its announcement.

Jobvite changes CEO

With its acquisition of JazzHR and NXTThing RPO, Indianapolis-based Jobvite also sees promise in the SMB HR market.

Jobvite makes an applicant tracking and recruiting system for midsize and enterprise firms. Pittsburgh-based JazzHR, founded in 2009, provides complementary software but focuses on the SMB market.

NXTThing RPO is a 25-year-old recruitment process outsourcing company in Jacksonville, Fla.

Jobvite's approach is saying that talent acquisition is available for everyone regardless of company size.
Madeline LauranoAptitude Research

While Jobvite's customers range up through the enterprise, JazzHR "extends its talent acquisition moving down market," said Madeline Laurano, founder and chief research officer at Aptitude Research.

"Jobvite's approach, with these acquisitions, is saying that talent acquisition is available for everyone regardless of company size," Laurano said.

JazzHR CEO Pete Lamson is now CEO of the combined firm. Jobvite's previous CEO, Aman Brar, will join the board of directors.

JazzHR and NXTThing RPO will continue to operate under their respective brands. The combined employee headcount is about 500, a spokeswoman said.

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