Paychex’s market changing acquisition of Flock

A couple of years ago, at The Hartford’s Benefit Technology conference in California, I was seated next to Raj Singh, the CEO of Flock. I had not met Raj before, but had heard great things about his company via multiple carriers prior to the event.

Raj didn’t come from the group insurance world; during the conference, he displayed an insatiable, genuine curiosity about distribution, scaling, market API adoption, brokers and marketing. Raj’s perspective was not formed by a history of employee benefits, payroll and/or brokerage experience. His questions were akin to a company like an Apple or SFDC entering Benefit Administration. “How can the industry move faster? How can we adopt universal file standards? How can we get APIs to be more prevalent?”

Fast forward a couple of years, I stayed in touch with Raj, and worked with him on a couple of projects. Reading yesterday’s press release that Paychex had acquired Flock made me happy for Raj, Paychex, brokers, carriers and employers.

In transitioning back to consulting, and working with my old friends Lynne, Meg and Thomas at Informed, I have recently been on calls with carriers, investors, benefit technology companies, brokers, HCMs and payroll companies. A common theme in these conversations has centered around the small and mid market. Brokers want more customers in this space. Carriers want to introduce new products to this market, but as a number of small employers remain on paper enrollment forms and/or work with benefit tech companies challenged by the lack of universal data transmission limitations, this impacts a carrier’s SMB operational cost. Benefit administration companies want to figure out how to scale downward to successfully manage the volume, and payroll companies have to offer a more robust benefits module to stay ahead of the massive growth in new digital health products.

So Paychex’s acquisition of Flock will ultimately solve a number of these issues. Brokers will be able to place more products via their Paychex customers, as Flock’s platform is lightweight, modern and nimble. Carriers partnering with Paychex and Flock will be able to distribute both core ancillary products and supplemental health, as Flock’s preference is to utilize APIs vs flat files. Employers, having to offer a wide variety of benefits to recruit and retain a 5 generational workforce, will leverage Flock’s highly configurable platform to drive greater employee engagement.

Lastly, whether it’s a carrier purchasing a digital health company, or an HCM/payroll company acquiring a smaller software company, the primary challenge in this scenario is “how do you keep the ‘essence’ of a company like Flock without losing what makes it unique in transitioning to a larger company like Paychex”? While there are examples of a corporation's achieving this balance of maintaining the ethos of a smaller company within their larger organization (e.g. SAP’s acquisition of SuccessFactors years ago), unfortunately there are numerous examples of a carrier or payroll company turning a unique, small company into….well….a carrier or payroll company. I’m hoping Paychex embraces Raj’s perspective and it drives a much greater benefits experience for their employer customers, brokers, and carriers.