ADP 2011 Annual Report Download - page 7

Historically ADP
’ s businesses have not been overly sensitive to price changes, although in the current economic conditions we
have observed, among some clients and groups of clients, an impact on sensitivity to pricing and demand for ADP
’ s services. ADP
enjoys a leadership position in each of its major service offerings and does not believe any major service or business unit in ADP is
subject to unique market risk.
Competition
The industries in which ADP operates are highly competitive. ADP knows of no reliable statistics by which it can determine the
number of its competitors, but it believes that it is one of the largest providers of business outsourcing solutions in the world.
Employer Services and PEO Services compete with other independent business outsourcing companies, companies providing
enterprise resource planning services, software companies and financial institutions. Captive in
- house functions, whereby a
company installs and operates its own business processing systems, are another competitive factor in the industries in which
Employer Services and PEO Services operate. Dealer Services ’ competitors include full service DMS providers such as The Reynolds
& Reynolds Company (Dealer Services
’ largest DMS competitor in the United States and Canada), DealerTrack, Inc., and companies
providing applications and services that compete with Dealer Services
’ non - DMS applications and services.
Competition in ADP
’ s industries is primarily based on service responsiveness, product quality and price. ADP believes that it is
very competitive in each of these areas and that there are no material negative factors impacting ADP
’ s competitive position.
Clients and Client Contracts
ADP provides its services to about 570,000 clients. In fiscal 2011, no single client or group of affiliated clients accounted for
revenues in excess of 2% of annual consolidated revenues.
Our business is typically characterized by long
- term client relationships that result in recurring revenue. ADP is continuously in
the process of performing implementation services for new clients. Depending on the service agreement and/or the size of the client,
the installation or conversion period for new clients could vary from a short period of time (as little as 24 hours) for an SBS client to a
longer period (generally six to twelve months) for a National Account Services or Dealer Services client with multiple deliverables,
and in some cases may exceed two years for a large GlobalView client or other large, complicated implementation. Although we
monitor sales that have not yet been billed or installed, we do not view this metric as material in light of the recurring nature of our
business. This is not a reported number, but it is used by management as a planning tool relating to resources needed to install
services, and a means of assessing our performance against the installation timing expectations of our clients.
ADP
’ s average client retention is estimated at approximately 11 years in Employer Services, approximately 6 years in PEO
Services and 16 or more years in Dealer Services, and has not varied significantly from period to period.
ADP
’ s services are provided under written price quotations or service agreements having varying terms and conditions. No one
price quotation or service agreement is material to ADP.
Systems Development and Programming
During the fiscal years ended June 30, 2011, 2010 and 2009, ADP invested $674 million, $614 million and $588 million, respectively,
from continuing operations, in systems development and programming, migration to new computing technologies and the
development of new products and maintenance of our existing technologies, including purchases of new software and software
licenses.
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