Paychex 2010 Annual Report Download - page 22

The composition of the U.S. market and the client base we serve by number of employees is as follows:
Business size
(Number of employees) Estimated market distribution
(1)
Paychex, Inc. distribution
of client base
1-4 77% 41%
5-19 17% 41%
20-49 4% 12%
50-99 1% 4%
100+ 1% 2%
(1) Based on currently available market data from Dun & Bradstreet.
The market for payroll processing and human resource services is highly competitive and fragmented. We
believe our primary national competitor, ADP»(“Automatic Data Processing, Inc.”), is the largest U.S. third-party
provider of payroll processing and human resource services in terms of revenue. We compete with other national,
regional, local, and online service providers, all of which we believe have significantly smaller client bases than us.
In addition to traditional payroll processing and human resource service providers, we compete with in-house
payroll and human resource systems and departments. Payroll and human resource systems and software are sold by
many vendors. Our Human Resource Services also compete with a variety of providers of human resource services,
such as retirement services companies, insurance companies, and human resources and benefits consulting firms.
Competition in the payroll processing and human resource services industry is primarily based on service
responsiveness, product quality and reputation, breadth of service and product offering, and price. We believe we
are competitive in each of these areas.
Software Maintenance and Development
The ever-changing mandates of federal, state, and local tax and regulatory agencies require us to regularly
update the proprietary software we utilize to provide payroll and human resource services to our clients. We are
continually engaged in developing enhancements to and the maintenance of our various software platforms to meet
the changing requirements of our clients and the marketplace.
In fiscal 2010, we completed implementation of an enhanced platform for our core processing capability,
which allows us to leverage efficiencies in our processes and continue to provide excellent customer service. Over
the next few years, we expect to expand this platform to additional service offerings.
Employees
As of May 31, 2010, we employed approximately 12,200 people. None of our employees were covered by
collective bargaining agreements.
Intellectual Property
We own or license and use a number of trademarks, trade names, copyrights, service marks, trade secrets,
computer programs and software, and other intellectual property rights. Taken as a whole, our intellectual property
rights are material to the conduct of our business. Where it is determined to be appropriate, we take measures to
protect our intellectual property rights, including, but not limited to, confidentiality/non-disclosure agreements or
policies with employees, vendors, and others; license agreements with licensees and licensors of intellectual
property; and registration of certain trademarks. We believe that the “Paychex” name, trademark, and logo are of
material importance to us.
Seasonality
There is no significant seasonality to our business. However, during our third fiscal quarter, which ends in
February, the number of new payroll clients, new retirement services clients, and new Paychex HR Solutions
worksite employees tends to be higher than during the rest of the fiscal year, primarily because a majority of new
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