This IDC study examines the competitive landscape and provides a five-year forecast for the U.S. market for payroll services. The market for payroll services in the United States grew modestly in 2004 and is dominated by a small number of market leaders that hold a large percentage of market share. Beyond the leaders, the market consists of numerous small players, many of which offer services only in a local area. Further market consolidation took place with the merger of CompuPay and PayMaxx, and this will likely not be the end of this activity as larger players seek to eliminate competition and gain footholds in particular regions or markets.

"The U.S. market for payroll services grew modestly in 2004, after we saw strong growth in 2003. 2003 growth, however, was higher due in large part to the recovery from higher unemployment in 2002. We will continue to see market consolidation as vendors seek to grow market share and enter new markets," said Lisa Rowan, program manager for HR Management and Staffing Services at IDC. "Payroll service providers have an opportunity to grow their businesses through the pursuit of a number of strategies, including simplifying pricing, developing comprehensive ROI models, and broadening their offerings to include options for both less comprehensive and more comprehensive services."