IBM, ADP Launch Cloud Tax Service For SMBs

IBM unveiled a new phase of its cloud initiative Wednesday as it announced that its Cast Iron connectivity would enable Automatic Data Processing, a leading processor of company payrolls and benefits, to offer software-as-a-service (SaaS) for tax filings.

IBM acquired Cast Iron Systems in May and its software is allowing ADP to automate an existing on-premises software system aimed at large enterprise tax filers into a self-service online offering for the small and medium-sized business tax filers. ADP officials said they couldn't reach such customers before.

Lori Schreiber, general manager of the ADP tax and financial services unit, said IBM's Cast Iron connection-building software "will help ensure our clients can take advantage of ADP TAXServices," the name of the new service offering. ADP TAXServices simplifies the process of connecting to payroll, accounting, human resources, and other enterprise resource planning (ERP) systems through a drag-and-drop connection building method. As different ERP systems are tied into the online tax filing system, more information becomes available to help further automate filings.

Prior to the new service, ADP deployment of its tax filing software more typically required consultants to visit a customer site, assess existing systems and build connections to an on-premises ADP tax system, Schreiber explained. That approach was not feasible for small and medium businesses with fewer than a thousand employees.

IBM has fashioned data conduits from the on-premises ERP applications to the ADP online tax filing system. Cast Iron provided a set of routines and templates to build such connections to specific systems. The Mountain View firm was staffed with executives from leading applications and application connections firms, such as Informatica, Oracle, PeopleSoft, Siebel, Vitria, and WebMethods.

Cast Iron was initially financed by Sequoia Capital, Norwest Venture Partners, and Tenava Capital. No purchase price was named in IBM's acquisition, but IBM said it would expand its ability to automate business process and application integration, a segment of its business that grew 20% in the first quarter of 2010.

The partnership between IBM and ADP also tips IBM's hand on how it will gain revenue from the growing adoption of cloud computing. As a company with few business applications, it won't necessarily try to establish many forms of SaaS itself. But it can enable application vendors to rapidly extend their reach to a wider client base by generating cloud-based versions of their product, with IBM aiding in the customer connectivity.

The ADP tax service includes many specific services such as filing state, federal, and local payroll taxes; depositing regular tax payments; annual filing of federal, state, and local W-2 forms; filing amended returns; resolution of tax agency inquiries; and providing a single data source through which to process employee W-2s, payroll tax returns, and tax deposits.

The expertise of a central, online tax system, such as ADP's, gives customers "grater agility in responding to tax regulatory changes and uncertain market conditions," said Marie Wieck, general manager of IBM application integration middleware, in Thursday's announcement.