KRONOS AND ULTIMATE SOFTWARE ANNOUNCE MERGE INTO $22B CLOUD HR BEHEMOTH.
What does this mean to their customers, to cloud computing and Human Capital Management, and to their competition? Better asked, how does the merger of two of the biggest providers in human resources software affect the employees served by their technology? In a Digital Age obsessed with and fueled by both Employee Experience and Data for design purposes, how does this merger position Kronos and Ultimate Software to be greater than the sum of the parts?
Time and the market will tell. In the meantime, the most trusted advisors of the industry offer their congratulations and weigh in.
JASON AVERBOOK, CEO & Co-Founder at Leapgen
The merger of Kronos and Ultimate Software creates a juggernaut in the HCM technology market like never seen before. We’re seeing the combination of mission-critical technology foundations: time and labor management and workforce planning along with foundational core people data. When we talk about the future of work, these are the foundational drivers that will help organizations be more efficient in maintaining and developing their workforce, while simultaneously allowing them to plot a future picture of value for the workforce from both an HR and a business point of view. These two companies have become wildly successful in building strong foundations for HR to build upon, and now the whole can be greater than the sum of the parts.
Leapgen blew this horn as we began 2020: the new Decade of Data means we need to stop down, shore up, and invest our efforts in a strong HR foundation. This strategic merger for our industry ties directly into that priority for HR and business leaders around the world. The joining of Kronos and Ultimate Software positions the combined organization for amazing synergies across huge existing customer bases. This union gives the market a new way to look at the future and the digitization of the people function.
This cloud computing juggernaut isn’t only a combination of organizations with great technology. Kronos and Ultimate Software are two of the most admired, employee-centric, experience-focused companies we know. This is continued proof for our own industry that creating a superior employee experience drives long-term, sustainable value in organizations and will be a competitive differentiator in all industries for decades to come.
ABOUT JASON:
Jason Averbook is a leading analyst, thought leader and consultant in the area of human resources, the future of work and the impact technology have on that future. He is the Co-founder and CEO of Leapgen, a digital transformation company helping organizations shape their future workplace by broadening executive mindset to rethink how to better design and deliver employee services that meet the expectations of the workforce and the needs of the business.
Prior to founding Leapgen, Jason served as the CEO of The Marcus Buckingham Company (TMBC). In 2005, he co-founded Knowledge Infusion LLC and served as its CEO until 2012, when the company was sold to Appirio. Earlier in his career, he served as the Chief Business Innovation Officer at Appirio Inc., where he led the HCM business. He has also held senior leadership roles at PeopleSoft and Ceridian Corporation. Jason has more than 20 years of experience in the HR and technology industries and has collaborated with industry-leading companies in transforming their HR organizations into strategic partners.
HARRY WEST, VICE PRESIDENT AND CUSTOMER PARTNER at Leapgen
Kronos and Ultimate Software both share a Private Equity owner group (includes Hellman and Blackstone) that has been very active in HCM space recently, placing bets aggressively in areas which have both software and long-term services offerings for large workforces. (Note: Blackstone also owns Alight, which has been acquisitive recently also- for example buying NorthgateArinso last year).
The common thread is that these are all players with a long history of market success delivering in some of the most complex parts of traditional HR — Payroll and Time Management, particularly in blue collar production environments. These solutions tend to be “sticky” and hard to unwind. Even newer competitors in core HCM (SAP SuccessFactors and Workday) do not attempt to compete with the likes of Kronos in Time Management. SAP specifically partners with them instead.
You can see why collecting businesses that serve large, complex, global workforces and do really complex things for them on long-term contracts is an attractive investment combination.
Ultimate Software has been known as a mid-market player, historically struggling to compete with Workday on larger deals. Recently however, we have seen them very successfully compete for Payroll business against Workday (including in Workday HCM accounts) – showing an impressive ability to take their value proposition upstream in the market.
This newly combined entity has the potential to be viewed as a new 4th dominant player in the HCM software space alongside SAP, Workday and Oracle. It also makes partnership questions a lot more interesting. For example, would SAP reconsider its partnership with Kronos if Kronos is now more aggressively pursuing HR and Payroll business in their install base? The market and time will tell.
ABOUT HARRY:
Harry West has over 20 years’ experience as a Human Capital Management (HCM) professional. Harry ran the HCM Advisory and Change Services practice for Alight, the Workday and HCM Strategy consulting practices at Appirio, and was a Managing Consultant in the HCM Strategy practice at Knowledge Infusion. Harry advises firms around the world on getting the most out of their workforces through better alignment of people, processes and technology. Harry was also a leader in the Product Management organization at SAP AG and SAP Labs for over 15 years, where he led the introduction of new HCM solutions for managing people and talent for users of the SAP Business Suite.
Harry has been a contributor and presenter at numerous industry conferences and webinars on the future of work and global HCM topics, including Workday Rising, SAPPHIRE, Dreamforce, HR-XML Consortium, CoveoImpact, Conference Board, HCI, and other HR and technology-related events. His recent interviews, and presentations have appeared on BloombergNext, Workday.com, Entrepreneur.com, Huffington Post and in international research publications. He lives in the Seattle area with his wife and two sons.
JIM HOLINCHECK, VICE PRESIDENT OF ADVISORY SERVICES at Leapgen
The Kronos-Ultimate Software merger is a very interesting combination. To Jason’s point, they have very complementary cultures. And as Harry said, they served somewhat different markets. Ultimate started in Payroll — literally launched as an alternative to ADP, where founder Scott Scherr came from. Kronos has its roots in Time and Attendance. Both vendors have expanded the scope of their solutions over the years. They do have some common ownership with Hellman and Friedman. One reason Kronos went private was to focus investment in the development of a next-gen SaaS solution to be the successor to their flagship Workforce Central solution. Along the way, they acquired a HR/Payroll/Workforce Management solution (which is now called Workforce Ready) that was targeted at the SMB space. Using those assets, Kronos set out in a secret, skunkworks project to build a new solution eventually called Workforce Dimensions leveraging those assets using the Google Cloud Platform. It would have been extremely difficult to make that investment (and keep it secret for 5 years) if they had not become a privately-held company.
Ultimate faced a similar challenge. They had done a great job over the years building strong functionality and transitioning its products to different technical architectures (they started with a DOS solution, moved to client/server, and eventually web-based, SaaS solution). However, with various acquisitions over the years and a desire to move into new markets (larger companies, international), they realized creating a next generation solution would be challenging as a public company. So, that was one of the reasons they decided to go private. As Hellman and Friedman, got to know Ultimate better, they likely came to the realization that Kronos has already made the investment to build a next generation solution. It would not make sense for Ultimate to spend the time and money to do basically something similar. Kronos Workforce Dimensions does not have all the functionality that is in Ultimate’s Ultipro solution, and likely will not have for many years. So, I expect that the combined entity will continue to support and invest in the existing solutions for some time. However, eventually, as Dimensions gains more parity with Ultipro, that investment will lessen.
There are a few details known today. Kronos has re-affirmed the commitment to support and invest in the existing solutions. Aron Ain, CEO of Kronos, will be the CEO of the combined organization with Adam Rogers, CEO of Ultimate, leaving. There will be a lot for the combined entity to work out. Ultimate Software’s user conference, Connections, happens in about 10 days. Kronos executives will be there and will provide some answers about the future. One question sure to arise is what happens with Ultimate’s workforce management solution? (They have offered a hosted version of Infor’s Workbrain solution for a number of years.) A question SAP/SuccessFactors customers will be asking is what the merger means for their partnership with Kronos going forward. The roadmap for the combined entity and the partnership strategy will be key for customers of both vendors to understand.
ABOUT JIM:
Jim Holincheck has more than 25 years of experience in the HCM technology industry and is the Vice President of Advisory Services at Leapgen. Jim has spent his entire career working with customers to strategize, select, implement, support, and optimize their usage of enterprise applications. As a seasoned industry veteran, Jim brings a wealth of practical insight to the role. Before joining Leapgen, Jim served as the Vice President of Customer Deployment Applications at Workday where he led Workday’s Services Strategy in 2012 and 2015, and then moved into product management to build and lead the Adoption applications team.
Jim launched his career in Chicago at Andersen Consulting (now Accenture) in its Software Intelligence group, where he worked on the full lifecycle of Financial and HCM application projects. After ten years at Andersen Consulting, Jim moved to Giga Information Group (acquired by Forrester),where he was an industry analyst covering ERP applications. In 2000, he joined a startup, IQ4hire, to create a consulting marketplace around ERP and CRM applications. In 2002, Jim joined Gartner as an analyst covering the HCM market, where he also managed the research agenda for Financials, HCM, and Procurement applications.
ABOUT LEAPGEN
Leapgen is a global digital transformation company shaping the future of work. Highly respected as a visionary partner to organizations looking to design and deliver a digital workforce experience that will produce valued outcomes to the business, Leapgen helps enterprise leaders rethink how to better design and deliver workforce services and architect HR technology solutions that meet the expectations of workers and the needs of the business. Contact us to get started.
Need more content like this? Follow Leapgen and sign up so you don’t miss a beat.