is the Fifth Largest HCM Vendor?

ADP has long (and justifiably) complained about being the fourth after our Big Three HCM vendors. Are you surprised to learn that Kronos follows them as the fifth? After making its bones building and renting time clocks, that's a difficult transition to make, especially changing public perception. But in more than annual revenue, Kronos has finally done it, and here's how.

By Bill Kutik

I've always thought it appropriate that Kronos has, for the last 16 of its 39 years, been located near the Merrimack River in northeastern Massachusetts, whose falls powered the birthplace of America's industrial revolution.

Now the company is moving to the revolution’s actual birthplace, and that of others, in Lowell, Mass.: specifically, the former Wang Building (birthplace of the corporate word processor) and later the home of Monster, the first successful job board.

I like the connection to mid-19th-century capitalism because Kronos started by renting a better way to catch employees leaving work 15 minutes early and arriving 15 minutes late -- or at least not paying them for the time not worked.

In the late '70s, Kronos (under founder Mark S. Ain, brother of current CEO Aron Ain) invented the first microprocessor-based time clock, which automatically recorded, totaled and reported employee hours.

The ugly fact is that, in some industries (retail and hospitality spring to mind), your hourly employees may not be your company's most important asset, no matter what your annual report has been saying. Certainly, not when they turn over at rates of 100 percent to 150 percent a year -- so quickly that managers can hardly learn their names.

Those kinds of employees have long been considered exactly what they were in the mid-19th century: cost centers to be carefully controlled and their expense minimized. Certainly, not human assets to be invested in.

As that corporate attitude evolved, Kronos changed with it. Starting with a PC-based time and attendance product, it eventually built out what became the industry's first workforce-management software. At first, still largely focused on controlling labor costs, the suite included:

·         Time and attendance (collects and tracks time worked, applies complex work and pay rules and calculates zero to gross pay);


·         Absence compliance (manages absence requests from paid time off to paternity leave, including regulatory compliance such as Americans with Disabilities Act and Family and Medical Leave Act);


·         Scheduling (creates work schedules based on employees preferred shifts, their availability, skills, union rules and avoiding overtime); and


·         Analytics (decision support).

Some years ago, Kronos decided to expand to an HCM suite with payroll and began purchasing working products to fill some of the holes, just as ADP had done many years earlier.

Five years ago, it was a company called SaaSHR. Integrating it with the WFM products, Kronos created Workforce Ready, a more-or-less complete HCM solution for the mid-market. Earlier this year, Kronos announced new modules for recruiting and performance management. Position management is being added by next September.

Kronos reports it as the industry's fastest selling end-to-end solution for HR, getting to $100 million in sales in five years with about 17,000 customers in the cloud.

For prospects with fewer than 100 employees, a network of 200 local payroll-service bureaus resells Workforce Ready under their own names. With fewer than 600 employees, Kronos goes after prospects with 41 inside salespeople.

For companies with up to 2,500 employees, 114 quota-carrying field sales reps are calling on them, and at least 22 (inside and out) will be added next year.

Why does it win in the mid-market? Kronos quotes customers who chose it over ADP, Ultimate, Ceridian, Paychex, and even (at the low end) Workday. They say its unified platform, UI and UX, and overall value sealed their deals.

Kronos likes to point out its structural advantage by citing the Bureau of Labor Statistics that the majority of U.S. employees are hourly. And the four industry verticals already dominated by Kronos -- hospitality, manufacturing, healthcare and retail -- are more than 70 percent hourly!

Earlier, for the larger market, Kronos created a similar product called Workforce Central. Vice President, Product Management Bill Bartow says the company has close to 1,400 Workforce Central customers in the cloud, with 90 percent of new customers buying the cloud version and a new client going live just about every day.

Of course, the product started as on-premise and nearly 12,000 remain there. The cloud customers are all single-hosted.

The HR and payroll functionality are delivered through an old acquisition -- Best! Imperativ -- which now has 700 to 800 customers.

Analytics has become huge for Kronos, once it figured out that customers wanted problems to be solved, rather than simply receiving tools to use on undefined problems. Sales are reportedly up 170 percent from last year.

With its focus on hourly workers, it should be no surprise that Kronos' analytics are intensely practical, including the following problems:


• Who are your high-performing hourly employees?


• How can you be sure your engagement results are not being overstated?


• How is hourly turnover impacted by the length of the employee's commute?


• How can you deliver a fact-based performance review to your hourly workers?


• How can you measure the effectiveness of your frontline managers?


• Do you have the most reliable employees working your busiest shifts?

At Kronos, data science is focused on timecard fraud, schedule quality and overtime abuse. And machine learning is being applied to predict customer volume in stores. Practical stuff.

And it's still renting and selling clocks with 130,000 Kronos InTouch clocks (on an Android tablet) in use around the world.

Kronos turns 40 next year and with more than 30,000 customer (more than half in the cloud) and $1.2 billion in annual revenue produced by 5,000 employees. But as Holger Mueller, vice president and principal analyst of Constellation Research, points out: It is doing two of the hardest things that an enterprise software vendor can do: building the next generation of its flagship product and converting existing customer to a new cloud platform.

Every indication is that Kronos will manage that next evolution just fine.

HR Technology Columnist Bill Kutik is co-chair emeritus of the 20th Annual HR Technology® Conference & Expo, returning to Las Vegas, Oct. 10-13, 2017. Watch SAP SuccessFactors President Mike Ettling on the 23rd episode of his broadcast-quality video series, Firing Line with Bill Kutik®, for his insights on life, work and HCM & Financial Software.


Dec 6, 2016
Copyright 2017© LRP Publications