David Steps Up Its Game Against Goliath in Workforce Management
How would you like to compete against Kronos, the fourth largest HCM vendor right behind ADP, according to research firm IDC, and nearly as dominant in its field? Workforce Software (plus others) have successfully been doing it for years, and those two companies' recent back-to-back user conferences in Florida revealed a lot about the challenges each faces.
By Bill Kutik
HCM has lots of category killers: Companies that so dominate their domain that it's sometimes surprising to remember they have competitors. ADP is like that in payroll (though Ceridian and Paychex would certainly contest that example), and Kronos is like that in Workforce Management (WFM).
The ERP vendors still call WFM "Time & Attendance" or "Time & Labor," and with good reason: Their applications are rarely as fully featured as WFM applications.
It all starts with time, which seems a little like 19th-century capitalism, since both companies began by selling clever ways to catch employees leaving work 15 minutes early. Or at least not paying them for that time.
Well, the ugly fact is that in some industries (retail and hospitality spring to mind) your employees may not be your company's most important asset, no matter what your annual report might say. 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 kind of employees are considered exactly what they have been since the 19th century: fungible cost centers to be rigidly controlled, not human assets to be invested in.
We're already reminded from research by Christa Degnan Manning of HfS Research (and available on the LinkedIn group) that fewer companies are investing in training their employees. So why pretend that we've come a long way?
Certainly, Kronos and Workforce Software don't pretend. Their WFM suites include all the levers of command and control. And the control is all about labor costs, not just the comings and goings of employees, as the components of their suites make clear:
* time and attendance (collects and tracks time worked, applies complex work and pay rules and calculates pay)
* absence compliance (manages absence requests from PTO to paternity leave, including regulatory compliance like ADA and FMLA)
* scheduler (creates work schedules based on employees preferred shifts, their availability, skills, union rules and avoiding overtime)
* analytics (decision support)
Kronos and Workforce Software are not alone in offering this software functionality. But they are the two most firmly focused on the largest companies. Workforce's 2,500 clients had an average size last year of 9,950 employees. Kronos has so many clients -- sold through different channels including long-time partner ADP -- that CEO Aron Ain can't be sure of the number: "more than 30,000," he says.
Both have had amazing success this year, the best in their histories given their relative size. Workforce Software says total revenues are up 75 percent year-to-date over the same period last year, and total bookings are up 79 percent.
With revenues almost 20 times larger, Kronos' growth numbers are obviously more modest but still impressive: total revenues up 10 percent and product bookings up almost 20 percent.
Both companies are coming out of their on-premise past and selling new customers cloud solutions and migrating old ones to it. About 85 percent of Workforce Solution's new clients in the first half of this year chose cloud solutions, and Kronos Cloud revenue grew 51 percent. Kronos now has more than 9,000 organizations in the cloud.
Both companies are dipping in the SMB market through acquisitions. Kronos bought a company called SaaS HR and renamed it "Workforce Ready." The combined HR, payroll, absence, and time and attendance solution has about 7,500 customers with fewer than 100 employees. Kronos has added about 400 more since re-launching the product for companies with 1,000 to 2,000 employees.
Workforce Software also bought an SMB vendor, but in Australia, called RosterLive, a small exclusively WFM vendor with 250 clients and apps aimed at companies with 2,500 employees.
In the greatest irony of all, long-time Kronos reseller and WFM competitor ADP has contracted to resell RosterLive in Australia. Now Workforce can really find out what it feels like to be Kronos, which has competed against itself with ADP for 22 years.
Both are expanding around the globe.
So with all these similarities, what's the difference, except scale?
Workforce CEO Kevin Choksi is adamant that his firm's advantage over Kronos is its focus on compliance. While Kronos offers clients information on the more than 300 state overlays to FMLA, for example, Workforce puts it in its product. Just as ADP adds any change from the nearly 800 taxing authorities to its payroll.
"Our goal is to handle every possible labor law," Choksi says.
A panel of marque Kronos customers brought together for its Analyst Day backed up Choksi's contention. In answer to a question I posed, Kronos' clients – including Nike, Marriott and GE – said they got the new "legs and regs" from Kronos but had to put them into the system themselves.
But they added that they preferred it that way! The SMB client did, too.
They all talked about liking to configure new rules themselves, allowing for their own interpretation. I didn't follow up, but it reminded me of how the largest corporations file their income taxes: "Here's what we think the rules mean, IRS. Prove us wrong!"
Whatever. Clearly companies like it both ways.
Both competitors have referral relationships with SuccessFactors, which has declared it will not include benefits or time and attendance functionality in its new HCM suite, including Employee Central, designed for large SAP R/3 customers such as PepsiCo.
Oracle has not yet finished its Fusion Time & Labor module and partners with Workforce, not Kronos, to bring those capabilities to clients. Workday is doing it without either of them through its Time Tracking module (GA since the summer of 2012).
For years, Workforce Software has gingerly stayed out of Kronos' way and generally not competed for clients in the giant's strongest verticals – healthcare and retail (including hospitality) -- but has ventured successfully into manufacturing.
Then last year, it fought hammer and tong to win its first major healthcare client, Adventist Health System, with more than 70,000 employees at 44 hospitals in 12 states, and won. It will require new scheduling software, which Choksi promises in 2014.
Ironically, with all WFM vendors running away from being seen as time clock sellers, Adventist was much taken with Workforce's latest time clock called Open Tablet – built by EmployeeTouch (now owned by Ultimate Software) on Android tablets and shown at 2012's "Awesome New Technologies" at HR Tech. They are being connected to the hospital group's old mainframe system before the new software is implemented.
Kronos, meanwhile, has sold 45,000 of its new tablet time clocks in the last two years.
What can you say? Both companies are doing extremely well. But clearly a more direct and intense battle is underway in yet another software category. And as always, customers will benefit from it.
HR Technology Columnist Bill Kutik is co-chair emeritus of the 17th Annual HR Technology® Conference & Exposition, returning to Las Vegas, Oct. 8-10, 2014. You can comment on this column at the Conference LinkedIn Group, which doesn't require prior or future conference attendance to join. He is also host of The Bill Kutik Radio Show®. He can be reached at email@example.com.