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Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday or catch up on full episodes with transcriptions here.

HR Tech Weekly

Episode: 254
Air Date: February 20, 2020





Important: Our transcripts at HRExaminer are AI-powered (and fairly accurate) but there are still instances where the robots get confused (or extremely confused) and make errors. Please expect some inaccuracies as you read through the text of this conversation and let us know if you find something wrong and we’ll get it fixed right away. Thank you for your understanding.

John Sumser
Stacey Harris


John Sumser 0:14
Good morning and welcome to HR Tech Weekly, One Step Closer with Stacey Harris and John Sumser. This is our special Ultimate marries Kronos edition and we’re coming to you a little later than usual. Hi Stacey.

Stacey Harris 0:28
Hi John, how are you doing? We are coming to you a little later than usual. How are you? I’m doing well. You are right, it is later so it’s dark and kind of cold and North Carolina because we’ve got snow on the ground which is unusual here which caused me to even have some travel challenges getting home today but it’s been a busy day for news. So lots of fun stuff to talk about and your home as well right now.

John Sumser 0:49
Yep, no snow, no snow we don’t do snow here. There’s a mountain you can see from my house that has snow on it every once in a while. You can see snow off in the distance and that’s where I think it should be.

Stacey Harris 1:02
I would have to say today when it took me about an hour to get from the airport to here that that probably would have been a preferable view of the snow versus being on the ground because people don’t know how to drive in Raleigh, North Carolina in the snow. I will say sometimes that’s the way you know, it should be far far off. It can be very pretty, but they get challenging to drive in. But we are here and we’ve got lots to talk about. The big news today, which we were getting ready to do the radio show and about a half an hour before we got the cryptic message that basically said, be on a conference call at noon and we’re going to tell you about all the exciting new changes that are going on. So it was kind of interesting wasn’t it?

John Sumser 1:41
It was, it was good timing. They just they just wanted us to wait, and so the news is that Kronos and Ultimate Software are merging. And it’s a pretty interesting story. It’s on one level, nobody would have guessed otherwise. They’re both owned by the same private equity company, but they are kind of different companies. And so the resulting entity is a $3 billion a year revenue company same size as WorkDay, roughly. And they have enormous growth objectives, the entire story that they’re telling us about how this makes growth possible. And that’s worth that’s worth talking about a little bit, but it is a marriage of an industrial northern entity and a people oriented Southern entity. And well, we’ll see how that goes. So, so, what have you heard and what do you think?

Stacey Harris 2:36
Well, I mean, I think the conversation that I was able to capture from their conference call they delivered for all the analysts and people in the market who were interested in this merger and acquisition was that this is a joint venture where they’re coming together as two equal company so the 12,000 employees is a pretty good mix them from each side of the group was planning to continue to expand that employee base to another 3000 over the next three years will create enterprise value that they’re saying is around 22 billion, right? Neither of them are public at this point. So those are numbers that are sort of from the private side of the numbers perspective. But, I think that the revenue and the numbers even the features and functionalities of the different sets of tools they have are definitely not the big conversation, right? I mean, they they think it makes sense if you look at it all on paper from the perspective of technologies that they both don’t have a huge amount of overlap. There’s definitely some but their customer base did not overlap a considerable amount. They have different perspectives on the types of technologies that they’ve invested in heavily so you know, obviously this payroll and core HRMS side for the mid market and enterprise side is where Ultimate has spent the last couple years investing heavily in Kronos has spent a lot of money investing in their SMB market, their Workforce Ready product for their core HRMS and payroll and workforce management and obviously, the brand new workforce management applications they’ve been rolling out the last several years. So it all fits in nicely from the perspective of where the market probably has a need for them to be working together. The big challenge, I think will be the cultures. And maybe, as you noted, it’s a northern sort of industrial, other internal people first culture mix. But I but I do think that these organizations were very different in just the kind of cultures of the organizations that tended to bind them to, right. I mean, so their internal cultures are different. And the approach they took externally from a cultural perspective to the kind of organizations that they were bringing into their sphere of influence is also very different. So yeah, I think I think it’s going to be interesting. And I think everybody’s talking about whether this makes sense financially, or whether this makes sense from a product perspective or a technical perspective or a talent perspective, but I think the big conversation will be the culture perspective.

John Sumser 4:43
Yeah, you know, it’s interesting question, because if you think about the span of operating, I believe this is the richest if you were to borrow to combine both companies functionality into a single offering and sell it to all their people who would be the richest data set for HR in the industry, if I’m not mistaken, because it has everything from scheduling and payroll and workforce management all the way out to a sophisticated talent management toolset. And so that means that you got the capacity to do predictive analytics throughout the enterprise in a way that I don’t think anybody else could match. What do you think?

Stacey Harris 5:25
I would agree on that, except for a lot of the data that is in the what would be considered Kronos side of the house is still probably sitting inside a very, inside of their on premise environments, right? They have a large install base of on premise workforce management organizations. And so as those things slip to cloud, and they were probably flipping faster than most probably thought they would, then yeah, it will be the most sophisticated is probably a better way to put everything the largest data set by far at least from our perspective would probably still fit with ADP, but as far as sophistication goes, these are going to be some of the most complex organizations who are leveraging the khronos environment, workforce management perspective. And Ultimate’s, probably been, I don’t want to say they are for sure. But they’re definitely one of the longest running cloud core hrms environments with that data set that they’ve got inside of their core hrms and payroll environment as well. So they have definitely a large data set there that would be in play. Yeah.

John Sumser 6:24
So as I was listening to the that’s what I thought a lot about what Day Force force did with Ceridian. And you remember that story, right de force came in, and they did a fantastic job of converting a huge number of existing Ceridian clients of the Day Force platform. But they did that by putting the newer stuff on the top of the pile and then and then focusing on that, and so I wonder if you think that that’s possible here.

Stacey Harris 6:53
Well, this is a little bit of a different story and the fact that you’ve got two organizations who have new platforms Right at some level now, I think if you would listen to sort of the more technical aspect of it, there’s no doubt that the workforce dimensions platform, which is the most recent to have launched in the market is built on some of the most sort of forward thinking technology that’s in the market right now. So the question would be from an HR perspective, though, that is not the base where the base fits right. From an HR perspective, the basis was the ultimate organization and ultimates definitely been investing heavily and updating their platforms, they read platform several times in the environment. So don’t know enough. If there’s a case I would say a current winner in that current conversation like there was with de force, it was a clear conversation and de force to what was the newest technologies that made the most sense to invest in I think, here, this will be a partnering of two different types of system, it might be a little bit more like what we saw with the Oracle HCM and SAP acquisition of Taleo and SuccessFactors where you have some existing technology that’s really good, and you’re bringing in some technology, that’s probably almost as good. And you have to make some decisions about where you make integrations versus where you actually build out on top of it.

John Sumser 8:07
That’s interesting. So dig a little bit more into that you said something about this, this not being the base. So you’re saying that the Kronos new workforce platform is new enough to their mix that that they have a lot of customers that haven’t adopted it. Is that what you mean?

Stacey Harris 8:27
Yeah, it was in the workforce dimensions, which is their workforce management platform, right. Because they’re the HR side of that workforce dimensions platform was Workforce Ready, right. Workforce Ready is still a more modern architecture, but it’s not as new as the workforce dimensions architecture is right. And the expectation was they think they were going to build up more on the workforce dimensions platform, but the workforce dimensions platforms is brand new, and they but it’s still a small amount of organizations that are sitting on that technology yet, right. I mean, as far as workforce management goes I know they are the market leader in workforce management applications, both for large and mid-market workforce management buyers, so from that perspective, they have a very large installed base on the Kronos workforce management application.

The other thing that I’m hearing a lot about, as we’re talking about, this is also when it comes to sort of the cultural conversation, who’s gonna lead that? So even though we’ve talked about sort of where the customers are at where the base is that there’s also a big conversation about which of the cultures will take the lead. But we do know that right now the decision was made that Aron Ain who’s the chief executive officer for Kronos will be leading this entire entity, correct?

John Sumser 09:38
That’s right. He’s an amazing guy. But you know, the, this is one of the things that has my attention, but the Ultimate culture is very family oriented. And very much, you know, the founder was Scott Scherr and the new CEO appointed around the first of the year was Adam Rogers. And Adam is Scott’s Son-in-law, you know, it’s a family business. And it’ll be interesting to see how that translate. I don’t want to sound negative here because as a family business, it has it has done an incredible job of prospering, and the emphasis on being a family has been at the heart of their success, I think.

Stacey Harris 10:13
And with that, ya know, and I think you’re right. I mean, that has been an big part of their success. But it’s also been, I think, the approach that they’ve taken to this focus on their employees as much as their customers to as part of that family conversation. Right?

So here’s the conversation, though, that I really seen going on Twitter. And then seen going out on on sort of all of the other networks around this acquisition is what will it do to the rest of the market? What do you think is actually more interesting conversation on some level, because this is this is going to take a long time, this isn’t going to be you know, all the way through for several months, I think October is the deadline they gave us versus actually closing all of the deals. And until that happens, they’re going to continue to work in separate companies. But what does this do for the conversations from a buying perspective with the oracles and the work days or even as you’re reading in and the ADP is in the market right now? Do you think this is Going to make them think a little bit differently about partnership relationships about their pitch to the market right now as to why you should focus on buying one vendor over another because this basically takes one of the biggest partners for every vendor in the market. At an HRMS level, right. Kronos was the largest workforce management partner for any HRMS vendor in the market, right at an enterprise level and puts them now directly connected with their own core HRMS that could compete with almost any one of these organizations right.

John Sumser 11:39
Well, you know, the news is being framed as this creates one of the world’s largest cloud companies. And so you could be excused for thinking that this is the gateway to the two combined units declaring themselves to be peers of SAP, Oracle, and WorkDay. Right. And when they do that, that that would suggest I don’t know anybody who is hard into the ecosystems of those big players who partners with people outside of them is it seems to me that that people tend to specialize within so so I don’t know how much the khronos business is tied to relationships with SAP Oracle and WorkDay. But I imagine that stuff is going to get pressure. Yeah?

Stacey Harris 12:27
It’s gonna get pressure. And I think it’s also there is not another single platform that I think could honestly say that they have, other than Ceridian probably at this point, right, that they have a workforce management solution that could compete with the Kronos workforce management solution right now.

John Sumser 12:46
Right? It’s an interesting point of departure. Because if they tuck in their wings and focus on growing the entity rather than growing the individual parts that would suggest that they’re going to constrain their relations with the larger players. Yeah?

Stacey Harris 13:03
Yeah, definitely. And it’ll not only constrain the relation with the larger partners, but this is the thing that’s that oftentimes we dismiss as influencers or industry analysts or people sort of launching what you would call sort of this, you know, chess game, right, which is the challenges for the buyers, whether they currently own these products or whether they’re looking to buy these products on how they try and get these vendors to play nice together. Right. I had an interesting conversation with a very large global technology company not too long ago, who’s struggling because two partners who used to work really nicely together, one now offers a competing product. So the two vendors are no longer as friendly as they used to her one of her biggest challenges is getting these two vendors to now work together where previously that wasn’t a challenge, right? So for the buyers and the practitioners, this is actually becomes a bit of a bigger issue in some things, because they have now figured out how to make a system that’s made up of multiple solution providers who are now competing directly work and integrate and Make those vendors sort of talk to each other in a way that helps the buyers right?

John Sumser 14:10
Well, so it starts to poke a big giant hole in the idea that you get something special by buying into a single vendor and their ecosystem president, right? That has been good conventional wisdom for four or five years now that if you really want to succeed, you sign up with a single vendor and you don’t look at the rest of the HR Tech perfect. You only look at the things that have good relationships with your partner, your your, your preferred platform, and just will poke a hole in that there’s a poker home and if you want workforce management functionality, you’re going to have to go outside of the ecosystem.

Stacey Harris 14:51
Exactly. At this point.

John Sumser 14:53
Wow. Wow, so that’s earth shaking actually.

Stacey Harris 14:55
It’s earth shaking, it also makes the next piece of this puzzle will come about when we find out who’s going to be the next workforce management solution that will either grow as a more standalone app Location right was there’s a few of them out there, right work for software, been in the market for quite some time and has a lot of complex capabilities. There’s a lot of point solutions specific industry specific workforce management applications and cloud plus those kind of things that are out in the market that would probably love to grow into some of these bases now, right. But the other question becomes, will the enterprise vendors just simply make the decision to build out the extensibility and their own generally smaller versions of workforce management applications? And that I think is then you know, it’ll be interesting to see in the next six months to a year what the decision is, from the enterprise systems as to where they’re going to invest their time and money will be in building this out or will be and finding the right partners to build up to compete with what is now a combined Kronos / Ultimate competitor in the market, right?

John Sumser 15:57
Yeah, it’s a good question. But I think workforce management software is hard. This is not the same as standard enterprise software where you fill in the blank and the machine gives you a report based on the data you’ve put into it. This is the sort of early stages of AI were happening and workforce management because you had to have the capacity to deliver information about shifting priorities. So I don’t think it’s easy to build it right. I don’t think it’s easy to build it.

Stacey Harris 16:26
It’s not going to be easy to build it. And it requires a large amount of what I would consider to the more complex predictive and capabilities when it comes to scheduling and thinking about the alternative variations and scheduling models, right. And that’s one of the biggest reasons why it takes so much to figure out what first man’s ramifications is, because you’re not just doing one scenario in general. You have to be able to run multiple scenarios when you’re doing a scheduling model. And then you have to run those multiple scenarios against all of the regulations you have in your scheduling and time tracking tool requirements. And then you have to make sure those are all tied to compliance and regulations standards that are held at the state and regional and city level and Some cases, so it’s not just a technology conversation. It’s also a face and feed conversation when it comes to the technology as well as the ability to literally maintain a catalog of all of the constantly changing regional and city and state compliance requirements.

John Sumser 17:24
So, running down this track, you know, I’ve been following the sort of real time coverage of this, and I haven’t seen anybody go, wow, this is really smart. But I think you’re saying, wow, this is really smart.

Stacey Harris 17:37
You know, when I first started this, and I think everyone was like, Oh, yeah, they’re on the same equity firm, they’re going to get, you know, they’re going to be working together. I think that this was the smartest move for Ultimate and for Kronos, both in the fact that they had gaps and these fit the gap. And it is very unlikely that any organization like an Ultimate would be able to build out all the things you need when it comes to workforce management at the speed and level of pace, they would need to build it out. So I do think this is very smart. And I do think that this puts the other enterprises organization makes it this a much more difficult sell for them because they aren’t going to be able to catch up as quickly. This is not like learning or even recruiting. And we all know how hard those environments are. So don’t get me wrong, but you can’t build I think a workforce management application in a year that meets the needs of large complex organization.

John Sumser 18:24
Sure, that means that if these guys can surely get it together and make the combined entity actually work, that they’ve got a head start on something pretty amazing. Wow. Wow. I I agree with you. I totally agree with you. And that was I’m glad we had this conversation because that was not apparent to me when we started the conversation.

Stacey Harris 18:46
And I think because this is what I’ve been, you know, since I’ve been watching all of the the conversations there is this feeling of sort of will these two entities be able to mesh and that is a big conversation and it’s something we all have to pay attention to. But if they can make it mesh, then it was definitely the right move. It will put them above and beyond where many of the other enterprise organization threat and it will require and this is what I’m going to love. Because if we kind of watch what happened in the creator space, what we saw was that an organization like workday came in and basically up to the bar as to what people would expect from an enterprise HR platform at that level. And so everybody had to move as quickly and as fast to up their bars as well. And I do think that the industry all good that everyone basically stepped up and said, We can compete in this space as well. I think this will be the next place where you’re going to start to see some competition has to come out, which is who’s going to up the Barnett and what we’re doing on workforce management now that this is a competitive conversation versus a partnership conversation. And my hopes Is this a more relevant conversation because it’s not an HR space right now, most of the time when you go in and talk to your head of HR, they are not thinking about their workforce management application. It isn’t part of their purview in some cases, but they do know that they have problems with making sure they have the right people in the right places, but it’s not oftentimes talked about at the workforce management level.

John Sumser 20:07
This is so interesting because part of what you’re saying in the subtext is that most HR software doesn’t contain the subtleties necessary to actually make AI work. Because there’s so much you don’t know about what it takes to actually get worked on. And by introducing workforce management tooling into a fully integrated HR stack, you’ve sort of forced the question of making sure that you know what work is getting done. And that allows you to make much better predictions about all sorts of things. That’s really interesting to me. I hadn’t really considered that as a deficit in most HR Tech Data stacks, isn’t it?

Stacey Harris 20:53
It really is. And there’s a lot of interesting ways that organizations have addressed the issue in many cases they have they have addressed it by creating really tight integrations with these platforms, or by making sure they had really good tools for extracting data and wasted Could do planning or workforce analysis, but it is a gap. And it has been a gap for some time. And I also think it’s an area where we just haven’t seen the level of innovation. I think there’s been a lot of innovation made in sort of the look and feel, but not maybe in how these tools can be leveraged at the highest level. And partially as they just haven’t gotten the attention of the person who’s writing the biggest paycheck right now, which is generally the head of HR, the head of it. Most of the time, they’re relegated to an operations conversation, which has finances to fix the operations issue, but does not care as much about how that gets rolled into an HR conversation.

John Sumser 21:49
Mm hmm. Well, it’s gonna be fun to see how this evolves over time, isn’t it?

Stacey Harris 21:53
It will be and I think for the rest of the industry the next few months and how the different organizations react to this will give us some insight into what this will look like in another year or two. But it is important I think, for all the buyers and everyone out there that nothing’s going to change overnight. And we should probably say that and I think that was very clear from both the Ultimate and the Kronos group as they were giving their insight into this is that they are going to be focusing on their customers, making sure their customers understand what the opportunities are, but also making sure that they’re not losing anything in this process. So there was a lot of emphasis on that in the conference call this afternoon. And there was a lot of focus on making sure that the employees both on the Ultimate side and the Kronos side were being looked after in this process. And I think that was definitely some of the other conversation has concerns about any one employee said, so there’s going to be no regions that are going to be changed and no headquarter locations that are going to be going away right now. No offices that are going to be closing all that stuff with very need to be very clear in the conversation to.

John Sumser 22:52
Well, so we’ve had a good go at the first wave of this. I’m sure we’ll be talking about it more as time goes on. Thanks for taking the time to have the conversation and enjoy the snow. Maybe you can give a sled.

Stacey Harris 23:06
Yeah, maybe a sled. Could make a snowman this week.

John Sumser 23:09
Make a snowman, that’s the deal. And thanks everybody for listening in. You’ve been listening to HR Tech Weekly, One Step Closer with Stacey Harris and John Sumser. Bye Bye now.

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