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Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday at 8AM Pacific – 11AM Eastern, or catch up on full episodes here.

HR Tech Weekly

Episode: 47
Air Date: November 19, 2015


This Week

This week John and Stacey discuss:

  • KronosWorks 2015
  • Kronos and Cornerstone OnDemand Announce Strategic Alliance in the Cloud Nasdaq
  • Zenefits Payroll launches Business Insider
  • Venture Capital in HR (discussion)
  • Microsoft and the pain of software updates (discussion)

About HR Tech Weekly

Hosts Stacey Harris and John Sumser discuss important news and topics in recruiting and HR technology. Listen live every Thursday at 8AM Pacific – 11AM Eastern, or catch up on full episodes here.

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Begin transcript

John Sumser:                        Good morning, and welcome to HR Tech Weekly, One step closer with Stacey Harris and John Sumser. Good morning, Stacey, how are you?

Stacey Harris:                        Good morning. I’m fine. I’m finely home. We’ll be home for a little while. Although it’s a bit rainy and drizzly here in North Carolina, it is nice to be back at home office again, so doing well.

John Sumser:                        That’s great. I’m sure all of your friends who work on airplanes are going to miss you over the next couple of weeks.

Stacey Harris:                        They might, they might. I just spent about three hours with all of them in the airport last night when we had delays coming out of Chicago, so we all got to say goodbye for a while.

John Sumser:                        You should start borrowing their luggage, and making sure to get their rates on the hotel rooms you stay at.

Stacey Harris:                        That would be nice, yeah.

John Sumser:                        Before the show, we were talking about your grand adventures in Microsoft updates.

Stacey Harris:                        Yes, we were. Before we get started though, because I know there’s a lot of stuff going on in the news this week. There’s some interesting stuff about Microsoft. There’s some interesting stuff about, well not really interesting stuff about Microsoft, more of I think our realization about this is what the world is probably going to be like due to updates. Some interesting stuff about Kronos, because of KronosWorks this week, that’s where I was at out in Las Vegas. Some commentary from Mike Ettling about data privacy, which I think is worth mentioning, and some commentary about venture capital stuff that’s going on in the market.

Then if we have a little bit of time, then probably talking about what’s going on with Zenefits. There’s some ups and downs in that story that we talk a little bit about last week, some new news that came out for them.

A lot of stuff going on this week in the HR Tech space. Before we get started, I think we do want to say a commentary. We had our last show last Thursday, right before the attacks in Paris. Our thoughts and prayers go out to our friends and colleagues who are located in the Paris location. We did want to make sure we said that here on our show. The other stuff, John, where do you think we want to start as far as the conversation goes?

John Sumser:                        Let’s see, you went to Kronos this week, and so there’s a new Kronos and Cornerstone strategic alliance. It seems to be that these days strategic alliances actually mean something. I’d be interested to hear what you learned there. Sounds like Zenefits is in a desperate scramble. They’re launching a free service that will automatically do everything in a company’s payroll with no human interaction required, which is great except that’s not possible. We can talk about whether or not that’s possible. Zenefits probably says they built that product in 6 days, so it’s a term paper. It’s a term paper, but in a hurry. Somebody needs a marketing department.

Stacey Harris:                        Yes. There’s a whole conversation we have there. Let’s talk about Kronos though real quickly, because I think there was a couple of good things that came out of KronosWorks this week. First off, they had 2,500 people at their event, probably about 500 of that was from Kronos itself. I think sometimes we forget how big Kronos is in the scheme of things, because it’s always been listed as just primarily the workforce management solution. A few years back they pick up a total HR suite product, which is their cloud based and truly multi-tenant cloud HR management solution along … It’s primarily a mid-market. I’m saying mid-market, it’s actually more small business, somewhere in the range of 500 employees and below for that product.

That product has grown from 4,000 organizations to 14,000 organizations, so the organization has really invested heavily in that small business cloud based core HRMS. Their clients of that particular product are very, very happy with it, that’s their small business workforce solution. That is the area where Kronos is partnering with them. When you’re looking at the Kronos product, they’re partnering Kronos’s small business solution, which used to be Sonar6 solutions, with … They’re going to do some deep integrations with the Kronos’s small business solution. It’s going to be interesting to see- [crosstalk 00:05:20]

John Sumser:                        If I have that right, Kronos has an HR solution. Cornerstone is an HR solution, and the integration is going to what?

Stacey Harris:                        What they’re basically going to say is that if their very, very light version of talent management doesn’t meet the needs of these clients, then they are going to recommend, and they’re going to have some deeper integrations with Cornerstone. That is the gist of this. Cornestone’s not reselling Kronos. Cornerstone and Kronos don’t have a financial agreement, basically money is not going to pass between the group. They’re not going to work off of each other’s papers. This is really just a we shake hands, and we’re going to have another partner to go to market with us.

I thought that it would be more interesting for them to say that they’re going to go to partner up the enterprise level, but Kronos actually has a deeper partnership with SuccessFactors at the enterprise level with their workforce management solution. Now it will be interesting to see how long that partnership works, because SuccessFactors just came out last week commenting that Fieldglass, their contingent workforce management solution is now going to start in development for a total workforce management solution. I’m not sure how long all of that’s going to become a good partnership for them.

John Sumser:                        It’s an interesting time. In this Kronos Cornerstone relationship is there a plan and defined data integration, or is this just a sales lead exchange?

Stacey Harris:                        I think the goal is that on the Workforce Ready, which is the smaller product, on the Workforce Ready side, they are going to do some deeper integration with some data crossing. I think that that’s going to take a little while for them to get there, so I think initially it’s going to be more of a lead generation opportunity. I think they are thinking at least the Workforce Ready to do some more deeper integration. The other thing, which I think is even more interesting that came out of this event, we’re going to start to see some odd partnerships, I think, across the board with all these various solutions as the more comfortable partnerships like Cornerstone and Workday start to go by the way side. Because organizations are seeing their partners pick up some of the solutions that they all ready offer.

The one partnership that I thought that Cornerstone, that Kronos … Sorry guys, too many k’s and c’s today this morning … that Kronos mentioned and actually has really deep integration with is Google. The Workforce Ready product in Kronos has the deepest integration with Google, Google Docs, Google Small Business, products I’ve ever seen, and they’re coming out the door with it. Now on some level, but by January we’ll have it looks like almost the range of like a hundred different types of integration points with the Google products. To me, that was actually a more interesting partnership, and they didn’t really put a big announcement out around some of that.

John Sumser:                        It’s hard to get that right. There’s this sense that the only partnerships that count are the ones that are close to the heart of the current industry, and that’s hardly an interesting picture. What I’m noticing is that all of the majors are in the process of really building out and thinking about how their ecosystem works. It’s like being a department store. There’s always so much room for so much inventory and so much attention. What you get is even in an expanded world where there’s software within an ecosystem wrapped around it, one’s choice is very limited when you choose a platform. I think we’ve talked about this before. I actually imagine that starting now sophisticated HR operations are going to build their own API’s, and move to become independent of a platform provider and become their own platforms. I think we’re in a very interesting time.

Stacey Harris:                        I think that these independent platform solutions are going to, as you said, not only give more options, but it’s going to make people maybe rethink what is HR technology. What’s the gist of it? The other space that Kronos mentioned heavily this week … Kronos is one of those organizations I think that has taken a conversation of cloud, and cloud implementation, and the word cloud, and looked at it maybe differently than the rest of the talent management core HR market that we cover in general. This was my first opportunity to go to Kronos Works. I was interested in hearing that their big focus this year is really on what they call a Paragon, which is an implementation services model, which is really focused on a very service driven implementation perspective.

I think the rest of the market has done this and probably did this a little bit earlier in the progression or movement to the cloud technologies, so I was a little surprised when I saw that this was the big focus for Kronos. I think it makes a lot of sense when you look at the data. Workforce management solutions are the least likely to be in the cloud, if you want to call them that, even in a hosted environment. Kronos’s workforce management, their workforce central solution is still a single tenant hosted version that is their cloud environment, where they give people options for when they do updates and upgrades versus forcing everybody in the same upgrade model.

Their big challenge is keeping a handle on implementations. How long implementations take. The services that go around implementations. The services that go around upgrades. Moving people from old versions to the new versions of upgrades, so maybe on a version 6 versus the new version 8. Those are all very distinctively unpremised challenges from a services perspective. What I think we saw much of the market going through maybe 2 or 3 years ago on the core HRMS and talent management side, I think Kronos is now starting to see and implement services that are going to be very much focused on trying to get them to a cloud product eventually. That was the other big announcement this week.

John Sumser:                        Cool, so what else are you seeing out there, Stace?

Stacey Harris:                        The other things that we talked about, go back to the Zenefits conversation. As you said, Zenefits has come out as of Monday saying that they have a payroll solution that was built in 6 days, which again as you said is a marketing challenge. The reason this was developed based off of the CEO’s commentary was because of their initial argument, even though they’ve settled that it seems the last couple of weeks with ADP. It is a self-service payroll solution, which basically, if I understand correctly is that it automatically calculates from the hours tracked. Things that they’re able to track within a Zenefit’s product automatically correct the pay environment, and does not allow an administrator to go in and adjust anything, which is probably the scariest thing I’ve ever heard when it comes to payroll. Because we’re all human, and we know that.

John Sumser:                        Payroll is the place where all of the money goes. It’s reasonable as a business owner to what to have a firm grasp on what the payroll system is doing, and a firm bit of control about the risks associated with it. Because if you give an employee too much money, you don’t ever get it back. If you don’t give them enough money, they get really mad. It’s a Goldilocks problem, where you have to get it just right, and that almost inevitably takes human beings because the compensation practices vary by employee. Even in the biggest companies, compensation practices vary by employee.

Stacey Harris:                        I would agree completely. Part of what I think Zenefits is doing is saying if you have a really small organization, and you do track things maybe in other tools that we can pull out of, this is one less step for you, I think is how they’re approaching it. A self-driving payroll is what they’re calling it. I guess it can maybe work for very small organizations. We’re talking maybe 5-6 employees, where you have control that wherever they’re entering their data is where you can make the updates and changes, and you can do that before it would be pulled out of payroll.

What I think the challenge is for all of this is that then there are conversations that well then you can go to a paid version, because that’s in their free version, a paid version that does allow them some more flexibility. I think even with that there is the risk that your solution is taking on a lot of the audit and compliance requirements for these small businesses. To be able to be comfortable with the fact that your solution can then meet all of the requirements at a government level, it does feel a bit risky to be on a product that was created in 6 days. As you had said, “I took longer to do my term papers in 6 days usually.” [crosstalk 00:15:47]

John Sumser:                        I don’t know about that. The thing here is that Zenefits doesn’t seem to understand that the payroll business is a risk management business, and that the reason that people don’t replace their payroll systems but once every decade or so is the risk associated with doing payroll less than perfectly is extraordinary. Clients of payroll companies exactly don’t want a vendor who turns products around in 6 days. That’s out of touch with the marketplace, to put that message out there. That’s what we know about Zenefits is that they’re brand new to the market and they’re making mistakes now that are bigger deals than they were when it was just a momentum play from a venture capital company.

Stacey Harris:                        I think it’s starting to have an impact on at least what their expected numbers are. I know one of the other stories that came out right around the same time, and maybe part of this was to have those stories out at the same time, was Wall Street Journal and the other noted that they missed their revenue targets. One sallied at 4.5 billion. They say that that’s starting to fall now. That they’re struggling to meet the numbers that they told the venture capital groups that they would hit. I think this is, as most of us know, HR systems is a long term play. Being very careful about what you say you’re able to do and that the systems can do what you say they can do as well, both financially and from a compliance perspective is a really big issue here in HR. It will be interesting to watch the Zenefits conversation and see where it goes.

John Sumser:                        That’s interesting because the next topic in our progression is a note about venture capital driving innovation in HR. On the one hand you’ve got Zenefits showing the risks that occur when venture capital drives innovation in HR, and on the other hand you have this pretty enormous trend right now of money and people who are not familiar with the industry or it’s customers coming in in a flood. I wonder if venture capital is actually going to drive innovation in HR, or if that is a moment of people thinking that if you spend enough money, you can do anything that you want.

Stacey Harris:                        Yeah, that I think is going to be an interesting. This was written by Franz Gilbert. I’m always intrigued. He always puts out some interesting commentary on the market. I think he’s worked with Korn Ferry now. I haven’t had the opportunity to meet him before, but he was pointing out that there was some good numbers that you could watch the progression of investment as well as where the market is going as a whole. The venture funding for the HR space is just continuing to go at much higher levels than the overall investment market. He commented on some of the investment areas, including Zenefits as well, [Zeder 00:19:19], and a couple others.

I think what’s more interesting about this idea that venture capital is maybe the place everyone has their eyes is that they’re not paying attention to some more of the traditional solutions and the long standing companies in the market and what they’re doing. That’s the challenge in this market is it’s much more fun to maybe pay attention to these newer products and new solutions, but I think the real opportunities are probably lying more with organizations like ADP, Paychecks, and even Kronos, who have been around for a very long time in this market.

You’re seeing that they not only have the compliance and the regulatory background, but now they are adding the cooler things on top of it. I think that’s something we haven’t seen in quite some time. The cooler things being the user-interfaces, the mobile technology, the ability to access the information at a data analytics level. All of these solutions are now adding those type of products, and they’re all going global as well. I think this is a game where if you can’t get to that level of compliance as well as all of the user-friendly areas, it would be hard I think to outplay some of these guys.

John Sumser:                        I was talking with somebody who I respect the other day. He was telling me a story about the great applicant tracking systems of the 1970’s. I said, “Ian, no, there weren’t any applicant tracking systems in the 1970’s.” The applicant tracking system business started in about 1990. The automation of HR beyond payroll started right around the same time. What you have in our business are a lot of companies who are no more than 25 years old. They all grew up in the .com era. They’ve all seen what disruption does.

What we’re witnessing, I think is a renaissance for those companies, and the idea that you can buy your way into markets like Amazon did for instance is simply not going to work in the same ways that it did before. It probably doesn’t work at all in the enterprise environment, and it specifically is problematic in HR. All of this investment money is going to have to get a good deal smarter in order to compete with people who actually know and understand the marketplace.

Stacey Harris:                        Yeah, that’s a very, very succinct way of saying it. Part of the things that we had talked about the challenge that I had with the Microsoft update this month. If anybody is in a corporate environment working with Microsoft Outlook and PowerPoint, and they did the November Microsoft Windows update, and you’re on I think Windows 10 or whatever … I’m not on the newest version. I’m on the one behind it. What you’re probably finding is- [crosstalk 00:22:35] Go ahead.

John Sumser:                        I’m just laughing, because in order to explain the problem, you have to be a technology expert.

Stacey Harris:                        I know. It’s crazy isn’t it? Yeah, exactly. No, I get it. I’m not that much of a geek to know every version that I’m on.

John Sumser:                        No, but it forces you, that’s what we’re about to talk about is the technology forces you to be a technology expert in order to use the stupid stuff.

Stacey Harris:                        It does. Now I’m in a situation where my Outlook, which is the engine that runs my life right now anyways, as well as my PowerPoint tools are crashing continuously, as well as my Surface Pro 3’s keyboard stopped working while I was traveling. Basically, took me out of work for the last 3 days. All those things would happen because of this Windows update. The Windows update that I was forced to take, it wouldn’t allow me not to take it. It did it overnight without my knowledge, because that’s how Windows does their updates. The conversation me and you had was that is this the future of cloud technology? No matter how much you test, no matter how much you check, this is always going to have an impact on our lives. Are we just going to have to get used to it, or are we going to require the vendors to do more testing and more double checking?

John Sumser:                        The Silicon Valley model is deliver the minimum, viable product, and then let customer complaints drive you through the real design, and that’s what you’re experiencing. That’s what you’re experiencing. They didn’t fix everything. In the old days, back when I had a red wagon, software updates weren’t necessarily comprehensive. As this agile methodology with it’s focus on doing the minimum necessary has taken root, you get systems that don’t anticipate all of the problems, and can’t test for all of the problems. The way they figure out how to improve it is based on what you do. Let me tell you that Apple is only a tiny bit better.

We did a big Apple upgrade last week and it took a day and a half to get all of the systems back online, and all of the passwords crashed out, blah, blah, blah, blah, blah … for no particularly interesting level of improvement in the work, so big hassles, zero benefit. You know what, people don’t do business with companies that behave like that over the long haul. It really isn’t the case that people continue to update. They learn how to turn the updates off, and they learn how to stand still. I hear a number of like 40% of enterprise companies have turned off the updates on their software. Because they don’t need new innovation, they need their processors to work in an uninterrupted way. Stability is significantly more important than innovation to an operating enterprise.

Stacey Harris:                        It’s interesting, that commentary about turning it off versus making it so that it does … Because this update if you looked at the Windows, because I’ve been looking at all the, what does this update do, because it’s been crashing everything. It was a security and data privacy update, which part of the issue now is I’ve got to go back in. There’s a 20-step thing that my IT group sent me that until my Explorer pulls and approves things that now I should be allowed to do, which is a workaround. What I think is going to be the challenge, and you commented on it even I think more so is that if you turn off what is more security, your backend updates, you’re also turning off the end user experience changes as well. There is going to become a point at which you feel like your system is not doing what it needs to do and the user experience is poor.

That’s really what drives people to switch and make the change then. I think the cloud providers are going to have to figure out how to get this right. If someone gets to a point where their user experience is just not good, then they’re going to start looking for a new alternative, and that gives you a window to make a change. The week before as I’d mentioned, I was at the ASUG event for their … They had a customer who was talking about in the SuccessFactors environment, they had to bring SuccessFactors back in to show their recruiting team all the things they had turned off, that they had not done in a cloud update over the last 2 years. They realized they actually had these products available versus having to go out and buy a new system. If they hadn’t brought them back in, they would have just gone out and bought another solution, because they didn’t realize they were even available.

John Sumser:                        Part of the new software model is you don’t have to talk to your customers. You don’t have to talk to your customers. You focus on making software. You farm all the implementation out to an implementation provider. You’re left in an island that’s very, very difficult to communicate from. That’s largely driven by the investors. Investors penalize you for having people on the team. Some of the most interesting software development models that I’ve seen are happening in non-public companies, because they don’t have to abide by the ridiculous notions about what constitutes good value in a software company that are put forward by Wall Street. I think we might be on the edges of a time when people don’t go to the public markets for financing, and instead do business in a way that’s smart for their customers.

Stacey Harris:                        That would be an interesting conversation to maybe take a look at all the various organizations that are in the market right now, and assess how they’re playing that game a little bit better, particularly in the software space, because I think it’s a good conversation to maybe have. We’re all ready at the end of our half hour, John, so we’ll have to move that into next week’s conversation, I think.

John Sumser:                        It’s always wonderful to spend time with you, and thank you so much for being here today, and thanks everybody for listening in. You’ve been listening to HR Tech Weekly, One Step Closer with Stacey Harris and John Sumser. This was our 47th show, and we’re starting to figure out how to do this thing. Thanks again, Stacey, same time next week, huh?

Stacey Harris:                        Thanks, everyone. Yup, sounds good. Bye, everyone.

John Sumser:                        Okay, bye.

End Transcript

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