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Ultimate Software: Growth Accelerated by Merger With Kronos

 

Ultimate Software recently held its annual Ultimate Connections client event in Las Vegas, drawing over 4.5k client and partner attendees from across the UltiPro HCM ecosystem. Attendees’ interest had been piqued by the announcement a few days before that Hellman & Friedman-owned Ultimate Software and Kronos plan to merge, forming one of the largest global cloud technology providers with a combined enterprise value of $22bn. Kronos CEO Aron Ain will be CEO and Chairman of the new company. The merger is expected to close in late March.

In his keynote speech, Ain highlighted the strong alignment between the two award-winning “culture obsessed” technology firms, also their complementary HCM and WFM technology capability. Ain assured Ultimate’s employees of his commitment to sustaining and building on the legacy of Ultimate’s People First culture and approach, and emphasized to clients the new entity is “here to stay, here to improve, and here to grow” with the UltiPro HCM platform at the foundation of that future growth.

And the new organization has ambitious growth plans, starting by doubling its revenues to $6bn within five years. In support of this, it intends to add around 3,000 jobs over the next three years across all segments of the business.

What’s new for UltiPro HCM?

From a roadmap perspective, 2019 was a productive year for Ultimate, which delivered >700 new platform features derived from >410 client ideas. 

In 2020, Ultimate launches multiple new HCM features, each aligning to the various stages of the ‘life-work journey' which for most is often in flux and continually evolving throughout their careers. Notable features announced at Connections include:

  • On-demand pay, through integration with Rapid!: provides workers access and control to earned wages prior to the pay-cycle end. We noted that Rapid!’s booth was crowded throughout the event, a reflection of the interest by employers in offering employees broader digital financial wellness solutions to help ease or avoid hardships
  • Privacy Manager: a dashboard enabling employees to manage personal data, which can be erased, or downloaded for portability through the new data management tool
  • Ulti-Giving: (from end March 2020) facilitates philanthropic donations through payroll deductions, including on mobile
  • Continuous Performance (Q3 2020): AI-infused performance development tool which gives real-time coaching to leaders to provide ongoing, meaningful feedback to their employees in order to drive performance improvements; also includes interactive meeting and goal-setting capabilities

While the future roadmap for UltiPro is mostly under NDA, it will center on three pillars, all leveraging AI, ML, and NLP:

  • Mindful AI, bringing together the capability of ‘Xander’ (sentiment, emotion, and intent insights) and ‘Aimee’ (business insights) to drive improved HR outcomes and address key use cases
  • Expansive Accessibility, enhancing the suite to be more nimble, inclusive and adaptive,  partnering with digital accessibility company Level Access (an UltiPro client since 2017)
  • Culture Inspired UX, improving personalization and in-context support. 

What’s next for the new organization?

Although Kronos has made significant strides in recent years with its HCM offering (Workforce Ready and Workforce Dimensions), the more mature UltiPro HCM will become the flagship HCM platform for the new company, with Kronos Workforce Dimensions being the flagship standalone WFM especially for enterprises.  The two offerings will be tightly integrated and will fill the advanced scheduling gap in UltiPro’s functionality. This HCM+WFM combined offering will play more toward the middle market and enterprise buyer. It further plans to retain and position Kronos Workforce Ready for small and mid-sized firms with less complex talent management and workforce management needs. Work on integrating the technology is already underway, with the plan for the combined Ultimate HCM + Kronos WFM offering to go live as soon as the merger completes in late March. 

The two companies have differed historically in their go to market, with Kronos taking a highly verticalized approach, an approach that Ultimate can benefit from. While Kronos has often targeted the operations side of the business with WFM, being particularly experienced with large complex manufacturing, retail, public sector, and healthcare firms, Ultimate has typically sold directly to the HR function without a vertical slant.  A vertical GTM approach for UltiPro HCM should help expand opportunities with new buyers. 

The joint client base has >23k organizations, with few shared clients: potentially, there are significant cross-selling opportunities.

Growth plans for the new organization also include international expansion. UltiPro HCM currently supports users in 175 countries. The integration of Kronos WFM with the PeopleDoc HR service delivery platform offers a gateway to multi-country clients.

Bringing two very strong brands and technologies together in what is essentially a merger of equals obviously has its challenges. Both are well-respected brands in HR technology; both have rich and admired cultures. The merger will take careful navigation, execution, and strong leadership. 

Clients with whom I spoke at the event expressed cautious optimism about the merger. UltiPro users are keen to tap into the WFM capabilities and innovation offered by Kronos, and of course they are interested in future innovations coming from the marriage. But naturally, clients are waiting to see how the merger will impact their engagement with Ultimate. Notably, all expressed confidence in Aron Ain's ability to lead the new organization to the next chapter. 

The new Ultimate/Kronos entity comes at a time when both firms are experiencing strong adoption and steady recurring revenue growth. Together, Ultimate and Kronos offer a very formidable combined HCM and advanced WFM offering and capability that will increasingly compete for larger, more mature global clients. We expect to see rapid innovation coming out of the new company, innovation that will help fuel continuing growth.

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