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KronosWorks 2011: Beyond Time Clocks for Modern Workforce Management

Written By: Predrag Jakovljevic
Published On: December 1 2011

While there were many similarities between the KronosWorks 2011 and KronosWorks 2010 user events (see blog post on Kronos’ 2010 user conference), attending Kronos Inc.’s 2011 user conference was worthwhile nonetheless. Kronos knows full well that its customers’ (labor) time is money, and the company specializes in workforce management (WFM) software, which ensures that a company’s employees complete their assigned jobs and receive pay and benefits accordingly. The company introduced the first microprocessor-controlled time clock in 1979. Today, it employs 3,200 people worldwide, and its proprietary hardware business (time clocks) brings in only about a third of its total annual revenue.

Nowadays, Kronos is the global leader in software solutions that enable organizations to control labor costs, minimize compliance risk, and improve workforce productivity. The company develops and implements its WFM software, particularly for organizations with large, complex hourly-paid workforces. Tens of thousands of organizations in 60 countries, including more than half of the Fortune 1000 companies, use Kronos time and attendance (T&A), scheduling, absence management, human resources (HR) and payroll, hiring, and labor analytics applications.

 

What’s So Tricky about Workforce Management?
I understand that employees on hourly wages tend to cheat with the clocking-in and -out times (no reporting being late, taking longer breaks, etc., see Kronos’ recent survey findings on which employees worldwide tend to “fudge” their clocks to get more pay), but what is the big deal about managing absence? What are the typical compliance traps besides not exceeding overtime hours or total hours per day, week, or month?

Absence management ensures companies have the right number of people with the right skills that are available to do the work (besides the obvious reasons for pay, discipline, overtime, etc.). Companies use sophisticated scheduling systems (such as those from Kronos, Dayforce, RedPrairie, Schedulesoft, Reflexis Systems, etc.) to match resources to demand, and so the absence of a scheduled worker means less than optimal staffing.

For example, if a distribution center or warehouse company needs 20 people to complete daily orders and two don’t show up for their shift, suddenly it has a hole to fill, and needs to know this as soon as possible. As an another example, if a retail store has five associates scheduled to cover the electronics department for the holiday rush and one doesn’t show up, it is understaffed and may lose sales. T&A systems can alert supervisors to these absences quickly so that they can react in a timely manner. Astute WFM solutions allow managers to reschedule replacement workers using predetermined rules so they don’t have to do this manually—and risk breaking compliance and other labor rules.

Compliance regulations relate to various issues including local government and/or union rules on replacing an absent employee—usually by seniority, as well as rules for retailers on the time of day past when young employees are not allowed to work. Scheduling systems automatically take these and other rules into account, and if managers in their haste override a rule, the system should be able to track it and escalate the issue.

Being alerted in regard to excessive leave, overtime, absence, etc., is critically important. An extreme cautionary tale, presented at a KronosWorks 2011 session on labor compliance, told of a California state employee who reportedly took $815,000 (USD) out in sick leave over a 30-year period, because the HR department didn't end his leave, and the sick leave accrued over time.

Astute WFM systems should track every minute from clock-in to clock-out. They can track “off the clock work,” which refers to indirect time—for cleaning up before or after a shift, allotted breaks, travel time between assignments/tasks, etc. While labor management systems typically measure the amount of time to perform specific tasks, they may not account for the time before or between these tasks, which can be a serious drain on productivity.

 

Back to KronosWorks 2011
Kronos Workforce Central
, the company’s flagship business management software suite, enables personnel managers to track crucial variables such as vacation, sick time, and overtime. The software also helps businesses comply with local, state, and federal labor laws and union contracts. With the goal of controlling labor costs and improving employee productivity, Kronos’ software products automatically collect T&A data (almost exclusively via Kronos’ time clocks), manage scheduling and absence, oversee administrative HR, payroll, and hiring processes, and provide data analytics on cost and performance issues.

Kronos primarily sells directly, but 8 percent of its revenue comes from partnerships. The company focuses on education, health care, hospitality, manufacturing, retail, and government markets, among others. Two years ago, the company decided to verticalize its business, assigning vertical focus to Kronos’ industry teams, from research and development (R&D) to sales force.

After a customary introduction by the conference organizers with an animated movie on current trends in labor and time management, Mark Jeffries, the familiar communications consultant, keynote speaker, and presentation coach took to the KronosWorks 2011 main stage. Jeffries briefly talked about the need for the so-called “LWAR” approach: Listen, Watch, Anticipate, and React. We humans usually React first and skip the other steps, said Jeffries, and offered a good example of folks not remembering the name of the person that they had just met (because everyone is just too keen on saying their own name). To that end, he concluded that Twitter is a good place to listen to the market’s sentiments.

 

Kronos’ Growth Continues
As in previous years, Jeffries then introduced Kronos’ chief executive officer (CEO) Aron Ain, who delivered the Kronos’ state of affairs to more than 1,000 customers, thought leaders, and practitioners at the Rosen Shingle Creak Resort in Orlando, Florida, in a question-and-answer session moderated by Jeffries. First and foremost, Ain was delighted to report on the corporate results for fiscal year 2011, in which the company grew 8 percent to become an $800 million (USD) gorilla in the market (and one of the largest private software companies).

In fiscal year 2011, which closed on September 30, 2011, Kronos’ earnings before interest, tax, and amortization (EBITA) increased by 14 percent to $217 million (USD). Ain added that Kronos’ growth, which was nearly double the WFM market’s growth of 4.5 percent,* is a testament to how Kronos’ core solutions, together with its next-generation products and cloud services offerings, are delivering exceptional value to customers around the globe. Kronos has achieved nearly 100 consecutive quarters of profitability, which is impressive, to put it mildly. 

 

Global and Cloud Expansion
The rapid expansion of Kronos’ international operations has contributed to a large extent to the company’s aforementioned growth. Developments in fiscal year 2011 included establishment of a direct sales channel and reseller agreement with Valueteam in Brazil. In China, Kronos announced the opening of additional offices in the Greater China Area in Guangzhou and Hong Kong, and newly established partnerships with Accenture, BeyondSoft, NetAGE, and Satyam to provide more complete distribution and implementation support across Greater China. During the year, Kronos also established reseller agreements in the Middle East, The Netherlands, Portugal, Spain, and Turkey.

These developments underscore Kronos’ commitment to supporting the global workforce management needs of multinational organizations and locally owned businesses. The company continues to hire staff worldwide to support existing customers and new customer deployments. In fact, Kronos hired 567 employees in fiscal year 2011, and seeks to fill more than 200 open positions around the world.

Part of Kronos’ growth comes from steadily increasing demand for cloud services. In a year-over-year comparison, new bookings of Kronos’ cloud services offering grew by a whopping 92 percent. Today, Kronos has more than 1.75 million licenses at hundreds of organizations managed via cloud services in more than 20 countries including Australia, Brazil, China, France, India, Ireland, Mexico, and the United Kingdom (UK). The company continues to see exceptional interest in cloud services from organizations of all sizes and industries looking to maximize their investment in WFM technology. By leveraging cloud services from Kronos, organizations are reportedly achieving significant cost savings, improving the reliability of their WFM solutions, and accelerating return on investment (ROI).

With cloud services, Kronos can perform hosting, configuration, maintenance, upgrades, and support of its WFM solution, freeing up an organization's information technology (IT) department to focus on other priorities. As a poignant example, when in May 2011 a tornado directly hit St. John's Regional Medical Center, a Sisters of Mercy Health System hospital in Joplin, Missouri, Kronos’ remote cloud services quickly ran a report on who was supposed to be where, so that the hospital could quickly locate all of its employees. Needless to say, that wouldn’t have been possible in the absence of Kronos’ remote cloud services if the on-site IT server had been badly damaged by the tornado (or simply if the power was out for days).

Key large Kronos cloud customers are multinational companies with more than 10,000 employees worldwide. Currently, there are nearly 500 Kronos’ private cloud customers, with 274 added this past year. Of note, over 90 percent of hosted customers use Microsoft SQL Server database (instead of Oracle).

 

Growth and Innovation Go Hand in Hand
Afterwards, Ain discussed how innovation and consumer-oriented technology (which is converging with mainstream enterprise platforms) is transforming business enterprise software. (Kronos largely refrains from using the term “social,” as social tools are not of interest and help to hourly workers executing immediate tasks, but rather useful for salaried “white collar” employees collaborating on mid- and long-term projects.) Based on the idea that users should not have to choose between deep functionality and ease of use, Kronos’ vision for the future of WFM is centered around the following three capabilities:

  1. Instant engagement
  2. Guided decisions
  3. Mobile management

In the fall of 2009 at KronosWorks 2009, the company recognized how today's consumer-centric products deliver functionality through simple, intuitive, and easy-to-understand user experiences. Kronos was the first company to bring a consumer-centric user experience to WFM applications, through its next-generation user interface (NGUI), which was recently dubbed the Navigator (see TEC’s blog post).

At KronosWorks 2010, Ain discussed the proliferation of smartphones and mobile technology and how they have forever changed people's expectations about WFM solutions. Soon thereafter, Kronos introduced mobile applications designed around how people naturally communicate in today’s fast-paced business world. Mobile WFM applications improve productivity by making it easier for managers and employees to complete a wide range of workforce-related tasks using a variety of mobile devices.

Finally, at KronosWorks 2011, Ain announced that Kronos has once again redefined the world of WFM software with the introduction of a revolutionary new time clock, the Kronos InTouch. He believes that this clock, which can be seen as a cross between Apple iPad and bank ATM machines, will reshape the way organizations think about, and employees interact with, their WFM solutions. InTouch rounds out the next generation of WFM solutions, bringing an innovative approach to collecting time-worked data, which Kronos pioneered in the 1970s with the introduction of the first microprocessor-based time clock. Ain said that InTouch, the first time clock built for today's modern workforce, has been designed around the following five guiding principles:

  1. Unrivaled user experience: While traditional time clocks rely on physical buttons, small displays, and fixed menus, InTouch combines the latest advances in hardware technology with a powerful UI to deliver an unrivaled user experience. Its color touch screen, graphical interface, and language hot keys deliver an unprecedented level of personalization (see figure 1), which should result in faster employee adoption and increased productivity. 
  2. Seamless integration: With ample self-service capabilities, InTouch enables employees to check accrual balances, request time-off, and view schedules all in real time, unlocking the value of an organization's existing WFM solution. In addition, InTouch can be configured to prevent punching timecards outside scheduled start and stop times and can provide an attestation solution for employees to sign off on the accuracy of their timecard. These unique capabilities make InTouch a valuable tool for helping to protect against employee wage and hour lawsuits.
  3. Built for the cloud: As the first time clock built for the cloud, InTouch works securely and easily over the Internet and through firewalls. Built on proven industry standards, InTouch devices can securely communicate with a private cloud provided by Kronos cloud services or with an existing enterprise cloud. InTouch devices are administrated, monitored, and controlled centrally, allowing for easy and secure Web-based management of data collection anytime. Users can record their time, check vacation days, or touch a call assistance option to dial a predefined telephone support number and ask questions via a built-in microphone and speaker.
  4. Extensible: During non-peak hours, most time clocks sit idle. InTouch enables organizations to use the device for other functions including opening maintenance tickets, checking sales or census data, executing an employee survey, or delivering a message to employees via video. In addition, Kronos empowers users to create their own applications and share them via the Kronos InTouch App Platform, the industry's first and only application platform and software development kit (SDK) devoted to improving the productivity of the frontline workforce. Ain demoed the “Work Through the Meal” third-party application with which workers can pre-order food from the local canteen or restaurant (and even have the bill deducted from their wages). With some self-deprecation, Ain said that the app was so easy that “even a CEO could do it.”
  5. Rock solid: With more than 30 years in the business, nobody knows time clocks better than Kronos. The InTouch clock has been put through extensive testing to ensure that it can withstand extensive user manipulation, ambiance conditions, etc.

InTouch is generally available in Chinese (traditional and simplified), Dutch, English, French, German, Portuguese, and Spanish. Kronos’ InTouch product replaces the Kronos 4500 time clock series, which was introduced in the early 2000s. Ain said that there would be some trade-in consumer protection deals for existing customers. Kronos InTouch not only uses biometric identification (no badge necessary), but is also smart card, cloud, and multimedia enabled (the 4500 clock uses biometric verification, i.e., confirms you are who your badge swipe says you are). It has nifty features such as call for assistance, video playback (as training materials), promo screen saver, and third-party apps, among others. Nestlé International has beta tested Kronos InTouch and is reportedly very happy with the experience.


Figure 1

Ain pointed out that in just two short years, Kronos has changed the face of WFM technology given that the Navigator UI provides the same look and feel for the Kronos Mobile, Workforce Central, and InTouch products (see figure 2). Regardless of the user’s preferred method of interaction—personal computer (PC), mobile device, or time clock—Kronos aims to deliver the industry's most intuitive and powerful set of WFM applications.


Figure 2

 

Specifics of Kronos’ Offerings
With the Kronos InTouch, Mobile, Navigator, Workforce Central 6.3, and other product deliveries, the vendor claims to have released more products and enhancements this past year than in any previous year in the company’s history. In a breakout session on the roadmap and directions of the Kronos Workforce Central 6.3 suite, Kronos revealed the results of a recent survey showing that Kronos’ customers want more room for content/workspaces in the screen, one-click access to everything, the ability to multi-task and compare, and more alerts and related items (for instant engagement and guided decisions). Kronos has responded to its users to simply WFM by investing in the following strategic areas:

  1. Built for the Global Workforce: Enhancements in this latest version deliver value to multinational organizations deploying Workforce Central across the globe. With Workforce Central 6.3, customers can now deploy multiple languages on a single server, significantly reducing their IT support costs. New time-off features for hourly, salaried, and contract employees simplify the process of managing complex and unique country and regional time-off policies. In addition, built-in approval workflows ensure that employee requests, no matter where they are around the globe, are reviewed and approved quickly and efficiently. New manager workflows are the pay period close, the ability to handle multiple employee requests at once, partial approvals, etc.
  2. Award-winning UI Gets Even Better: The aforementioned Kronos Navigator UI delivers new and more efficient ways to organize workforce content (although the older look and feel can be preserved, if preferred by users). Enhancements include one-click access to the most common business tasks, and customizable alerts to guide managers through the decision-making process. The release also introduces a new employee self-service design that makes it fast and easy for employees to check their schedules, request time-off, or edit their timecards. Both employees and managers can easily customize the UI to meet their specific requirements and preferences.
  3. Align Labor and Demand with Enhanced Scheduling: Workforce Central 6.3 includes a variety of new scheduling enhancements to help organizations better align labor with demand. Managers now have a real-time, consolidated view of coverage issues across multiple locations, departments, groups, or units. With one click, staffing managers can reassign or re-balance their workforce to meet their current workload needs.
  4. Minimize Compliance Risk with Enhanced Absence Management: HR managers, leave administrators, and frontline managers should benefit from more efficient leave administration. This release enhances the Workforce Central intermittent leave capability with automation of medical certification durations and expirations (e.g., for employees with chronic conditions). Managers can now be alerted when certifications expire or exceed approved limits. These new features save employers time while ensuring employee leave is accurately tracked to minimize compliance risk.
  5. Greater Scalability and Enhancements to HR and Payroll: HR and payroll applications are now even more scalable to support larger organization deployments. New ad-hoc reporting features provide organizations with instant access to HR data for report building. Enhanced flexibility and control enables organizations to improve the speed and accuracy of the on-boarding process. Added security enables system administrators to limit data available for certain roles and responsibilities.
  6. Lower Total Cost of Ownership (TCO) and Even Easier to Own: Major investments made in the Workforce Central suite's architecture help lower TCO and improve security. Built-in system health and performance monitoring provide IT with real-time visibility into the major components of the Workforce Central solution to identify and resolve system issues before they appear. Kronos on-premise customers on older product releases can save money by upgrading to the 6.2 and 6.3 releases if only by cutting down on the number of servers via virtualization and 64-bit support. Still, currently only about 10 percent of Kronos’ customers are on the 6.2 release.

Handling chronic illnesses is mainly based on following rules—state and federal rules, such as short- and long-term disability and the Family and Medical Leave Act (FMLA)—as well as union agreements and internal policies. Other than union rules, these are usually the same for exempt and non-exempt employees. Kronos handles this issue with a rules engine built into its T&A capabilities. Still, this is a gray area, as there are a lot of overlaps in regulations. In sensitive areas like this, HR departments usually get involved, so it isn’t simply a systems issue. However, the system can support decisions with facts, rule enforcement, and tracking.

Streamlined archiving and purging to databases (history) are other nifty enhancements in the release. Also new in Workforce Central 6.3 are the Offline (no connection) capabilities, which requires the Workforce Central Employee module license, and the Quick Time Stamp (no password required), which also has an additional license.

 

New Workforce Analytics
The enriched Workforce Central Analytics 6.3 module shies away from predefined Microsoft SQL Server Analysis Services (SSAS) online analytical processing (OLAP) cubes in favor of flexibility via metadata and star-schema databases. Kronos now partners with MicroStrategy for analytics framework and with Talend for extract, transform, and load (ETL) data import capabilities.

The overarching theme of the analytics breakout session was the so-called Big Data issue: today’s systems provide an overwhelming amount of data but not enough actionable information. Companies must get back to core workforce analytics key performance indicators (KPIs), such as overtime, absenteeism, productivity trending, etc., to control costs and improve business performance. Kronos’ labor analytics finds good use in many business sectors, particularly retail and health care. Workforce analytics systems currently offer more than 150 KPIs to many enterprises to garner actionable information.

Last but not least, in 2011, Kronos released TeleStaff Version 2.70 of the scheduling and notification solution for public safety organizations, which includes integration with the Kronos Workforce Central suite. And Kronos has entered the public safety vertical with the acquisition of Principal Decision Systems International (PDSI) and the TeleStaff product in May 2011.

 

The Importance of Mobile WFM
As was evident at the conference, Kronos has continued development of its mobile applications designed for both managers and employees (e.g., time-off requests and related approvals). During its breakout session, Accenture stated that global mobile commerce is expected to reach $119 billion (USD) by 2015. In addition, 77 percent of the world population has a mobile phone: China at 64 percent, India at 70 percent, United States (USA) at 103 percent, the European Union (EU) at 130 percent (as some folks have multiple devices). In 2010, the number of smartphones exceeded the number of PCs in use, which speaks volumes to the utility of mobile applications.

Thus, the Workforce Central Mobile Employee 1.0 module (released in 2010) offers employees the following capabilities: Submit Punch, Approve My Timecard, View My Schedule, Request Time-off, and View My Accruals. During fiscal year 2011, Kronos delivered new Workforce Mobile Manager and Workforce Mobile Employee applications, which make it easier for managers and employees to complete a wide range of workforce-related tasks using a variety of mobile devices.

These applications are native to iPhone, Android, BlackBerry, and even to a generic (platform-neutral) smartphone. Via J2ME, Kronos mobile applications are accessible on Symbian-based devices, which are still popular overseas. The company chose a native device design (rather than Web-based via HTML5) for better user experience. And while Kronos expressed its undoubting commitment to supporting Microsoft’s SQL Server platform, it is not developing native Windows Mobile applications for the time being (owing to lack of interest).

Personnel managers look to save from 5 to 15 minutes a day using mobile devices for daily WFM tasks, which can add up to big productivity gains. However, Kronos Mobile must overcome IT department hurdles to enhance its use: security and how to ensure that companies are not paying for employees' private use of mobile devices.

 

Other Noteworthy Product Releases
Kronos Workforce Talent Acquisition Version 8.8
and Version 9 of the selection and hiring solution reflect Kronos' continued commitment to providing customers with a unified hourly and salaried, role-based solution to meet their recruiting needs. As of the Workforce Acquisition 8.7 release, the product supports the recruitment of both contingent (hourly) and salaried employees, which puts Kronos in the same league as Taleo, Kenexa, SumTotal (Cybershift), and Peoplefluent.

The aforementioned recruitment module comes from the 2006 acquisition of Unicru, and is a multitenant software-as-a-service (SaaS) product with about 150 customers. Kronos has since undertaken significant R&D on the product, which previously focused on hiring only hourly employees. The solution offers integrated background check capabilities through the Tandem Select partnership. Kronos admits that the sales of its product have been less than optimal owing to its purchase and use by recruiters rather than operations and traditional HR departments, the customary buyers of other Kronos’ offerings.

Yet a well-attended breakout case study session revealed how Kronos’ hiring system is being used by Starbucks, a coffee giant with more than 17,000 retail stores worldwide, 7,200 in North America, 123,000 store employees worldwide (which it calls “partners”). Until 2008, Starbucks’s recruitment process was manual, with frequent job fairs and drop-by applicant store practices. Today, Starbucks has no more pedestrian in-store hiring events, and hires only through Kronos’ hiring online system.

Starbucks cited that on average it receives 34 applications per hire and the company has hired 6,400 employees through Kronos thus far. Starbucks’ key ROI from Kronos’ hiring solution comes from the work opportunity tax credit (WOTC) refund from federal, state, and local governments; the product’s support for equal employment opportunity (EEO) compliance also plays a role. 

Starbucks first used Kronos’ hiring solution and then Kronos’ flagship solution for workforce scheduling (currently at only 40 stores). Starbucks’ practice of seemingly having stores at each corner has helped the company with relatively easily reassigning employees from one store to a nearby one, as required. The closing of about 600 stores a few years back necessitates the need for more sophisticated workforce scheduling at stores. Like other large global corporations, Starbucks has a complex IT mix: Taleo for recruiting salaried employees, Kronos for recruiting hourly workers, SAP as corporate human resource information system (HRIS), SuccessFactors for learning and performance management, and Symphony Software for point-of-sale (POS) merchant terminals.

Kronos focuses on recruiting (both hourly and salaried employees) but will likely not enter the learning, performance management, and compensation areas of talent management. All eyes are on the recently announced partnership with Saba Software, given the vendors’ complementary nature (Kronos offers WFM, HR/Payroll, and recruiting, while Saba offers e-learning, performance management, career planning, succession planning, etc.), to see the benefits and synergistic interactions that ensue. Prior to the Saba partnership, Kronos entered into an alliance with Workday—to target even larger global corporations (with more 30,000 employees).

 

The Analyst Meeting Takeaways
The meeting between the industry and financial analysts and Kronos’ top brass also revealed the company’s continued forays in growing its cloud computing and managed services customer base. Kronos prides itself in being “easy to buy, deploy, and maintain.” To that end, customers have many options for payment (i.e., perpetual license, subscription, or rent to own), deployment (i.e., in a customer data center or hosted in secure off-site facility), and system management (i.e., either maintained by the customer or Kronos). Thus, since late 2009 (when the cloud offering was made available), Kronos has acquired nearly 600 single-tenant (private) cloud customers (with Applied Materials, Apple, and Nike as high-profile users of Kronos’ cloud services). The vendor expects to see 60 percent growth in its cloud business and 100 percent growth in cloud computing revenue next year. 

The company is also bullish about its future based on the prospects of up- and cross-selling to its large install base in North America (which is admittedly a so-called “replacement market”) and brand new customers in emerging markets. The company has been doing extremely well in North America, particularly in the manufacturing sector, and perhaps contrary to conventional wisdom, has had double-digit growth in China, the Middle East, and Brazil, and solid performance in the UK and Australia. Kronos has reached about 70 percent worldwide geographical coverage through its international expansion. Kronos’ emerging status in Europe was a blessing in disguise, as its fledgling business (and hence its corporate bottom line) did not suffer that much from the Eurozone crisis. 

Somewhat surprising was the 25 percent growth in the number of customers using the HR/Payroll module, with a total of 600 Kronos customers currently using HR/Payroll. This trend can be explained by customers’ interest in having HR/Payroll as part of a WFM suite. Integrated HR/Payroll and WFM applications offer data integrity and a single point of contact. Except for the softness in the public sector (in these days of austerity measures), other industries have performed well, particularly health care, manufacturing, retail, and services. The vendor will not necessarily look to expand into new vertical sectors, but will rather develop functionality for sub-verticals, such as process and discrete manufacturing. Some new Kronos retail customer names in 2011 were Cavender’s, Fossil, BI-LO, Mohawk Industries, and Finish Line. Retail customers do not see any negative trends since Kronos went private in 2007, as they believe that Kronos is making major improvements in the retail space.

Kronos is not shy about talking about potential tuck-in acquisitions, whether to expand its geographic and vertical presence or its functional footprint. As for the latter, the vendor still does not yet have task management capabilities for retail stores. Although Ain admitted that task management (or retail execution management as others might call it) comes up in only 10 percent of retail deals, the company would nonetheless like to win those opportunities. For the time being, Kronos continues to leverage its alliance with Opterus for task management. Some pundits believe that stitched-up solutions do not really bring the retailer much value. Retailers need the ability to evaluate and schedule service and task labor simultaneously to get a true picture of their needs and to optimize utilization.

Some pundits also believe that Kronos should buy or develop internally a proven WFM solution for small customers, given that Workforce Central is overkill for companies with fewer than 500 employees. The intended acquisition deal with API Healthcare was squashed by the US Department of Justice (USDOJ) in mid-2011 on anti-trust grounds (as Kronos would have owned 80 percent of the health care market). API is a good niche company that was regularly giving Kronos a run for its money in health care—hence Kronos’ intentions to buy it. It will be interesting to watch what Kronos can do in other verticals without facing similar anti-trust issues.

 

Customer Panel Takeaways
The customer panel organized by Kronos for industry analysts revealed many of the aforementioned sentiments about the difficulties of managing workforce. Again, contrary to machine assets and inventories, a workforce’s intellectual property and motivation (emotions) must be managed and bolstered in a multiplicity of ways, and merely trying to control labor costs via hourly wages is too darn suboptimal. To that end, representing the big-box retail sector, Lowe's talked about selecting and implementing Kronos Workforce Central for the reasons of scalability, ease of use, and the vendor’s industry WFM expertise. The large retailer will focus on WFM analytics and exception-based reporting on mobile apps for employees and managers. While the mobile platform hasn’t been decided upon yet, Lowe’s volunteered that it would not be rolling out Kronos Mobile on iPhones.

On the public-sector side, the City of Houston claimed a $13 million (USD) implementation project, thereby saving $7.2 million (USD) per year using Kronos Workforce Central for converting public-sector employees to a positive pay system. The city cited striking examples of prior bad labor practices, including some part-time employees being paid enormous overtime hours (say, 60 hours per week) because managers did not know that part-time employees are not legally entitled to overtime. Also, anyone that works more than 40 hours per week is automatically entitled to benefits, but the main reason for working part-time is avoiding the costs for these benefits.

McDermott International, a large engineering, procurement, construction and installation (EPCI) equipment provider from Houston, Texas, talked about a different angle of using Kronos Workforce Central. Namely, it uses Kronos’ Workforce Activities product in managing the company’s engineering activities (drafting, estimating, training, etc.) on a per-project basis and for more detailed activity-based project job costing. Last but not least, the Northwestern Lake Forest Hospital in Lake Forest, Illinois, uses Kronos for talent (nurse skills) scheduling and workforce analytics. The hospital cited an article entitled "Nurse Staffing and Inpatient Hospital Mortality" published in the tier-one journal The New England Journal of Medicine showing an association between understaffing of nurses and quality of nurses’ skills and the mortality rates of their patients. As a corollary, there was also a graph showing an association between work stress and nurses’ ailments, such as ulcers (which in turn result with unwanted absences).

 

What’s in Store for Kronos?
With fewer sales people focused on the workforce management problem, Kronos just seems to chug along nicely. The vendor is benefiting not necessarily from a dearth of competitors but rather from major competitors’ lack of dedicated sales and marketing. With the relatively high penetration rates of the time clock and WFM markets, big competitors have lost interest and/or the expertise. Without specialized expertise, these vendors see their WFM win rates shrink and their marketing budgets get slashed, with headcount cuts likely to follow suit.

Kronos still faces tough competition in the retail and health care sectors. Kronos is a very good company and a fierce competitor if it is a straight T&A or WFM deal, particularly in health care, manufacturing, and retail. Kronos seems to be benefiting from the high labor costs and tough compliance standards, and from the largely untouched lands of China, India, and Brazil.‬‬‬‬‬‬‬‬‬ As mentioned earlier, its weakness is the lack of a task management system, which is becoming increasingly important to retailers. IBM (in partnership with Reflexis), SAP, RedPrairie, JDA Software, and Oracle have developed integrated suites with online order management and clienteling, setting them apart from Kronos as broader retail platform vendors. Kronos seldom shows up on these vendors’ radar screens on the supply chain management (SCM) side of the retail business.‬

Outside of the retail sector, Kronos has been good at ensuring its staying power in SAP and Oracle ERP shops. SAP and Oracle’s WFM solutions are not suited for hourly employees, and in addition to their relatively high price and complexity, they support batch processing only, which often results in “after the fact” information. In contrast, via pre-packaged connectors and its Workforce Integration Manager (WIM) technology, Kronos is able to provide near real-time integration and analytics to SAP and Oracle customers. 

Unfortunately, only very small companies realize such opportunities. Kronos should quickly move to a cloud-based WFM solution for companies with fewer than 500 employees (e.g., Next View Software might be an attractive acquisition target) before large professional employee organization (PEO) advisor services companies such as Insperity and Paychex capture the lower end of the market. The relationship with ADP remains tricky and competitive, whereby ADP embeds Kronos for its eTIME WFM offering for large companies with more than 500 employees. ADP’s other offerings, ezLaborManager and TimeSaver, are supposedly offered to smaller companies, but there is often a gray overlapping area and direct competition. About 20 percent of ADP’s deals are reported to automatically contribute to Kronos’ revenues, but Kronos’ sales force is aware of only their highly contested deals with other ADP products, hence some resentment.

A couple of prospects at KronosWorks 2011 told me that they were down to the two vendors Kronos and Ultimate Software in their selection of an integrated HR/Payroll and T&A solution. (Ultimate partners with Infor Workbrain and NOVAtime for T&A and WFM capabilities.) Other notable competitors include Empower Software and WorkForce Software.

 

Time Clocks Remain Kronos’ Strategic Weapon
Most of Kronos’ WFM competitors do not make time clocks, or any hardware for that matter, but rather partner with clock manufacturers such as Control Module Industries, Amano Accu-Time Systems (ATS), TimeLink, ZKSoftware, e-DATA by Kaba Group, and others. They have integrated time clocks from other manufacturers with their own solutions such as T&A through open interfaces. Kronos, on the other hand, has been a maker of time clocks for as long as one can remember, way back when in the 1970s when clocks were not the commodity that they are today.

I don’t know how much longer Kronos can continue with its proprietary business model of Kronos time clocks and software mandating each other. Any time hardware or software vendors retire their products (the old “We’re not supporting this anymore, so upgrade or else” mantra), it forces the customer to take a step back and look at other options. On the other hand, by opening its software to run on top of other clocks, Kronos may realize more opportunities.

Still, as Kronos owns so much of the T&A market, I don’t think that sticking to proprietary hardware is a big issue yet. It’s a nice stream of revenue for the company and I doubt Kronos is going to lose many deals over hardware. After all, Apple has proven many folks wrong with its success largely based on proprietary hardware and software solutions.


*According to IMS Research in "The World Market for Workforce Management Solutions—2011 Edition", October 2011.


Further Reading

TEC. Integrated Workforce Management (WFM) Platforms: Fact or Fiction? – Part 3. August 12, 2010.
TEC. Workforce Scheduling and Optimization: The Missing Link on the Shop Floor? March 10, 2011.
TEC. (Software and Human) Help Wanted in Overwhelmed Retail Stores. June 7, 2011.
TEC. Human Capital Analytics: The Metrics That Matter. November 10, 2011.
TEC. Human Capital Financials: Understanding the Value of the Human Assets within Your Organization. November 3, 2011.
TEC. Saba Software: All about People (Cloud) – Part 3. September 7, 2011.
Gregg Gordon. Lean Labor Strategies.

 
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