Expect big investments as Kronos crosses the $1 billion mark, CEO says

Kronos is well-positioned for the future but needs a stronger push into SaaS, analysts say

Reaching US$1 billion in revenue has given Kronos CEO Aron Ain a reason to cheer, but its customers should be happy too.

"It gives us tremendous confidence to aggressively invest in what we're doing," namely global expansion, cloud computing and deep vertical expertise, Ain said in a recent interview. "These are all things our customers are going to benefit from."

The workforce management software company "has benefited mightily from being in on the ground floor of time and attendance recording," said analyst Naomi Bloom of consulting firm Bloom and Wallace, via email. "They have a huge legacy installed base for many flavors and generations of this type of software and hardware. Second, they've been very well-managed from the beginning, with steady hands on the tiller, so that they have maximized those early opportunities."

Ain has also been "very smart about expanding globally, doing reseller deals, and making some good acquisitions," Bloom added.

Still, despite its size and success, Kronos keeps a fairly low profile, something Ain acknowledges.

"I don't think people understand how many tens of millions of people start the process of getting paid starting with a Kronos solution," he said. "If Kronos disappeared, companies of all sizes would instantly have a problem accurately paying their people."

There's also an erroneous impression that Kronos is predominantly an on-premises software vendor, Ain added. In fact, there are between 11,000 and 12,000 customers running Kronos in the cloud now, he said.

Kronos' competitive advantages over rivals lie in a number of areas, particularly its extensive globalization, Ain said. "We support 100 countries today out of the box."

One question is whether the private-equity-backed Kronos will get scooped up by a larger software vendor, although that doesn't seem to be on the table for now. Earlier this year, Blackstone and GIC took a $750 million minority stake in the company, joining Hellman and Friedman and JMI Equity.

The private equity deal valued Kronos at $4.5 billion. While its investors likely first "went to all the usual suspects" in enterprise software seeking a buyer for Kronos, the price tag must have been too rich, leading to the backup plan of a minority investment, said Paul Hamerman, vice president and principal analyst at Forrester Research.

Looking forward, Kronos has a growing SaaS (software-as-a-service) business but "they need to continue to innovate and ride that wave," Hamerman said. "I see the market moving more and more to a SaaS deployment model."

While Ain was slow to move toward the SaaS model, "he's got enough runway to hold many of his customers, the majority of whom are not early adopters or in early tech adopter industries," Bloom said.

However, one area Kronos would be wise to invest in is better integration with core HR systems from the likes of SAP, Oracle and Workday.

"Although many will claim 'seamless' integration with other technology vendors, the truth is that they have different data models, were not designed to work together, are often direct competitors, and all the heavy lifting, complexity and cost is the responsibility of the customer," said Jarret Pazahanick, a veteran SAP HR software consultant.

Chris Kanaracus covers enterprise software and general technology breaking news for The IDG News Service. Chris' email address is Chris_Kanaracus@idg.com

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