Recasting its imprint on the HCM applications market, UKG is determined to break with tradition by jettisoning legacy products and streamlining its public cloud innovation with strategic partners, while pursuing a life-work technology approach that could usher in a radically different employee experience journey.
As these moves may sound unconventional, UKG CEO Chris Todd said he is not interested in copying someone else’s playbook to lead the 15,454-strong company five months after succeeding Aron Ain, who by any measure was consistent and predictable throughout his 15+ years at the helm. Todd added, “I don’t have any idol to follow.’’
At its Aspire user conference that attracted more than 4,700 attendees last week, UKG unveiled a series of initiatives that would have been non-starters years earlier. For example, its decision to sunset a number of key products like Workforce Central, as well as other industry-specific time and attendance applications that would otherwise earn the company at least $300 million in maintenance revenues over the next four years.
Todd said UKG is confident it will not only be able to retain that revenue, but potentially more than double it by adding thousands of net new and existing customers that are ready to adopt and migrate to its premier suite offerings like UKG Pro, UKG Dimensions, and UKG Ready. The upshot is that incremental recurring revenues from these SaaS products could amount to over $700 million over the same period, enough to offset the decline while boosting the vendor’s overall revenues to more than $5 billion and operating earnings of $1.5 billion by its fiscal 2025. For its fiscal 2022 ended on September 30, UKG was on track to post a solid single-digit increase to reach over $3.6 billion.
UKG did not attribute the decision to discontinue these products to its recent ransomware attack, which left thousands of its customers for weeks unable to access legacy products in a private cloud. The company said this is something that has been in the plans for many years since the introduction of UKG Dimensions. The longer UKG hangs on to the Kronos Private Cloud setup, the more risks it faces, not to mention the mounting costs and technical difficulties associated with supporting them adequately both in terms of security patches and regular compliance updates needed.
The underlying message is that UKG is better off investing in its new products like UKG Pro, UKG Dimensions, and UKG Ready than keeping the old ones indefinitely just to wait for problems to fester and present themselves at a time when enterprise software companies are more exposed than ever because of the mission-critical role they play in the day-to-day operations of big and small organizations around the world.
Another gutsy move by Todd is the decision to rally behind Google Cloud Platform, which accommodates most if not all of its platform and infrastructure requirements from cloud delivery to AI and machine learning tools like Tensorflow for deep learning, Apigee for API integration and Looker for reporting and analytics. UKG is also actively selling its products on Google Marketplace, which enables Google customers to use their credit for use of UKG apps.
UKG also partners with IBM, Microsoft, ServiceNow, Uber and Salesforce, but its alliance with Google appears to be the most impactful because of the high stakes involved on both sides, in addition to the non-competitive nature between the two.
Chief product and technology officer Hugo Sarrazin, Todd’s lieutenant hired last year to juice up UKG’s development capabilities after leading technology, digital and engineering functions at McKinsey, said life-work technologies including Benefits Hub for benefit administration, UKG Talk, Nudge and Pulse for manager and employee engagement to foster diversity and belonging in the workplace, along with a slew of mobile-first applications will underpin next-generation HR automation that facilitates end to end people-centric processes from payroll to recruiting and workforce management for scheduling and labor forecasting.
Some of its new products will center around personalized and contextual experiences resulting in long-term employee loyalty, in addition to key milestones for employees and teams throughout their career paths that result in meaningful connections, according to Sarrazin.
Sarrazin added leveraging Google’s heavy investments in machine learning will also help UKG customers gain visibility into smarter ways to stem employee turnover and prevent work-related accidents and injuries.
Another dimension to its life-work technology push is to create a startup ecosystem as part of its UKG Labs, which is involved in backing a number of startups including Growthspace for talent development through coaching and Roleshare for job sharing that can add value to its core applications by giving them access to its vast base of 70,000 customers through interviews and other user-derived insights, along with mentorships by working closely with UKG executives for at least 90 days.
Victoria Cacicedo, UKG senior director of research science, said the vendor harbors a unique view on what startups can contribute to the future of work and how UKG is well positioned to facilitate that because of its domain expertise and decades of experience of perfecting workforce management.
Another key attribute of its 2023 plans is the integration of its UKG Pro offerings with Great Place To Work acquired last year by launching the UKG Great Place To Work Hub replete with user insights, customer surveys as well as a treasure trove of HCM data. The objective is to deliver benchmarking data to its base of 70,000+ customers with the latest employee sentiments on hot topics such as diversity, equity, inclusion and belonging – similar to the seals of approval from the likes of Good Housekeeping and Consumer Reports. An intended outcome is that its current customers will be better served with actionable employee data, along with integrated enablement software tools like UKG Pro and UKG Ready.
Against the backdrop of this product realignment and its laser focus on public cloud providers like Google, UKG is banking on a horizontal set of HCM solutions that can scale to meet the needs of organizations regardless of their size and industry preferences, in addition to its earlier stance on purpose-built workforce management apps for healthcare, public sector, retail and other verticals.
Although the sunsetting of Workforce Central could turn off some of its biggest accounts especially those that have been using the product with considerable modifications to fit their needs, Todd said the pushback has been minimal with at least 200 out of a base of 1,400 WFC customers already migrating to UKG Dimensions, and hundreds of others preparing to run UKG Ready, including the full-suite’s HR and/or payroll, supporting Todd’s belief it will greatly grow revenue with this move.
To that end, UKG is aspiring to collaborate with them to deliver better employee experience at a time when many employers are still saddled with both the technology debts of running outdated systems and dual challenges of fighting the pandemic and talent shortage, compounded by a looming recession and heightened geopolitical risks.
Among the 20 largest ISVs in the enterprise applications market in the world, UKG is the only independent provider that is not publicly traded or part of a bigger organization, according to our continuous survey of more than 2,000 enterprise software vendors. With the financial support from a consortium of PE firms like Blackstone and Hellman & Friedman, UKG has the luxury of long-term planning and deliberate execution without hurry that its counterparts would kill for.
For that reason, its decision to forgo hundreds of millions in reliable revenue source may not sound too radical when its future is wholly dependent on growing its SaaS installed base organically and strategically, which ultimately will result in a more enduring and mutually beneficial relationship for all the parties involved.
One can even argue that if a calamity like the ransomware attack or a pandemic-scale disruption to its workforce productivity and customer support network has done little to stall its growth, a bold gambit may well be the quintessentially original idea designed to turn UKG into an even bigger player in the hotly contested HR software market with Todd readying to put his own stamp on the new UKG journey.
List of UKG Customers
Source: Apps Run The World, November 2022