Aiming to revolutionize the enterprise software industry for HR executives, UKG is counting on its new FleX platform components and Generative AI technologies to drive more user adoptions.
Under an extensive co-development and revenue-sharing arrangement with Google Cloud, UKG stands to gain early access to Google Cloud’s Vertex AI, the latest artificial intelligence enhancements including the use of large language models for synthesizing petabytes of data into easy-to-understand conversational suggestions, some of which may come as early as the second half of 2023 in the forms of career designers that better match employee skills and interests, machine learning-enabled labor forecasting, as well as strategic workforce planning.
Separately, UKG announced its acquisition of Immedis, a global payroll provider that serves over 160 countries. The move is expected to bolster UKG’s suite approach by offering a full suite of Core HR, payroll and workforce management capabilities for multinationals. UKG already covers the payroll needs of 7.7 million employees every month through its Pro offerings.
At a recent analyst event, CEO Chris Todd said the momentum of its $4-billion-plus run rate – coupled with its nascent GenAI strategy – is on track to help UKG achieve $1.5 billion in operating earnings on $5 billion in annual revenue by fiscal 2025.
Todd said with the closing of another double-digit sales growth in its most recent quarter, UKG is unfazed by the macro-economic conditions and occasional challenges like migrating some of the 4,000 recently-acquired Ascentis customers more quickly to its core products. Moreover, Todd revels in its 94% revenue retention and continuous growth trajectory after adding 712 new hires to a total headcount of 15,356 in its 2QFY23 ended on March 31 at a time when other enterprise software vendors resorted to layoffs.
UKG FleXes Its Muscles
At the heart of its radical makeover is the UKG FleX platform that melds into an integrated solution set from a partner network of over 250 disparate products, a smorgasbord of HCM and workforce management data and analytics from its installed base of over 75,000 customers, along with developer tools and machine learning insights and suggestions powered by the Google AI engine.
Hugo Sarrazin, chief product and technology officer at UKG, said customers can use the purchase of their UKG products for Core HR, payroll, and workforce management for any contract over $250,000 against their committed spend on Google, essentially incentivizing them to standardize on both vendors. Its early partner status on Vertex AI will also give UKG additional margins, Sarrazin added.
Going forward, Sarrazin expects Generative AI to deliver more value to its entire product portfolio from shift scheduling to employee engagement, and from ticketing support to data migration. Additionally, document and skills intelligence will become easier and quicker to manifest, while best practices that permeate throughout its Great Place To Work Hub (as a suite integration innovation from its recent acquisition that has already fueled cross-sell and upsell opportunities among major accounts) will make HR best practices easier to replicate and compliance consistently enforced.
What’s more significant is that software engineering, quality testing, and delivering security updates at UKG will be vastly improved with Generative AI and Sarrazin predicts that run-of-the-mill API integration tools will become obsolete because some of these connectors could be reproduced automatically with the use of GenAI.
The impetus behind UKG’s AI push is that 6,500 of its customers have already been running the 2,500 AI models that are in active use and their eight million employees are currently being helped by AI each month, culminating in tens of millions of Key Performance Indicators, events, identities, and documents that would be the dream of any data scientist to connect the dots.
UKG also recognizes the fallacy of relying solely on any single Large Language Model as it mitigates the risks by layering Google Vertex AI with its own AI models and customer models through the FleX integration and development framework to ensure that none of its proprietary data including those from its customers would be read and reused by the publicly available LLM.
Rewards and Risks
For the time being, Generative AI has proven to be adept at summarizing huge amounts of data and responding to queries with a lightning-speed conversational chat that could sometimes be brilliant or at worst incomprehensible with inherent bias, intellectual property infringement issues, or even misguided cultural references.
There lies the rewards and risks for UKG following its lucrative deal with Google, which desperately wants to shore up the support of tier-1 enterprise applications vendors like UKG against the quick-sand backdrop of any evolving technology, while sparing no expenses to leapfrog main rival ChatGPT from Microsoft-backed OpenAI.
In doing so, UKG is expected to receive subsidies from Google for every new and expanded contracts and users that it can bring to take advantage of the joint-development efforts from two of the world’s biggest enterprise software vendors.
At a time when few know exactly how to monetize Generative AI other than the common refrain of “Build It And They Will Come,’’ UKG is likely to be among the first to harvest the low-hanging fruits.
Still, UKG is experimenting with a shiny new object that knows no boundaries except the fact that staggering amounts of HR data are fast becoming the fuel and unproven algorithms the steering wheel. The scenarios that should worry UKG and its customers are not whether Generative AI can be made explainable, ethical, or even trustworthy.
Rather, Generative AI may be very good at summarizing HR best practices in some instances, but more often than not delivering one echo chamber after another. Relying on both the commercially available LLM and its own proprietary data does not make any of these outcomes more remote.
For well-honed HR organizations, delivering more best practices recommendations may only result in negligible improvement at best. It could also backfire among smaller entities that cannot put these practices into action because of their size, which ultimately could turn UKG’s installed base into a two-tiered system favoring its biggest customers because they have more readily available, useful, or actionable data and insights than their smaller counterparts.
Catching payroll discrepancies is another case in point only if Generative AI is good at spotting anomalies. On the other hand, Generative AI could fare poorly if it were asked to identify and recommend overlooked opportunities that entail incremental revenues and staffing requirements. For example, again because it’s an anomaly, Generative AI would be hard-pressed to recommend a new 3 PM shift for a busy restaurant that wants to optimize its operations through better load-balancing of its resources, capacity, and inventory by introducing a special half-price menu to new diners willing to postpone their noon routine in order to save money.
In other words, Generative AI may be well equipped to give tried and true advice, but not creative workarounds for any HR issue.
Regardless of the hits and misses out of this trend, credit must be given to UKG for its timely and full-throttled support of Generative AI in order to make it more widely available to HR executives and now it’s up to the customers to measure its perceived benefits against the tradeoffs.
List of UKG Customers
Source: Apps Run The World, June 2023
