Six Lessons Learned From Kronos' Cloud Computing Strategy

• 90% of new Kronos software purchases are cloud-based today, and there are 17,000 active customers on Kronos Cloud.
• Kronos’ latest release is written in HTML5 in response to customers’ requests for greater user interface flexibility and a more intuitive user experience.

• 90% of new Kronos software purchases are cloud-based today, and there are 17,000 active customers on Kronos Cloud.
• Kronos’ latest release is written in HTML5 in response to customers’ requests for greater user interface flexibility and a more intuitive user experience.
• Providing customers the freedom to define their cadence of cloud adoption from licensed on-premise software and not forcing migration with pricing or contracts is key.
• Enabling a direct line of communication from Customer Advisory Councils and go-live reports to the CEO brings urgency to achieving customer satisfaction and taking action on new product and service ideas.

Transitioning from licensed, on-premise to cloud-based revenues is a formidable task for any enterprise software provider. The more engrained the systems, processes and maintenance-driven product development mindset, the tougher the transition becomes. With so many enterprise software companies pursuing cloud strategies and many struggling, I wanted to find out how Kronos was able to transform their business model and shift the majority of sales to cloud-based software.
During KRONOSWorks2015 held November 15^th – 18^th last year in Las Vegas, I had the opportunity to speak with Charlie DeWitt, Vice President, Business Development and several Kronos customers including Community Health Systems regarding their adoption of analytics and cloud-based workforce management.  Charlie was formerly Vice President, Strategy at i2 Technologies and has been with Kronos 12 years.  During our discussion, he provided insights into how the vision of the company has changed, enabling a rapid transition to cloud applications and sustainable revenue growth.  Kronos paid for my hotel and airfare to attend their event, and they have never been a consulting client of mine.
Six Lessons Learned From Kronos On Creating A Successful Cloud Strategy
My interview with Charlie DeWitt focused on how Kronos was able to keep their licensed on-premise application business profitable while transitioning to cloud-based applications. Kronos was able to transition successfully to selling cloud applications to their existing customer base while also attracting new customers and it’s interesting to see how they accomplished this.

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1. Kronos’ Charlie DeWitt shared the top five lessons learned in navigating their transition to the cloud, in increasing order of importance. The five lessons include:   
   • Be nimble. The speed of cloud adoption has been surprisingly rapid across all sizes of customers. Traditional barriers to moving to the cloud such as security and data privacy issues have melted away faster than expected. There are 17,000 customers deployed on Kronos Cloud today.
   • Double your focus on driving revenue. Maintaining or exceeding traditional growth targets requires tremendous focus in the face of rapidly increasing cloud sales.  This is simple financial mechanics, cloud deals defer revenue over many years, to make up for that deferral, overall sales needs to enjoy much higher than traditional growth rates.
   • Selling and implementing are no longer separate processes. In the perpetual license world, it was a two phase process.  Step 1 – Sell the solution.  Step 2 – Implement the solution.  In the cloud world, these two phases blend.  The objective is to get happy customers as fast as possible.
   • Pay attention to a different set of metrics. Metrics such as time to live, churn, retention, NPS, and % of revenue from existing cloud customers – metrics that tend to be very customer-centric – become increasingly important.
   • It’s a mindset change that is not possible without tremendous employee engagement. One of the most difficult things to do in life is to change proactively something that’s working.  Transforming into a cloud company required changes in every function of the business.  It continues to require clear vision and a willingness of all to execute and improve upon the vision.
2. Kronos appears to be a very metric-driven culture from the outside. What metrics and Key Performance Indicators (KPIs) are most important in managing your cloud business?  Most of the metrics important to the cloud business are also important for different reasons in the perpetual license world.  However, moving to the cloud caused Kronos to view four classes of metrics in a different way.

• Customer Satisfaction metrics: We have always paid close attention to customer satisfaction metrics such as NPS and implementation survey scores.  In a cloud world, we have dramatically improved response time, both for attaining and processing information, but also in reacting to potential problems and ensure resolution.  Customer satisfaction is no longer a function-related issue, the entire company is evaluated on this metric.
• Time-to-value: Time-to-value is a critical metric and has helped us to become more customer-centric.  After all, what the customer cares most about is a solution that is rolled out as quickly as possible, delivering the value associated with workforce management. Kronos has rearchitected entire processes to make this more efficient from a customers’ perspective.
• Financial metrics: Our focus on financials hasn’t changed.  We pay close attention to new cloud business, customer conversions to the cloud, and add-on business in the cloud.
• Employee engagement: What Kronos has learned over the course of five major business transformations, is the critical importance of our people.   Their innovation, commitment, flexibility, candor, and desire to create something better are what make any major transformation possible.

3. What type(s) of new customers are you attracting as a result of having cloud apps? Is this different than your on-premise customers? Kronos has had a long history of selling on-premise workforce management solutions into a very diverse set of customers, diverse regarding size, industry, geographic location, and IT sophistication.  With the cloud apps, we see an uptick in customers tending to be on the smaller size with limited IT organizations looking for easy to own solutions.  Often these types of customers are looking for a single solution for their Time, Attendance, HR, and Payroll, which Kronos is happy to provide.

4. What barriers to cloud adoption have your customers mentioned in sales cycles and how have you overcome them? One of our key learnings is that we were expecting there to be more barriers to cloud adoption than what we see in practice.  There, of course, are some of the traditional issues like data privacy, security, and control over the application. Probably the biggest barrier is the activation energy associated with starting up a project to pursue workforce management in general or to upgrade an existing, fully functioning, successful on-premise deployment.  But once customers consider all the benefits of workforce management (improving productivity, minimizing compliance risk, controlling costs)  in the cloud (being on the most current solution, freeing up IT resources, pay as you go), this barrier to seems to melt away.

5. What is the length of a typical cloud-based sales cycle versus an on-premise sales cycle? Are they both shifting as a result of the success of the cloud strategy? On average cloud-based sales cycles tend to be slightly shorter than on-premise based sales cycles. We see variability in length of sales cycles, it is difficult to say if this observation is signal or noise, yet cloud sales cycles, in general, tend to be slightly faster.

6. Analytics has the potential to re-order your entire business model. Can you please give me five predictions for 2016 of how analytics will change HRM in general and how big of a catalyst of growth it will be for Kronos in 2016? Much of the discussion until very recently has been around technology such as data warehouses, data visualization, Hadoop, etc.  – so essentially it’s been a technology-centric approach, a solution push approach. More and more we’re finding that organizations have access to this technology, but they are unsure of what to do with it. We’re working with customers in our served industries, combining workforce, operational and financial data to drive greater insights and measurable business value.

• Batting for average: The market has told everyone, “It’s Big Data, you better be solving big problems”.  Organizations have over thought how to use their data.  In their quest for the next Netflix affinity or Google PageRank algorithm, they have lost sight of the idea of using the data at their fingertips to solve important, high value, but in some sense prosaic problems.  You don’t always have to calculate an eigenvector to create value. Organizations will begin to appreciate data oriented solutions that are right in front of them.  Analytics home runs are few and far between; it’s time for a few singles and doubles.
• Value over technology: Organizations will begin to measure the success or failure of their analytics initiatives the same way that businesses have been measuring success for millennia.  By measuring the value, they are creating.  Can the solution help an organization find and reduce overtime or absence abuse?  Can it flag a problem with same-store sales in retail and identify potential problems?  Can measuring maintenance-related labor to drive a preventative maintenance program?  Can it be used to show how individuals impact customer satisfaction, patient satisfaction, revenue growth, quality, on-time delivery, throughput or scores of other important, industry-specific business drivers?  The answer is yes.
• Democratization: More simple analytics solutions will start to make their way into the hands of front-line managers and employees to help them manage in the moment.  After-the-fact corporate level analysis can help organizations learn, but providing actionable insight to the front-line enable firms to become more nimble, avoid problems before they occur or make the most of fleeting opportunities.
• Good overcomes perfect: The uninitiated often think that more data is better, but to paraphrase Nate Silver, “there is only so much truth in the universe, most of the additional data being collected today is simply noise”.  It is not necessary to bring in ALL of the data from EVERY system to create value.  People will start to focus more on the data that matters.
• Strategic HR for everybody: Often discussions around strategic HR revolve around the knowledge worker and the shortage of talent.  However according to a recent Manpower study, the top ten hardest jobs to fill in 2015 include skilled trade workers, drivers, teachers, sales representatives and administrative professionals. Strategic HR Analytics will increasingly to look at the whole problem of building the entire workforce. Analytics in human capital management will also move out of the domain of HR and into the whole business – for example, it won’t be just about turnover but how turnover impacts business.  A logical result will be that the HR function will become more relevant and a stronger business partner.  For years, HR has asked to have a seat at the table, now HR will have this seat as businesses begin to realize their people are their only sustainable competitive advantage.We already see Analytics as a significant catalyst for growth, but the effect is more subtle than you might think.