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December 3, 2012

Clocking In At Kronos: The Evolving Workforce Management Business

Photo/Edd Cote
Photo/Edd Cote Kronos’ workforce management software suite helps employers track hiring, pay and hours.

If you've ever punched a clock at work, the odds are fairly good it was made by Kronos Inc.

The Chelmsford-based company has been a leader in the time-management field since 1977, and with a sharp focus on modernizing products, it continues to be on top of the game.

"We're always trying to figure out what the next threat is going to be," said Aron Ain, chief executive officer at Kronos.

Like most companies, Kronos -- today Chelmford's largest employer – came from humble beginnings. It was founded by Mark S. Ain, Aron Ain's older brother, who continues to lead Kronos as its chairman.

Mark Ain was a Massachusetts Institute of Technology graduate with a big idea, according to Aron. That idea was the creation of an automated time clock that would make it easy for employers to accurately track employees' work hours.

Aron joined his brother's company as its fourth employee when operations were out of a small office in Brighton. When the personal computer debuted in the early 1980s, Kronos decided to make its time clocks computer based.

"That's when things really took off," Ain said.

Since those early days in Brighton, Kronos, a private company, has grown heartily. Today, its headquarters occupy three buildings on Chelmsford's Billerica Road, the third of which opened in October as a center for innovation for the company's engineers.

Of Kronos' 3,600 employees worldwide, 1,100 work in Chelmsford, and it's a fairly high-profile business, as evidenced by Gov. Deval Patrick's attendance at a ribbon-cutting ceremony at the new building this fall. With more than 30 years of success behind it, Kronos has a hefty chunk of market share. The company claims a 37 percent share, and analysts at IHS, a global information company, said in 2010 that Kronos was "the clear market leader of workforce management solutions."

A late-2011 analysis from Utah-based health care technology research firm Klas Enterprises found that Kronos had the greatest market share in time, attendance and staff scheduling among health provider respondents.

With a position like that, one might think Kronos can rest on its laurels.

But Aron Ain will do nothing of the sort. He recalled acquiring the time recorder division belonging to Simplex of Gardner (now part of Westminster-based SimplexGrinnell) in 2001. Ain likes having control of his company, and the Simplex acquisition reminds him to this day that keeping that control is never guaranteed.

"I'm always running scared that someone's going to do to us what we did to them," Ain said.

As a defense mechanism, Kronos has made a habit of acquiring companies around the world. It recently completed its 64th acquisition – and its third so far this year – but Ain said organic growth through innovation is a quicker way to expand.

"Don't just be a mechanical time clock company that doesn't change your product for 25 years," Ain said in describing his philosophy.

To that end, the company concentrates on making sure time management services are on the cutting edge. Today, most of Kronos' revenue comes from the cloud-based services piece of the business, though the company's computerized time clocks are still in high demand.

One strategy for expanding sales is to make services applicable in countries around the world. Kronos has focused on learning the customs and regulations surrounding the workday in Asian countries like China and India, for example, in order to offer relevant services there. Ain said this has made Kronos the "clear choice" of multinationals.

And, Kronos is working on applications that will allow clients to use its services on smartphones and social media applications, as use of those devices during the workday becomes more prevalent.

Raghavan Sarathy, a software-as-a-service analyst at Dougherty & Co. in Minneapolis, said Kronos is not alone as it looks to make services available on mobile devices.

"These vendors are not there yet, but you can see more and more people want to do these things from a mobile device," Sarathy said.

In this area, niche companies, like Kronos and its competitor, Ultimate Software of Florida, a $270-million company that Sarathy covers, stand to gain over large payroll-processing firms like New Jersey-based ADP and Minneapolis-based Ceridian.

Sarathy said smaller companies are ahead of the game when it comes to cloud services, and their products are easier to use. While larger companies look to transition to cloud systems, smaller companies can focus on the next big thing, he said.

As for the industry in general, Sarathy said demand for employee management services won't let up any time soon.

"If you think about it, every business has some HR or payroll (needs)," Sarathy said.

Kronos is not shy about its success in the field. Although the company went private in 2007 after 15 years as a publicly-traded company, it continues to release quarterly earnings reports. Ain said he wants clients to know how the company is doing.

Kronos reports an average annual revenue growth of 9 percent in the last three fiscal years, while earnings grew an average of 15 percent. The company is assuming a continued annual revenue growth rate of 10 percent, and projects that earnings will continue to average 15 percent.

Kronos is also planning more acquisitions, Ain said, though he declined to provide details on possible targets.

Kronos' success has given it the freedom to invest. The innovation center that opened in October was a joint-venture between Kronos and the property owner, Boston Properties. Kronos invested $7 million to renovate the building.

The inside of the innovation center is a light and airy atmosphere that includes a gym, walls with living greenery, and snack stations, all meant to provide an ideal environment for Kronos engineers to come up with ideas. While acquisitions and sales growth are important, Ain said, creating a workplace that's attractive to employees is also vital.

"In order to recruit and retain great people, one of the things we need to have is a world-class work environment," Ain said. n

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