Kronos Inc. tomorrow will announce that it has acquired SmartTime Software Inc., a 21-year-old workforce management software competitor that enables Kronos to add manufacturing-centric technology, development talent, and blue-chip customers in one fell swoop. Details of the deal were not available at press time.
The acquisition comes just days after Kronos of Chelmsford, MA, disclosed an agreement to purchase privately held Unicru, a provider of talent management software, for $150 million. SmartTime, which was on a run rate of about $7.5 million this fiscal year, gives Kronos access to technology that was built from the ground up to integrate with leading MES and ERP applications and a customer base that includes companies such as Aloca, BP Amoco, Carrier, General Dynamics, Gillette Co., and Merck. (Read about SmartTime in our 2005 "Companies to Watch" Special Report.)
The acquisition of much larger Unicru, meanwhile, broadens the landscape for Kronos's applications. Until now, Kronos has built and deployed systems that help manage a company's exiting workforce -- empowering management to juggle tasks such as payroll, scheduling, and time and attendance tracking.
The addition of Unicru's product portfolio extends Kronos's personnel prowess to the hiring process, where Unicru's technology excels. Unicru offers its Talent Management Platform as an on-demand application that aims to improve the entire hiring process -- from bettering recruiting efforts to automating standard hiring tasks to selecting better employees.
Company officials said the synergy creates compelling possibilities. The combined solutions, according to Stuart Itkin, Kronos's chief marketing officer, can work almost as a reverse engineering process. The Kronos Workforce Management System can examine a company's best employee, he says, and then set the Unicru selection tools to search for those characteristics in prospective employees.
Unicru has developed a customer base by honing industry-specific criteria for the hiring process. That customer base now stands at 140 companies that collectively run the software at 29,000 hiring locations. The companies, including Toys 'R' Us, Marriott, Uno's Restaurants, and Marquis Healthcare, hail from sectors such as retail, food service, hospitality, and transportation, where the transience of hourly workers can create a revolving-door syndrome that increases costs and hinders productivity.
By bringing Unicru into the fold, Kronos can now market its product as a total solution that stretches from the job candidate phase all the way through the worker's tenure with the company. The logical step forward, analysts have commented, would be for Kronos to adapt Unicru's success in retail and other customer-facing settings to other segments of the business world.
At present, Unicru's technology comes closest to the manufacturing world with its transportation applications, which help logistics providers hire the most capable drivers for truck-based transport.
That will change, according to Itkin. The company has not announced a specific roadmap for expanding Unicru's technology into industrial terrain, but the intent is clear. "We see manufacturing as a very logical extension," Itkin said, noting that manufacturing is one of Kronos's largest verticals. He said the Unicru tool will likely be applied to the hiring of shop floor workers as well as customer service operations within manufacturing businesses.
The deal also broadens Kronos's customer horizons, according to Paul Hamerman, a vice president at Forrester Research. "I think it's the beginning of Kronos going on a path to expand its product capability into a number of adjacent areas." He noted that while the Unicru move addresses the hourly workforce, he expects Kronos to explore opportunities involving salaried workers in the future.
The fact that the Unicru software is exclusively an off-premises, on-demand offering means that it will be integrated with Kronos applications that are deployed via the more traditional, on-premises model. Itkin said any disparate products will be fully integrated for users.
According to Itkin, once the deal is finalized -- expected sometime between July 31 and August 15 -- the Unicru product will become Kronos Workforce Acquisition, and the Unicru unit will be known as the Kronos Talent Management division.
The move serves primarily as a technology acquisition, but to a lesser extent it is also a revenue play and a customer grab. Of Unicru's customers, 11% are common to Kronos. Both companies have delivered strong revenue performances over the last few years, and Kronos has big plans for the near future. Since fiscal 2003, when Kronos closed with revenue of $397 million, the company has managed a steady climb, closing fiscal 2005 with more than $518 million in revenue. Over the same period, net income grew from more than $34 million to almost $54 million.
The goal is higher still, according to Aron Ain. In a statement, the Kronos CEO said that the Unicru purchase would be a significant part of Kronos's push to become a $1 billion annual business. Kronos expects Unicru's contribution to fiscal 2007 to be in the range of $50 million, and for the acquisition itself to be accretive on a GAAP basis by fiscal 2008.
Reaching the $1 billion goal, company officials know, will demand a more robust set of product functionality coupled with more customers, milestones the Unicru acquisition can deliver only in part.
Asked how he sees Kronos reaching the $1 billion mark, Hamerman said: "More acquisitions."
Kronos's move to acquire SmartTime (Framingham, MA) is a step in the right direction, according to Hamerman.
That deal, Hamerman said, is more of a roll-up acquisition. "I think this one gives them access to some customers that potentially may want to adopt ... the Kronos solution."
A person close to SmartTime said its investors decided to sell to Kronos after realizing the company needed additional scale to satisfy the business requirements of the mid-sized and larger customers that it was pursuing. "We needed more horsepower and the infrastructure of a bigger organization," the source said. "That was a journey for us versus a trip."
The acquisition by Kronos resolves those needs. In the deal, Kronos gained access to all of SmartTime's assets, including technology, customer contracts, and roughly 20 developers and client service representatives, the source said.
Online Editor Alan Alper contributed to this story.