Kronos is Dead! Long Live Ultimate Software!

Perhaps the biggest trend in enterprise software right now is private equity. Investment firms are on a shopping spree lately, buying up Host Analytics, Apptio and BMC to name a few. Human Capital Management (HCM) superstar Ultimate Software is now the latest. The company has announced it is being acquired by a group of investors led by Hellman & Friedman. The $11 billion deal will take Ultimate private and leaves the current management in place.

From our analysis at Nucleus Research this is a great deal for Ultimate, the investment group and Ultimate customers. Big win all around. With record low unemployment, HCM has become highly competitive as businesses prioritize strategies to attract and retain top talent. Ultimate has emerged in recent years as one of two clear leaders on our Value Matrix, the other being Ceridian. The two have outpaced the competition in a hard-fought race.

Going private will take the pressure off Ultimate to show results quarterly and allow the company to focus on long-term growth and development. This will benefit its customers and partners. Clearly the private equity firms acquiring Ultimate see great value here too.

It’s interesting that lead investor Hellman & Friedman previously acquired HCM vendor Kronos back in 2007. Once a leading HCM software provider, Kronos has languished for years, steadily dropping in our Value Matrix in functionality and usability. It is telling that Hellman & Friedman would now go out and acquire Ultimate, a company that competes with Kronos. Both companies will be kept separate, and we’re not surprised. Hellman & Friedman had great insight into the market in 2007 but in our mind made a bad bet. No doubt they’ve just corrected that. The only question now is how long before Kronos customers realize their future supplier is in Florida, not Massachusetts.

But this blog is really about Ultimate. I believe this deal only strengthens Ultimate’s market position and will enable its leadership to focus on taking the company to the next level. The timing couldn’t be better, as HCM has emerged as a top priority for businesses seeking to manage their workforce in a tight employment market. Game on!

Ian Campbell is the CEO and founder of Nucleus Research, an industry analyst firm that delivers the cold, hard numbers that drive decisions. You can also follow him on Twitter @IanInsights