Analyst Perspectives

I attended the 2013 Ceridian’s analyst day in Chicago to hear about and evaluate the progress the company has made over the last year and see the latest updates to its products since our firm last commented on them. Last September my colleague Mark Smith assessed Ceridian’s workforce management product Dayforce. As well we selected Ceridian’s customer Guitar Center for the 2013 Ventana Research Leadership Award for Overall Business Leadership.

The analyst day started with a review of news highlights and financial progress for Ceridian over the past year. Ceridian generated overall revenue of $1.5 billion in 2102 (which was relatively flat against 2011 revenues, representing about 3% growth) and EBITDA of $448 million (11% growth over 2012’s $402 million result); Ceridian’s human capital management (HCM) business represents 63 percent of all revenue with $950 million and $197 million in EBITDA. Ceridian has more than 100,000 customers, most of which are midsize businesses; Ceridian’s primary target market is companies with up to 10,000 employees.

Ceridian made strong progress on the product front last year and was a winner of the 2012 Ventana Research Technology Innovation Award for Human Capital Management. David Ossip, CEO for Ceridian HCM, demonstrated the current release of Dayforce HCM during the event. The user interface of the new release is easy to navigate, and it integrates all of the HCM applications – payroll management, tax filing, workforce management and human resources –into one system. In addition, a powerful capability is the real-time calculation and rules engine that underpins the entire system. Using the engine customers can immediately see the broad effects of any changes, as the system calculates their impact (such as changes to pay rates or tax implications of an address change in HR) on the entire system as well as the individual employee’s pay. In addition, Dayforce HCM includes in-line analytics and reporting that help payroll managers and administrators track and audit payroll activities in real time within the system without having to print information or export it to ay third-party application.

In addition, the new release includes integrated employee self-service features that could increase employee satisfaction and reduce support questions to payroll administration. Among these features presenters demonstrated online employee pay statements, employee pay cards (for those without checking accounts) and direct integration to Ceridian’s HR and scheduling applications; this enables employees to make changes to their schedules and profiles that are directly updated into payroll. All of these features use the rules and calculation engine, so changes that affect an employee’s pay, such as bonuses, are immediately reflected in the online pay statement.

Our most recent benchmark on compensation management revealed that many organizations are still not integrating their compensation and talent management systems but also that a growing number are beginning to plan for this; as the chart shows, those that have it today or are planning it over the next year add up to 40 percent of all organizations desiring an integrated system. We expect that such unified systems will continue to be more common.

In conjunction with the new release of Dayforce HCM, Ceridian reported a dramatic increase in implementations done by its professional services team. A speaker said the team is completing 40 to 50 implementations per month on the new platform and called this a tenfold increase over the four or five monthly implementations of last year. The reason Ceridian gave for this impressive increase was the design of the Dayforce HCM product, specifically its centralized nature, which simplifies setup. We will watch as Ceridian engages clients at this much increased volume how well the quality of product and customer service is maintained.

Ceridian also showed three applications scheduled for release in 2013. The first is released already, the Dayforce Touch time clock. This new device incorporates various features of competitive time-capture devices, such as RFID, a touch screen and biometric capabilities. It also offers photo capture at punch-in to validate the identity of the person and prevent “buddy punching.”

A second product, called Engage, takes social collaboration into workforce management and is an add-on to the Dayforce HCM platform.  Its user experience works like the Facebook wall, showing activity streams of discussion on general topics, but it also has a rules engine that ties directly into the Dayforce HCM platform so users can perform tasks such as post shifts they want to trade with other employees and have the results take effect in the system. I think Engage could be an effective add-on product for Ceridian over time. In our research on next-generation workforce management the technology area in which most participants (70%) want new functionality for workforce management is collaboration. For more on this, read Mark Smith’s evaluation of the top priorities for the next generation of workforce management to learn other new innovations on the horizon for the future of workforce management.

Ceridian’s other product announcement was an upgrade of its recruiting product, scheduled for October. Speakers at the event said that recruiting is the strongest market need among Ceridian’s talent management customers. (It’s interesting that HR software provider Ultimate Software said the same about potential market opportunities in talent management.) This product upgrade was still in its early stages but will include a revised user experience for recruiters and functionality for applicant tracking in Dayforce HCM.

Having seen the company’s evolving situation, I conclude that faces Ceridian’s two large challenges in the coming year. First is to continue competing effectively with workforce management and many of the HR and talent management software vendors that many offer mature systems to the same market of less than 10,000 employees as Ceridian. Second is to continue the bookings and revenue growth to pace faster than competition for helping fund further innovation. After much internal change over the past year or so, including the acquisition of Dayforce, rebuilding the core product suite and adding several key members to the management team, Ceridian is now in a strong position with new product releases and early evidence on deployments and sales growth; its task is to keep on gaining momentum.

Organizations that are looking for a single solution for payroll management, human resources management, workforce management, benefits management and tax and payment services may find Ceridian’s offerings a good match. Ceridian has deep experience in this space, and its product direction shows promise in the coming year. If you have not looked at Ceridian or Dayforce HCM, we recommend doing so.

Regards,

Stephan Millard

VP & Research Director