Software as a service (SaaS) has made great strides in recent years, especially in small and midsize businesses (e.g. NetSuite) and for departmental applications, such as salesforce automation (e.g. Salesforce.com) and customer service (e.g. RightNow.com).
is showing that SaaS also has a place in core applications of large organizations. I first noted this trend about two years ago, when Workday announced its wins at Flextronics and Chiquita
, both of which are still named accounts for Workday today.
So, I jumped at the chance to get a briefing on Workday's latest release, Workday 10. This post will document a few of the key points I found of interest.
By way of background, Workday was co-founded in 2005 by Dave Duffield
, founder of PeopleSoft, after Oracle acquired PeopleSoft. The firm's original focus was on Human Capital Management (HCM), though it is now expanding its footprint. More on that at the end of this post.
Lowering Total Cost of Ownership
- Scalability. Workday now claims 133 customers live on its system, up from the 40 I noted in May, 2008. It's not a large number, but it includes several mega-customers, as noted earlier. Flextronics, for example, has already implemented for 16,000 users in the US and Canada and is now rolling it out to another 30,000 in Mexico, on the way to its eventual goal of 200,000 users live on the system. This shows the ability of SaaS and Workday in particular to scale to vary large numbers of users in a multi-tenant environment. Workday does run multiple instances of its system, but only for purposes of load-balancing--which makes sense in light of some massive customer counts. The back-end of the system is Workday's own proprietary object management server, which uses MySQL as a persistent data store, which would seem to be a very large implementation of that open source database management system.
- User-Friendliness. Workday's user-interface is really, really slick. At one point, I had to stop the demo to verify that this is indeed a browser-based system. It is, based on Adobe Flex, with many features of its UI not seen often in on-premise systems.
- Protection of Customer Data. I noted that much of the information managed by Workday is extremely confidential, such as succession plans--especially for publicly held companies. Does Workday still get push-back on security and privacy concerns? The team indicated that those issues still need to be addressed in the sales cycle, although buyers are often coming to the table with a higher level of comfort with SaaS than they did in the past. Nevertheless, from a due diligence perspective, buyers still look for evidence that their information will be secure.
- Extensibility. I know from experience that large-scale HCM implementations can often required extensive customizations to accommodate customer-specific work rules, such as those resulting from union contract negotiations. Can Workday accommodate such changes in a multi-tenant system? The team assured me that it can. They claim the system has been designed with a rules framework, with predefined business processes that can be configured--not just at the customer level, but at the organization level within customer. This is another sign that Workday has large enterprises in its sights. They contrasted Workday's approach to customizations with that used by PeopleSoft, which did not ensure that changes would carry forward to future versions of the software.
Can Workday keep up with demand? It would appear so. Implementation is currently handled by a combination of Workday's own professional services group along with major partners.
Workday watches implementation costs and schedules closely, shooting for implementation services not to exceed 50% of the three-year subscription costs of the system. This is a significant savings over traditional on-premise implementation costs, which can run multiples of the initial software license cost. I know it's not apples-and-apples--but do the arithmetic and tell me this is not a major advantage for Workday.
I mentioned earlier that Workday thus far has been focused on HCM, with intentions of an expanded footprint. Consistent with this strategy, it is rolling out Financial Management this year with the goal of becoming a complete ERP suite alternative in 2011 and beyond. I noted that this was the same development path taken by Duffield at PeopleSoft. The Workday team agreed, indicating that -- like PeopleSoft -- it is starting with people at the center of the system, then rolling out to the other entities of the enterprise. Like PeopleSoft, its first foray beyond financials will be in procurement.
Gunning for SAP and Oracle?
Ultimately, Workday intends to offer full-ERP capabilities, though most likely for service-based businesses. This is a bit of a disappointment, as I would love to see a player with Workday's resources tackle the manufacturing sector as well.
Nevertheless, Workday would appear to be a nascent threat to the traditional on-premise Tier I vendors, Oracle and SAP. They are no doubt already seeing Workday in some deals for HCM and will probably begin to see Workday encroaching on their turf in financials. Another SaaS player, NetSuite, already has been campaigning for a slice of SAP's business
for smaller units. In contrast, Workday has a real shot at displacing SAP and Oracle in larger units or even for corporate applications of HCM. How much longer will it be before Workday is competing head to head with SAP and Oracle for complete ERP replacement in large organizations with legacy versions of these Tier I systems?
Hopefully, not too long.
Update, Mar. 29:
Read Naomi Bloom's writeup on Workday 10
. Naomi is a top HRM consultant and knows her stuff.
Workday: evidence of SaaS adoption by large firms
Dave Duffield debuts new on-demand ERP
NetSuite a viable alternative for SAP customers?