Wednesday, May 14, 2008

Workday: evidence of SaaS adoption by large firms

Workday, the on-demand HR system provider, has signed up two new mega-clients: Flextronics and Chiquita (hat tip: Vinnie Mirchandani), providing evidence that software-as-a-service (SaaS) is not just an option for small companies.

Workday is a new human capital management (HCM) system provider, founded by David Duffield after he sold is previous software company, PeopleSoft, to Oracle.

According to Information Week, the Flextronics deal is huge, and Workday won in a bake-off with all the major traditional enterprise system vendors, including SAP and Oracle:
Flextronics, which designs and manufacturers parts for automotive, cell phone, and computer companies and grossed $28 billion in sales last year, selected Workday HCM to replace some 80 HR systems being used by the company in 30 countries, said Flextronics CIO David Smoley. The decision, he said, involved a "direct comparison with all the alternative, on-premise [software] vendors," which likely includes SAP and Oracle.
The deal with Chiquita is also large, covering 26,000 employees.

As a green field development effort, Duffield's company is creating a pure SaaS offering without the encumbrance of a legacy on-premise product. Though such offerings have had some success in smaller organizations, have had a mixed track in larger companies. is the best known example, in the CRM arena, and relatively successful as a choice for large organizations. On the other hand, Netsuite, which attempts to provide the entire range of ERP functionality, has had some rough sledding even among smaller implementations.

Workday is the latest high profile attempt at establishing an enterprise-class solution on an on-demand platform, this one specifically for human capital management (HCM), with functionality also rolling out for financials, purchasing, and payroll. The projects at Flextronics and Chiquita have just begun, and success is not guaranteed. But if successful, they will offer an existence proof that SaaS adoption is moving up-market to large organizations.

It will be a good sign and a welcome trend.

Update, 4:43 p.m.:
Workday's wins are getting a lot of attention from other bloggers as well. Phil Wainewright notes that SAP must be really hurting with the loss of Flextronics to Workday. He also mentions that is going live internally on Workday's HCM service, "extending its ambition to switch completely to on-demand products for its own internal use."

Dennis Howlett has lots of good insight, coming from his close association with Workday. He explains why Workday has found itself going after large customers, which wasn't its original intent. He also points out the nascent threat that Workday poses to SAP and Oracle:

The customers Workday is winning - it has 40 - are those that want to get off Oracle/SAP. Until now, there hasn’t been a choice that offers enough of an overall compelling package to make the switch....Workday is in the right place at the right time, which is more luck than judgment.
Of course, SAP in particular is not standing idly: its developing its own SaaS ERP offering for the SMB market, its Business ByDesign. But Workday's wins show that it will be facing new competition when it gets there.

Related posts
Dave Duffield debuts new on-demand ERP
All not sweet with NetSuite
Dave Duffield's next thing: bigger than the White House

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