In 2005, after his PeopleSoft venture ended (successfully in financial terms, at least), I was sure that Dave Duffield would not sit still for long. And in fact, I’ve been listening to a slew of otherwise hard-to-please analysts and bloggers raving about Workday for a few years now – this company that was founded in March 2005 and launched in November 2006 by two great IT minds and PeopleSoft alumni: Dave Duffield and Aneel Bhusri.
Dave Duffield is Workday’s co-CEO, co-founder, and chief customer advocate. As mentioned earlier, he was co-founder, CEO, and chairman at PeopleSoft, and Workday is the fifth company that he has founded (see his full bio here). Aneel Bhusri is Workday’s co-CEO and co-founder (he was vice chairman at PeopleSoft). Aneel was named #15 on the 2011 Forbes Midas list (see his full bio here as well as other Workday leadership bios here).
Indeed, David Dobrin, Naomi Bloom, Ray Wang, Vinnie Mirchandani, Dennis Howlett, Dana Gardner, Nick Carr, Mike Krigsman, Jason Busch, Phil Wainewright, and Brian Sommer are only a few of the renowned market observers that have been talking, blogging, tweeting, and whatnot about Workday as possibly the best invention since sliced bread. Naturally, the skeptic in me has wondered what all this fuss and adulation was about. For some flavor, here are the blog posts on Workday by Dennis Howlett of ZDNet, Nick Carr of the Rough Type blog, and Vinnie Mirchandani of Deal Architect, and these seasoned and discerning fellas are not easily impressed.
I finally had a deeper look at Workday at the recent Dreamforce 2011 conference by salesforce.com (where Workday had a noted presence at the expo floor), and the vendor’s conceptual design and approach is beyond reproach. In many ways, Workday can be viewed as the next generation of good-old PeopleSoft enterprise applications. Like its predecessor, the company started with a set of best-of-breed applications around human capital management (HCM).
What Is Workday?
Workday was founded to bring enterprise software focus back to the customer (end users) and innovation. The company delivered Workday HCM (including personnel records administration and benefits enrollment) in late 2006, which is the foundation module that all 210 or so current Workday customers have. Today, the company also offers Global Payroll, Financial Management, Spend Management, and Initiatives solutions. Another fast-growing module has been Workday Payroll, currently with about 65 customers, while Workday Financials, Initiatives, and Spend Management have thus far garnered about 50 customers.
As a true multi-tenant software as a service (SaaS) provider, Workday has three updates a year. All Workday customers are currently on Workday update 14. Delivered in July 2011, Workday 14 included deep updates across its entire functional footprint to enable global enterprises (spanning the gamut from mid-sized businesses to very large organizations) to run their operations. Embedded analytics, mobility enhancements, and momentum in the public sector and higher education sectors are some of the major highlights of the product release (see the company’s Web page for more details).
Currently, Workday has over 800 employees in its offices including Pleasanton, California, United States (US) and Dublin, Ireland. Workday is currently ranked the “#3 Best Place to Work in the Bay Area for companies with 101-500 employees” by San Francisco Business Times. This is the company’s fourth year on the list.
As mentioned earlier, Workday delivers its Human Resource (HR), Payroll, and Financial Management modules as modern SaaS solutions. For customers, SaaS means no databases, upgrades, maintenance, and patches. For Workday, SaaS means that the vendor can put all of its support and research and development (R&D) resources into one version - since all customers are always running the latest version. This is in sharp contrast to traditional enterprise resource planning (ERP) solution providers that are “lucky” if 60 percent of their customers are on the latest product release.
SaaS delivery, which has found particular traction in the HCM space thus far, also means that implementations are measured in days and weeks, rather than in months and years. Currently, the average Workday customer has gone live on a core HR system of record somewhere between 4 and 8 months, with some of the fastest implementations in under 40 business days. As of 2009, Workday has been available on on smartphones including Blackberry and Apple iPhone. In August 2011, Workday became available on Apple’s iPhone/iPad devices as a native iOS application and will relatively soon support Blackberry and other smartphones via HTML5 (which seems to be the mobility strategy of its major partner and customer salesforce.com).
Tackling Cloud Integration
In early 2008, Workday acquired its former partner Cape Clear Software. Workday had previously partnered with Cape Clear since launching its service for easier integration with the myriad of other systems that customers required. By taking advantage of Web Services standards, the Workday platform could plug into complementary products (at launch, it included a tie into ADP’s payroll system). With integration particularly challenging and costly for firms, especially midsize companies, Web services promise to reduce the effort and expense required to link systems together and maintain flexible connections.
With this acquisition, Workday has since built modern integration hub capabilities that make it even easier to create, run, and maintain those integrations. Workday now offers integrations on-demand (e.g., to own or third-party payroll, benefits, and other systems), which eliminates significant systems integration headaches. In addition to providing an integration platform as a service (IpaaS), the acquisition has also given Workday a platform for orchestrating business processes across Workday and other customer applications. These capabilities give the company another way to show faster return on investment (ROI) and lower total cost of ownership (TCO) than its traditional ERP competitors.
Initially, Workday was funded by its co-founder Dave Duffield and the venture capital (VC) firm Greylock Partners. In April 2009, Workday secured US$75 million in Series E funding round led by New Enterprise Associates (NEA). Existing investors Greylock Partners and Workday co-CEO and co-founder Dave Duffield also participated in the round. That new round brought the company north of US$150 million in venture funding.
While this has been a sizeable investment, it’s a pittance compared, for instance, with the amount that SAP puts into R&D each year. Established SaaS businesses are intrinsically more profitable than their on-premises software counterparts, in part because the vendor makes money by renting both the software and hardware (so the share of the deal for the vendor is higher) and in part because the company is not wasting a lot of R&D and support money on certain kinds of software distribution and testing. At “old school” on-premises ERP vendors, the distribution, testing, and support costs are roughly 20 percent of their R&D costs, not counting the enormous costs of software patches management and distribution.
Who Uses Workday?
Workday customers are typically looking to move off legacy on-premises enterprise systems that haven’t kept up with their business requirements, no longer provide a competitive advantage, and cost a great deal to maintain and upgrade. In other words, Workday aspires to be the SaaS option for Oracle E-Business Suite (EBS), Oracle PeopleSoft, and SAP ERP replacements for the foreseeable future.
Workday is focused on enterprises with over 1,000 employees. Current customers range in size from mid-size companies with a few hundred employees to global corporations with over 150,000. Currently, there are nearly 2 million individual workers under contract, and the company is on pace to double its 2010 bookings number of US$150 million.
Initially, Workday was marketed to companies based in North America with 1,000 to 5,000 employees, or roughly US$200 million to US$1 billion in revenue. Beta testers and initial customers included Kana Software and Biosite. Back in 2006 Workday had no plans to provide vertical solutions to various manufacturing or services industries. The situation is much different now, with many multinational customers and the vendor’s intent to tackle certain sectors (e.g., higher education and public sector in Workday 14).
Most Workday customers fall into the following industries: Financial Services, Healthcare, Manufacturing, Services, and Technology. Big-name customers include Flextronics, salesforce.com, Time Warner Inc., Chiquita Brands International, and Thomson Reuters. Large production clients range from 23,000 employees at Chiquita to 200,000 employees at Flextronics. Workday has a direct sales force and does not currently use value added resellers (VARs). The suite is now available in 18 languages and supports business operations in over 210 countries.
PeopleSoft 2.0 (and more)?
At first glance, one might think of the Workday suite as being a service-oriented architecture (SOA), social, mobile, cloud, and open standards-based 21st century redux of the 1990s client/server-based and Web-enabled PeopleSoft suite. And they would be correct in terms of the similar functional scope that these two products cover. But while PeopleSoft might have been a technical redo of much of the functionality and data design of venerable Integral Systems (founded in 1972) in the early 1990s, Workday is a complete rethinking of the functionality, enabling architecture, and technology used.
Workday was a huge leap, in other words. Unlike most of today’s ERP products, Workday has the advantage of having built its software around a new set of technologies and standards, including rich internet application (RIA) tools, extensible markup language (XML)-based Web Services, and in-memory database (IMDB).
But the key concept of developing applications by Workday is the one of so-called definitional services that is close to object-oriented programming (OOP). The basic concept is that the next generation of software must be developed by defining an object (services)-based model of what users want the software to do instead of programming code for software to do it. The idea is also for users to have no software to manage (as governance would be built in), the application would be global and unified from the start, business intelligence (BI) and performance management would be core (not a bolt-on) and contextual, and it would be easy for users to use, change, and integrate.
With this grandiose undertaking in mind, from the ground up Workday took a fundamentally different approach to tackling business computing challenges than did the previous generations of ERP solutions. Having done this once before at PeopleSoft, Workday founders understood well the challenges of managing today’s global and dynamic workforce and teams. In these days of geographically mobile workforces, virtual enterprises, virtual teams and projects (being constantly formed and disbanded in an AGILE Scrum development manner), matrix reporting structures and whatnot, a global HCM system should be able to handle all the possible privacy laws, (fleeting) employee addresses worldwide, language skills, work visa requirements/ex-patriot employees, local payroll and benefit structures, and you name it other issues.
These global workforce management requirements are a tall order that had not been done entirely successfully the first (or second) time around. This time, though, Workday founders figured that their cloud-based, object-oriented, in-memory technology with flashy user experience would be much better able to do all of this complex stuff (because of many converging factors, from globalization to shifting workplace demographics) than what they had previously accomplished.
In addition, as it turns out, Workday is highly compliant with the latest IT buzzwords and acronyms. For example, according to Ray Wang’s Software Insider blog post, Workday incorporates the following 8 of the 10 essential elements for social enterprise applications:
According to Wang, the “Pervasive and natural collaboration” (i.e., software embeds knowledge worker skills into existing work flows) and “Self-learning and self-aware” (i.e., software that tracks preferences and identifies patterns for future correlation) traits are not there at Workday yet. Part 2 of this series will get under Workday’s hood and analyze the product’s secret sauce. In the meantime, your comments, thoughts, suggestions or individual experiences with global talent management in general, and Workday in particular, are more than welcome.
Great summary of Workday capabilities - however, the statement that Workday does not use VARs is incorrect. For prospects under 1,000 employees, Workday refers to and is resold by OneSource VHR, who runs the product for core HR & Payroll in an outsourced mode along with Newton for Recruiting.
Thanks for your insight Roy. In my talking to Workday’s executives, they firmly maintain their mostly direct approach at this stage. I am sure the VAR approach will expand much more down the track. Best regards, PJ
I meant Ron (sorry for my hasty mistyping) :-)
Hi Thanks for the part 1, may I have your help in letting me have a sample project on the above how software helps employees or companies.
I will need these information please
Thanks in advance
Existing investors Greylock Partners and Workday co-CEO and co-founder Dave Duffield also participated in the round. That new round brought the company north of US$150 million in venture funding. Large volume of employees managment which reduce overall time in staff payroll or time scheduling.
Great insights Ron, thanks for this post.