“Cloud Computing was taking off, but a year ago we didn’t have the functionality to replace the legacy systems,” says Aneel Bhusri, co-CEO of Cloud Human Capital Management (HCM) provider Workday. “But now we’ve closed that gap and overtaken the legacy providers. Customers are switching off their old HR and payroll systems. The more a company values its people, the more they will value a next generation set of HCM applications. For those companies, their core asset is their people.”
Workday’s HCM credentials are impeccable. The firm was set up around five years ago by Bhusri and Dave Duffield, the legendary founder of PeopleSoft. In its day, PeopleSoft was the most successful of the original breed of HCM applications which made it an obvious target for Oracle’s ever expanding portfolio of software purchases. Much of the early success of Workday came from Duffield tapping into his old contact book of PeopleSoft customers, but over the past year or so there’s been a ramping up activity that has seen quaterly bookings increase by over 50%.
The type of customers that Workday is attracting include some well-known brands such as Sun Life Financial, Lenovo and Aviva. These are genuinely enterprise-scale customers with enterprise-scale needs. For example, Sun Life Financial is using Workday to replace multiple legacy solutions with one global human resources system of record while Aviva is standardising globally on Workday as its HR system, with 16,000 employees in Europe and North America.
The entry point for Workday typically comes as a replacement programme. “In almost all cases, we come in as a replacement for PeopleSoft or SAP," says Bhusri. "It’s almost equally split between those two although there is a surprising amount of conversion from SAP customers. I’d expected more PeopleSoft/Oracle customers than SAP to be honest. We didn’t really compete against SAP when I was at PeopleSoft.”
To date, SAP has not had a Cloud offering that could compete in the HR and payroll space in which Workday operates. But with the firm showing some signs of ‘Cloud religion’, presumably that’s something that might change? “SAP’s only strategy in the Cloud is to make Business ByDesign [SAP’s low end ERP offering],” argues Bhusri. “Surrounding ten year old technology with add-on SaaS applications doesn’t get you near the Cloud.
“When I was at PeopleSoft, we had third party hosting solutions. We had people like Corio who were able to host PeopleSoft applications and who offered something of a cost saving, but you got none of the benefits of multi-tenancy as you do with the Cloud. I don’t see SAP’s offerings as more than short term solutions. Every new generation of technology is led by those who start with a clean sheer of paper. That’s not SAP.
“As for Oracle, it looks as though with their acquisition of Sun Microsystems that they are more lined up to compete with IBM. But at the end of the day, Larry Ellison and Oracle are smart and they recognise that the world is moving this way and there’s no going back to the old model.”
The HRO alternative?
As well as running hosted applications, customers have also had the option to outsource their HCM applications, but HR outsourcing (HRO) has had variable results. “Several of our customers have done HRO and it didn’t work out,” says Bhusri. “They wanted to outsource their systems but found that having their people outside the company just didn’t work for them. The technology had become so commoditised that they just outsourced it but then they realised that the people are so valuable. So they brought their people back in house and let someone like Workday manage the technology and the systems. For a bunch of companies that meets their needs. It’s hard to control your HR practice if it’s outside the company.”
But Bhusri does still see a role for the traditional HRO providers. “We have had a few conversations with HRO providers who want to ‘re-platform’ onto us,” he says. “HRO might work if it’s paired with new generation technologies like ours, but when it’s paired with older technology that’s inflexible and change resistant then it becomes prohibitive.”
Bhusri says that while the Workday offering is HR-centric, buying decisions still come down to a combination of business and technology executives. “Business leaders get excited by the Workday’s ability to address today’s business requirements,” he argues. “But typically it comes down to the CIO in the end. I can’t think of a situation where we haven’t won over the business user and then gone to the CIO for the decision.
As for the CIO’s willingness to make the move to the Cloud, that can depend on a number of circumstances. “The economic downturn helped us out thanks to the cost benefits of Cloud," says Bhusri. "Customers who are on an older version of SAP or PeopleSoft will look at the cost of an upgrade or the cost of a full implementation and then look at us and see the difference.
“With Workday, upgrades are our issue so you get none of the surprise costs that catch you out when you run your technology on premise. Hard as we tried at PeopleSoft, there is only so much that you can do when you give people a piece of software and wish them luck. Two years on, they will have customised it to such a degree that they can’t even compare notes with their peers because they’ve all customised it differently.”
Cloud-based HCM has the further benefit of ease of use, a crucial factor at a time when so many organisations are moving towards a self-service model of HR. This in turn prompts a startling revelation from Bhusri. “I ran the products business at PeopleSoft and I couldn’t work out how it worked,” he says. “At Workday, I’ve never had any product training and I can use the system. It’s the mind set that comes from Amazon: you don’t need training to be able to use Amazon."
Until recently, Workday has focused its sales and marketing efforts on the domestic UK market, but this is now changing as the firm expands its international ambitions. “We’re still in the early days of Cloud adoption although we’ve gone from early adopters to the early majority now,” says Bhusri. “But 75% of the world is still not ready and that’s our opportunity. We still compete 99% of the time with on premise solutions. We’ve just entered the UK in the past few months. There’s a pent-up demand there because there has been no large scale on demand solution on offer – and now there is.”
