Workday Introduces ERP as a Service

Those looking for signs that Web 2.0 applications are becoming an increasingly dominant part of enterprise IT systems need look no further than Workday.

The company, founded by former PeopleSoft founder and CEO Dave Duffield, announced new additions to its HCM (human capital management) suite on May 19. And while SAAS (software as a service) offerings have generally been restricted to simpler, self-contained processes such as CRM (customer relationship management) and compensation management systems, Workday intends to build out a complete ERP (enterprise resource planning) suite to compete with the likes of Oracle and SAP.

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Big, bulky enterprise systems, with their perpetual license agreements and maintenance contracts extracting perpetual expenses from customers, are the dinosaurs of the enterprise IT world, while the future of the IT infrastructure is with Web-based, less expensive and more flexible systems.

SAAS vendor Netsuite has offered an on-demand ERP suite since 2003, when it was still known as NetLedger. But despite a relatively long existence in Internet years, it has never been able to announce anything like the deal Workday just made with electronics manufacturer Flextronics, to which it will provide software service for more than 200,000 employees.

Workday is also announcing a deal with McKee Foods, which has 6,600 employees, and has already landed contracts with the likes of Chiquita (25,000 employees) and ITT Defense (16,000 employees). This kind of momentum stands in sharp contrast to the struggles of SAP, which has had to delay the rollout of its on-demand ERP platform, Business ByDemand, and is becoming the poster child for the struggles of on-premise, perpetual license vendors trying to come up to Internet speed.

Workday Chief Technology Officer Stan Swete said Workday has also taken eight customers away from PeopleSoft and Oracle.

The primary new feature of the HCM suite release is a payroll system that can either stand alone or integrate with third-party payroll vendors such as ADP (also, not so coincidentally, a SAAS vendor).

Workday has also added absence management and organizational management tools. The organizational management application reflects what Workday officials said they see as the reality of modern business organizations, which are flatter and have more complex team and reporting structures than in the past.

Christine Ferguson, marketing lead for HCM applications at Workday, said employees often report to one organization but can also participate in activities on teams in parallel organizations.

The HCM application is intended to mirror this reality by, for instance, allowing managers to approve vacation days or expenses for an individual, even if the person doesn’t report to them directly.

“We want to have one instance of a person,” Ferguson said.

Workday also uses the same calculation engine both for payroll and absence management. “A lot of people can claim they’re doing this, but I don’t think anyone is,” she said.

Swete explained that this is because most other systems are cost-center-based. “Those reports don’t have knowledge of supervisory structure; Workday does. Reconciliation between those two isn’t necessary with Workday,” he said.

Workday is also introducing the first elements of a business management suite, with an end-to-end procure-to-pay application.

The irony of the deal with manufacturer Flextronics is that Workday is focusing on services-oriented companies. Thus, the focus of the application is on tracking resources, whether human or nonhuman, rather than on the accounting treatment required with businesses that rely on a physical plant.

“We do a better job of tracking what used to be called a small item, but which is becoming a more and more important part of expenses,” Swete said.