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Workday Gets to Work
Its still difficult to start a conversation about Workday without referencing PeopleSoft and Oracle and the sequence of events that brought the latter two companies crashing together. In 2003, Oracle launched a hostile bid for PeopleSoft, then the second-largest enterprise resource planning company in the world.
In the midst of a dramatic 18-month takeover battle, Dave Duffield, PeopleSofts founder, emerged from retirement to try to save the company. With longtime PeopleSoft executive Aneel Bhusri at his side, Duffield waged a three-month campaign with Wall Street to save the company from Oracles clutches.
Duffield and Bhusris efforts were, in the end, unsuccessful. Oracle acquired PeopleSoft in the winter of 2005 for nearly a $10-per-share premium over its original asking price.
Wounded but considerably richer, Duffield and Bhusri rode off into different directions. Duffield worked as an activist for displaced PeopleSoft employees, and Bhusri went to work for Greylock Partners, a venture capital company. But the two were working together to start another company—one that would compete with Oracle as well as with the other giant in the industry, SAP.
That company—Workday—was launched in October 2006. One year later, Duffield and Bhusri sat down with Senior Writer Renee Boucher Ferguson and Executive Editor Michael Hickins to discuss the Workday human resources and payroll on-demand platform and their strategy moving forward.
Its been a year since Workdays launch. What have you learned in that year?
Bhusri: At the time, we had two customers; today we have 23. We had about 70 employees, and now were 150 employees and on our second release of the HR/benefits system and first release of accounting systems. So a lot has changed.
At the time, our customers were small to medium—1,000 to 2,000 people. [Our] most recent [customers] are companies like Chiquita Brands, with 25,000 employees. This year, we thought we would be targeting the 1,000-to-5,000-employee market; as the product became broader and more global, we went after those big customers probably sooner than we would have expected.
The applications continue to get broader and deeper. Rolling out accounting was important. Almost all the revenue this year and the bulk of next year is still going to be HR. Starting next year, it will be HR/payroll-based. And then, starting in 2009 to 2010, when financials really start and the product gets broad enough and deep enough, we can really start [rolling with financials].
What does it mean to get a customer such as Chiquita sooner than you expected? Are you ready for it? Is it a 25,000-seat deal?
Theyre going to roll it out in chunks—first in North America, then Latin America, then Europe. We dont look at seats, we look at employees tracked in the system, so its per employee. What its caused us to do is put a rollout of a global product on a more rapid timetable.
Click here to read more about how landing Chiquita forced Workday to enhance its product.
The first wave of customers were probably predominantly U.S.-based. As we started moving up, we started running into larger and larger global customers. Thats where we wanted to be, but were just moving quicker. So were turning global fairly rapidly.
From what I understand, the majority of Workdays employees are ex-PeopleSoft workers. So, what are you doing the same, and what are you doing differently at Workday?
Duffield: Very broadly, what were doing the same is our value and core beliefs. Theyre exactly the same as they were at PeopleSoft: Treat employees well, try our best and customers are really important. Were honest people, we have fun and eventually we will make some money. But thats not really important now.
Bhusri: And, starting with HR and accounting—thats the same. So peoples experience with processes—accounting business processes—are completely transferable from PeopleSoft to Workday.
Duffield: Whats different is certainly the business model, and also the technology. Aneels brought some very savvy consumer Internet people to Workday because, while PeopleSoft was good at a lot of stuff, we didnt have the skill set [to move forward] the user experience. It was old. So 20 percent of us are new folks that have had no involvement in PeopleSoft, and theyre primarily in the user experience.
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Can you talk a little about Workdays model-based development approach and how thats a differentiator for Workday?
Bhusri: The underlying technology platform is a purely object-oriented development system that runs in memory, and the real value you get out of that model-based development is [that] application developers who build applications are working with a tool set that requires no code. So in our vernacular its called a definitional system; you define business objects, relationships, methods and executions that are going to be performed against those business objects, and you basically just point and click your way to build all those relationships. What it allows us to do is versioning in upgrading these systems, as opposed to lines of code.
And thats where old ERP [enterprise resource planning] systems have completely broken down. You cant easily upgrade from Version 5 or Version 6. One company were talking to tomorrow is a large insurance company that just did a PeopleSoft upgrade for financials that cost it $30 million. They looked at each other and said, “Were not going to spend $30 million again. This technology allows us to basically forever take care of the upgrades for our customers.”
Click here to read more about Workdayss ERP-like beta.
You mentioned the customer you are going to see. Who are you talking to? Are you talking to chief financial officers, CIOs or line-of-business folks?
Bhusri: Mostly vice presidents of HR are the people who get excited about [the Workday platform], and we typically win over the HR project folks. And then the CIO [has] some influence—in some cases as an early adopter and in some cases as a vetoer. You need a particular type of CIO that likes on demand. Theres a new generation that likes it, and theres a generation that likes having their system on premises and having large empires of people—they dont like on demand right now.
I would guess, particularly with financials, that controllers and CFOs are a pretty conservative bunch. What is your strategy to win those folks over?
Bhusri: The whole security thing—I think it is a red herring. Our security platform is better than any one companys. Maybe the government has better security technology. We use all the same stuff that they would use internally. Its about as secure as you can be. Yes, you access it over the Internet, but you access it over SSL [Secure Sockets Layer]. Its a secure connection that has proven to be robust.
Duffield: And the financial folks, theyre also not IT guys. The whole HR team is enthusiastic about our product. The controller isnt, but the CFOs are up for it, IT is up for it. The controllers are sort of digging their heels in.
Bhusri: By definition, we have to be best practice, state of the art. We have to be better than anyone else. The CIO of Chiquita, we walked him through our security, and hes a believer of on demand. He said, “Hey, this is the right way to deliver HR.” In that case, it was the CIO who was an advocate.
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What about conversations around service-level agreements? Does that come up with customers, and what are you offering in your contract?
Bhusri: It does come up, and we do have an SLA. Right now, were at five nines [99.999 percent guaranteed uptime]. Weve only had one problem, and that was one outage for about an hour. It wasnt our issue; it was the data center issue. And that was very early on when we only had one data center. Now we have three. There was a power failure, and we had to get it up and running, but basically we havent had any issues in a year. …
People put an enormous amount of trust in us. We have to earn that trust and make sure we never give them reasons to not trust us. That is the basis of software on demand—that you absolutely trust your providers to do the right thing, and if you ever break that trust, for some companies it could be the end of the company.
What is your strategy in terms of beating Oracle and SAP, and do you think those are the guys to beat?
Duffield: Yes, they are. The kinds of customers were striving for—big companies—theyre the very ones Oracle is courting. Its the thing that [motivates] us with on demand. We have this great graph of how were going up-market and SAP is going down-market and eventually coming back up with its on-demand solution.
So, with Chiquita looking for an on-demand solution, theres not much to choose from out there, other than us and some smaller companies. And it will be that way in accounting as well. So thats a big differentiator. The other is the fact we have a reputation for delivering what we promise and trying hard to do the right thing, making [customers] jobs easier through software products.
Do you plan to personally finance Workday until you make a profit, or will you look outward for financing?
Duffield: We havent done any serious thinking, but going public is a rite of passage. It gives another dimension to your company, a very positive one. Its a good thing—not for me, necessarily, but for the employees and early customers. Thats one of the first questions they ask: When can I buy some Workday stock? That happened at PeopleSoft, and a lot of people made some good money.
What is the time frame for an IPO?
Bhusri: I would say 2010 would be the first time we start thinking about it. We have a lot of growth and a lot of things to do before going public, and a lot of those things have to happen before we even have a chance.
Duffield: We wont go public because we need money. Well go public because its a good thing from the perspective of larger customers. Its the financing [questions that they ask]: Are you going to be here? Its nice to not have to worry about that—where they can look at the balance sheet and feel pretty good.
Youve both been in the industry for such a long time. What is the biggest shift youve seen? Is it software as a service?
Duffield: Its changing all the time. There are certain points where various technologies combine to offer a new … I hate to use the “paradigm” word, but its not just one technology—its a bunch. It happened with client/server. We were successful [at PeopleSoft] because we were at that transition point where Windows was just coming out, SQL was just becoming popular standard, PCs were proliferating. You put them all together, and youve got a dramatic new technology.
Those things are happening today with Web services, object orientation, in-memory databases, the enormous growth in size in the small computer. You put all those together and you have something dramatic. Its just not one thing. Its what I really look forward to—being able to dramatically change things.
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