Workday's Progress
Workday now has 325 customers and is generating over $230M in runrate business, with revenue growth around 100% over the last few years. This week they announced that they closed Google as a customer, demonstrating their success in winning large complex deals.
The product started out as "The Only" cloud-based HRMS solution and is now evolving to a cloud-based ERP. While Workday does not yet have a complete analytics solution (the product has fantastic reporting capabilities but no real open analytics solution) and is missing recruiting, learning, and other parts of the talent suite, it is among the most compelling to use so customers are evaluating it at a fast rate.
(Read more on "systems of engagement" vs. "systems of record" here.)
Interestingly almost 1/3 of Workday's revenue is coming from professional services, showing how Workday's "Apple Strategy" (delivering a very tightly integrated, somewhat closed system) is forcing the company to spend a lot of money on integration services. These systems are very complex to implement (the clients I talked with told me it often takes a few years to fully implement) and they must interconnect with many other enterprise systems. Workday is working closely with Deloitte, Accenture, and others to build a strong ecosystem of implementation partners.
One of Workday's biggest innovations is the company's object-oriented database, which lets customers reconfigure the system very easily. What the financials point out is that this strategy, while excellent for selling, makes integration complex. (99% of enterprise systems are built on traditional relational database architectures, so customers or consultants have to map these systems against Workday's object interfaces.)
We are big fans of Workday for many reasons, and the IPO should be very successful. But as the company comes to its public offering the competitive space has become crowded. Oracle, SAP, and a variety of smaller companies have picked up Workday's message and are delivering a number of strong competitive offerings.
Incidentally, the market for cloud-based ERP is enormous (many billions) and there is no reason to believe Workday will not become a billion dollar company over the next 5-7 years.
Oracle's Progress
We sat down with Oracle this week and walked away very impressed with the company's progress in the Cloud HRMS and ERP area.
Oracle Fusion HCM (the company's next generation cloud-based HR software) is in production and we estimate Oracle has more than 100 corporate customers. This is an amazingly fast rampup over the last 18 months and Oracle appears to be winning 30-40 deals per quarter. Fusion HCM has many capabilities not yet available in Workday (predictive analytics, recruiting, learning, social networking, and others) and it coexists with existing PeopleSoft and Oracle EBS systems. (Workday pretty much is a "rip and replace" solution.)
The User Interface of Fusion is less exciting than Workday (but it's good and being continuously updated) and Oracle does not push its "object oriented database" in the same passionate way. On the other hand Oracle's products are built on tried and true traditional relational databases which we all know how to use and integrate with. Workday's database is proprietary and you can only access parts of the system they have decided to expose.
Oracle won a major deal with UBS and the company is now at a point where the company leads with its cloud-based HRMS solution. (Other notable clients include Alcoa, MetLife, Societe Generale, Toshiba, TRW, Healthsouth and a lot of smaller companies like Zillow, Shutterfly, and Brocade).
I think more and more PeopleSoft and Oracle customers are going to see potential here and Oracle's progress will make Workday's solution less "unique" and "exclusive" in the market. So in many ways the competition has caught up to Workday.
Oracle also briefed us on the Taleo acquisition and what we heard was impressive. Oracle is investing heavily in Taleo (the industry leader in recruitment and applicant tracking software) and will continue to push its lead in talent acquisition with a focus on sourcing, the candidate experience and analytics. Not only is the investment in Taleo increasing, the company is now sharing core technology so features like analytics, mobile (Oracle mobile applications will be launched soon), and integration with the core system of record are being shared.
Oracle's analytics products, while built on a traditional database architecture, are ahead of Workday's today - and while Workday believes it's reporting is far easier to use (the demos are impressive), they have a lot of work yet to do. If you want to build an HR data warehouse and a talent analytics system, you're very likely to lean in the Oracle (or SAP) direction.
Workday and Salesforce.com and Social Software
In a few weeks there will be a variety of announcements from Workday and Salesforce.com. What will likely happen is a strong integration between the two companies with the goal of providing customers a best-in-class cloud-based ERP solution from Workday coupled with a strong set of social tools from Salesforce.com. This is likely to be a very compelling solution for mid-sized companies but it begs the question of what Workday's long term strategy is for social tools.
Today social software is becoming a "feature" of core applications, not a separate product. This is why nearly every HR vendor in the market is "socializing" its apps with many features within the system to share information, comment, and use the employee directory.
Workday has basic social tools today and over time plans to enhance these features within the application, so the integration with Salesforce.com is most likely a sales, marketing, and integration partnership. I think it would be very exciting to see Workday and Salesforce.com go to market together with an integrated solution (it's something we would probably use in our company.)
Salesforce, by the way, is going to be announcing its own "Work.com" initiative in a few weeks, and has plans to greatly enhance its own toolset for employee management, goal alignment, performance management, and more. (The company acquired Rypple, a social goal-management system, last December.)
Let's not Forget SAP and IBM and Others
Let us not forget the other sharks feeding in this huge market.
IBM acquired Kenexa and stated a clear goal to build out and sell its own branded talent management software. The company plans to get "very aggressive" (IBM's words) in the HR software marketplace.
SAP is selling its own enterprise-class cloud-based HRMS, payroll, and ERP solution (available today with features rolling out each quarter) and its product roadmap looks very much like Workday. SAP's analytics solution is very complete, and will push Workday to invest heavily in this area.
One of the most exciting things Workday has done for the market is "legitimize" the use of the cloud for ERP applications. This has created a tremendous upsurge in replacement discussions around the world.
Typically large companies look at replacing their core systems every 7-10 years (particularly when new technology architectures come along). It's a tough decision. Changing vendors is a very expensive process, and customers have to ask themselves whether or not there's really a ROI to making the switch.
(It's a little bit like buying a new house, at some point you "outgrow" the one you have, but you can always build-on and sometimes you like the neighborhood you're already in!)
Through its innovation and upcoming IPO, Workday has shown companies the "promised land" of cloud-based ERP and we all love it. The entire enterprise software industry has now drunk the cool-aid and is moving in this direction. Oracle, SAP, ADP, Silkroad, SumTotal, NetSuite, Ultimate, and nearly all the talent management vendors are here now, making the market bigger and more competitive.
We congratulate Workday on helping to "transform an industry" and bring to market a wide variety of new systems we can now use to re-engineer our businesses.
