Workday 13 Update

Workday provided a preview of the latest product update, Workday 13 at the end of April.  This appeared to be a major release of functionality across their entire ERP suite including Workday HCM, Workday Payroll, Workday Initiatives (Work Management), Workday Financial Management, Workday Spend Management as well as some new user experience capabilities.

This was the first update we have received in about two years so it was really impressive to see how much progress the company has made not only with their products but also with their overall business.  Here are some key facts:

• 200 customers and more than 130 of them are live
• Flextronics have over 100,000 employees using their systems
• Over 1,000,0000 employees are using their various products across their customer base
• Targeting an IPO for the second half of 2012
• Releasing about 3 updates per year, compared to 1 every 18+ months for their ERP competitors

Workday HCM

As I mentioned, the last time I saw a Workday product demonstration, they didn’t very much in the way of talent management functionality but that has really changed. They now have compensation planning, performance management, succession planning and competency management.  They have wrapped these capabilities in a robust in-line analytics and decision support framework.  This framework includes pre-packaged reports and some really slick user interfaces for workforce management.  This screen shot is of their 9-box interface for their succession planning product.  What I thought was really cool is how they have integrated their position management and organization charting capabilities right into this 9-box interface for their Talent Matrix.  These capabilities look very competitive to most of the other leading SaaS TMS players in the market.

For capabilities that they don’t currently have in the their talent management products like recruitment they will continue to partner with leading specialists like StepStone (now Lumesse) who acquired MrTed and Taleo.

For learning management they have built an intelligent interface into Plateau (recently acquired by SuccessFactors).

When they demonstrated the Workday 13 product, the one thing that popped out at me was the user experience and how engaging it was.  The user interface appeared to quite flexible, allowing the user to drill down, or across to access important information, as well as the use of compelling charts, graphs and dashboards.  I thought it was interesting to see how an object oriented architecture can really impact the overall usability of your SaaS products.

Workday Payroll

For an ERP system it is very useful to provide a payroll solution to tie into.  Workday’s product has been built from the ground up to be a SaaS-based payroll solution.  Workday Payroll was launched in 2009 and supports US based payroll requirements.  The news for Workday Payroll is a new partnership with OneSource VHR for payroll co-sourcing services such as payroll settlement, tax and garnishment administration.  These are common requirements for organizations with very large workforces.

Workday 13 still offers integrations into third-party payroll providers and payroll aggregators such as Patersons and ADP.

Workday Mobility

Seems like every HR software company is now offering a mobile application for users.  The news in this area was the announcement of limited availability of Workday for the iPad.  Again, one of Workday’s strengths is user interface design and this product is no exception.  The product is not intended for heavy transactional use but more for the executive or manager that wants to easily browse through talent profiles, monitor their Chatter-like personal Workday Workfeed or gain insight into their workforce by running a report or analytics.   The general availability for Workday for iPad is planned for Workday 14.

Overall, I thought that the Workday 13 release contained some useful improvements and the product is really impressive.  Given their 3 times a year release cycle, they will continue to innovate at a brisk pace which will be difficult for the traditional ERP competitors to keep up with.  Also, their laser focus on usability will also become a huge differentiator when looking at incumbent solutions, as long as Workday can deliver the necessary functionality and security that enterprises are going to continue to demand.

Seems like we were just here a few months ago but a lot of things have happened since the last Oracle OpenWorld in 2009.

It was great to see a full house of exhibitors that consumed most of the Moscone center in San Francisco. Walking through the two completely full tradeshow floors, which indicates some degree of growth in the broader technology market, especially after I saw a number of mega-booths with a lot of promotional events.

Fusion Applications

I didn’t see the Sunday keynote with Larry Ellison, but I heard multiple times that he announced everything at that session.  It appeared that area that SaaS followers were keenly interested in learning more about was Fusion and as one analyst mentioned to me it, ‘Larry mentioned a couple of the new Fusion Apps and then went Yada Yada Yada for the rest of them.’  His opinion was the anytime you Yada Yada anything that means you are not taking it seriously.  Well maybe.

It sounds like Oracle is taking Fusion serious, having invested close to $4B in R&D during 2010 alone,  in order to be ready to launch these next generation apps.  Oracle is offering 100 modules and over 7 different product families including Financials, Procurement, Sourcing, Project and Portfolio Management, HCM, CRM and SCM. We will see over the next few days if there is real detail and deliverables around all of this investment in Fusion or just more Yada Yada.

If Oracle plays this correctly, they will be able to cash in on the buying public’s shift to OPEX spending rather than traditional capital spending on software, which is no longer in vogue.  Fusion applications could be a viable alternative to smaller more risky best-of-breed application alternatives, but they need to be both pure-SaaS and functionally complete.  We will know over next few days.

Riding Hurd

I personally think that Oracle’s hiring of Mark Hurd was a true master stroke, and a major mistake on the part of HP for letting him go.  Mark kicked off the Monday keynote session and he looked like he had worked at Oracle for years, brimming with confidence and very comfortable.  It is also clear that having someone with his knowledge of the hardware world at the helm, is a major advantage, with all of the Sun technology now firmly part of the Oracle ‘Full Stack’ offerings.

We saw a fully buzzword set of presentations this morning; OLTP, Petabyte, threads, cores, and ZFS to name a few.  Speeds and feeds were the name of the game and Mark Hurd and John Fowler discussed the new Exadata 2 and Exalogic products.  Oracle loves fast products and breaking records, so owning the entire technology stack is going to be fun for Larry.   It is interesting that all of these really fast “Full Stack” products will be huge advances and will definitely improve the performance and scalability of future Cloud Computing services, offered by Oracle and others.

M&A in the Air

There have been a number of deals in the technology space over the past 30 days including HP purchasing both 3PAR and ArcSight for close to $4B.  In the HCM space there have been a very rapid spat of deals including one announced between SumTotal Systems purchasing Softscape, Taleo purchasing Learn.com, Kenexa buys Salary.com and Stepstone picks up MrTed.  One has to wonder if there won’t be a big announcement at Larry’s Wednesday afternoon keynote.  I have heard that Oracle might buy Netsuite, which is interesting considering that Larrry already owns about 65% of the company.  Considering Salesforce.com is speaking and exhibiting here at OpenWorld that might be sort of embarassing to everyone concerned.  It might also not be a ringing endorsement of Fusion either, but we will wait and have to see what happens.

More from OpenWorld tomorrow.

In Charles Darwin’s landmark work on the Theory of Evolution, he stated that “…Natural selection acts only by taking advantage of slight successive variations; it can never take a great and sudden leap, but must advance by short and sure, though slow steps.” Based on what has been happening with our economy over the past six months, the Human Capital Management software world is going to be forced to do a quick evolution.

Times are tough; just consider the global economic slowdown over the past three years. In 2007 it was the sub-prime mortgage crisis, in 2008 it was the Banking crisis and in 2009 we are beginning to see the Human Resources crisis.

This is very different environment for HR professionals than the old War for Talent era that was discussed by industry experts over the past five years; this current crisis is more related to a dramatic reduction in jobs in the economy and unemployment approaching 10%. Human Resources related budgets and headcount have been cut way back in an effort to stem the financial tide. Unfortunately most companies were not ready to eliminate anywhere from 5-30% of their workforces overnight. Not only were they not prepared for this change but they probably don’t completely understand what the future impact of their actions will be for their workforces. These dramatic changes have left HR in a precarious position looking forward because they have little in the way of staff or resources but their charter remains the same.

HR’s Rapid Evolution

As someone who sold HCM software for the last 12 years, it was always part of the sales pitch that the HR organization is always expected to do more with less. Now that the environment has really changed, when senior executives now say to HR, ‘do more with less,’ they really mean it.

Just like in natural selection, the HR survivors need to evolve. So in this brave new world, you no longer have the level of resources that that you have taken for granted for years. Resources like IT support, capital dollars in your annual budget, a team of people to work on projects and time. You may ask, how do I evolve? With dramatically less people, budget and basically the same responsibilities, you need to automate as much of your workload as well as your personal interactions. In this new world, the human touch is going to be at a real premium when it comes to HR.

Well - now that you are completely depressed, let’s review some ideas on how you can be an HR survivor. Did you know that most companies have up to 200 different HR suppliers, depending on the size of your company? Do you really need all of them? Since you are now in a zero sum budget exercise, start looking at your operating expenses as one big pot of money and start determining what is essential and what is optional. As you start your process, you need to free up budget to fund critical automation projects that can enable HR to continue to push along its strategic objectives. This may actually be a process that your IT business partners might actually be willing to help you with, since they are feeling HR’s pain like never before.

Natural Selection

So as you start thinking about your natural selection budget project, you should start to build out your game plan by trading out your old software for new software. My general conclusion about software is simple, old software is bad and new software is good.

Let me explain…

Many of the current Human Capital Management software providers evolved from PeopleSoft. PeopleSoft was the leading HR software provider in the market for nearly twenty years and spawned a complete suite of Enterprise Resource Planning applications including benefits administration, payroll and other HR applications. When PeopleSoft was purchased by Oracle in 2005, Oracle became the dominant provider but they appear to have no clear future plans for their HR software. So you need to continue to pay maintenance for old software, which keeps getting older.

When thinking about natural selection for HR software, think about the clear disadvantages in the current environment for your old school software provider:

• Software requires a large capital investment. This might be really difficult to get funded in our current environment, no matter how critical the software is to your company’s objectives.

• Implementation projects are both long and complex. Lots of investment to support customization and an expensive team of consultants who will live on-site for months or years. The consultants have to install your software in your data center, which will require a significant investment in hardware and infrastructure.

• Massive software upgrades. Whether it is moving from PeopleSoft 8 to PeopleSoft ? or to the latest version of SAP, these upgrades are expensive and require a lot of internal support resources and a big hardware investment.

• Lack of flexibility. The older software providers typically have rigid products, which make it tough to make even basic changes to features, reports or anything else. This is also a big disadvantage of buying all your HR software from a single vendor, like Oracle or SAP.

• Don’t play well with others. Ideally all of the software works together to make it easier to configure workflows, data elements, reports, and analytics because your data is sitting in a lot of different systems. If your software isn’t open to working with other systems, it can get really expensive, and you don’t have any budget to glue everything together.

Now you can see why old software is bad… and why they may be going the way of the dinosaur in the next 5-10 years. That’s right, even Oracle and SAP. Remember MSA and McCormick & Dodge!

What attributes should you be looking for in your future surviving HCM software suppliers?

These survivors have these clear market advantages:

• Software-as-a-Service. You have probably heard this term but it is simply when the software company rents you the software and you subscribe to their service the next 3-5 years. Because of this approach to delivering software as a service, SaaS firms are forced to be more cost-efficient because they get paid over time. SaaS software is delivered to your users through the Internet, which means your IT department doesn’t have to have to buy or support any software or hardware – this can save your company a lot of money.

• Long-term relationships. Because you rent the software, your SaaS provider has a vested interest in keeping you happy because you will want to continue to renew your subscription to the their software. Unlike old software firms who would sell you their software and disappear, SaaS firms are encouraged to stay close their clients and listen to your input.

• Incremental changes. It was not only the expense but also the tremendous organizational disruption associated with large software upgrades that customers really dislike about the old software model. SaaS clients enjoy a ongoing stream of transparent upgrades, that fix bugs, add features and their software literally evolves over time.

• Less extra costs. Since SaaS providers host their software in their own data centers, your company doesn’t need any IT staff to support their software or infrastructure (servers, firewalls and security) typically required to run HR applications.

• Configuration. SaaS firms offer more flexibility in the way they set up your software. Unlike the older software firms that bring a cast of thousands to customize and install your software, SaaS companies can set up an initial version of your software in minutes or hours rather than in months. Then once they understand your business needs, the software can be configured without custom programming. This approach saves you both time and money.

• Open for business. In this new world it will be difficult for any company to purchase every type of HR software from a single provider, so it is important for software to communicate and share information with many different software packages. This sharing will enable you to automate as many HR tasks as possible, allowing you to do more with fewer resources over time.

Slow Evolution of HCM Software

A little known fact is that the original Software-as-a-Service provider is Automatic Data Processing. They have been delivering payroll and HR services as a service, for nearly fifty years. Their offerings started out as a basic payroll service and their internal software just helped them to deliver their service more efficiently to their clients.

In the 1990’s, the next generation of on-line solutions appeared - where on-premise software was transitioned to being hosted in providers’ data centers (commonly referred to as Application Service Providers). A number of HR ASP software providers emerged including: Employease, PeopleSoft eCenter, and Workscape.

Then about ten years later, the conversation evolved from just hosting traditional software and a new model emerged - on-demand software, that provided a pay-as-you-go pricing model along with streamlined upgrades and new support processes. Some of these on-demand providers included: Authoria, Kenexa, SumTotal, Stepstone and Ultimate Software.

Then just a few years ago SaaS providers started to gain momentum. These firms really looked at delivering their software truly as a service and never delivered it on premise, sold in the traditional way. The HR SaaS providers always delivered their software over the Internet, with a modest amount of services, no upgrades, per-employee-month pricing and self-service support. Many better known HR SaaS providers include SuccessFactors, Taleo and Workday.

The next generation of HCM software might be based on Cloud Computing, where the SaaS providers no longer own their data centers and use providers like Google or Amazon.com to deliver world-class infrastructure support at on a pay-per-transaction fee. This approach could drive down costs, complexity and make a wide range of traditionally expensive HCM software much more affordable for small and medium-sized businesses.

Darwin Speaks

The HCM software market has undergone a number of wide ranging transformations over the last thirty years. We come back to the premise of old software is bad and new software is good. Old software is bad because it is expensive to maintain, modify and upgrade. Software teams that have the experience of working on traditional software but now working at new companies where they are using modern techniques might find it difficult to make their software better, faster and cheaper.

As you think of your portfolio of HCM software providers, maybe Darwin could help. And if Darwin were alive today, and knew about Human Capital Management software, I think he could put many of your company’s providers into these categories:

• Endangered – they are doing some of the right things to turn themselves into survivors but haven’t turned the corner just yet. These are the providers you need to keep a close eye on, just in case they become extinct.

• Extinct – those providers who are on the downside of innovation, living off of your precious maintenance, old architectures, delivered on premise and probably won’t be around for the long term.

• Survivors – those software firms who are worthy of your investment and will be in the market for the long term.