Many of the executives at software-as-a-service (SaaS) business applications provider Workday, which launched in the UK in April 2010, are veterans of the enterprise resource planning (ERP) wars that took place in the early part of the last decade.
Its founder, David Duffield, was previously co-founder and chairman of PeopleSoft, a contender for the ERP crown before it was acquired by Oracle in 2005, and president and chief operating officer Mike Stankey was PeopleSoft’s senior vice president of sales in the US.
So while its predictions of the demise of the on-premise ERP providers should be taken with all the salt appropriate when a company has something to sell, they at least come from the perspective of experience.
“There have been four main technology waves on which technology systems have been built,” Stankey argues. “And with each wave, the leaders in the preceding wave have not become anything close to the leader in the next wave.“
As proof that the new, cloud-based wave of application providers is taking over, Stankey points to on-demand CRM vendor Salesforce.com’s billion-dollar business and Workday’s own growth.
A privately owned company, its revenues grew by 50% in 2009, although they were still in the “tens of millions”, and by 300% year-on-year in the first quarter of 2010.
The company, whose flagship product is a human capital management (HCM) application and which has recently introduced a finance package, has no shortage of ambition. “We like to think of Workday as the replacement for ERP on a global basis,” says Stankey.
A common analysis of the SaaS industry is that while functions at the periphery of the organisation – such as CRM or HCM – are ripe for the cloud, the resource planning process is so central to business operations that the software that supports it may never leave the premises.
Stankey refutes this for two reasons. The first is the implementation, upgrade and maintenace costs of on-premise ERP software, which are so bad, he says, that customers are deploying SaaS alternatives even when they already own licences for on-premise products.
“One of our customers in the US is Sony Pictures, and they have one of the ERP suites which includes an HCM product,” he explains. “For three budget cycles they went forward with a proposal to implement what they already owned, but it was too expensive.”
“With Workday,” Stankey claims, “they were able to take forward a proposal to implement in one third of the time and at half the cost.”
These cost savings derive from a number of sources, Stankey says. Its 2008 acquisition of Irish service-oriented architecture infrastructure vendor Cape Clear gave Workday the technology to make integration with existing system easier and therefore quicker. Design and implementation is accelerated, he says, by the fact that the application executes in memory, meaning customisations can be made live instantly.
The applications interface means it can be used without training, he claims, aiding adoption and ensuring functionality is exploited. This interface is the result of the recognition that it doesn’t always pay to be an enterprise software veteran: “Although a large core of our employees came with us from PeopleSoft, we made a decision to have no former PeopleSoft employees on the user interface team,” Stankey says. “Instead, we recruited that team from consumer web companies.”
The other reason why Workday believes it can “replace ERP” is, according to Stankey, that the mainstream conception of ‘enterprise resources’ is outmoded. “ERP has its roots in materials planning,” he explains. “And 20 to 25 years ago, when the US and the UK economies were based on companies that made things, materials is what business systems had to manage.” Now though, he says, people are the key enterprise resource.
There are other, larger SaaS vendors in the HCM space, notably Taleo and SuccessFactors. But, Stankey argues, these vendors’ tools are peripheral even to the HCM task. “Taleo and SuccessFactors are not core systems of record, and that is what Workday is going after.”
The company is planning its initial public offering (IPO) in the next 18 months “as long as we continue growing as rapidly as we are, and the public markets maintain their strength,” says Stankey. If the PeopleSoft veterans enthuse investors with a fraction of their own ambition, it could be quite the comeback.