Workday: a tipping point?

Larry Dignan is enthusiastic about Workday's 200,000 person deal it won to supply Flextronics with HR functionality, adding in the Chiquita 26,000 person deal as validation for what he suggests is a 'tipping point' for Workday. I'm a little more cautious.

Next week, Workday will release update 4 of its application suite and while I can't give details, there are a LOT of changes to discuss. What I can say is that the reason Workday is going after the larger accounts is because it is being forced to do so. Here's why along with my reservations:

• In discussions with Workday management earlier in the week and late (my time) today, with HR specialist and fellow Irregular Jason Corsello, it is apparent that the depth and variety of functionality being demanded by customers is requiring that Workday develop solutions that have a natural market at the higher end of the enterprise food chain rather than the mid-market which is where they were focused.
• About a year ago, Workday realized that the compelling tipping point for potential customers comes from having payroll. As Workday acknowledges, customers do not want to be running multiple systems yet uncoupling and recoupling payroll from SAP and Oracle to HR is pretty much a non-starter. Now that Workday is developing payroll, it is a far more attractive value proposition for those high end customers.
• The customers Workday is winning - it has 40 - are those that want to get off Oracle/SAP. Until now, there hasn't been a choice that offers enough of an overall compelling package to make the switch. As Larry surmises, Workday is in the right place at the right time, which is more luck than judgment.
• As Vinnie Mirchandani says in his warm assessment, everyone loves Dave Duffield. He is one of the nicest CEO's I've ever met. He can take the sting out of the fiercest questioning and I don't know anyone who has a bad word to say about him. At PeopleSoft, that reputation plus the ability to create a culture that reflected the CEO's personality carried PeopleSoft to $1 billion in sales. Duffield handed over the reins to the hard nosed and unloved Craig Conway. Such is Duffield's charisma, that one ex-PeopleSoft person told me last week that the change in atmosphere when Conway departed and Duffield returned was not only perceptible but immediate. Workday is trading off that reputation but humans are not scalable so there will be limits to Workday's ability to scale based on Duffield's reputation alone.
• Workday has many ex-PeopleSoft people in senior positions and they bring with them that 10-20 year old DNA in thinking about what works. While they are building to a new technical model, it is far from certain that they grasp the potential for melding Web 2.0/social applications into the HR mix. Jason Corsello remarked to me that: "I'm at a conference where the talk is of social applications as part of HR. Everyone is eager to know about this stuff. We're a way off from mass adoption but I can't see a real indication that Workday gets it. That's not a bad thing while they're building the core but they're not really innovating." Workday is proving to be quick on its developmental feet but it only takes an Oracle or SAP to fully grasp the additional pulling power of social HR apps for Workday to find itself behind the curve.
• Workday is including financials for which there is very little apparent on-demand appetite at the top end. As I said to Mark Nittler, who runs Workday's financial apps marketing, there is deep distrust among CFOs for multi-tenant financial apps at the middle and top ends of the market. That's why SAP is going mega-tenant, where each customer has their own instance of the database. If Workday goes down, everyone goes with it. If a SAP blade goes down, one customer has a problem. Given that skepticism, Workday still has to get a return on its financial apps investment or find itself with an R&D drain. It's a gamble that may pay off in say 5 years, but today the picture is far from clear.

I'm not taking anything away from Workday's great wins for which they should be congratulated. It will probably PR the Flextronics deal to death, claiming it's the largest on-demand HR deployment ever and building buzz accordingly. Potential customers will take note and at least take a sniff. On that score alone, Workday has delivered another shot in the arm to the on-demand fans (me included.) But a tipping point? We'll see.