Workday unveils Financials and Work Tags

Since Workday publicly appeared on the scene in January 2006, it has been self-described as a "revolutionary application platform and the next generation of business applications to drive your enterprise's performance," with applications that will be "dramatically easy to use, be responsive to your organization's changing needs and will significantly lower your total cost of ownership."

The sales pitch from Workday, which was co-founded by PeopleSoft founder Dave Duffield his former vice chairman Aneel Bhusri following the contentious acquisition of the PeopleSoft by Oracle, sounds similar to what SAP is saying about its mid-market A1S product due in 2008 and Oracle's Fusion applications, which the company said is a "vision" for the next-generation of enterprise technologies, applications and services that will revolutionize business.

All of the three are based on Web services, focus on ease of use and deployment and will address mid-market customers (with needs beyond Quickbooks) who have more flexibility to engage a new platform than the larger enterprises deeply invested in the previous generation of ERP systems from the now much consolidated market.

On demand, software-as-a-service is also part of the story and business model across the vendors to achieve better economics and less complexity for customers.

What makes Workday think that it can turn ERP on its head or side, as salesforce.com has done with CRM in enterprises, or that the startup company can outsmart SAP and Oracle over the next few years?

That's not exactly clear, although starting from a clean slate and adopting the latest technology concepts, from on demand services and in memory databases to tagging and SOA, is an advantage, especially if the company is well funded like Workday.

Workday has 120 employees, a few customers and is starting to shed more light on its core, differentiated technology. This week the company is moving beyond its on demand HRM (Human Capital Management) roots, announcing the beta release of Workday Financials, which it claims "delivers an entirely new model for helping companies manage revenue, resources, and financial accounting, while effectively measuring business performance."

Rather than siloed buckets of data and the rigid code block structure of traditional accounting systems, the core of Workday's new model is event-driven and uses tags to help glue pieces together into coherent snapshots of business activity.

"We have a fresh perspective," said Mark Nittler, vice president of applications strategy at Workday. "Business is about commerce and trade, not accounting. The entire business wants good information."

It's not a very fresh perspective to say that business is not about accounting or that companies want good business intelligence. But, the idea of atomizing each event in a business process and tagging them according to a schema, provided by Workday and easily modifiable by customers (without programming), does provide a more agile and lean platform for getting a 360-degree view of business activities.

"In today's financial systems each transaction that happens is assigned code blocks and that is how reporting is rolled up," Nittler said."Everybody in the organization faces the exact same set of fields, and all have the same set of code block fields to describe activities. It's the lowest common denominator, and to change these is hugely expensive risk and challenging."

Code block structures don't support notions of facilities, territories, channels, cost center, industries, he added. "Our approach is to do away with code blocks and make every perspective equal. Cost centers, activities (such as order, hire, pay invoice, receive order, ship) and accounts can all be on the same level. We are modeling the real things taking place and can deliver more business intelligence to each department."

Workday is using tags to identify the various dimensions of a business. All events are tied to configurable business processes. For example, a purchase event by marketing or a facilities department both need company and account information, but the facilities department will require tags for a specific facility and customer, while marketing will tag for entities such as campaign and region.

"The real key is being able to qualify which tags are necessary by department," Nittler said, and having those knowledgeable within a department modify or define the tags is key. "It's not quite del.ic.ious or Flickr, but we are able to have business information structure grow organically."

"The key to capturing information is in the events--who, what, where and when," Nittler explained. "This is the base business model of what is going on in the business. Some systems do a relatively decent job today, but the real issue is 'why'."

Workday believes its 'flatter' architecture and object database will allow for more business intelligence out of the box (or hosted service). By having the data on who spent money when on what campaigns, products and regions, for example, you can get a more contextual picture of why the money was spent and if it was a worthwhile investment of capital. In addition, governance is built into the new financial offering.

The key operator is 'built-in.' Business intelligence or governance isn't a potentially costly add-on that has to be integrated into the system. On the other hand, Workday doesn't yet have a full suite of financial capabilities or business intelligence functions. The company is planning to add the non-colored items (see the roadmap chart below), many of which are critical functions, over the next several months.

Workday didn't offer any pricing or final release information.

The target customer initially is the upper mid-market of unaligned organizations, Nittler said, meaning not committed to SAP Oracle or other vendors. In addition, the focus will be on the private sector (foregoing government and education), with an emphasis on service industires, which are more people-oriented, playing to Workday's PeopleSoft origins and staying out of SAP's native ground in manufacturing.

Regarding the competition, Workday CTO Stan Swete said that SAP is providing more APIs presented as services for accessing core processing, but it is limited in flexibility for modeling organizations, such as creating an ad hoc organizational structure. He gave Oracle's Fusion a similar report card, saying that Fusion attaches to service-oriented middleware but the core is not being restructured.

Both SAP and Oracle have focused on giving developers more touchpoints, while keeping the core engines off limits to preserve order and maintain propriety in an increasingly open sourced world. NetSuite is in the game too, but is addressing the lower half of the mid-market. Microsoft is persistently pursuing larger accounts with Dynamics. At some point, salesforce.com could add ERP applications through its Apex platform.

It's not clear, other than the Work Tags and no legacy code to carry around, how differentiated Workday will be over time as SAP rolls out A1S and Oracle follows suit with a similar offering sooner or later for the upper mid-market. The good news is that the market opportunity is huge, Workday is already in the market with a real product, and that a slick solution that is easy to use and deploy and can deliver great intelligence reliably, has a good shot as success. And, Duffield and company have a good track record of success in the past that could carry over into the new venture.

See also: Dennis Howlett posted "Workday Financials: Accounting isn't real ," and takes a close look at Workday's go-to-market strategy.  Phil Wainewright also analyzes Workday's latest announcement.