Simplifying the enterprise: the next big thing

One of the key messages to come out of the recent Workday financials launch is the notion of modeling the business from the business reality perspective rather than the accounting oriented approach that typified many so-called ERP implementations of the 1990s and early 2000s. In the ensuing discussion among my Irregular colleagues, Jeff Nolan said:

Everything emanates from the financials applications, or has an impact on. It's overlooked by most that the entire concept of ERP has financials as it's keystone, which is one reason why Siebel was destined to hit the wall, as was PeopleSoft before they developed a really kickass set of financial applications.

Jeff is right. If you look over PeopleSoft's history, it is true that in later years they sold more financials than HR applications, despite being better known for the latter. The same has been broadly true of the other big players. The result? Vinnie Mirchandani paints a broad picture where: "My clients have achieved 75 percent 'ERP' coverage but it is only 20 percent across verticals." In a post dealing with complexity, Vinnie goes further:

In many verticals outside of manufacturing, the ERP vendors did not deliver enough functionality (see how few ERP packages even today have replaced legacy utility billing, telecom billing, insurance claims processing, banking DDA systems and a long list of major applications). And where ERP vendors did deliver vertical functionality, many of the vendors (some vertical specialists did better) priced those "vertical engines" expensively (argument being there are fewer customers to amortize the vertical investment across - and a bit of "no CIO wants to custom build these any more, so we will justify the premium pricing").

To put it more crudely, ERP was never about the Enterprise or its Resources and I can't think where Planning fits when I look at what was actually delivered. But it has been mighty expensive.

Workday is attempting to break the value log jam by taking the end-to-end business process view, presented as a well priced service. This is something that one of its customers, KANA attempted in the late 1990s with order-to-cash sell side processes. KANA met with some success but as it was focused on the customer related buy and service processes, it was heavily dependent upon other applications - especially financials - to provide the data it needed to demonstrate value. As those who work in enterprise land will know, vendors go to great lengths to ensure that while you can sniff at their apps core, tasting is another matter.

Workday has the benefit of coming at this problem with a clean sheet of paper so it can model business as it is in the real world rather than as a cobbled set of departmental siloes. Will it succeed where others have failed? No-one can be sure except to the extent that it is focusing on service related industries (do I hear telco, energy utility and financial services?) If so then it will likely be more successful than attempting to put its arms around the hundreds of vertical markets that exist in manufacturing. At least that's what Jason Busch hopes:

At this point, even though Workday is talking a good game around putting the business first, they have have yet to take a vertical approach to customizing and positioning their modules. However, I would expect them to head down this path in the future.

So would I. But it won't be easy. The businesses at which Workday aims have become wildly and unnecessarily complex. If you look at telco for example, what does it do? Provisions and maintains a service, collects money. Much of what goes on in-between is about managing third party suppliers and attempting to keep customers happy in a self-inflicted world of ridiculously complex pricing. Managing the ever growing list of business processes makes life hard. Replicating existing processes rather than rethinking would be a huge mistake. As Jeff correctly points out:

To the core question, complexity lies in the interconnections not in the applications themselves. The developing false god of the enterprise 2.0 set is the assumption, like in all previous new things, that these systems and ideologies will make redundant and obsolete those that preceded them and in the process create simplicity through reduction. What is far more likely is that there will be downsizing of some legacy systems as usage decreases, but demand for integration will rise and the complexity equilibrium will be restored.

True enterprise simplicity will come not from better systems but from the realization that companies are complex as opposed to the systems they use to run them. Simplify the modern enterprise and the systems will look a lot less complicated.

The only remaining question then is this: Can Workday make the case for relative simplicity with enough conviction that its target market will see the value in investing in its approach? If so, then we'll have a new game.