Workday sees opportunity for cloud financial management in Europe

Workday plans to push cloud finance and accounting services to enterprise in Europe, but observers say its background in HR technology may prove an obstacle

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Cloud services company Workday plans to step up competition by offering cloud-based financial and accounting software to enterprises in Europe.

The company, which has established a track record in cloud HR services, claims there is a huge opportunity for its financial management service.

Chano Fernandez, European president for Workday, said the technology would be a priority for the company as it expands beyond the US.

“In Europe the financial market is almost twice the addressable market of the HR market,” he said.

Analysts cautious

But industry watchers have questioned whether Workday will be seen as first choice for cloud financial and accounting services given its strong focus on HR technology.

“Clearly they see financials as an important piece in their overall play and they are gunning for a joint proposition with HR. I am less convinced about them gunning as a pure play in financials,” said David Wilson, managing director of HR technology analyst at Elearnity.

Workday senior executives’ presented their strategy at  briefing for journalists and analysts as they staged their first European customer conference Workday Rising.

Workday Key facts

Worldwide customers: 600+

European customers: 50

Worldwide employees: 2,600

European datacentres: Ireland and the Netherlands

Certified workday consultants in Europe: 279, up from 91 in 2012

The company, founded in 2005 by former executives of PeopleSoft, has  come from nowhere to win contracts with 600 enterprises and expects to grow its revenues to $700 million this year.

Still a teenager

But the company has yet to make a profit, and its customer base is still small compared to SAP and Oracle, which have more than 10,000 customers between them.

“Workday are still on the journey of internationalising their business. Compared with the size of the overall business, it is still a teenager in Europe in terms of maturity,” said Wilson.

However, Aneel Bhusri, founder and co-CEO of Workday, claimed last week however that the company's competitors, SAP and Oracle, had made a strategic mistake by allowing Workday to gain a foothold in the market for financial and accounting cloud services.

“If I was SAP and Oracle, I would have let us have HR. I would just not have given an inch in financials. And frankly they have tried to do the reverse. They have tried to slow us down in HR,” he said.

Combining HR and financial management

The company argues that combining financial, accounting and HR data into a single database makes more strategic sense for enterprises.

Its only the limitations of technology, that has kept them separate until now, said Mike Frandsen Workday’s VP of products.

“I was at PeopleSoft when we put financials and supply chain in one database and HR in another. And we did that not because it made sense functionally, but because the database could not cope with everything in one area,” he said.

With cloud increasingly becoming the norm, the debate about whether to run HR technology in the cloud or on-premise is now largely over in the US, and will soon be over in Europe, Workday claims.

“Even the legacy competitors don’t talk about on-premise HR any more," said Bhusri.

Emerging cloud markets

He predicts financial and accounting software will go the same way. They will make up one of five cloud software markets he expects to emerge over time – the others being, sales and marketing, IT services, productivity tools and industry-specific cloud services (see the box below).

In the longer term, Bhusri sees the potential for Workday to move into industry-based clouds, such as healthcare or insurance.

But for now the focus is HR and financials with analytics as a third element in the strategy.

C-level analytics

Workday co-CEO and founder, Aneel Bhursi, predicts the emergence of five big cloud IT markets

  • The customer facing cloud, offering sales and marketing services, from companies like Salesforce.
  • The IT Cloud, offering services for IT departments from companies like ServiceNow.
  • The HR/Finance cloud, featuring companies like Workday SAP and Oracle
  • The productivity cloud, featuring services like Gmail and Office 365.
  • Industry specific clouds that will grow up around areas like retail, manufacturing, and healthcare.

“We look at most analytics that the c-level cares about,” says Bhusri. “Financial data is the denominator. Profitability by sales region, profitability by product line, cost and turnover.”

The company has partnership agreements with companies such as Salesforce and ServiceNow, which can integrate their sales and IT services data into Workday.

One insurance company, for example, has worked with Workday to find more scientific ways of working out who its top sales performers were.

By combining data from diverse sources they identified star performers who had previously been overlooked.

CEO confident of growth 

Bhusri is bullish about Workday's prospects. He argues that CIOs come to Workday when they are facing a crunch decision, often a major technology upgrade that could cost them tens of millions of pounds.

And they are happy to move their HR and financial management data into the cloud, because they are commodity services, rather than services that generate a competitive advantage.

Just look at Silicon Valley, he says. “Every major social media company, search company and software company in the Valley is running Workday.”

Problematic payrolls

But analysts argue that while Workday may score highly on features, enterprises may still struggle if they are looking to roll out Workday alongside regional payroll systems.

More HR IT stories

“Workday talks about being global at the core but that means its not local at the core. You can opt for a global infrastructure, but you will have to use local payroll providers. For a multi-national, that clearly is a point of pain,” said Wilson.

Although Workday is developing payroll capabilities for France and the UK, SAP may have the edge on global payroll integration, he suggests.

Upstart startups

Bhusri said he loses little sleep over his established rivals, however.

What keeps him awake, he says is not SAP and Oracle, but the possibility of a start-up company disrupting Workday in the same way that Workday disrupted the established on-premise software companies.

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