Workday comes to bury ERP and prise finance from its grip

Workday is done with cloud ERP. Not the cloud aspect, but the ERP acronym, which is weighed down by too many negative connotations that simply don't fit the image of a modern enterprise system. Speaking at the company's annual technology briefing for industry analysts this week, co-CEO Aneel Bhusri said it was time to lay the term to rest, stating:

We really want to have ERP, as a term and as a concept, just rest-in-peace. It's time. The idea of cloud and ERP coming together, it's just a total misnomer. Everything about ERP is static. It's not flexible. It's wedded to highly customized systems, very different than a lot of the cloud architectures.

We've coined a new term, Enterprise Management Cloud, as something that really carves out what we're doing, which is really the business backbone between HR, finance, procurement [and] planning components, and as we move into industry apps, like student systems and others, that as well. But it's really that business backbone.

At the core of this new proposition is the concept of 'data-driven' applications built on Workday's data layer, bringing together information across its own HCM, finance and spend applications, along with data from external sources such as third-party cloud applications, on-premise systems and elsewhere. The Workday platform unifies the data using its own object framework, adds machine learning to automatically identify and act on patterns, and presents real-time results in a format that's digestible by business users, who can then drill down to the underlying data for extra context.

These capabilities are finding a market even among finance teams that remain wedded to on-premise ERP systems in industries such as manufacturing and retail. Around a dozen customers have already signed up for an enterprise finance offering that uses the vendor's Prism analytics to bring data into the Workday platform to expose it to the planning capabilities of Adaptive Planning, the AI-powered automation of Accounting Center, and sometimes also sourcing and procurement. This typically appeals to organizations with a complex landscape of ERP and other on-premise systems, as Terrance Wampler, General Manager of Workday Financial Management, explains:

As they think about doing a full transformation, they don't have an appetite to do that within the company. But they do need to be more agile, especially around either their corporate finance, or around a subsidiary or division that they have a high growth for ...

We can talk to customers, predominantly, that are product-based — but could also be service-based companies who don't quite have the full appetite to move to the cloud entirely yet — and we can come in and offer them an enterprise finance layer.

Expanding the addressable market

This new offering expands the addressable market for its financials products outside of Workday's traditional stamping ground of services-oriented industries, notes co-CEO Chano Fernandez:

It is opening lots of doors for us with customers in any industry, since it enables them to leave their existing operational ERP systems in place, while moving their corporate financial function solutions to the cloud.

Of the customers so far signed up, around 80% are either completely new to Workday or had been users just of Adaptive Planning, with the remainder being current HCM customers. The first implementations are in progress and one is just going live. This is a global retailer that wanted to improve its planning for growth as it opens new stores, and sees its adoption of the solution as the first step towards ultimately moving its HCM and financial systems to Workday. Jim Stratton, Workday's Chief Technology Officer, takes up the story:

They initially set out looking for a traditional planning and consolidation tool, but saw Workday's ability to combine high volumes of detail from their point-of-sale system with financial data to inform planning and budgeting is really a dream scenario for them.

Workday's approach is going to enable them to plan and analyze across data from seven core financial systems and retail systems without building an expensive data warehouse or without massive integration environments. They view this project as just the first step to eventually replacing all finance and HR systems with Workday.

Once core financials and HCM are brought into the Workday platform, the full potential of 'data-infused' apps can be realized. Pete Schlampp, EVP of Product Development, explains:

These sorts of apps unify data from across the enterprise. They transform it into consumable insights, and provide an easy way for knowledge workers to plan, execute and analyze, all within the application itself. It's exactly the opposite of a knowledge worker having to go and learn and use three different systems to do the equivalent in other vendor offerings ...

We take that rich combined information from those different data sources and surface it as an application. More importantly, it's an immediately understandable application that shows that knowledge worker their summarized data and then allows them to navigate back to the detailed transactions across their people and financials. And because we're packaging these data-infused apps as a complete workflow, the knowledge worker will be able to initiate a plan based upon whatever findings they surface, and then they'll be able to execute on that plan.

He cites as an example Workday's recently released vaccine management solution, which draws on planning, HCM, the recently acquired Peakon people experience app, and Prism, which went from concept to being available to customers in as little as five weeks. Others draw on the AI capabilities built into the Workday platform, such as a candidate skills-matching app for recruiting, which will be generally available in the second half of this year. With the roll-out of the Workday Extend toolkit, custom apps for specific customer use cases become possible. One example is a consumer goods manufacturer with a highly seasonal product line sold through grocery chains that partnered with Workday for demand planning. Schlampp recounts:

We deployed our ML-powered forecasting engine, which takes factors like seasonality and promotions into account and automatically generates SKU-level forecasts based upon historic actuals. We're just getting going here, but the cycle time savings have been significant, and the generated forecasts are proving to be incredibly accurate.

Slaying the ERP monster

Workday has been trying to kill off traditional ERP since its foundation, and in 2013 portrayed it as a Franken-soft monster of cobbled-together workarounds that was dragging business down — an image originally conjured by diginomica contributor Brian Sommer in his then ZDNet column. Nowadays pretty much everyone feels that way, and Workday rival Oracle even used the exact same Franken-soft image — without attribution — in a recent online event. The irony is not lost on Bhusri, who remarked:

We're now on the same page, they're just eight years behind in recognizing that ERP is a Frankensoft and needs to rest in peace.

So is enterprise management cloud the silver bullet that finally kills off ERP for good? Who better to ask than Brian, who emails these thoughts:

Workday co-founder Bhusri wants to use this terminology to make a clear, visible demarcation line between older ERP solutions and today’s Workday suite. Older ERP solutions have a lot of faults, to be sure. Many of those products were built in a different time using tools and techniques that are simply archaic by today’s technology standards. Those old solutions are often patchwork wonders of acquired and internally developed solutions. They may possess murky data models, redundant data stores, a number of redundant tools, many different report writers, etc.

While I’d agree it is time to kick those old solutions out, the value proposition for wholesale replacement of systems is either thin or poorly understood. Alternatively, those old solutions are still in use because old ERP vendors (and their systems integrator co-enablers) have created deep account control relationships while viable industry vertical solutions in the cloud are still a ways off. A branding mechanism alone won’t close the vertical functionality or account control gaps.

Many tech firms try to create a new market segment that (no surprise here) just happens to represent exactly what the vendor has already created. But, that isn’t necessarily want customers want (or even think they need) ...

The enterprise management cloud concept needs more meat on the body if it is to represent what the market wants. Software buyers need to see proven integrations with numerous non-Workday products AND, equally important, proven analytics, cost accounting transactions and decision tools using data from numerous Workday and non-Workday sources. The market also needs Workday to incorporate more manufacturing data into its cloud and tools if its ‘management’ cloud is to really add value. A back office solution alone won’t cut it.

Lastly, there aren’t as many pure service firms out there. The ‘as-a-service’ concept is everywhere with manufacturers, and even service providers often create equipment kits to sell alongside their services. The world needs an enterprise cloud that covers all of the enterprise (from storefront to plant to warehouse to services) and all kinds of enterprises.

My take

Brian's point about integration is well made. Today's Workday platform, however you choose to describe it, does the important task of unifying enterprise data in a way that makes it available on-demand for joined-up analysis and action — a key requirement for today's frictionless enterprise world. That puts it ahead of many of its rivals in the race to bring enterprise business operations to the cloud. It's right for Workday to emphasize that advantage, and its ability to bring some of those capabilities to organizations that are not yet ready to move their core systems to the cloud does substantially broaden its addressable market.

What worries me is that its moves to open out its platform and make it more extensible remain at an early stage. Yes, Workday has had a cloud integration platform since 2008, but can it sit at the center of what we call a tierless architecture — the kind of fluid, API-centric application ecosystem that we see some vendors and enterprises starting to build today? Unifying data within your own platform is part of the answer, but that ability to interact within a best-of-breed ecosystem is also essential and as Brian says we need to see more evidence of that happening.