Workday CEO: systems of record are moving to the cloud

Phil Wainewright Profile picture for user pwainewright September 25, 2014
Workday CEO Aneel Bhusri says systems of record will move to the cloud within 10 years. The vendor is re-engineering its infrastructure to deliver on that

a businessman stepping on clouds © Rob hyrons –
In ten year's time, no one will be buying on-premise ERP, believes Workday's CEO Aneel Bhusri. It'll all be in the cloud:

It's hard for me in ten years time to see any enterprise not buying HR and finance in the cloud. The legacy vendors no longer pitch on-premise technology.

That creates a tremendous market opportunity for the likes of Workday, he added:

We're less than 10 percent of the way through the market replacement of legacy on-premise with the cloud.

Despite their conversion to cloud delivery, Bhusri doesn't see the legacy vendors — which effectively means Oracle and SAP — making headway with the model:

Three or four years ago I worried about one of the majors waking up. Right now I see the innovation gap getting wider.

First 100 financials customers

Bhusri was speaking this week at the company's technology summit, an annual event at which Workday shows off its latest innovations to a cross-section of leading industry analysts. Some of the most interesting features this year were, alas, revealed under non-disclosure and so I can't share them with you just yet. But there was a fascinating insight into the underlying infrastructure which I can tell you about in a moment.

More important though than any of the technology bells and whistles was the solid progress Workday has been making in building out its financials product. Bhusri is under no illusions about how critical it is to be able to offer full functional parity with traditional systems of record in order to open up additional markets to Workday, such as healthcare and hospitality.

The next hurdle for us is to reach the point where our financials have functional parity with legacy systems. All of those industry segments are opened up by financials.

Workday has led with its HR product and now has more than 700 customers overall. Financials came a year or two later and is a tougher nut to crack: there's more functional complexity to build out. Nevertheless, Workday has made big strides and today announced it has reached the significant milestone of signing its first 100 financials customers.

Systems of engagement

While Workday is focused on displacing the incumbent legacy ERP vendors, I wondered if it worries about potential competitors among up-and-coming systems of engagement vendors. I've written recently about the emergence of new enterprise application stacks in which the systems that automate interactions across the enterprise boundary — ecommerce, digital sales and marketing, collaboration, mobile workforce and e-sourcing — are taking a rising share of enterprise IT spend.

Although Workday has all the characteristics of a system of engagement in terms of its user experience, its business functionality is still firmly rooted in the landscape of systems of record. There's a risk that by focusing exclusively on this market it will end up dominating a sector that is increasingly squeezed as enterprises switch their focus to systems of engagement (many with built-in systems of record).

Aneel Bhusri, Workday
Aneel Bhusri, Workday

This is not a risk today among the larger enterprises that Workday targets, but in a few years' time I suspect it will be more substantive. For now, Workday's management remains focused on winning the market for cloud ERP. Bhusri explained:

This business is a zero-sum business. If we don't replace the legacy system as the system of record then the business case doesn't work.

CTO Stan Swete didn't rule out moving into new areas of functionality but said the focus would remain on being the system of record:

We don't feel like we have to cede every bit of that [functionality] to systems of engagement. At the same time we don't feel we have to be In every activity that's defined as systems of engagement.

Data analytics appeal

Workday is increasingly talking up data analytics as a key component of its appeal to executives, above and beyond the seamless upgrades, global consistency and flexible deployment that comes as read with the cloud model. Its latest release, Workday 23, includes a new feature called composite reporting, designed to make it far simpler to view and analyze data from multiple sources, including financial and HR metrics.

While it's always been possible to export these data sets into external reporting and visualization tools, Workday emphasizes the value of working with live, actionable data that represents a 'single view of the truth'. Certainly one customer presenting at the summit was celebrating being able to ring the death knell for hundreds of spreadsheets that had previously been in operational use.

Personally, whenever presented with demonstrations of this kind of capability, I sit in wonder at the thought that most businesses today actually manage to operate without making this kind of analysis readily available to managers. It seems pretty mission critical in a fast-growing or high-turnover business, for example, to know how much your staffing head count and spend is varying from budget. Or in a professional services business to have a tight handle on profitability by project. To go without seems as foolish as filling up your car with gas and then relying on estimates of fuel consumption to know when to fill up again. For goodness' sake, install a fuel gauge!

Astonishingly, there are plenty of enterprises in the world today where the CFO and HRO are quite happy with their cumbersome reporting systems. So long as they hit their numbers and keep the paperwork up-to-date, it's job done. Workday needs focus on exceptional organizations where the leadership is willing to embrace creative disruption and sweep away the old ways of navigating by guesswork.

Internet software design

All of this is powered by an underlying technology infrastructure that is getting close to achieving what some may have considered an impossible goal. Workday is evolving towards an enterprise-grade transactional system that runs on a best-in-class consumer Internet application architecture.

David Clarke, VP of technology development, described how Workday is moving its infrastructure onto OpenStack so that it can deploy software-defined compute, networking and storage, within an Amazon-like availability zones datacenter architecture.

In contrast to the single-point-of-failure, scale-up designs of traditional enterprise software, Workday is evolving towards a Netflix-like microservices-based architecture, in which every microservice is independently owned and operated by a separate development team.

One of the most important tenets of Internet application architecture is that you design for failure, in the sense that you build in a tolerance for failure so that the system will recover fast on those occasions when a component fails. Workday has even invested in specialist disaster management training to ensure that its operations teams are equipped to rapidly recover from an unexpected outage.

A function that Netflix famously incorporates in its architecture is a 'chaos monkey' service that randomly turns off components within the live production infrastructure as a way of constantly testing its robustness. When I asked whether Workday's architecture includes a similar service, Clarke confirmed that this will be rolled out in a test environment in the Open Stack deployment, adding:

We'd like to get to a point where we're running a chaos monkey service in production.

Being able to contemplate this kind of function demonstrates the extent to which Workday is engineering its infrastructure in line with the best thinking in large-scale Internet application architectures. I have not encountered any other cloud-based enterprise software vendor, whether it plays in the systems of record or systems of engagement space, that has demonstrated this degree of sophistication in its software design.

When Bhusri in his opening remarks said, "we pay attention to what's happening in the consumer internet," many in the room may have assumed he was talking about user experience or application functionality. Those words in fact apply all the way from top to bottom of Workday's stack and its readiness to continue evolving the underlying technology is perhaps the most significant demonstration that it really is serious about taking systems of record to the cloud.

Disclosure: Workday, SAP and Oracle are diginomica premier partners.

Image credits: Businessman stepping on clouds © Rob hyrons –; Aneel Bhusri headshot courtesy of Workday.

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