April 20, 2006 4:00 AM PDT
Duffield's Workday, gearing up to punch in
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While Workday's initial subscription costs are not expected to be cheap, the software could help cut costs related to integration with existing systems and implementing a new system, a source said. Where implementing and integrating a client-server ERP system may cost two to four times as much as the software itself, the price tag to implement Workday's service could run less than one time that cost.
Old meets new
The HR industry, like a number of other industries, is eyeing the lure of on-demand applications, which are designed to offer faster installation, overall lower costs and greater ease of use. The difficulty is getting newer on-demand systems to communicate and share information with old legacy systems.
"If you're using an on-demand recruiting system, but want to recruit people from outside the company and within, you're probably going to have (data migration) issues," said Jason Averbook, the chief executive of human capital management consultant Knowledge Infusion, speaking on industry trends.
"The employee information will be pulled from the legacy system, like job codes and titles. And although SAP and PeopleSoft do allow for Web services and XML integration, a lot of HR departments don't use XML yet," Averbook said.
The slow adoption of XML stems from the years of companies investing millions of dollars into traditional ERP systems.
HR departments throughout corporate America collect vast amounts of information and data, but the industry overall has done a "horrible" job in pulling it out in a meaningful fashion, said Nov Omana, the chairman of the International Association for Human Resource Information Management, a Burlington, Mass.-based trade group.
Another issue for the HR industry is its transition to a competency-based data-gathering and reporting system. It also suffers from the lack of on-demand vendors who can supply a comprehensive human capital management system, said Rick Fletcher, president of HRchitect, who also provided an industry overview.
But the challenge for companies is finding ways to integrate that human capital management strategy with their software applications, Fletcher noted.
Because Workday is focusing on human capital management technologies, it will forgo the more transactional types of HR applications, like payroll, in its first version, sources noted. But Workday's open-source technology will allow customers to have other HR applications, such as payroll, communicate with their Workday information, sources said.
"Dave wants to build the architecture and have other people write applications to it, like payroll and taxation rules," noted a long-time industry player who is familiar with Duffield's plans.
Workday's first version of its HR offering is also expected to handle multinational problems, such as taking into account how people are paid in different parts of the world, the hours they are allowed to work, multiple-languages and currencies for compensation, sources said.
Succession planning is another feature that sources say is slated for Workday's first version of the service. Succession planning applications are designed to assess the competencies of an employee and their potential development.
And although multinational capabilities and succession planning features are commonly found in installed, licensed HR software, a bundling of these features is not common in the on-demand software environment, sources said. On-demand HR providers tend to focus on one specific area, they note.
As a result, expectations for Workday are running high, even though details of its plans are scare.
"The market is looking for something really different and expectations are really high that Workday will be dramatically different than Oracle, SAP or Microsoft," said Bruce Richardson, an analyst with AMR Research, who noted clients frequently ask questions about Duffield's new company.
But Workday will likely take a couple of years to take hold in the market, given it has to build up its product line, sales channel and marquee customers, Richardson noted.
"The first year will probably be spent on a beta site, the second year they'll probably issue a second release with core functionality and the third year will probably have a third release with a lot of functionality and big customer base," Richardson said.
Ultimately, however, Workday is expected to be a success, he added.
Duffield is worth millions of dollars and can easily support the company in its early years. And after building and selling two software companies over the years, Duffield will have no trouble attracting executives to his new venture, Richardson said.
"I think Workday has a shot at being the next cool thing in the enterprise applications space," Richardson said, noting, "Money and talent won't be a problem for Dave."
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