Handicapping the HCM Horse Race
Which of the big three -- Workday, Oracle or SAP/SuccessFactors -- will come out ahead in the next few years as the premier HCM provider? Read on for more insight and some predictions.
By Bill Kutik/Technology Columnist
For the next three-to-five years, three companies -- Workday, Oracle and SAP/SuccessFactors -- will battle mostly each other (but also some others) to be the new HCM provider on SaaS and in the cloud for every large company on the face of the earth. Older on-premise systems will not be retired quickly, but we have reached an important inflection point.
Lexy Martin's new CedarCrestone HR Systems Survey, debuting at the HR Technology® Conference, reveals -- for the first time -- that more companies are planning to replace their HRMS than upgrade it! In July and August, I spent a day with each company trying to handicap their chances of winning. But remember, handicappers only give you odds; they don't pick winners. So expect more information and insight than predictions.
'The Racing Form'
Before any race, it's important to pore over The Racing Form, a daily newspaper with every available statistic about the racers' past performance. But in this case, it's hard to make exact comparisons. All three are public companies, often following different fiscal years (Oracle's Q1 ended on Aug. 31, Workday's Q2 on July 31!) and SEC rules prohibit disclosing the truth ("quiet periods") except during certain well-defined times in the quarterly cycles.
So, while all three were happy to disclose key sales numbers, we are comparing apples, oranges and apricots in terms of the exact moment each was true. Certainly they are all larger now.
Who said handicapping is easy?
Oracle's new numbers are probably the oldest (from the end of May) but finally show the velocity long expected from its huge sales force. In July 2012, it reported closing 200 Fusion deals, 100 of them for HCM with 25 of those customers live.
This summer, Senior Vice President of Applications Development Steve Miranda said a total of 240 deals for Oracle HCM Cloud Service (the new product name slowly replacing Fusion) had been closed, with about half live (120). More significantly, 60 percent to 70 percent of customers had bought Core HR, he says, or about 160-plus customers.
The last is important because Steve's numbers do not include sales of acquired vendors Taleo and SelectMinds, but they do include customers that might have bought a single talent- management application to integrate with their PeopleSoft, Oracle or JD Edwards on-premise system.
SuccessFactors (SF) continues to build out its SaaS HRMS called Employee Central (EC). Both as a replacement for on-premise SAP Core HR or to attach to it, and as a cloud system for multi-national subsidiaries connecting to SAP Core HR at headquarters.
The last are both hybrid solutions, similar to those Oracle promoted for Fusion from the start. In July 2012, it reported 110 sold and 60 live. A year later, Vice President of Product Management Thomas Otter reported 200-plus sold and 90 live by Aug. 1.
His significant point was that 45 percent (or 90) systems were sold outside the United States in countries and continents including Australia, Israel, Brazil, Europe, Africa and China. Nothing quite like having your product in the bags of the SAP international salesforce now merged with SF's.
Workday continues its rapid growth. On its August 27 earnings call, Co-CEO Aneel Bhusri revealed that deals went from 325 reported last July with 200 live to 500 closed now with 337 live. Both numbers include sales of the newer financial-management product: 34 last summer and 50 at the end of April, and obviously smaller numbers of its customers live. But they do not include the 125 sales made by OneSource Virtual, which resells Workday (with additional services) to companies with fewer than 1,000 employees.
Any good handicapper watches the contestants walk around the paddock before the race to see what they've got!
In our race, all three companies are concentrating on increasing the power of their software configurations (i.e., making check-box choices within the system) to get closer to the on-premise power of customizations (i.e., writing new code). This is the third biggest reason large companies cite for not moving to SaaS in Lexy's latest survey: "inability to customize." In short, getting the software to do exactly what they want it to do.
Last year, Workday caught up by offering "flex fields," custom data fields and labels, protected from being overwritten by new releases. SF has offered a similar option for years, which was even available in the Oracle E-Business Suite on-premise HCM and now in the Oracle HCM Cloud. In addition, SF has recently added the ability for users to create custom objects for all standard actions.
It may just be marketing bushwah, but Workday, Oracle and others have started using the word "tailored" software to describe a capability that fits between configured and customized. With the impression of making an off-the-rack suit fit perfectly, it's great marketing and even may be coming true.
In the paddock, you can't help noticing that eight-year-old Workday has put on a lot of muscle in the last year. Hard to see that in the others, which are so much bigger.
In July 2012, the official number of Workday employees was 1,200; now it's 2,120 with an additional 70 hired in just the first week of August. And Bhusri says the company is behind in its hiring plans! An entirely new campus of buildings in Pleasanton, Calif., is now being filled with new hires.
Except for the new employees hired or old ones posted overseas: around 327 at press time. Workday now has six offices in Europe -- England, Ireland, France, the Netherlands, Sweden and Germany -- plus Hong Kong and Japan. This is but a light dusting of the globe compared to Oracle and SAP, but a major expansion for Workday, which now says 15 percent of its revenue comes from outside the United States.
Obviously, salespeople hit the beach first, followed by sales-support people to run the real demos. But now Workday has reached an important milestone by supporting them with executive ambassadors who can meet with local prospects and partners, and maybe hire local product managers. Vice President of Business Development Jeff Pulver is in London and Vice President of HCM Product Strategy Amy Wilson is in Paris (tough duty).
Oracle and Workday have both built out their time and labor applications, while SF has decided to rely on partners Kronos and Workforce Software. SF has also decided to stick with its pre-SAP decision not to offer benefits functionality, a traditional part of Core HR. Instead, it will continue with its partners and outsourcers Benefitfocus and Aon Hewitt.
"U.S. benefits administration has largely been outsourced," says Senior Vice President of Product Management Dmitri Krakovsky. "Building global-benefits functionality is much more of a priority."
In horse racing, all the nags start at the same time. This is rarely the case in software. The best example here is recruiting, vital for every large customer. And I've been hearing lately that many are not happy with their choices.
SF clearly leads here, thanks to its purchase of jobs2web back in January 2011, a month before SAP bought SF. Jobs2web is one of the early dashboards incorporating social recruiting and many of the "edge" applications that recruiters value more now than their applicant-tracking system. This product was covered thoroughly in my August HREOnline™ column, at http://bit.ly/14dhpZs.
Of course, Oracle now owns Taleo, which is the good news and maybe the bad news. Good because of its large, big-company installed base and proven international functionality. Maybe bad because, after 15 years, it needs a major overhaul and integration issues remain (see "The First Turn" on the next page).
Oracle's best recruiting move was acquiring SelectMinds, an early provider of social networks for corporate alumni, which years ago pivoted to recruiting and includes automated job postings to social networks, candidate-relationship management and employee referrals, including automatically searching employees' social networks (with permission) for job matches. That's a key function in Jobvite and copied by some recent start-ups, but still employee-initiated in SF's offering. Oracle now calls it Social Sourcing. Bottom line: Similar to jobs2web, Oracle now offers much of the functionality savvy recruiters crave.
Plus, Oracle has inherited Taleo's special deal with LinkedIn, which lets users view their LinkedIn search results within the recruiting app. That may not sound like a big deal to you, but ask any recruiter who toggles all day between the two. Plus, like SF does today, Oracle will by year's end facilitate private online conversations about a candidate -- or about lots of other subjects.
Workday, you may know, is a late entrant to recruiting, having announced only last October at its annual Workday Rising user conference that it would be building a recruiting application. At this September's conference, users were scheduled to see a short working recruiting demo on an iPhone with functionality for hiring managers. The application is slated to be generally available in April 2014 with Workday Version 21.
Workday's Amy Wilson (remember, now in Paris?) makes clear her team is fundamentally reinventing the ATS or whatever they end up calling the app that takes in thousands of job applicants at one end and spits out dozens of new employees at the other. SF calls it Recruiting Management.
Workday is focused on improving the existing core processes, making them more flexible, dynamic and more collaborative between hiring managers and recruiters, and facilitating sharing of candidates, while nurturing both internal and external ones. The full functionality planned for putting more warm butts into cold seats is still TBA, but will certainly include employee referrals.
Workday is also developing a full workforce planning application, which many have argued should be the seventh talent-management app and should come before recruiting. SF has had one since buying Inform. Oracle's is part of its new Big Data initiative.
The First Turn
It's still early in the race, but the challenges and strengths of Oracle, SAP/SF and Workday are starting to become clear. For between one and two years, Oracle and SAP/SF have been laboring away on enormous integration challenges that Workday, with its home-grown unified system, has been spared.
While independent, Taleo and SF apps were bolted on to just about every major HRMS under the sun. But now there has to be true integration -- 10 times more solid, standardized and templated -- to the new owners' applications. And both Oracle and SAP have lots of applications.
Take Taleo, first. Oracle closed the acquisition on June 1, 2012, and Taleo recruiting is still not fully integrated into Oracle's (originally Fusion) talent-management suite. Vice President of HCM Product Strategy Gretchen Alarcon explained all the integration challenges ahead under non-disclosure and shared a roadmap for it all being done in FY 2015, which could be in calendar-year 2014.
And how about the question I asked years ago, when customers were buying best-of-breed talent-management apps before there were suites: Whose employee profile are you going to use? A federated profile with Fusion and Taleo is still on the roadmap. Once Taleo becomes a Fusion application, it will presumably benefit from all the integrations already created for the other Fusion talent-management applications to on-premise PeopleSoft and Oracle EBS systems, a second integration point, as well as to Fusion Core HR, a third.
Hard to believe, but SAP's problems have been even more complicated. SAP Group Vice President David Ludlow and SF's Krakovsky have broken the deployment options and integration challenges into three models:
"Hybrid HCM" has SF SaaS talent-management apps, workforce planning and analytics being integrated into an on-premise SAP Core HR.
"Two Tier HCM" has the full SF suite, called Cloud HR, including Employee Central, perhaps at several locations integrated into one on-premise SAP Core HR. In most cases, EC acts as a "slave" system, but there is a sub-option of it sharing the responsibilities of the "system of record" with Core HR.
Finally there is "Full Cloud HCM," where SAP Core HR has been completely replaced, but now it must integrate with SAP ERP!
To keep it simple, SAP and SF went through four different integration methods over time and hope to have it licked, if implementation goes well with marquee customers PepsiCo and Timken, although an integration for learning is still in the future.
The first was a cloud product that came with EC called Boomi. Then old one-way flat file documents, each to connect seven applications! Then on-premise Netweaver PI (product integration) middleware; and now, finally, Hana Cloud Platform, which includes PI.
Back in simpler days, before the acquisition, SF always added small but incredibly clever features. That continues. Lately, two new things have been added to the Employee Profile: a clock showing the time right now where the person works (not GMT or MSK or something equally confusing) and a recording of the person pronouncing his or her name. Obvious additions, maybe, but totally great.
In August, Workday released a Big Data application in Version 20. Vice President of Product Management Leighanne Levensaler called it "the third leg of the stool with HCM and financials." Without relying on a data warehouse, this application using Hadoop will allow mixing data from the Workday system with third-party data, both structured and unstructured. This is key for effective business analysis.
Oracle has its own Big Data offering, using 300 million applications from Taleo, plus it has been leading the competition in predictive analytics, thanks to the work of the recently departed Humair Ghauri.
Payroll is a weakness for Workday. SAP has had an HCM for 27 years; Oracle for 24; and both have payrolls covering dozens and dozens of countries. Whether or not they are true SaaS, they get people paid. Whether the pricing model works is in the eye of the buyer. While international payroll outsourcers abound, some large multinationals want to do it themselves. Even with a global payroll engine, country versions are a bear to create, and not quickly pushed out the door. Workday promises U.K. payroll in 2015 and France in 2016.
So the finish line is not even in sight, perhaps three to five years away, at the very least, during which they will still be competing. But if you want short-term predictions, just about half of Lexy's 1,266 responding companies revealed their plans for Core HR products. These are not market-share numbers. The first percentage is what her respondents have today; the second is planned within 12 months. (Obviously, anything SaaS is small compared to the current percentage of on-premise PeopleSoft or SAP.)
* Oracle Fusion 1% and 4%
* SuccessFactors 4% and 6%
* Workday 5% and 12%
Before Workday starts ordering reprints, Lexy is quick to point out that her respondents last year predicted Workday would climb to 10 percent but only reached the 5 percent you see in 2013. Anyway, these are all pretty small numbers right now. And obviously, all three companies are a long way from the finish line.
HR Technology Columnist Bill Kutik is founding co-chairman of the 16th Annual HR Technology® Conference & Exposition, returning to Las Vegas, Oct. 7 to 9, 2013. Attendance is still open. You can comment on this feature at the Conference LinkedIn Group, which doesn't require prior or future conference attendance to join. Kutik is also host of The Bill Kutik Radio Show®.