Back Stretch of the HCM Horse Race

For the third year, this extended column handicaps the odds of the big three -- Oracle, SAP/SuccessFactors and Workday -- to become the top provider of next-generation HCM cloud systems to large organizations. The stakes are enormous and, no surprise, much has changed since last year as they enter the back stretch of the track.

Friday, October 2, 2015
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For longer than I've been handicapping them, Oracle, SAP/SuccessFactors and Workday have been battling each other to become the top provider of next-generation HCM cloud systems for large organizations everywhere.

The stakes are enormous, with more than 25,000 large organizations worldwide currently running on-premise HCM systems and potentially in play.

The draft of Sierra-Cedar's 18th Annual HR Systems Survey, the definitive survey on HR's current and future technology plans, indicates the tipping point predicted last year has been hit. Fifty percent of organizations that purchased an HRMS responded it was a cloud core HRMS.

Not to beat a dead horse -- or the analogy -- to death, but after full-day briefings with each vendor and dozens of their executives in July and August in Silicon Valley, they are clearly entering the back stretch of the track. While the finish line is still a couple of turns, a home stretch and years away, a lot has changed since last year.

One Thing Remains Constant

Workday continues to grow, creating a campus in a handful of buildings around its original one in Pleasanton, Calif., to house its burgeoning number of employees: now at 4,500, up from 3,150 last year and expected to be 5,300 by the end of this year.

No plans have been announced yet to start its own building on land bought near the local BART (commuter rail) station, but employees who have seen the plans call it the "rocket ship" due to its modernist design. Even with the company still in the throes of finishing construction on its own broadcast-quality TV studio, many people have already seen Workday's second wry TV commercial on news programs and sports events, complete with Workday-sponsored players.

But it's not like winning the America's Cup, and that headcount growth is a rounding error for its gigantic competitors: SAP, now with 75,000 employees, and Oracle, with 135,000.

Workday recently reported signing more than 100 large enterprise customers headquartered in Europe with good traction in newer European markets. But Gartner Research Vice President Ron Hanscome pointed to Workday's still limited but growing global reach as its biggest challenge in a video interview comparing all three vendors on the current Firing Line with Bill Kutik®.

The Latest Numbers

Oracle and SAP are closing the gap with Workday in numbers of signed cloud customers of varying sizes. In the past, SAP and Oracle talked endlessly under nondisclosure (complete with slews of confidential flag pages of logos) about their own customers adopting their own cloud solutions. Naturally, they've also emphasized customer wins against Workday.

This year, for the first time, while flag pages continued, the conversation shifted to on-prem customers they snatched away from each other for their cloud offering! This signals a new dynamic in the marketplace.

Oracle has started categorizing its HCM numbers in a way that makes them more comparable to SAP's. And more transparent. The Oracle HCM Cloud has many pieces (and some confusing names), and now it's clearer how large each one is. All of these numbers are as of the end of Oracle's fiscal year on May 31:

* 750 Core HCM customers

* 1,450 Enterprise Talent customers (the former Taleo, double since the acquisition)

* 100 Global Payroll customers

* 900 Learning customers (the former, not quite double since the acquisition)

* 7,000-plus HCM Cloud Service customers (counting everybody buying anything: Core HCM, any talent-management cloud application, including Taleo and

Group Vice President Gretchen Alarcon is quick to point out that, in the last half of that fiscal year, more than 50 percent of the clients were "net new," meaning they previously had no Oracle applications. She cited customer takeaways from SAP, Ultimate, Microsoft Dynamics and others.

It also means that fewer than 50 percent were migrating from or adding to their Oracle eBS or PeopleSoft Enterprise on-premise applications, the most likely source of new cloud customers in the past.

The SAP/SuccessFactors numbers are a month more recent, end of Q2 on June 31, and reported in similar categories:

* 732 Employee Central  customers for Core HR

* 1,300-plus Recruiting customers

* 1,300-plus Learning customers

* 4,300-plus Cloud HCM customers for the SuccessFactors talent-management suite, not including EC.

EC is growing at a robust 87 percent year over year, up 340 customers from last year's 390. The growth was significantly faster in Europe, where sales are growing at 116 percent. In North America, the growth rate is less than half, at 55 percent.

Moreover, everyone conveniently forgets that SuccessFactors started life as a mid-market software vendor. But now, it has 610-plus customers with more than 10k employees, 120-plus of those with more than 50k users, and 40-plus of those with more than 100k employees. So no one can doubt its ability to take on "elephants," the largest customers in the world.

EC marquee customer PepsiCo is finishing its four-year global rollout of most of the applications in March 2016, when plans are to go live in 84 countries for all its 270,000 employees. Vice President of Global HR Operations and Shared Services Shakti Jauhar agreed on my executive panel at SuccessConnect in August that he had the last laugh as a very early adopter of EC. SAP had just acquired the company when he signed. The result of a "co-innovation partnership," the software now works the way PepsiCo wants it to!

Workday, with its mantra of "one system," breaks out very little, despite having a handful of HR modules sold separately from its HCM system. A year ago, Workday CEO Aneel Bhusri said he would not be precise, announcing only "milestone" customer numbers.

On his Aug. 26 earnings call, he did: More than 1,000 customers signed, against last quarter's 925-plus and last year's vague "well over 700." This compares to 500 in 2013. So, signed customers have doubled in two years.

And that number includes Financial Management customers, who number 150, with 80 live, after "closing in on 100 signed" last year. Recruiting, released only in May 2014, already has 300 customers signed with 95 live. Workday does not yet offer Learning.

Workday is justifiably proud of its 97 percent customer-satisfaction rate for the second year and the fact that 70 percent of its signed customers are already live, which handily beats the competition.

Just when SAP and Oracle seem now to battle each other more for cloud customers, Workday Senior Vice President of Products Leighanne Levensaler points to seven companies that had already bought Oracle HCM Cloud and switched to Workday. Most notable is hamburger chain Red Robin, an Oracle early adopter, saying in its own earnings call that it implemented Oracle Financial Cloud but abandoned HCM in favor of Workday.

Regardless, mathematicians will quickly note that, in terms of raw customer numbers (total revenue and subscription billings from them may be wildly different), all three are now adding new ones at grossly similar yearly numbers, and Workday's lead has narrowed.

Some of the New Products

All three continue to innovate at a furious rate, which benefits everyone.

SAP is focused on two major projects while doing others: Intelligent Services (parts already delivered) and the re-invention of the application SuccessFactors was originally built on: performance management.

Senior Vice President of Products Dmitri Krakovsky describes the first as "enormously ambitious," and it is. Put most simply, Intelligent Services is self-service on steroids. Today, any change an employee makes might have a dozen ripple effects of other required changes that must be made manually by the employee or a shared-service center.

Dmitri's ambition is that Intelligent Services would cross over all SAP/SuccessFactors apps (including acquisitions Ariba, Concur, Fieldglass and partners) to make all those changes smartly and automatically.

So a predefined event, such as an executive taking an extended leave of absence, might trigger assigning all pending work to others -- candidates scheduled for interviews, expense accounts needing to be approved, meetings already booked -- and also postpone required learning, even temporarily modify goals and org charts.

Someone being promoted to manager might automatically be served up with all available data on the team members (while notifying them all of the change), enroll the manager in relevant new social subgroups and surface new learning opportunities (or requirements).

Fourteen other predefined workforce events were delivered this summer, with a wish list of 60 for the future.

Despite the widespread and booming criticism of performance management and numerical reviews, Dmitri says the company sold more software seats enabling that traditional process last year than in any other year in its history. But major companies are dropping numerical rankings (Washington Post wrote about Accenture) and it is being re-invented.

The process started with a clever analysis of the seven reasons companies actually do performance management and reviews. And the insight that one reason -- rewards distribution, including compensation, promotions and terminations -- has hijacked the entire function! Plus, legal and record-keeping for verticals has historically been subject to employee lawsuits.

So the plan is to create seven lightweight apps that cover all seven reasons, each on its own schedule. For the first time, they would include execution and productivity, employee development and assessment. Naturally, the productivity part includes weekly check-ins (see my previous column on StandOut, Is This Next-Generation Software?), two-way communications and very task-centric activities.

Eight early adopters are using the software. A demo showed it to be more transactional and about managing project work than StandOut. As a result, Dmitri claims it can automatically create that critical 1-to-5 number that so many companies rely on to make their compensation decisions.

Delivery is expected in the first half of 2016.

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Workday is moving aggressively into Co-Founder Dave Duffield's favorite area: college student information systems. Dave wrote his first one in 1968, and the most recent package reportedly being used today was first released in 1995, before most businesses (forget colleges) used the Internet.

So Workday Student is targeted at a market of thousands of colleges that look like corporate HR did 10 years ago when Workday was born: no cloud offerings. And the A-Team is on it: The group reports personally to Dave as chairman; PeopleSoft co-founder Ken Morris is part of it; oldest son Mike Duffield runs sales as general manager of a larger group, and Vice President Liz Dietz, who ran the same product for PeopleSoft, is back doing it again.

Student Recruiting is already available and Student Admissions is sitting with the nine design partners ranging from traditional Yale to ultra-hip Southern New Hampshire University. Many applications are on the road map drawn from Workday's existing apps, but some (Student Records and Financial Aid) are being written from scratch.

The one-sentence summary is "recruit, admit, award, enroll, bill, advise and retain your students." Sounds like an HCM where the employees pay the employer! It's also maybe a solid start on an LMS should Workday ever reveal its plans for filling that long-time functional gap.

Ever ask your HR and finance departments how many people are working for the company today or are in the plan to be working there next year? Never got the same answer, did you? That's because they are divided by their data, which is never the same.

Workday Planning hopes to fix that, and a whole lot more, as a new short-term planning, budgeting and forecasting application that may finally get HR and finance on the same page. More importantly, it may finally bring HR onto finance's page of financial planning and analysis, which is used to make all the business decisions!

Workday is also targeting healthcare providers -- as so many other vendors are -- with a new application, Workday Inventory, as well as new features for Workday Procurement, to meet their supply chain needs -- for both materials and people, plus those that supply both. Inventory is available now, and the new procurement features come next year.

But fundamentally, Workday really wants to invest in data -- and broaden its Insights applications to include a success predictor, external labor analysis, skill-availability analysis and lots more on the financial side.

Senior Vice President Dan Beck, in charge of technology products at Workday, says it simply: "Data is the next big thing."

All Oracle cloud applications are going downstream into the mid-market, with the clearest evidence being a separate Oracle OpenWorld for Midsize being held in San Francisco Oct. 25 through 29 during the always-gigantic OOW.

Oracle HCM has already been partially serving that market with the former Taleo Business Edition, which started with an acquired small-company application ( and then got additional talent-management applications. It now has 5,400 customers.

Oracle HCM Cloud for Midsize will be sold to customers with 500 to 5,000 employees. Funny, back when it was called Fusion, many of the early adopters were about that size. And they will be getting the full large-company product, nothing dumbed down, all the same modules to implement, but what they choose. Or an ERP package with HCM, fully integrated Financials and allied applications.

Oracle sees HCM stand-alone competing with systems from ADP, Ceridian and Ultimate -- never in its sights before.

Oracle has long had Predictive Analytics, which continues to be built out, plus with a new Workforce Planning application. Healthcare and Higher Education (where the employer still pays!) are top vertical industry targets with new functionality for both being released this year and next.

What to Expect

If you want short-term predictions, the Sierra-Cedar survey has them. As always, the full report will debut at the HR Tech Conference. Of this year's 1,205 survey respondents, slightly more than half provided both their current Core HR vendor and the solution(s) they plan for next year. The bullets below are not market share. They are the percentages of the 19 percent reporting they will make a change or are evaluating a change to one of the three vendors covered here in the next 12 months:

* Oracle HCM Cloud, 3% to 6%

* SAP /SuccessFactors EC, 4% to 6%

* Workday, 10% to 16%

Sierra-Cedar Vice President of Research and Analytics Stacey Harris points out in the last survey that almost all of the cloud solutions achieved only about half the expected adoption reached by the current year's participants. But Harris, who manages the survey, expects the percentages will be much closer for companies with more than 10,000 employees, the largest target for the three.

The combined 17 percent for the three featured vendors is up 50 percent from last year's number. While still small, the historic shift to a new era in computing, which everyone sees and some will resist for their own good reasons, is continuing. And Oracle, SAP and Workday will continue racing for years.

HR Technology Columnist Bill Kutik is founding co-chairman of the 18th Annual HR Technology® Conference & Exposition. You can comment on this feature at the Conference LinkedIn Group, which doesn't require prior or future conference attendance to join. Watch his new broadcast-quality video series on YouTube Firing Line with Bill Kutik®.


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