Home Stretch Of the HCM Horse Race

For the fourth 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. This year brings a big change, with all three now having special programs to target mid-market companies and adding the software pillar the industry has always called "financials" to their offerings.

Tuesday, October 11, 2016
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For longer than I've been handicapping them, SAP SuccessFactors, Oracle 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. Of those, only about 15 percent have already switched to the cloud.

Sierra-Cedar's 19th Annual HR Systems Survey, the definitive poll on HR's current and future technology plans, found that SaaS or cloud adoption continues to rise, albeit slowly. Of this year's 1,528 survey respondents with 50 to hundreds of thousands of employees, 51 percent said they have a cloud HRMS, including 10 percent with a hybrid solution of on-premise and cloud software.

But now the race and the track itself are morphing:

* First, all three have special programs to sell and compete with in the mid-market, which naturally they define differently. Oracle's acquisition of financials-software vendor NetSuite is a key development here and Ultimate is in its sights.

* Second, after being sold with HCM for 40 years since mainframe days, financials came late to the cloud but have now rejoined HCM in the familiar bundled sale.

After briefings with all three vendors and many of their executives in July/August, it is clear that they are entering the home stretch of the original track. The finish line is still many years away, and the track itself may change just as much next year as this one!

They're all innovating so rapidly that their new products will be described in subsequent columns.

Still Growing Like a Start-Up

Workday continues to add people at a start-up rate of nearly 50 percent a year, even after being in business for 11 years! Construction has finally started on its new building, on land the company has owned for years adjacent to the Pleasanton, Calif., BART (commuter rail) station. It's also walking distance from the campus of buildings already housing its approximate number of 7,000 employees -- up from 4,500 last year at this time, including hundreds overseas.

Of course, Workday's head count and square footage remains a rounding error for its gigantic competitors: SAP, now with 80,000 employees, and Oracle, with 140,000.

The Latest Numbers and Bragging Rights!

All three are public companies following different fiscal years. So they announce the number of signed customers and the employee subscriptions they represent at different times of the year and aggregate them differently. This makes a direct apples-to-apples comparison difficult. Plus, this year, I am adding financials customers. But handicapping must have numbers, so this is my best shot:

Workday in the Lead on the Pole

Workday is most annoying for my purposes, since CEO Aneel Bhusri decided that customer counts did not reflect the company's success properly and would only be announced at unspecified "milestones." So he last declared Workday had more than 1,100 HCM customers months ago and did not update that number on his August financial-analyst call. His most recent number on financials customers (Workday calls it "Financial Management") is 220.

Workday rightly emphasizes that 70 percent of HCM customers are live (higher than the competition), but a little more than 50 percent of Financial Management customers are live (about the same as competitors' HCM customers).

But last spring, Bhusri reported total customer subscribing employees to be at 17 million, including Financial Management. Most of those are already HCM customers and not counted twice. So, with no direct knowledge of their number or employee population, I'm shaving 250,000 employees off Workday's total customer number. Workday has 16.5 million HCM customers in the cloud, if my assumptions are correct.

And in the last quarter (and not included), Workday sold HCM to IBM for most of its global workforce and to Samsung, the leading company in South Korea, maker of Galaxy smartphones.

SAP SuccessFactors Moving Up

SAP SuccessFactors numbers are much more current as of June 31. More than 1,250 companies have bought Employee Central -- its cloud core HR product. If companies owning SuccessFactors products (sold for the last 10 years and now totaling 4,900) are included, the total of customer subscribing employees is a whopping 42 million. But that's not the proper comparison, since many may be using the other two companies' core HR.

Group Vice President David Ludlow precisely broke out just the EC subscribers, giving it 12.5 million HCM customers in the cloud.

SAP was late out of the gate delivering cloud Financials, at least two years behind Oracle and five behind Workday. S/4 HANA ERP (which includes Financials) was released in February 2015 and has sold about 1,900 cloud-based customers. A separate multi-tenant cloud-based version was not available until the end of that year and was first introduced at the company's August user conference, SuccessConnect.

The HCM conference featured a full track of breakouts on Financials. In an interview there, Financials sales leader Ross Wainwright emphasized that this product is designed to integrate with Employee Central. He reports having 11 customers signed, including seven implementation partners, with two of the 11 live. One signed client is a $40-million division (based in Switzerland, Singapore and Shanghai) of a U.S.-based $10-billion fiber optics company.

Of course, the big deal, which SAP President Mike Ettling claims is the largest public cloud software deal in history, is Accenture, with 380,000 employees around the world. It's a multi-year HCM contract eventually including Employee Central and talent management everywhere, but unclear whether Accenture will use the performance and training applications. CLO Rahul Varma explains how Accenture has reinvented both processes itself on a recent episode of Firing Line with Bill Kutik®.

Mike is very quick to point out that, despite signing with Workday, IBM will continue to use his performance and goals software under a multi-year contract. Ettling is very quick to point out that, despite signing with Workday, IBM will continue to use his performance and goals software under a multi-year contract. Plus Big Blue's Smarter Workforce group will refer customers to SAP SuccessFactors for the many HCM applications it no longer sells.

Oracle Coming from Behind

Oracle's numbers are in the middle, as of May 31. It reports 6,000 cloud customers, comprising core HR (with 1,300 customers and 800 live in 190 countries) and others subscribing to the former Taleo (2,000-plus customers) or one or more of Oracle's talent-management modules.

It leads the pack with more than 2,500 Financials customers, a fact trumpeted every week with an in-your-face-Workday bar chart comparison ad on the front page of the Wall Street Journal.

Unfortunately, Oracle's top applications executive could not break out its core HR subscribers (as David did for SAP SuccessFactors). But Oracle last reported a total of 15 million HCM subscribers within its 6,000 customers in the cloud. Simple division would produce a customer average of 2,600 employees, which seems absurdly low.

As with Workday, if customers are not counted twice (using core HR and Taleo, for instance) it makes backing out the number very difficult. Let's say core HR customers represent 30 percent of all HCM customers and perhaps of all subscribers:

* Giving Oracle 4.5 million HCM customers in the cloud, if assumptions are correct.

Of course, Oracle has bagged its share of elephants, all on core HR, including Xerox expanding to cover 145,000 employees, H&R block with 140,000 and Fujitsu with 125,000.

Prime Target: the Middle Market

You may not know NetSuite, a very successful mid-market cloud financials vendor, famous for being about half-owned by Oracle's Larry Ellison. A few years ago, it bought TribeHR to create a coupled HCM offering.

That clearly didn't work out as expected, when NetSuite recently announced a partnership with Ultimate, the most successful HCM vendor in the lower mid-market group of 1,000 to 3,000 employees. Soon after and long expected, Oracle bought the entire company and announced it would be using Oracle HCM Cloud as its HCM offering, leaving the partnership uncertain.

Workday CEO Aneel posed the question in his earnings call whether NetSuite becomes the primary cloud platform for Oracle enterprise apps going forward. Others suspect the same.

Before the sale, CEO Mark Hurd had announced an "Accelerated Buying Process" for mid-market companies (3,000 to 10,000 employees), the second program in the last year. This one features a fixed-price bundle of core HCM and talent applications, a templated implementation and a subscription with a systems integrator for help or even application-management services.

Software will still be licensed directly from Oracle.

Nothing dramatizes the new importance of the middle market to the Big Three more than SAP SuccessFactors' president announcing in his SuccessConnect keynote that his company will sign a total of 2,000 Employee Central customers by the end of the calendar year.

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Wait just a minute! The company has taken about five years to sell 1,250. How can it possibly sell 750 more (60 percent of the existing total!) in just six months?

When I confronted Mike with the math at the press conference afterward, he was, as always, straightforward: "That's if our middle-market strategy works. If it doesn't, we won't make that goal."

His new "Cloud Profit Program" goes well beyond Oracle's offer of a help subscription with a systems integrator to giving the SI part of the yearly SaaS license fee -- forever! -- for completely taking over the care, feeding and management of a customer with 1,000 to 10,000 employees.

Mike emphasized it's not meant as a sales channel. Big SIs for big vendors have long been required to close sales of a certain number of customers to get various levels of benefits and access to tools and information from the vendor. Not here. SAP SuccessFactors will offer a new customer to SIs even after it has signed the deal itself on "its own paper," vendor-speak for its own contract.

Just not any SI, of course, since the company is essentially outsourcing the many aspects of customer care it now does itself. This is a classic idea from Mike, who grew up in IT outsourcing at EDS and Unisys before becoming CEO of HR outsourcer NorthgateArinso. He then declared SAP SuccessFactors to be essentially in the same position as an outsourcer, despite being a SaaS vendor, on the very first episode of Firing Line with Bill Kutik.

This profit program will only be offered to 40 to 50 vendors around the world that have been certified in implementation and in possessing skills similar to the company's own "Client Engagement Executive" program and much more: delivering total customer lifecycle management, instead of dashing from the room after the "go-live." It started in July.

For several years, Workday has offered something equally unprecedented, at least for Workday, and exactly opposite from Oracle's new program. From the beginning, customers have been required to buy Workday HCM as a single package or "SKU" ("stock-keeping unit" in vendor-speak) that, for one price, includes a dozen or so modules that Oracle and SAP SuccessFactors have always sold separately.

Workday has long had separate SKUs for additional functions, such as payroll, recruiting, time tracking and now learning. But for the middle market, Workday divides Workday HCM into multiple SKUs that can be licensed separately by companies from 650 to 3,500 employees.

Funny, both Oracle and Workday consider their directly opposite approaches (bundling and unbundling) as giving customers additional flexibility. Rather than providing just an implementation template, Workday offers an automated-deployment methodology and tool set developed for more than three years by former Gartner analyst and Vice President of Customer Deployment Applications Jim Holincheck and Annrai O'Toole, CTO for Europe. Called Lifecycle Deployment Program, the goal is to reduce deployment costs and get customers live faster.

Unlike in past movements down-market, all three intend to use the exact same software they sell to the largest customers and not hobble the apps or create new code lines. In short, watch this space.

What to Expect

If you want short-term predictions, the Sierra-Cedar survey has them. As always, the full report debuted this year at the HR Tech Conference (go to for your copy). It had 424 medium and large respondents providing information on both their current core HR vendor and the solution(s) they plan to have implemented next year. The bullets below are not market share. Both numbers are percentages of the 12 percent of respondents that reported they will make a change or are evaluating a change to another of these three vendors. The first percentage is what respondents are using now; the second is what they might switch to in the next 12 months.

* Oracle HCM Cloud........................5% to 10%

* SAP SuccessFactors Employee Central.....6% to 8%

* Workday................................18% to 22%

Sierra-Cedar Vice President of Research and Analytics Stacey Harris points out these are respondents with 2,500 employees or more. Plus, historically, cloud solutions achieve only about half of the expected adoption predicted. Harris says the percentages are much closer for the three vendors among only companies with 10,000 employees or more.

But with the new battleground among the Big Three starting so much lower, next year could be different. The next generation of computing is continuing to take hold and evolve. And Workday, Oracle and SAP SuccessFactors will continue racing for years.

HR Technology Columnist Bill Kutik is chairman emeritus of the 19th Annual HR Technology Conference & Exposition®. This year's conference program is online at www. Watch one of the 22 broadcast-quality HCM videos in his YouTube series Firing Line with Bill Kutik® online at

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