Workday

Workday: Getting Smarter and Smarter

Enter the Age of Intelligence

In a recent Mint Jutras report, “How Smart Are Your Enterprise Applications?” we outlined some of the different ways solution providers are adding a new level of intelligence to their offerings… or not. While “intelligence” has become the holy grail of enterprise applications of late, not all vendors are delivering on the promise of smarter applications. For some, it’s just the latest buzzword added to their marketing collateral and some are simply playing catch up to current next generation applications. Others are taking their first baby steps, but a select few are truly entering the “age of intelligence.”

Where is Workday along this progression? Since its inception in 2005, it has never been a company that over-inflated its capabilities with bravado and marketing spin. Born in the cloud and built on a next-generation platform that continues to evolve, Workday also never had to play catch-up. And the first steps it took in moving into the age of intelligence were not baby steps, but instead bold ones, including some strategic acquisitions.

Workday’s acquisition of Identified in 2014 was an important step in incorporating predictive analytics and machine learning into its portfolio. In 2015 it acquired Gridcraft and last year it acquired Platfora. With both of these acquisitions, Workday sought to build insights [read intelligence] directly into its applications. More recently its benchmarking capabilities take insight and intelligence to another whole level by putting Data as a Service (DaaS) in the context of your business performance, in comparison to your peers. And Workday has opened the doors to more innovation from a broader community by making its Workday Cloud Platform available beyond its own development team.

It is clear Workday is getting smarter and smarter with each new release.

Smart, Smarter, Smartest

So, what does it take to make an enterprise application smart? In our previous report we distinguished different levels of intelligence:

  • Smart: We concluded any enterprise application is smart in that it’s not dumb. It can follow instructions – instructions like, IF <this condition> THEN <do this> ELSE <do that>. Business applications have been built on IF THEN ELSE statements since the earliest computer programs were developed. Workday applications are no exception and indeed, they can now go beyond simply following specific instructions. They are starting to learn to take some simple rule-based actions on their own. For example, the recruiting module is smart enough to decline any outstanding applicants once a position is filled, and yet keep them on file to review when other vacancies open up.
  • Smarter: To make an application smarter, you need to make it easier to use and better at communicating. Progressive releases of Workday have made the user experience very compelling while also adding more and more insights. Workday has also borrowed concepts from consumer technology, putting more power in the hands of users using mobile devices, not only alerting managers to exceptions, issues and required approvals, but allowing them to take immediate action. Workday Talk provides a “chat” capability modeled after social media. Participants can follow conversations attached to business objects like sales orders, customers or products. Groups and teams can be assembled to foster collaboration. When people are better informed, they can make more intelligent decisions, faster.
  • Smartest: But the smartest applications today combine the pattern recognition capabilities of machine learning to produce artificial intelligence (AI) and predict the future. The highest level of intelligence will be achieved in combining a variety of technologies together: AI, deep machine learning, Natural Language Processing (NLP), image recognition and predictive analytics are all at the forefront of this movement. And Workday has all these technologies in its kit bag. It has already taken some initial steps in leveraging them. For example, it has embedded machine learning capabilities into its Talent Insights to identify retention risk. Look for more use cases to be delivered using data from both inside and outside of Workday.

It is quite clear that Workday’s Human Capital Management (HCM), Financial Management, Student Management and Planning solutions are smarter than your average enterprise applications. Let’s dig a little deeper into some ways they will get even smarter.

Building Insights In: Prism Analytics

Good reporting is a necessary backbone of applications like HCM and financial management. Reports provide a historical perspective, help you assess your current position and answer questions you have about your performance. But analytics provide a deeper level of understanding and help you ask the right questions. Analytics are iterative by nature. You start with a question, issue or problem: Sales are down. Reports might tell you what regions or products are problematic, but you won’t really know why until you drill down, and you are never quite sure what path you need to take until you find out more. And you won’t even be prompted to investigate until you already have a problem.

Predictive analytics help you anticipate conditions, prompting you to investigate a situation before the problem rears its head. You would like to be able to conduct this kind of investigative work right in the familiar environment of the solution running your business. But it is even more powerful when you can look beyond the structured data that resides within your enterprise applications. Workday has woven the technology acquired from Platfora, into the fabric of its solution, rather than bolting on components. And yet Workday Prism Analytics will not be limited to Workday data, but will also bring in non-Workday data, which can then be presented through Workday reports, scorecards, and dashboards for analysis.

Typically this type of mix of data requires data preparation to be done by a data administrator with the technical skills needed to load the external data, cleanse and prepare it and then create reports, queries and/or dashboards. This activity doesn’t go away with Workday Prism Analytics, but it is simplified enough for a technical business user to perform – and perform quickly enough to be of value. And the data can be blended with, transformed and enriched by your transactional system of record (Workday data). In doing so Workday has struck a nice balance between having a super powerful tool on the back end but also super easy to use on the front end, avoiding the usual trade-offs.

Workday is in the early stages of delivering this, and also has plans down the road for data discovery. Data discovery typically goes after big data in search of patterns that may not be intuitively obvious. Using the right visualization tools, it helps you understand which data is most relevant to your problem, even if you don’t know exactly what to ask for.

Benchmarking Performance with Data as a Service (DaaS)

It takes a different kind of intelligence gathering to understand your business performance in relation to others in similar roles or industries. As a multi-tenant SaaS solution provider, Workday is in a unique position to provide you with access to this kind of comparative data. But of course, you must be willing to give, in order to receive. Workday needs permission to use this data, but paraphrasing the words of Workday leadership: We don’t take customers’ data. They give it to us.

Workday sits on a large volume of data collected from hundreds of customers subscribing to its software. This is data that can be invaluable to the entire Workday community for benchmarking against peers. Customers must opt in to contribute secured aggregated data. In turn, they receive benchmarks. Today this Data as a Service (DaaS) is available for customers to explore Workday usage and HCM results, including workforce composition, diversity, turnover, etc. Financial management data is coming soon. Within the first three weeks of this service being available, Workday reported 100 customers had opted in and contributed data. Obviously, as this number grows, so will the value of the data.

Expect more from Workday along these lines in the future, including data from other sources (private and public) not included in Workday.

Machine Learning and AI

Of course the availability of a growing volume and diversity of data opens the door for machine learning and therefore artificial intelligence. Workday’s acquisition of Identified in 2014 was an important step in incorporating predictive analytics and machine learning into its repertoire of capabilities. Identified’s patented SYMAN (Systematic Mass Normalization) technology mines Facebook for social data and then uses artificial intelligence to transform that data into professional intelligence. The “learning” comes from continued use, validating predictions with outcomes from Workday employee data on performance and retention.

Workday released Workday Talent Insights in 2015, identifying retention risk and delivering a talent scorecard. Through this introduction Workday learned that customers prefer an embedded experience, not a standalone application and that the overall user experience is paramount, along with access to data for training algorithms.

The Power of a Platform

Since it was founded in 2005, Workday has always insisted it was (and is) an applications company, rather than a technology company. It has always offered cloud-based business solutions. While it built these applications on a solid and modern platform, it always resisted the urging of pundits and industry observers to become a “platform” company. Until now.

The Next Chapter for Workday

Now it will be both a “platform” player as well as a business solution provider. The Workday Cloud Platform was soft launched a few months ago with selected service partners. Built on the principles of openness, Workday will provide the tools needed to manage the complete application life cycle, with data modeling and a single Application Programming Interface (API) point of integration.

So how does this make Workday applications smarter? Of course there are no guarantees, but by opening up the platform, along with all the presentation services, conversation services, and analytics Workday uses to make its solutions smarter, the level of intelligence is more likely to deepen. The Platform will include both Workday Talk (NLP) and BOT for anomaly detection.

So, what are developers building on the platform? Here are a few examples:

  • Talent Mobility, allowing employees to visualize career opportunities and connect with employees across globe.
  • ID Services to manage security badges
  • Supplier requisitioning that allows suppliers to directly populate data in Workday
  • Safety services management

Summary

The Innovation Keynote at the 2017 Workday Rising Event was entitled “The Age of Intelligence.” The Keynote was presented by Mike McNamara, the CEO of one of Workday’s largest customers, Flex (a contract manufacturer formerly known as Flextronics). In his opening remarks, Mr. McNamara summed up this new age by saying, “Today it’s not about controlling land and resources, but rather about applying intelligence.”

In many ways, intelligence is a new currency in the global, digital economy. And yet, when most solution providers today talk about intelligent applications, they often simply mean new ways of interacting with the solution and analytics that help you derive more and better insights from the data. But this is the minimum you should expect today. Workday has aggressively taken steps towards real intelligence, through acquisition and its own development efforts. Workday Prism Analytics, Benchmarking and DaaS, machine learning, natural language processing and the Workday Cloud Platform all combine to provide powerful insights and intelligence, not through separate bolt-on tools, but embedded in a single solution.

If your current solutions are not headed down the path towards intelligent applications, if you are starting to look for new, smarter ones, Workday is a good place to start.

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Workday: Is it ERP or Not? Does it Matter?

You may have noticed I haven’t written much about Workday over the past few years. It’s not because I’m not interested. I am. But I haven’t had as much direct contact and interaction with the company as I would like in order to write from a basis of knowledge and experience. Having recently been invited to an analyst briefing call, I hope that is changing.

Some might assume this lack of direct contact is because I write a lot about ERP and Workday seems to go out of its way to characterize itself as not an ERP company. However, as an analyst, I always describe my coverage area as “enterprise applications with ERP at the core.” But the footprint of ERP has grown to the point where it is getting more and more difficult to determine where ERP ends and other applications begin. Those that know me well “hear” me talking about functions and topics (like performance management, talent and human capital management, etc,) that used to sit squarely outside of ERP, but today might sit either inside or outside that boundary. They also “hear” me talk about financial management, which can be an integral part of ERP, or a stand-alone solution. Both of these are certainly in Workday’s wheelhouse.

While Workday might be careful to say “We’re not ERP,” I hear other influencers refer to the company and its products as “ERP” all the time. In response I have been known to challenge those influencers, asking, “Is it really ERP?” I don’t do that to be contentious, or to denigrate Workday’s solution, but to better position it. Who should buy it and why?

I have always been careful to define ERP quite clearly, and in fact my definition outlasted me at Aberdeen. I left Aberdeen and founded Mint Jutras almost four years ago (January 2011), but my definition of ERP lives on there.

My definition of ERP is quite simple:

ERP is an integrated suite of modules that provides the operational and transactional system of record of the business.

Of course many (if not most) ERP solutions today do much more. But the minimum requirement is to provide an auditable record of operations, including any transaction that impacts the balance sheet (assets and liabilities) or the profit and loss statement. So does this mean an integrated suite of accounting modules qualifies as an ERP solution? It’s close, which is why I am able to collect so much data on financial management solutions in the context of my annual ERP solution studies, and in 2015 I am devising a way to capture data specific to each while distinguishing between the two. But the question is not as simple as it might seem and I have found the real answer lies in whether or not the solution handles orders: both purchase orders and sales orders. While purchasing is not strictly the domain of finance, it is not unusual for a financial management solution to include at least the basic requirements for purchasing transactions. It is less likely for these financial solutions to include the sales order.

An interesting aside: I attended the very first analyst call back in 2006 when Dave Duffield and Aneel Bhusri introduced Workday. I remember clearly that Workday was introduced as a ‘new ERP company”, although the first functions that would be developed would be for managing Human Resources (HR). The HR part came as no surprise given the founders’ background (Peoplesoft). But the reason I remember it so well is because Dave Duffield actually said something along the lines of, “You are probably wondering whether the world needs another new ERP system.” Of course Workday went on to fully develop its Human Capital Management solution, including HR, benefits, talent management, recruiting, payroll, time tracking and workforce planning and analytics. Financial Management came later.

So, what about the full operational and transactional system of record? Yes, Workday’s Financial Management solution handles the purchasing side, covering the full procure-to-pay process. And earlier this week, I got excited when I heard it also handles the full cycle from contract to cash. Aha! Is that the final piece of the puzzle that would qualify it as an ERP? While I might prefer a simple black and white, yes or no answer, I think there are at least a few shades of gray here, depending largely on the type of operations in question.

So I went in search of the sales order. I found a “contract” but not a sales order. But then remember that Workday specifically targets talent intensive organizations, including several for which it has developed new features in its latest Workday 23 release (the topic of the recent call):

  • Software and Internet Services
  • Financial Services
  • Business Services
  • Higher Education and Non-profits

Also noted on its website are healthcare, state and local governments, and retail and hospitality. These types of businesses don’t necessarily book an order in the classic sense of the term (e.g. when you think about an order for widgets). Colleges and universities don’t sell degrees. Hospitals don’t sell surgical procedures. Hotels don’t sell and deliver rooms. Business services are contracted for. Even software companies that might talk about booking an order are really more likely to sign a license agreement or offer a subscription (both are contracts). So in this case, the contract represents the commitment to buy and is the trigger for invoicing. In these cases, I would guess that Workday’s Financial Management suite can provide the full operational system of record for the business. In other words, by my definition, they are providing ERP to these types of businesses.

But if they were to stray outside these target markets, they can’t provide the full operational system of record, especially for a manufacturer. While Workday does target manufacturers, if you look closely you realize it is selling Human Capital Management to manufacturers, especially those looking to balance human resources to optimize revenue opportunities.

Flextronics, a global leader in design, manufacturing, distribution and aftermarket services, and one of the largest contract manufacturers in the world, is a Workday customer with over 200,000 employees in 30 countries. According to Mike McNamara, CEO, “We have to rebalance our workforce on a continuous basis for our customers. For example, we may be spending a lot more time in Malaysia and a lot less time in China. We may want to move more of our workforce into Mexico as opposed to Eastern Europe, depending on the markets we’re accessing. And Workday actually gives us the data to continuously analyze what our cost structures are—the average labor rates in each area. It has actually changed some of our investment policies for different countries as a result of studying the data and the trends in the data.”

Flextronics is running Workday’s HCM. I suspect Workday doesn’t sell a lot of Financial Management to manufacturers except maybe to replace corporate level financials. Manufacturing sites already have accounting functions embedded within ERP because it is hard for them to live without it. This is the perfect setup for a two-tier standard for ERP: manufacturing ERP at the divisions, rolling into a corporate ERP, which may just be financials, analytics and maybe even HCM (like Workday).

So this begs the question: Why does Workday go out of its way to characterize itself as not being ERP? Mark Nitter is the vice president at Workday responsible for setting the strategic direction of its products. He wrote about this in his blog post Why ERP Is Out, and Unified Finance and HR Is In, in which he assumes all ERP solutions were “designed for enterprises engaged in the manufacture and distribution of goods” and that “people were primarily seen as labor—a commodity whose cost is to be minimized.” He also assumes there is an arm’s length relationship between finance and HR. Mr. Nitter writes:

At Workday, we certainly don’t consider what we offer as “ERP.” From the beginning, our mission was to deliver an enterprise cloud for HR and finance, and this solution has been a key driver for many of our talent-driven enterprise customers, including AAA NCNU, Allied Global Holdings, Life Time Fitness, Sallie Mae, and TripAdvisor. For these companies and others, a business management system that unifies HCM and financials provides efficiencies and insights far beyond the capabilities of the ERP model.

An example: Imagine that a P&L analysis points to a revenue shortfall for your fiscal quarter. State-of-the-art financial drill-down analysis may help you identify which organization, product, or customer is responsible. But what if the reason for the shortfall cannot be determined through analysis of financial data? What if the reason for lower-than-expected revenue is that you have three open positions in the sales organization, and have had for six months?

The arms-length relationship between finance and HR that exists in ERP systems cannot deliver this insight. Separately, the finance department could identify where the shortfall occurred, and the HR department—if it knew where to look—could identify the hiring problem, but only a unified solution is capable of connecting the dots.

I would agree that most ERP solutions today couldn’t identify this hiring problem. But that is not because of any inherent limitations of ERP. It is because the ERP solution doesn’t have the same depth of functionality in HR that Workday has built into its solution. Yes, ERP evolved from MRP, which was originally designed to meet the planning needs of manufacturers. But ERP has evolved way beyond the realm of manufacturing and some ERP solutions on the market today – in fact those solutions that compete most directly with Workday – were never designed to support (physical) product-based businesses.

So, is Workday ERP? I would mostly agree with Workday and say, “Not really.” But does it matter what you call it? I would say, “Yes it does.” That is if Workday wants to be considered as a viable option in all the places where it could truly add value.

This is particularly true in companies that already have ERP and are not looking to replace it. Because HR has been largely underserved by ERP for many years, many ERP implementations lack a lot of specialized HCM functionality. Workday’s HCM can add very significant value, even without being sold as a “unified finance and HR solution.” If Workday portrayed itself as an ERP solution, that prospect would likely say, “No thank you. We already have one of those.”

Mint Jutras data indicates a dichotomy of preferences in satisfying HCM requirements. While there are some that have a strong preference for HCM functionality embedded within ERP, an (almost) equal number strongly prefer a separate (possibly stand-alone) applications. The remainder has no defined preference and will decide based on a combination of functionality and price (Figure 1).

Figure 1: Preferences for HCM Functionality

Figure 1 WorkdaySource: Mint Jutras 2014 ERP Solution Study

However, where the Workday solution might provide a complete system of record, this argument might work against Workday. Where those companies perceive the need for ERP, even though Workday might have all they need, if Workday says it doesn’t sell ERP, it might not be considered. This may also be true where companies might define a two-tier ERP strategy, with one ERP providing corporate financials and a second standard defined for units, divisions or business units. If the prospect has defined this as a “two-tier standard” for ERP, it will be looking for ERP at the corporate level, even though orders are managed at the divisional level and “unified finance and HR” is what it really needs. The difference in the label might make all the difference in which solutions they will consider.

Bottom line: I admire Workday for identifying the value of a unified finance and HR solution particularly for the “talent-driven enterprise” and for not portraying itself as something that it is not. Some of the influencers who refer to them as “ERP, just not for manufacturing” could learn a lesson or two from this. But at the same time, I would caution Workday against assuming that an ERP can’t and won’t unify finance, HR and a lot more.

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