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Business software is beginning to undergo a design revolution comparable to the seismic shift from the green screen to the graphical user interface (GUI) that began in the mid-1980s. Three forces are at work. One is the retirement of large numbers of members of the baby-boom generation and the rise of a generation that grew up with computers and computer games from a young age. Also, software and technology vendors have been recognizing the need to “consumerize” business applications as mobile device interactions, gestures and other newer user interface (UI) conventions, and are incorporating these innovations in their stodgy products. I commented on this in my assessment of Tidemark early this year. A third factor, “gamification” is all the rage in business consulting circles. The idea is to engage younger employees more completely by transforming dull, routine chores into more entertaining pursuits. I join with those skeptical of just how fun one can make clerical tasks. But software can – and should – be made less tedious (and therefore more productive), especially for a new generation of users.
I saw evidence that the generational shift is upon us when walking around this fall’s Dreamforce and Oracle OpenWorld conferences, which were held just weeks apart. It struck me that the crowd at the 2012 Dreamforce was younger and its energy level was higher. While the focus of Dreamforce has shifted more to those working in IT rather than line-of-business roles (and in this respect the event is increasingly like OpenWorld), I found there more of a sense of fundamental change in design and use of business computing even (and maybe especially) when you stripped away the cloud ballyhoo. The applications I saw demonstrated seemed more fluid, agile and easier to use. By contrast, many of the newer business applications on offer from Oracle have a stale look and feel to them.
Supporting the design revolution over the next several years will be evolving information technology. For example, HTML 5 enables a richer, more capable set of capabilities in web-based and mobile software. A growing number of vendors offer low-cost computing infrastructure in the form of platform-as-a-service, which significantly reduces barriers to entry for startup software companies because up-front costs are low and businesses enjoy fewer constraints to scaling up. Third, there are the ongoing gains in the price and performance of computer processing power and memory. It is – and will continue to be – difficult to say which of these is most important, since each will feed off of and drive the others.
Until the 1990s, the market for business applications was pretty small. The client-server revolution had a profound impact on the design of business software, making it easier to work with and more flexible compared to the mainframe applications that preceded them. Much of this change was driven by a switch to relational and multidimensional databases, easier-to-use development tools, and the adoption of graphical user interfaces, which permitted event-driven programming. These underlying technologies made it easier for people to do computer-related jobs. With that came a change in how users expected to work with business software and the information they expected to get from their systems. The new generation of technology was easier to use, more flexible and more powerful. This, and the increasing homogenization of infrastructure elements and buyers’ demand for open standards, also contributed to the decline in the cost of developing applications and drove demand for more off-the-shelf applications.
Today we’re on the cusp of a similar generational change as the evolution of underlying information technology drives a major redesign of business software. To oldsters, the coming shift in business computing may be welcome, disconcerting or both. If you’re a baby boomer, you probably can remember what things were like before the client-server era and maybe what life was like before personal computers. The major shifts that took place in the 1990s are about to be repeated in ways that are subtle individually but fundamental in aggregate. People entering the workforce today and people who are in the process of taking leadership positions in companies have a different set of experiences and expectations in dealing with computing devices and technology than the boomers. The set of CIOs that came of age in the 1990s and even some millennials will need to forget old certainties, or the organizations that employ them will be forced to lose their old CIOs.
I’m pretty sure that accounts receivable or order entry will never be fun for all but the chosen few. For the rest, I’m equally certain these processes can be far less painful to execute. More fluid interactions with the software, less burdensome training, easier collaboration and greater adaptability to personal preferences are all feasible and increasingly essential for the coming releases of business applications. I also foresee increased automation to improve efficiency and reduce processing errors in these sorts of purely mechanical tasks. The result will be that, more than ever, executives and managers will need to rethink how work is performed in their parts of the business. Corporations must automate as much of the purely mechanical aspects of work as they can. This is especially true in the finance function, which still grinds out work that can and should be handled hands-free by software. In the process, companies must shift the focus of what people do to tasks that require knowledge, insight, perspective and judgment – things that (for now at least) are not easily supplied by IT. That would make back office work “funner,” if not exactly fun.
Robert Kugel – SVP Research
I recently got an update from Workday that focused mostly on its Financials software. This part of the company’s business management suite has received less development attention than the HR aspects since the company’s founding in 2005. The bulk of Workday’s development investment has aimed at making its human capital management applications an industry leader and adding related capabilities such as payroll. It’s hard to argue against this strategy, if only because Workday is the spiritual offshoot of PeopleSoft; founded the company after Oracle’s hostile takeover of PeopleSoft, which he also founded. This pedigree gave the new company an advantage with workforce management software buyers. Moreover, adoption of cloud-based ERP has lagged far behind that of other cloud-based applications such as sales or workforce management, especially in the larger companies that have been Workday’s target market.
In the past couple of years, Workday has improved the capabilities of its Financials offering, building out basic general ledger, payables, receivables, purchasing, billing and cash management functions. It offers project and work management capabilities, full-featured expense management and revenue recognition management.
Workday’s Financials is not designed for every type of business because it is people-centric. For instance, it has contingent labor management explicitly built into its procurement capabilities (in contrast to other ERP systems), but it’s not set up to handle the complexities of managing discrete or process manufacturing businesses. This approach makes it unsuitable for most companies that create physical goods (that is, SIC codes below 4000), and it may not be appropriate for, say, distribution or specialized industrial services businesses. However, it could be a good fit for corporations that are in people-centric service industries, particularly hospitality, healthcare, professional services, education or government. It’s also possible that some companies that have large professional services staffs and that use Workday as their core HR and human capital management applications for the workforce may find it useful to deploy Financials to handle some or most of the financial aspects related to the workforce, such as time cards, billing and expense management. This may be the case even for corporations that want to limit the number of ERP vendors they support; the operational benefits of having these elements integrated with Workforce Management (such as better staffing of projects, faster and more accurate client billing and more accurate identification and allocation of costs, to name three) trump the costs that might come with having additional systems.
Workday comes with built-in business intelligence for workforce analytics and good financial analytics capabilities. With respect to financial performance management, although it will track budgets in the general ledger, it does not manage budgeting and planning processes. For this, companies will need a dedicated third-party application. Partly for this reason Workday has a strategic partnership with Tidemark, about which I recently commented, which will enable users to integrate their planning process with their core enterprise data. Tidemark would also be useful as a data aggregation, analysis and reporting tool for organizations that do not have all of their operational and financial information collected in Workday.
Although Workday is targeting only a portion of the ERP market with its Financials, I think it’s an attractive niche. its main competitor in this area, particularly in North America, is Infor, with its Lawson and Infinium units, which I recently commented on. More broadly, across both financials and human capital management, Workday is vying with Oracle, which my colleague commented on.
Workday’s Financials are maturing rapidly. As more organizations deploy this part of the company’s offering, either as their full ERP suite or in components to support workforce processes, buyers will have a clearer picture of whether (or to what extent) the software can support their business.
Robert Kugel CFA – SVP of Research