Robert Kugel's Analyst Perspectives

Workday’s Financials: Maturing

Posted by Robert Kugel on Feb 10, 2012 1:37:15 AM

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

Topics: ERP, Operational Performance Management (OPM), expense management, financial, PSA, Analytics, Business Analytics, Business Mobility, Cloud Computing, Oracle, Workforce Performance, Business Performance Management (BPM), Financial Performance Management (FPM), Infor, Tidemark, Workday, Workforce Performance Management (WPM), Professional Services, Project Management

Robert Kugel

Written by Robert Kugel

Rob heads up the CFO and business research focusing on the intersection of information technology with the finance organization and business. The financial performance management (FPM) research agenda includes the application of IT to financial process optimization and collaborative systems; control systems and analytics; and advanced budgeting and planning. Prior to joining Ventana Research he was an equity research analyst at several firms including First Albany Corporation, Morgan Stanley, and Drexel Burnham, and a consultant with McKinsey and Company. Rob was an Institutional Investor All-American Team member and on the Wall Street Journal All-Star list. Rob has experience in aerospace and defense, banking, manufacturing and retail and consumer services. Rob earned his BA in Economics/Finance at Hampshire College, an MBA in Finance/Accounting at Columbia University, and is a CFA charter holder.