Can Dave Duffield reinvent the industry he helped to build?
It's been nearly 20 years since Duffield launched PeopleSoft to help bring mainframe-caliber human resources software to PC-based systems. Now Duffield has turned his attention to the new high-tech frontier: on-demand systems.
Next month, Duffield hopes to launch his new company, Workday, an on-demand business applications company. Sources said it will seek to create a new way to organize HR data and to make decisions, using the latest service-oriented architecture tools to link to existing software.
Workday will initially focus on building a set of HR applications to handle such tasks as employee hiring, succession planning and multinational capabilities. Later, the company will add financial and supply-chain applications to the mix, sources told CNET News.com.
The company has been holding private demonstrations of its products to a range of prospective customers and industry players. Karen Beaman, a Workday vice president, declined to comment on the company's plans, and said it will withhold details until a planned launch that could come as early as May. Duffield was not available for comment.
But sources who are familiar with its plans said that Workday promises to address some of the major technology problems affecting the HR industry.
"What impressed me was how Workday (will) organize employees--like which person was going to report to which person for a particular task, to how they were progressing on the various tasks," said one source familiar with the company's plans. "You could also track your total (human) resources for a project--like applicants that could do the work, contractors, to full-time employees."
Industry observers note that Duffield brings his deep knowledge of HR applications and attentive ear to customer demands to his new venture. He remains a prominent figure in the ERP (enterprise resource planning) applications industry, even after the sale of PeopleSoft to arch-rival Oracle.
Duffield, who founded PeopleSoft in 1987, guided the company to a prominent position in the ERP market, but found increasing competition from Oracle and SAP that damped the company's financial prospects.
He stepped down as PeopleSoft chief executive in 1999 to make way for Craig Conway, the company's president and chief operating officer. Duffield returned to the CEO post after Conway's ouster in 2004, during the takeover battle with Oracle.
Plans for Workday will once again place Duffield in competition with Oracle and SAP, the ERP market leader. The company aims to outflank competitors by selling a more flexible and comprehensive set of human resources tools--what Workday and the HR industry refers to as "human capital management" applications--than competitors offer, sources said. "Our focus is to tackle the traditional ERP markets, in a nontraditional way," according to a posting on Workday's Web site.
Human capital management tries to match the behavior, skills and other characteristics of employees with the qualities a company needs in order to achieve its strategic goals. These types of HR applications are considered strategic and much different than transactional, or processing, HR applications such as payroll tools.
Customers will take information from their "legacy," or old, systems and use an automated tool to enter it into Workday's on-demand applications. The application will examine the data and outline the various steps the customer needs to take to realign its staff, based on the specific needs of the company or industry, a source said.
Here's how it works: Companies typically process job applicants by taking in their resumes, assigning a manager to conduct an interview, and logging in all relevant employee information into a database. The final step in the hiring process is usually assigning an employee number. But with Workday, the technology is designed to allow a retailer in the crush of the holiday season to get sales clerks on the floor quickly, by reconfiguring the system to assign an employee number first and then back-filling in the other information.
"You should be able to configure the software and tailor it to your program...and you should never have to touch the code," the source said. "Workday will bring the cost of implementation down."
While Workday's initial subscription costs are not expected to be cheap, the software could help cut costs related to integration with existing systems and implementing a new system, a source said. Where implementing and integrating a client-server ERP system may cost two to four times as much as the software itself, the price tag to implement Workday's service could run less than one time that cost.
Old meets new
The HR industry, like a number of other industries, is eyeing the lure of on-demand applications, which are designed to offer faster installation, overall lower costs and greater ease of use. The difficulty is getting newer on-demand systems to communicate and share information with old legacy systems.
"If you're using an on-demand recruiting system, but want to recruit people from outside the company and within, you're probably going to have (data migration) issues," said Jason Averbook, the chief executive of human capital management consultant Knowledge Infusion, speaking on industry trends.
"The employee information will be pulled from the legacy system, like job codes and titles. And although SAP and PeopleSoft do allow for Web services and XML integration, a lot of HR departments don't use XML yet," Averbook said.
"Dave wants to build the architecture and have other people write applications to it."
The slow adoption of XML stems from the years of companies investing millions of dollars into traditional ERP systems.
HR departments throughout corporate America collect vast amounts of information and data, but the industry overall has done a "horrible" job in pulling it out in a meaningful fashion, said Nov Omana, the chairman of the International Association for Human Resource Information Management, a Burlington, Mass.-based trade group.
Another issue for the HR industry is its transition to a competency-based data-gathering and reporting system. It also suffers from the lack of on-demand vendors who can supply a comprehensive human capital management system, said Rick Fletcher, president of HRchitect, who also provided an industry overview.
But the challenge for companies is finding ways to integrate that human capital management strategy with their software applications, Fletcher noted.
Because Workday is focusing on human capital management technologies, it will forgo the more transactional types of HR applications, like payroll, in its first version, sources noted. But Workday's open-source technology will allow customers to have other HR applications, such as payroll, communicate with their Workday information, sources said.
"Dave wants to build the architecture and have other people write applications to it, like payroll and taxation rules," noted a long-time industry player who is familiar with Duffield's plans.
Workday's first version of its HR offering is also expected to handle multinational problems, such as taking into account how people are paid in different parts of the world, the hours they are allowed to work, multiple-languages and currencies for compensation, sources said.
Succession planning is another feature that sources say is slated for Workday's first version of the service. Succession planning applications are designed to assess the competencies of an employee and their potential development.
And although multinational capabilities and succession planning features are commonly found in installed, licensed HR software, a bundling of these features is not common in the on-demand software environment, sources said. On-demand HR providers tend to focus on one specific area, they note.
As a result, expectations for Workday are running high, even though details of its plans are scare.
"The market is looking for something really different and expectations are really high that Workday will be dramatically different than Oracle, SAP or Microsoft," said Bruce Richardson, an analyst with AMR Research, who noted clients frequently ask questions about Duffield's new company.
But Workday will likely take a couple of years to take hold in the market, given it has to build up its product line, sales channel and marquee customers, Richardson noted.
"The first year will probably be spent on a beta site, the second year they'll probably issue a second release with core functionality and the third year will probably have a third release with a lot of functionality and big customer base," Richardson said.
Ultimately, however, Workday is expected to be a success, he added.
Duffield is worth millions of dollars and can easily support the company in its early years. And after building and selling two software companies over the years, Duffield will have no trouble attracting executives to his new venture, Richardson said.
"I think Workday has a shot at being the next cool thing in the enterprise applications space," Richardson said, noting, "Money and talent won't be a problem for Dave."