SuccessFactors’ user conference, SuccessConnect, has come and gone, and the four questions I posed in my previous post about the challenges facing SuccessFactors and SAP were largely answered. But, as in any good dialectic, one good answer is just the starting point for another good question….. I’ll start with the Workday question/answer in this post, and continue with answers to my other three questions in a subsequent post.
Workday isn’t just SAP’s problem, the cloud maverick is an equal-opportunity problem for a number of big and small vendors in the market. Combating the triple threat of pure cloud, the Dave Duffield effect, and Workday’s position in the heart of Silicon Valley’s cloud keiretsu is hard for everyone. I believe Workday is vulnerable, and SAP/SuccessFactors and other competitors have a good position from which to respond to this triple threat, the question is how to do it well and do it quickly.
It’s important to note, before I opine on what I think SAP can do, that SuccessFactors doesn’t do too badly against Workday, at least according to SAP HR head Mike Ettling. The win/loss record is between 1:1 (win one, lose one) in North America and 2:1 (two wins for every loss) in Europe. Win/loss numbers are tricky – you have to get invited to the dance first before you either get lucky or get rejected – but if we assume Ettling’s numbers are pretty good, the question of why SAP is so worked up about Workday needs to be addressed.
The answer is found deep in the core of SAP’s strategy to be the “Cloud Company Powered by HANA.” SAP CEO Bill McDermott is playing to win in the cloud – Lord knows SAP has spent enough on cloud acquisitions recently – and to McDermott that means ceding nothing to Workday. Or at least trying to cede as little as possible. The goal is to turn the tide on Workday, and become the number one thing that keeps Workday’s execs up at a night, and not vice versa. So, win/loss ratios notwithstanding, there’s no way McDermott isn’t going to try to grind away at Workday until he gets whatever win rate he wants.
Back to what SAP can do about Workday – and others like SAP that have a combination of industry-focused ERP and cloud offerings. The real trick is for SAP to sell a vision that slots SuccessFactors HR and talent management (and contingent labor and training and LMS and everything else in Ettling’s bailiwick) into a set of complex processes that span multiple functional domains, like manufacturing, supply chain, CRM, service delivery, retail, and on and on. That complex process view ties well into SAP’s core strengths as a broad-based vendor of business processes, and provides a somewhat easy way to have a conversation with a prospect that Workday has trouble having outside of its HRMS and finance domains.
That complex process delivery conversation, which is centered around a single vendor providing the processes and the means to integrate and orchestrate them, is one that definitely plays to SAP’s strengths. But it would be misleading, and execs like Ettling know this, to intimate that all the complex processes SAP can enable are well-integrated and orchestrated. One of the key announcements that Ettling and others hammered home at SuccessConnect is that SAP is committed to productizing as many of the SAP to SAP integrations as possible. And, knowing what’s at stake, I’m pretty sure they’re going to push that productization as hard as humanly possible.
But there’s another thing that has to be pushed, and that’s really the hardest nut to crack for SAP and others like. The trick for SAP with respect to Workday, and Salesforce.com as well, is to sell that integrated, complex business process story to the right audience, and therein lies the rub. The right audience, from Ettling’s point of view, involves a sit-down with the chief talent officer or head of HR and the CIO: when SAP presents to both constituencies, the message goes over well.
But that’s easier said than done. Siloed cloud apps like Workday and Salesforce.com have thrived precisely because they are selling to a single process owner who typically has no interest in looking at the integrated, complex process opportunity across their enterprise. These vendors effectively get to the LOB first, and relegate the CIO to trying to make sure the growing cloud back office doesn’t grow out of control (which it all too often does: it’s not uncommon to have dozens of cloud apps in the back office, all running their own code base and all not well-integrated.)
I think SAP is talking about the right conversation, for now, but it needs to broaden its messaging and extend the conversation even further if it’s going blunt the perceived Workday juggernaut (700 customers after nine years in business and not a profit in sight, no particular success in branching out into finance or international markets – believe me, perception is huge part of the game).
The problem is that the complex, integrated process message that SAP needs to articulate was conspicuous at SuccessConnect largely by its absence – it wasn’t totally absent, but it wasn’t exactly front and center either. It was clear that SAP was deliberately tailoring its messaging towards the core processes of HR and talent, without trying to stretch the SuccessConnect audience too much about the complex, integrated process issue. When asked why, the general consensus was that this audience wouldn’t necessarily want to hear the message or even understand it if they could.
That’s where I think SAP has it wrong. The HR/talent LOB could and should be leveled up to talk about this more complex opportunity, and not just because it will help SAP beat Workday. While there are many new and worthy domains in the HR LOB that are more immediate in the minds of those who focus exclusively on HR and talent, the more strategic future of this LOB very much lies in extending its reach into non-LOB domains.
The discussion at SuccessConnect about Fieldglass’ integration with Ariba Procurement is a decent place to start this conversation, and the topic was broached at SuccessConnect in the keynotes and elsewhere. A good start, but SAP needs to keep going. Contingent labor isn’t just an HR issue, it’s a big deal in the supply chain, in warehouse management, in retail, health care and hospitality. Heck, a big part of the rationale for buy Fieldglass is that contingent labor is taking over the entire job market – which means strategic planning and operations across a huge swath of the enterprise will need some integration with what Fieldglass has to offer.
Again, while SAP has a long way to go in productizing all the integrations it needs between the HR side and the rest of the product portfolio, if it can entice the “run of the mill” SuccessConnect attendee – and their counterparts across the industry – to think bigger and more strategically, there will come a time when the CIO doesn’t have to be in the room for SAP to successfully pitch against Workday. The excellent presentation by Edward Cone, the technology practice head at Oxford Economics, of a major study commissioned by SAP had some interesting data on the limited role that HR has at the overall enterprise strategy table. (I think their numbers are actually a little aspirational, representing a somewhat rosier picture than what is really happening, but I’m just one cynical enterprise software guy and Cone works for an organization that has Oxford in its name.)
Regardless, if SAP and any other vendor (like Infor and Microsoft) that can offer a complex, integrated process vision would arm their HR sales and marketing efforts with a bigger strategic picture focusing on the increasingly strategic role of this LOB, I think Cone’s next survey would begin to show a much greater strategic role for HR overall.
I hope this both articulates a littler better why I think Workday is vulnerable, as well as what I think SAP and others in the same boat can do about them. I’m sure there are reasons why SAP or Workday is the better choice in a feature/function bake-off, but continuing to have that discussion with the market is to play the competitive game on Workday’s field, using its rules and referees, and that’s not what any competitor who has more to offer should be striving for.
Talking about complex, integrated processes is something Workday can also do, but only by evoking a cloud middleware strategy that would be hard to manage: integrating a heterogeneous cloud back office alone is a major pain, adding a lot of on-premise integration is an even bigger pain. Having as much of that integration come from the vendor that owns the biggest piece of an integrated process is a story that we know is music to a CIO’s ear. It needs to be music to the HR LOB’s ears as well.