Cloud Evolution

Workday's website talks about the "shackles of traditional ERP systems". Which shackles need to be thrown off? "Traditional ERP systems are complex, rigid and slow. They can only ever provide a fragmented view of data", Chano Fernandez explains at the beginning of the E-3 conversation. "And on top of that, any change to an ERP system requires a number of resources, budget, and months or years to implement."

The SAP community knows the problem: With the increasing pace of change, users need to be able to act faster, get a unified view of the business in real time, and act with data-driven precision. "To meet these challenges, executives must move from traditional, outdated ERP systems to modern, cloud-based technologies that have enough agility to keep pace with continuous change", defines Fernandez.

Antithesis to ERP

Many companies today are struggling to keep up with the pace of change, which has only been exacerbated by the events of the past year and a half. "They ultimately lack the tools, systems and resources to take advantage of the opportunities in front of them" Workday co-CEO Fernandez knows from numerous conversations with customers.

"I have already discussed the limitations of the traditional ERP system. We believe a new class of software, which we call Enterprise Management Cloud, is needed to make businesses successful. It builds on a frictionless foundation and enables data-driven decision making and continuous recalibration so companies can stay ahead of accelerating change."

What are Workday's existing customers saying? "With Workday, we can deliver critical business processes in a way that would have been unthinkable with our previous ecosystem. The virtual go-live was absolutely seamless. We were able to complete our performance and salary planning cycle without interruption and implement a new approach to performance management - all with Workday."Paul Davies, Head of People Operations at GE, reported. A cloud-native and cloud-only approach results in a new approach to digital transformation that not only encompasses the technology itself, but also has a positive impact on the entire organizational and operational structure.

Workday is different

On Workday's German website, the question is "Why are we different? "To succeed in this changing world, it is critical that companies demonstrate much higher levels of agility, flexibility and resilience", answers Chano Fernandez.

"This can be achieved through a modern, cloud-based system like Workday that can scale seamlessly with businesses and deliver the real-time insights customers need to make more informed decisions. Customers can plan, execute and analyze in a single system. Customer service is a core value - along with innovation - and we believe our 97 percent customer satisfaction rating is further validation that we are different."

Indirectly, Workday co-CEO Fernandez is addressing exactly the concerns of many existing SAP customers and DSAG members. In a recent survey, the SAP user association found that only 37 percent are satisfied with the ability to make contract adjustments, for example, in user scaling or server resources.

However, 63 percent had a rather negative attitude. The overview of their subscribed cloud services in terms of cost transparency, contract duration, changes to services, etc. is considered by 65 percent to be rather positive. "The more than two-thirds who are rather dissatisfied overall complain, among other things, that the metrics can only grow upwards and that the barriers to entry are often too high. The desire for possible small steps is widespread among survey participants", summarizes DSAG Board Member for Licenses and Maintenance, Thomas Henzler.

Where it makes sense to scale dynamically, however, must be evaluated from product to product. In the end, users should be able to decide whether they want to commit to purchasing certain services over a longer period of time in return for better conditions or whether they prefer to be able to reduce services or individual licenses at short notice.

Flexibility is one of the current demands from the ERP and SAP community. So how is Workday responding to this challenge? "Workday was developed in the cloud", Chano Fer-nandez describes the initial situation, "which means that our system remains flexible at its core as we add new products and features to meet our customers' needs. We also perform weekly and twice-yearly updates and upgrades, respectively, to make the latest innovations available in a timely manner. This enables our customers to be flexible in an increasingly dynamic environment."

Oracle's Larry Ellison has said that SAP systems aren't bad, but they aren't for the cloud and never will be. Workday as a cloud-native company is different, right? "I don't know that I would agree with Larry Ellison's statement one hundred percent", says Chano Fernandez in an E-3 interview, "but I think it's definitely easier when you can go to the cloud without legacy. At Workday, when we started developing our cloud application, we didn't have a single customer. So there were no legacy systems being transformed and no compromises we had to negotiate with our existing customers. So we could really focus on what the ideal cloud application for Human Resources and later Finance should look like."

The result from these considerations Fernandez explains as follows: "If you are already programming for the cloud, then there is no custom code. In my opinion, companies that include cloud in their planning from the beginning are better off in terms of speed of innovation, agility and flexibility."

Cloud-only and virtual

In the wake of the pandemic, Workday moved its deployments and training almost entirely to virtual processes in March 2020. As a cloud-native platform, Workday was able to complete this transition in a matter of days and with minimal disruption to planned go-lives - a huge benefit to its international customer base.

Successful deployments across a wide range of industries and geographies have enabled Workday customers from midsize companies to global enterprises with over 500,000 employees to advance their digital transformation initiatives while maintaining continuity of operations.

Are there business and organizational requirements for using Workday that an existing SAP customer should meet? "Of course, it can be difficult to make the case for replacing legacy systems because of the high investment costs incurred to date", Jens Krüger, Chief Product Architect at Workday, is aware of a certain inertia in the SAP community.

But cloud products are established in most companies and industries, reported the German-speaking SAP User Association at the end of June this year. Among the important details of this DSAG survey is, for example, the demand for more transparency in pricing. Only about one-third are satisfied with the flexibility of SAP cloud services. Respondents rate the overview of their subscribed cloud services as sufficient.

Cloud becomes standard

However, 91 percent of the DSAG members surveyed consider the use of cloud
members in general for possible. But familiar topics such as data privacy and
-security, also in connection with current case law, are still recognized as obstacles.

The same applies to integration with third-party applications such as computer-aided design (CAD) applications. Of the companies that already use cloud solutions, 63 percent use corresponding cloud services from SAP, such as Ariba, SuccessFactors, S/4 Cloud or the Business Technology Platform (formerly SAP Cloud Platform).

"New technologies offer companies the opportunity to re-evaluate and re-engineer processes"Jens Krüger knows from many successful projects. "When customers choose Workday, it's not just a move from on-prem to the cloud. Those who have decided to buy a Workday solution have a vision for change.

First and foremost, it takes a transformational mindset - that is, digital mindset - and an understanding of changing business processes to realize the full potential of cloud-based software like that offered by Workday. Since the beginning, Workday has focused on providing simple and update-proof configuration options as an alternative to costly legacy system customizations."

Agility and flexibility

Many factors play a role in the success of cloud computing. "We offer modern technology, a pleasant user interface, and the agility and flexibility to easily adapt processes to given structures," says Chano Fer-nandez, describing Workday's approach to the market.

"We communicate clearly and openly with our customers about the value that certain innovations bring. We help them decide if they want to implement that innovation or if that is even relevant to their industry. Our community has been and continues to be a great help here. Since almost all customers are on the same release level due to frequent innovation cycles, it is very easy to find relevant information. This has proven to help our customers adapt and prepare for new workflows."

The use of cloud products is now a permanent fixture across all industries and company sizes, confirms the current DSAG survey. As far as the general transparency of pricing is concerned, the pros and cons roughly balance each other out. Dissatisfaction prevails primarily with the metrics offered. And last but not least, existing SAP customers want a consolidated and uniform view of all their cloud subscriptions with corresponding reporting options. 

So is best-of-breed back in vogue and is an ERP user's choice of Workday a best-of-breed approach? "In a spectrum where the fully integrated but inflexible ERP stands on one side and the flexible but non-integrated best-of-breed approach on the other, Workday can be located in-between", explains Jens Krüger. An ERP system tries to cover as many functions as possible in an integrated way, while best-of-breed focuses on individual, dedicated functions.

"In contrast, Workday focuses on specific domains and bundles all functions within them to find the sweet spot between integration and flexibility" is how Chief Product Architect Krüger describes the Workday approach. The facts behind this domain focus at Workday: business domains differ among themselves in the progress of digitization; processes mostly take place within a business domain; reports and analyses are mainly domain-driven; and actions are executed within the domain.

"All of this means that the next generation of enterprise software will consist of a composite of domain-specific SaaS solutions - but will not exist as the next version of an ERP system", Jens Krüger explains Workday's vision.

Visions and alternatives

The digital transformation has been fueled by the pandemic, so these visions of an upcoming ERP system have also become the focus of SAP's existing customers, who are increasingly evaluating whether the move toward S/4 is not currently too late and whether an ERP alternative would be the better solution for a horizon beyond 2030.

"The pandemic has shown companies that things have to move faster and faster, and innovations in the system have to adapt to this rapid market speed", says co-CEO Chano Fernandez in this regard. "Most companies - not to say all - have now realized that they need to transform digitally. The most important resources in companies are people and money, so HR and finance. Transforming these processes has been a priority for many. As an enterprise management cloud, Workday is ideally positioned to help customers do this."

The past of SAP legacy customers consists of R/2 and R/3 data centers. The change from on-prem to cloud computing is a technical and mental challenge. How resilient is cloud computing compared to on-prem data centers? "When an enterprise chooses cloud, architecture plays an important role - legacy infrastructure, hybrid cloud or native cloud", knows Jens Krüger.

For example, the cloud-native Workday applications are built on a unified architecture, which offers advantages: "Everyone is working on an up-to-date version of the software, there is consistent and uniform user operation on different devices, one data source for analysis and reporting with a uniform object model shared across all applications. And there is a unified security model" defines the Workday Chief Product Architect.

Resilience and elasticity

In terms of resilience, elasticity and innovation, cloud computing offers the advantage that applications are faster and easier to update. For example, with a cloud-native application, any change to the underlying platform is largely invisible to the end user.

And Jens Krüger emphasizes: "Here we need to clarify what is meant by cloud, because the term is used in many different ways - if we equate it with SaaS, cloud not only provides access to the latest software version, but the service as a whole is crucial - this is where the benefits of higher agility, flexibility and continuous update of latest innovations come into play."

Many existing SAP customers prefer cloud computing on AWS, Google or Azure, while few go directly to the SAP cloud. What does the Workday cloud offer over hyperscalers and SAP? "If you move your on-premises system to a hyperscaler that only provides the infrastructure, you as a customer only gain the benefits at the infrastructure level" responds Workday Chief Product Architect Kruger.

"But at the software level, it's still the old ERP. This means that the company is working with the existing processes, but cannot take advantage of the real benefits of SaaS - as offered by Workday - such as agility, flexibility and innovation."

Much of the SAP community thrives on trust among market participants. How does Workday create the trust necessary for customers to transform their processes to the cloud? Co-CEO Fernandez says that in recent years, the ERP market has seen companies trust the cloud more and more, including with their HR and finance processes.

"Workday also relies on the success stories of our existing customers," explains Chano Fernandez. "We encourage any prospective customer to contact Workday customers to discuss our solutions. We don't mean select customers that we introduce to them, but simply any existing customers who are willing to have a conversation. It won't come out in these conversations that we're perfect - no one is. We hope that through our customers' Success Stories, it will be clear that we are doing our best and are committed to our customers' success. Our company history clearly shows that customer satisfaction and credibility are our top priorities: We do exactly what we say we're going to do, we stick to schedule and budget, and we embrace our customers' feedback."

Many existing SAP customers are facing the challenge of a Hana and S/4 transformation. While perhaps S/4 is the logical successor to ERP/ECC 6.0, the cost of the release upgrade and the necessary DB transformation from AnyDB to Hana is a daunting challenge. What could Workday's alternative look like, i.e. a release upgrade from ERP/ECC 6.0 to Workday?

"It is not a pure software upgrade and in this case is not simply a one-to-one replacement of the legacy system as it exists in its previous form", Jens Krüger describes a possible roadmap. The Workday Enterprise Management Cloud is part of a federated SaaS landscape.

Private versus public cloud

The move to S/4 Hana is too expensive for some existing SAP customers, so they are looking for alternatives in the market. Are SAP customers switching to Workday? "Most of our customers are migrating from legacy systems, which means SAP or Oracle," answers Chano Fernandez. "If customers move from on-premises systems like ECC 6.0 to a private cloud, they would get stuck again in terms of speed of innovation and agility. A switch to the Enterprise Management Cloud brings advantages here."

Finally, what does Workday have planned for the near future? Workday Co-CEO Chano Fernandez: "We see a huge opportunity for us in the market. We will continue to work with the processes we already have - Finance, HCM, Analytics. At the moment, we are not planning to move into other areas. We will continue to be very innovative in the areas mentioned above and thus support our customers in their digital transformation."