Supporting 10,000 employee records was a starting point for Workday, the HR-as-a-service company launched by PeopleSoft founder Dave Duffield. The startup's next challenge is to manage 50,000 employee records, then 100,000 and beyond. The vendor is using custom database software to get it there.How quickly Workday can get its apps to run at scale using its "in memory" database will determine how fast the company grows. Workday is in an enviable position for any startup. Duffield and co-founder/president Aneel Bhusri already have those hard-to-get connections inside large companies; they're the ones who originally sold CIOs the PeopleSoft apps they now aim to replace. "We don't have an issue of getting in and seeing CIOs," says Bhusri.

Hundreds of potential customers are waiting in the wings for Workday to demonstrate that it can scale to their needs, according to Duffield and Bhusri. Workday also needs to broaden beyond HR and financial apps. Procurement capabilities are due in the first quarter of next year, and payroll in the second quarter.

Two-year-old Workday now has 23 customers, including three that are replacing PeopleSoft apps with its offering. Existing PeopleSoft accounts are the sweet spot for Workday. With PeopleSoft now in the hands of Oracle, Duffield and Bhusri think companies want alternatives.

Workday's biggest account so far is banana distributor Chiquita Brands, which has 26,000 employees. The majority of Workday's customers are companies with 1,000 to 10,000 workers. Moving upstream to larger companies is central to its strategy. Since Workday charges by the number of employee records managed, bigger companies mean more revenue.

Workday's applications are developed with its own object-oriented programming language and in-memory database. Duffield calls them Workday's "secret sauce" because they allow for rapid development and quick version-to-version upgrades. But Duffield and Bhusri admit the company still has work to do in scaling the architecture up and out.

Workday is mulling the question of whether it needs to let some customers store data it manages on the customers' premises. Workday doesn't do that now, but some companies are wary of storing employee data on hosted servers. A Workday appliance at the customer's location could be the answer; Bhusri says no decision has been made.

In store for 2008: Workday is accelerating its release cycle to introduce new features and functionality every three months. That will include multilanguage support for companies with global operations.