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Global CIO: Under The Oracle-SAP Radar: Can Workday Scale Into Financials?

With many Fortune 500 companies using its SaaS HR apps, Workday is developing a suite of financial applications as well—plus an IPO.

Workday just doesn't conform to traditional molds: it's privately held but has lots of Fortune 500 customers; it expects to go public in 18 months but its co-founders view that as a means to an end instead of the end in itself; and in a sector dominated by companies up to 500 times larger than it is, Workday is spreading the word that those big guys personify the past while Workday frames the future.

Co-founders and co-CEOs Dave Duffield and Aneel Bhusri launched Workday about five years ago because their experiences running Peoplesoft—Duffield was the founder—convinced them that huge opportunities for creating customer value existed in niches either not served or poorly served by Oracle and SAP.

Since then, the company has built a rapidly growing customer base that is as close to rabidly loyal as any I've ever come across in this business. At events where Workday customers are speaking, I've seen that passion create dissonance among audience members who then say things like, 'Well, that all sounds nice, but you're a Workday employee so of course you're going to say only nice things about the company!'

As is true with all small but rapidly growing tech companies (Workday's Bhusri says the company's revenue is growing at 200% per year but declines to reveal precise figures) that have exploited a niche but have aspirations to expand out to new levels, the big questions confronting Workday are these:

1) Can it continue to grow toward full escape velocity without being confronted very directly by SAP or Oracle?

2) Will one of those big competitors simply swoop in and make Workday an offer it can't refuse?

3) Can it develop relevant and dynamic products beyond its initial set (for Workday, that's HR and payroll) to provide sustained future growth?

4) Can it sustain and expand technological and performance advantages over the big guys that are so substantial that customers are willing to diversify their portfolios to bet on the new guy? And,

5) As Workday looks to extend its play upstream from HR into financials, will a critical mass of Fortune 500 companies trust a software company that's not publicly held and not widely known with something as vital as its financial operations—particularly when its products are based on a relatively new technology?

"In the last six months, the market has really changed—I can't say it's changed on a dime, but it's been building and building and now cloud and SaaS are no longer questioned—they are the future," said Bhusri in a recent interview.

"And I think the legacy vendors for the first 4 or 5 years of our existence just tried to dismiss us as being a company and a technology platform that wasn't going to reach large companies. Lawson's CEO has a great quote about how SaaS was going to explode in a couple of years, and he's right—it did—but it didn't explode in the [destructive] way they thought, but rather in a very different way.

"In the first half of this year," adds Bhusri, "we grew more than 200% year over year, and our pipeline is filled with a number of very large Fortune 500 companies."

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That growth has not gone unnoticed—several weeks ago at Oracle Open World, as Larry Ellison was previewing some of the capabilities of Oracle's new Fusion applications, he cited on a couple of occasions features and functions that would match or exceed what Workday's products can do.

That sort of competitive challenge hardly intimidates Bhusri, who makes no effort to hide his disdain for the bare-knuckle tactics Ellison deployed in his hostile takeover of Peoplesoft six years ago after Bhusri and Duffield had been brought back in to run the company.

And now, he said, Workday is able to begin setting the terms for the next battle:

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