These announcements significantly enhance Workday’s position in the market, giving the company greater momentum as they compete against the world’s two largest software companies for the next generation of integrated business management software.

For those who don’t know a lot about Workday, the company has developed a next-generation cloud-based HRMS and Financials system (it's actually a next-generation ERP solution) which incorporates many innovations designed for the web. While originally offered as an HRMS, the system now includes a well developed financials module and is rapidly becoming an end-to-end business management platform.

Under the covers the product is quite innovative. Perhaps the most significant innovation is the company's object-oriented database, which enables the system to run fast and give users the ability to quickly find information, generate reports, and create corporate workflows (think business processes) which can be developed and managed easily. Apparently this is not the first time this has been done: Baan had a similar ERP architecture in the 1970s and 1980s.

Part of the underlying infrastructure is an embedded "Business Process Framework" which lets organizations build configurable workflows (think of them as configurable business processes with alerts) which inherit all security and structure in the rest of the system.

These platform features, coupled with other parts of the cloud infrastructure, make the system fast, easy to navigate, and highly flexible (even moreso with the extensibility announced today). And additionally (as I discuss below), Workday can produce real-time reports and analytics very quickly (without the need to buy business intelligence software).

(We are publishing a detailed research bulletin on Workday which Bersin & Associates members can read in the next 30 days.)

The company made a series of major product announcements this week:

1. Workday BigData Analytics.

First, the announcement which is the biggest (I spent 7 years in the data warehousing business, so I have an appreciation for the complexities of analytics). Workday introduced an end-to-end offering to extend its platform to become an open, highly scalable, BigData analytics systems for businesses.

(This is positioned as Workday's "third leg" in the cloud - after Financials and HCM.)

Let me briefly explain. Workday, like Oracle, SAP, and any other system, manages and stores vast amounts of financial, HR, and business process information. Traditionally such systems store this data in a relational database and you, as a customer, buy tools and create external data warehouses to query and analyze this information.

The whole process is comple, expensive, and requires extensive support from IT. As I've discussed in other blogs, a whole slew of vendors have arrived to help us put this data online and analyze it using modern BigData tools (the biggest being Hadoop and MapReduce, open source tools which let you parallelize access to huge amounts of data).

Workday, as a next-generation application, has been unable to offer such a solution to date, primarily because the database structure is proprietary and customers have not been able to load external data into the system (ie. external salary data, customer data, employee performance data, etc.).

Behind the scenes the company licensed a set of extraction tools (OEM from a third party) which let companies bring together large amounts of business and social data into the Workday platform. This includes a BigData store, a set of connectors to load data, pre-built analytics, and tools.

This means that Workday can not only be your BigData warehouse, you can also use Workday's reporting tools to query and report on the data. And the company plans to offer pre-built analytics in areas like workforce planning, retention analysis, diversity scorecard, pay-for performance, and others.

This essentially puts Workday into two new businesses.

First, the company now offers an open “BigData platform” which enables companies to use Workday as its standard place to implement a wide range of analytics programs. To date, companies had to lash together relational databases, hire other smaller companies, or look to IBM, EMC, or other big service providers for this offering.

Second, Workday is now in a "high-service" analytics market. Analytics problems are not solved with tools - they are solved with smart thinking and vertical business experience. Every company has its own data sources, and it takes brainpower, business analysts, and statisticians to pull information together and start to do predictive analysis. (Read our BigData in HR maturity model for more details.) Workday, in conjunction with its partners, will now be in this business.

At its roots, Workday is a software company - so the company's strategy here is to offer this high-volume, easy to use platform and build an industry of customers and consultants who use Workday's tools to implement and solve analytics problems. While there are many such platforms already in the market (Oracle, SAP, and many other vendors offer "data warehouse" tools), Workday customers are going to use the Workday platform. And frankly since the Workday platform is built on modern technology, this will become another reason to make a Workday platform decision.

Analytics and data-driven decision-making is the next big-thing for HR (and business in general).

What, for example, predicts who will be a high-performing sales person? This one question plagues nearly every company in the world, and the science of selecting high-performance sales people is quite imperfect. While there is no “repeatable” model that works for all companies and all roles, you CAN look at the patterns of high-performers in your company and use that data to recruit, select, manage, and coach people to that model. This type of BigData analytics can be worth millions to any business.

Workday discussed its work with AIG to correlate sales performance, claims data, and employee data to understand which sales reps most contribute to the bottom line. This is an excellent example of the type of analysis all companies would like to do.

Workday's Challenge and Risk

This is a big move for Workday and not without risks. The company is already spread thin with all its applications development (the company announced plan for its recruiting platform as well) and this requires a whole new set of technologies. And as other analysts have mentioned, the introduction of all this new data could distract Workday from its fundamental applications business. 

Second, Workday now enters a world with many new competitors.  IBM, Oracle, EMC, Splunk, Platfora, and a long list of other companies plan to enter this market. So Workday just signed itself up to compete with lots of smart companies.

Third, Oracle, SAP, and Mercer already have highly mature products in this market. If one were to compare Workday's HR analytics solutions against these other products, one would see that the Workday solution has some fascinating technology and a lot of potential, but will need services and time to mature. 

But ultimately the company has no choice. The other vendors (SAP and Oracle) are already well ahead, with packaged analytics tools and lots of customers.

(Read our BigData in HR research to gain a complete understanding of your roadmap here.)

2.  Workday Recruiting

If this was not enough, Workday dropped a second shoe. Yes, the company is going to build its own recruiting platform. We have all been speculating about this for years, and the company is making a smart move not to acquire an ATS vendor and to build its own integrated, next-generation recruiting platform.

The product (which is not even available for demo yet) will not be available until 2014, but Workday felt pressured to pre-announce its plans because so many customers keep asking "which recruiting platform will you work with."

The applicant tracking industry (which we follow closely) is more than 20 years old and consists of tools (like Taleo, Kenexa BrassRing, Lumesse, JobVite, and many others) which were developed to store, track, and manage resumes. As we all know, resumes are slowly going away entirely, so these systems are fairly clunky, inflexible, and generally produce a terrible candidate experience. And even though they are mandatory systems for any company, they are not well liked by most buyers.

The recruiting industry is undergoing a complete revolution. Platforms like LinkedIn have become "the source" of candidates, and most recruiting teams now want their systems to manage advertising, the candidate experience, provide  mobile recruiting tools and video interviews, and have extensive functionality to streamline the entire candidate sourcing and marketing process. ATS systems were never designed to do this.

So Workday gets to start from scratch, and build this system into its existing platform. The Workday platform already has the concept of a "candidate" and "requisition" built-in, so while there is a lot to build here, the core infrastructure is already in place. Time will tell, but we can hope to see a highly integrated, social network-aware solution to come out in the next year or so.

(Note: Taleo, JobVite, Kenexa-IBM, Lumesse, and others are not standing still either. It is somewhat arrogant for Workday to assume, with no beta product at all, that their product will simply replace and fix all the problems with existing ATS solutions.  Time will tell.)

Workday essentially told its customers "it's time to make plans to decommission your existing ATS." (Not that this is likely to happen, but Workday clearly wants that market over time.) I remember when PeopleSoft introduced its LMS and they expected all the LMS vendors to roll over and play dead. That didn't happen, so this time we should be skeptical and just wait to see what Workday has to offer. I don't think any company which needs an ATS can afford to just "wait" for Workday to provide a solution.

3. Extensible Objects and Custom Fields

The third announcemen is one that seems a bit geeky, but is actually quite important. Workday is introducing a tool set which lets customers add custom data fields and extend the Workday object database.

For those of us who grew up in relational database applications, this seems pretty basic. All applications have this feature already. But if you understand Workday, you realize this is a more profound enhancement.

The Workday system stores data in an "object" form - the "Worker Object," for example, is not a table in a database - it is a program which includes business rules (called methods), data, and awareness of all the other objects in the system. So in Workday when you click on a person's name, you can see all the related information about that person, as well as their reporting structure, the invoices they processed, their work history, etc. All "related information" is interconnected through the object architecture.

This means that in Workday (or any object based system), you can't view the data without going through the application. (Unlike SQL, where you can query the database directly.) So when you add a new "data field" you are actually extending the application itself.

While this may not really matter much to most users, what it means architecturally is that Workday lets you extend the object model - and add your own objects, which in turn have their own data. Initially this looks like a toolset for custom fields, but over time I imagine they will let you add methods (behaviors) and far more extensibility.

Cloud vendors have been struggling with this type of feature, and in a multi-tenant system this can get tricky. Salesforce, for example, has let customers built custom objects for years - but their external APIs weren't completely in place so they kind of "stood alone" like islands when you ran reports or wanted to integrate them with third party systems.

In Workday's case, it appears this functionality is built into the core platform, so all reports, screens, analytics, and integrations will immediately work. I see this as an important innovation and a huge boost for consulting firms and customers to help customize the Workday platform for vertical and other applications. (PS, I have since been coached that Baan, an ERP provider from the 1980s and 1990s, had a similar object architecture - so this is not the first such solution in the market.)

Bottom Line:

Workday is an aggressive software company. Most of the executives spent 10+ years at PeopleSoft so they are painfully aware of all the "gotchas" that come from traditional enterprise applications. Using that experience, the company is unafraid to "start over" and reinvent how business software works.