Workday: The Next Software Power?

PeopleSoft founder Dave Duffield is building another software upstart that is attracting a lot of attention

By Steve Hamm

Ever since veteran software entrepreneur Dave Duffield launched his new startup, Workday, a year and a half ago, people have wondered if it could become the next Salesforce.com (CRM). Marc Benioff, Salesforce.com's chief executive, had shaken up the customer-relationship management software world and created a company with a market cap of $8 billion with an online service that replaces expensive and complex traditional software packages. Could Duffield and Workday do the same? Just now, there's growing evidence they can.

Workday has landed three large companies as customers—important votes of confidence that it can be trusted to handle some of a corporation's most crucial computing tasks. Flextronics (FLEX), the biggest of the three, plans on rolling out the Workday human resources management system worldwide for more than 200,000 employees in the next two years. "Workday could definitely be the next Salesforce.com," says David Smoley, Flextronics' chief information officer. "Their model is in line with companies like us. We want to keep things as simple as possible and keep costs as low as possible."

The other major customers are Chiquita (CQB), with 25,000 employees, and Life Time Fitness (LTM), which plans to adopt all three of Workday's services, adding accounting and payroll to human resources management.

If Workday does a good job of serving these clients it will gain credibility with large corporations that are looking for alternatives to traditional software packages. "They're in the phase where they're getting big customers. If they do well with the rollouts they'll get the attention of a lot of mainstream corporations," says analyst Jim Holincheck of market researcher Gartner (IT). David Dobrin of B2B Analysts is even more effusive: "Workday is like the iPod for enterprise HR software. It's a better and simpler way of doing things, and people can see it."

A Long Rollout

Rivals caution that these are still early days for Workday, though. It will take years for the company to build out all of the functionality large corporations need. Its trio of large customers is willing to wait while it adds capabilities, but not every company will be so patient. "Twenty customers does not a success make. You have to be ready to put 10 years into this deal," cautions Zach Nelson, chief executive of NetSuite (N), a company that provides accounting and HR services for small and midsize companies, and which has spent a decade building up its offerings.