CIO —

The company

Workday

Headquarters: Pleasanton, Calif.

Employees: 400

2008 Revenue: Privately held

CEO: Dave Duffield and Aneel Bhusri

What They Do: Workday is a software-as-a-service vendor headed by Duffield, the founder of PeopleSoft (which is now owned by Oracle) (ORCL), and PeopleSoft’s former vice chairman, Bhusri. It sells applications for human resources, payroll and financial management.

The Pitch

Dave Duffield and Aneel Bhusri, co-founders and co-CEOs of Workday, propose that their software-as-a-service application, with its enterprise resource planning capabilities, can, in Bhusri’s words, serve “as the administrative backbone for a non-manufacturing company.”

Duffield founded PeopleSoft and has sought to recreate that company’s reputation for solid customer service as a competitive differentiator. He and Bhusri, who was vice chairman at PeopleSoft from 1999 until 2004, aspire to broader ERP functionality. “We’re trying to do in three years what we did in 10 years at PeopleSoft,” Bhusri says—that is, develop a global financial platform for large companies.

Workday employees get incentives to maintain high levels of customer satisfaction, such as additional stock options or time off, Bhusri says. Flextronics CIO Dave Smoley says execs “listen to their customers and act on it personally,” with attention to the smallest details.

The catch

Workday isn’t quite ready to replace your SAP or Oracle financials yet, as Bhusri will readily admit. “[Financials are] just such a massive undertaking, doing it for large companies,” he says. “We think we’re a year away from taking on a Fortune 500 company in financials,” says Bhusri.

Right now, Flextronics, a $24 billion electronics manufacturer, uses an ERP system from Baan. Smoley says he would “love for Workday to get to the point where they’re competitive at the enterprise level” in financials.

To do so, however, Workday must be able to handle multiple currencies, tax codes and variations in reporting across industries. For example, SAP offers 45 country-specific versions of its financial application.

Flextronics is using Workday to replace about 80 legacy human resources systems, Smoley said. “We brought Workday in at a point where the company realized we need to focus on HR as a core competency,” he says, and he wanted to use a SaaS application. Flextronics is halfway through the global rollout of Workday, which produced millions in cost savings the first year, Smoley says.

The score

Workday has grown steadily since its founding in 2005, and it seems off to a good start technically. But its future isn’t certain, says 451 Group analyst China Martens.

While other SaaS vendors, such as Salesforce.com, are pushing a platform strategy, allowing third parties to build extensions to its software, Workday doesn’t yet have one. As a result, she says, Workday risks being perceived as less open in an era when standards, interoperability and extensibility of software are becoming more important.

Meanwhile, Martens says, it remains to be seen whether Workday can effectively deliver the broader functionality it promises, and whether it can, as it grows, maintain the type of service that has customers like Smoley smiling.

Smoley thinks, however, that the challenges SaaS companies face compared to on-premise vendors work in favor of customers.

“It’s a different alignment of priorities. If I’m a packaged-software guy, my goal is to sell licenses, then get [customers] to upgrade and add more features.” In contrast, SaaS vendors’ success is driven by factors like usability and lack of service disruption, he says. “They have to be continuously on top of their game.”

Chris Kanaracus is a U.S. correspondent with IDG News Service.