Select A Workday Services Partner For The Next-Generation Of ERP

For: Application Development & Delivery Professionals Select A Workday Services Partner For The Next-Generation Of ERP by Liz Herbert and Paul D. Hamerman, September 2, 2014 Key Takeaways Workday Customers Have Different Services Needs Compared to the services needs for traditional ERP implementations, Workday customers must seek faster and more iterative rollouts. They need the ability to assimilate more frequent software updates and partners that can help them with fresh ideas and open minds about HR and finance processes as well as the experience to guide the change management. Look For These Five Must-Haves When Selecting A Partner Five must-haves for a good-fit partner are: 1) deep functional experience in the areas that matter to you; 2) technical knowledge of how Workday works and the proper way to configure and integrate; 3) a strong, agile methodology based on the Workday Accelerated Methodology; 4) change management built into the project plan; and 5) support from Workday. The Workday Services Market Is Still Maturing Workday has since balanced a careful, conservative approach to growing its partner ecosystem to control and ensure quality with its need to support a fast-growing customer base. The ecosystem can be bucketed into four categories: Workday specialists, cloud specialists that do Workday, HR consultancies, and large systems integrators (SIs). Forrester Research, Inc., 60 Acorn Park Drive, Cambridge, MA 02140 USA Tel: +1 617.613.6000 Fax: +1 617.613.5000 www.forrester.com

September 2, 2014 Select A Workday Services Partner For The Next-Generation Of ERP by Liz Herbert and Paul D. Hamerman with Chris Andrews and Fraser Tibbetts Why Read This Report Enterprise resource planning (ERP) is dead (again); long live ERP! As leading business executives rush to create digital, customer-centric companies, next-generation ERP solutions are playing a key role in the BT agenda, supporting modern employee needs and business flexibility. Workday continues to be one of the most disruptive and fast-growing solutions providers in the new era. A software-as-a-service (SaaS) pure play from its inception, Workday enables employees to work in a more agile and customer-centric way supporting modern, innovative HR and finance processes. However, in-house application development and delivery (AD&D) professionals rarely have the right expertise or resources to implement the solution or to get value out of it in the long term on their own. Instead, Workday customers are turning to services partners for help with process design, technical implementation, change management, and ongoing solution management. But, buyer-beware; effective approaches to implementing Workday are different from traditional (onpremises) ERP vendors. And, the list of potential options is a moving target. This report provides an overview of why and how Workday customers rely on services partners, why selecting a Workday partner differs from traditional partner selection, and which are the key players you should consider for your short list. Table Of Contents 2 3 6 8 8 Workday Customers Have Different Services Needs Than Classic ERP Workday Customers Need Fast, Iterative Rollout Approaches With Ongoing Innovation Don t Try This On Your Own: Workday Is Not A Do-It-Yourself Solution Five Must-Haves For Any Potential Workday Services Partner...... And Five Nice-To-Haves That Are Hard-To- Find Or Immature In The Workday Market The Workday Services Market Is Just Emerging recommendations Revisit Your Options Frequently In This Fast- Moving Market Supplemental Material Notes & Resources Forrester interviewed Workday and 13 Workday services partners for this report, including Accenture, Aon Hewitt, Appirio, Collaborative Solutions, Deloitte, IBM, Jeitosa, Kainos, Kloud, Meteorix, OneSource Virtual, PwC, and Towers Watson. Related Research Documents Navigating The Fast-Moving Landscape Of Digital Implementation Partners May 7, 2014 Application Adoption Trends: The Rise Of SaaS May 5, 2014 Define Your Strategic HR Technology Road Map November 19, 2013 2014, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. To purchase reprints of this document, please email clientsupport@forrester.com. For additional information, go to www.forrester.com.

Select A Workday Services Partner For The Next-Generation Of ERP 2 Workday Customers Have Different Services Needs Than Classic ERP Workday is a rapidly growing SaaS applications vendor, targeting enterprise organizations that want to move from traditional on-premises software to the cloud. Its key offerings are Workday HCM, a comprehensive HR, payroll, and talent management suite, and Workday Financials, an accounting and financial management solution. It is also developing Workday Student, a future offering for higher education institutions. Currently with approximately 700 customers, Workday has sustained growth rates in the range of 70% and is expanding globally as the company closes in on $1 billion in annual revenue (see Figure 1). Workday also has growing net losses (negative net income on a GAAP basis), which is a potential concern to investors, but this is common for SaaS vendors and consistent with Workday s strategy to pursue high growth and market share gains. How can Workday boast such impressive growth when old ERP stalwarts are losing market share? Workday customers say the solution gives them increased business agility and better ability to engage employees and customers. For example, one of the vendor s marquee clients, Flextronics, said that Workday freed up HR from transaction-based processes, allowing them to focus on strategic projects to the business and provide data to business leaders to help make data-driven decisions. However, to achieve these business results, Workday customers need to take a more agile approach that focuses on fast ROI and ongoing innovation. Following old approaches to ERP (long implementation cycles, heavy customization) will stifle innovation and hurt business results. Figure 1 Workday s Revenue Growth Is Offset By Increased Expenses $500 $400 Workday financials Sales/revenue $300 Gross income* (USD millions) $200 $100 $0 -$100 -$200 Net income 2009 2010 2012 2013 2014 Source: MarketWatch website *This growing gap between gross income and net income is due to continued growth in SG&A expenses. 117385 Source: Forrester Research, Inc. Unauthorized reproduction or distribution prohibited.

Select A Workday Services Partner For The Next-Generation Of ERP 3 Workday Customers Need Fast, Iterative Rollout Approaches With Ongoing Innovation In contrast to a traditional, on-premises ERP implementations where customers lay out a three to five year plan with heavy design and customization, Workday customers implement more rapidly and use the metadata configuration capabilities to avoid customization and allow postimplementation adjustments. Twice a year, automatic upgrades present even greater opportunities to drive business value in contrast to less-frequent on-premises system upgrades that are often deferred. To succeed with Workday, customers need the following: An Agile development/rollout methodology to iterate business results. Workday s architecture lends itself to a more agile, iterative approach to implementation. This mean faster time to value for the initial go-live and the ability to evolve processes and global reach in subsequent phases. Workday partners are mandated to use the Workday Accelerated Methodology. This methodology comes with nearly 300 prebuilt business processes that enable an accelerated approach to deployment. The ability to assimilate more frequent software updates. Since Workday provides two significant software releases per year, this means that your rollout plan should incorporate new features as they become available and your business processes should evolve as the Workday product expands. In addition, new product introductions like Workday Recruiting may influence project scope and integration requirements. Fresh ideas and open minds about your HR and finance processes. Departing from the heavy customization that was classic in ERP in the 90s and 00s, modern Workday rollouts leverage out-of-the-box processes as much as possible. Because this SaaS platform limits customization (versus on-premises alternatives that give you more ability to customize), you must work within the metadata configurability that the application delivers. However, Workday s in-memory architecture and integration tooling allow you to recalibrate processes that reflect old ways of getting work done (e.g., batch updates and manual workarounds). Don t Try This On Your Own: Workday Is Not A Do-It-Yourself Solution Workday indicates that approximately 75% of its deployment projects are led by its implementation partners. If Workday s professional services team is leading the implementation, third parties may also be involved, and vice versa. While early customers may have required much less support from partners, the rapidly expanding footprint and the increasing scale of customer usage mean that you can t do this on your own. To get high ROI, fast time to value, and ongoing innovation from Workday, customers turn to services partners that can bring the right know-how for both business domain knowledge and software expertise. There is good news: Although there is some amount of data migration, conversion, and technical interface development required for Workday, it is significantly less than you would need in traditional, on-premises ERP. Instead, the bulk of the work falls into three categories:

Select A Workday Services Partner For The Next-Generation Of ERP 4 1. Process. Services partners help Workday clients design process flows and business rules so that you can take advantage of pre-built Workday functions. 2. Integration. Partners help clients connect the Workday application to internal systems, cloud applications, and third-party services. 3. Change management. Adapting users to the new application environment requires programmatic change management practices, including communication and training. Five Must-Haves For Any Potential Workday Services Partner... In this nascent services market, experience and proof points will vary widely and will help to differentiate the best-fit provider for your Workday needs. These partners can be particularly helpful if your deployment is in finance (a newer offering than Workday HCM), the emerging industry solutions (e.g., higher education and state and local government) or any geography outside of the US. Beyond the basics, five must-haves for a good-fit partner are: 1. Deep functional experience in the areas that matter to you. To find a partner with the right functional expertise, you need to get specific. Ask about specific domains where you need thirdparty help such as benefits, compensation, staffing, or financials. Dig particularly deep on any newer Workday modules or modules where third-party expertise is still scarcer (e.g., accounting and financial reporting). 2. Technical knowledge of how Workday works and the proper way to configure and integrate. Like other SaaS leaders, Workday wants to ensure your success by training and monitoring the partner community. One easy way to check for technical expertise is to ask for certifications, both at the partner level and at the individual level for individuals on your project team. 3. A strong, agile methodology based on the Workday Accelerated Methodology. All Workday projects must adhere to the Workday Accelerated Deployment Methodology, which provides standardized training, prebuilt processes, and quality assurance steps. Beyond the Workdayowned methodology, partners can augment this based on their own experience and IP. Watch out for unapproved, rogue partners because they likely won t use this standardized best-practice approach. 4. Change management built into the project plan. Look for a partner who builds change management directly into the Workday rollout plan, not as an add-on or afterthought. For example, Towers Watson founded a center of excellence (CoE) in 2009 specifically to help global Workday customers get better results by infusing change and communication throughout the implementation and in ongoing HR changes.

Select A Workday Services Partner For The Next-Generation Of ERP 5 5. Support from Workday. Because of the SaaS-native architecture of the Workday solution, a partner is dependent upon Workday for technical fixes and problem resolution; a partner cannot touch your code because all Workday customers run the same code in the multi-tenant model. Workday, in fact, mandates all customers to pay for Workday services resources that effectively oversee and check the work of partners (or your own implementation resources if you happen to have these in-house). So, while using an approved partner is always a good idea, it is particularly necessary in the Workday world. 1... And Five Nice-To-Haves That Are Hard-To-Find Or Immature In The Workday Market Because the Workday services provider market is still nascent, you should expect to trade off some elements that you would ordinarily look for in an ERP services partner. Be realistic about what you ask for as the market is still maturing. Five elements that are nice to have but shouldn t cause you to rule out an otherwise strong option are: 1. Tools and prebuilt IP, such as testing and migration tools. Workday s platform does not expose a coding environment for extending the application (in contrast to salesforce.com and NetSuite, which enable partners to build deep industry-specific versions and add-on modules using native SaaS development tools). That said, there are some areas where early IP has emerged from third-party service providers. For example, Kainos has proprietary IP called Kainos Smart, which is a testing tool and way to provision testing support and services. 2. Pricing that aligns to your business success. Clients we speak with ask whether we know of Workday partners that will tie their pricing to the client s success. There are ample opportunities for partners to do this through either human resources outsourcing (HRO) models that are transaction-based or through success-based payments at each phase of the rollout. But, the reality of today s projects is that most are either time and materials or fixed fee. 3. Local resources based in your geographic area. Clients want their partner to bring knowledge of local HR or accounting practices, which is best accomplished by local, in-country talent. However, buyer beware that even the larger partners are still ramping up and that most have limited in-country resources even where they boast deployment experience in dozens of countries. 4. Global delivery models that leverage low-cost or factory-model talent. With technical work (data migration, conversions, testing) being a smaller part of a Workday rollout versus classic on-premises ERP suites, there has not been as much focus on growing global delivery resources or factories yet. Today, most of the specialists do not leverage global delivery whereas larger firms tap into the existing global delivery footprint they have in place already, such as Deloitte s centers in India and Ireland; PwC s center in Shanghai; and Towers Watson s center in Manila.

Select A Workday Services Partner For The Next-Generation Of ERP 6 5. Ongoing services that focus on continuous business value improvement. Workday s frequent upgrades and ability to support iterative deployment mean that customers who want to get the most business value should build an overall support plan that includes continuous business improvement. For example, boutique Jeitosa regularly engages with clients on production support projects after the first phase go-live, which typically last a couple of months. Workday specialist Meteorix has been one of the first to formalize its post-production services (PPS) offering. The Workday Services Market Is Just Emerging Workday, founded in 2005, started growing its partner ecosystem from the get-go with specialist partners such as Jeitosa (founded in 2004), Collaborative Solutions, and Aggressor (founded in 2006 and later acquired by Deloitte) as well as large partners Deloitte and Accenture. Workday has since balanced a careful, conservative approach to growing its partner ecosystem to control and ensure quality with its need to support a fast-growing customer base with increasingly complex needs. In more recent years, the market has grown to dozens of partner choices. Key types of firms include (see Figure 2): Workday specialists. A select few specialists have emerged in the past decade to focus exclusively on Workday rollouts. Examples include DayNine, Meteorix, Collaborative Solutions, and Jeitosa. These firms only do Workday and have only ever done Workday although many of their leaders come from PeopleSoft backgrounds. These specialists offer the advantage of laser-focus on Workday but the downside of minimal knowledge of any other platform. Because they only focus on Workday, they are not in position to help with software advisory/platform selection needs (for non-workday applications). Cloud specialists that do Workday. Systems integrators that focus on cloud products only eye Workday as one of the next big SaaS solutions. Similar to the Workday specialists, they are focused but they will have knowledge of some other cloud platforms. For example, Appirio has Google and salesforce.com capabilities in addition to its Workday practice. These vendors generally have just one ERP (Workday) in the portfolio and therefore are also not in a position to help with software selection. HR consultancies. HR consultancies such as Towers Watson, Aon Hewitt, PwC, and Deloitte have been expanding their technology skills to include Workday, both organically and inorganically. Deloitte boosted its practice with the acquisition of Aggressor; Aon Hewitt acquired Workday specialist OmniPoint, both in 2012. Beyond consulting and implementation, some of these HR consultancies (such as Aon Hewitt) also use Workday in their HR BPO practices. This group of companies is best at process consulting and change management, particularly for larger deployments.

Select A Workday Services Partner For The Next-Generation Of ERP 7 Large systems integrators. With Workday gaining much attention and increasing market share, leading technology integrators including Accenture, IBM, and more recently HP are building Workday practices. Most of these are adding Workday to an already-deep ERP consulting and systems integration capability, which will help them catapult their Workday practices through cross-skilling resources. Others continue to bolster their Workday practices through acquisition; KPMG recently announced its acquisition of Axia Consulting s Workday Practice. 2 These providers are best for end-to-end technology integration needs, especially projects where your needs extend outside of Workday into areas such as data warehousing. Figure 2 Workday Partners Focus Varies Partner HQ Partner Practitioners Best for: Geofocus: Accenture Dublin, IE 2008 ~500 HR transformation based on Global Workday; complex projects Aon Hewitt Lincolnshire, Ill. 2008 ~500 HR outsourcing based on Workday; Workday deployments Appirio Collaborative Solutions Kloud London, UK 2010 >50 European-centric Workday deployments 117385 San Francisco, Calif. 2010 >100 SaaS deployments, including Workday >150 Deloitte New York, N.Y. 2009 >500 HR transformation based on Workday; complex projects Jeitosa OneSource Irving, Tx. 2010 >150 Smaller to medium deployments; BPO PwC London, UK 2008 >200 HR transformation based on Workday; complex projects Towers Watson Arlington, Va. 2008 >150 HR transformation based on Workday Reston, Va. 2007 Workday-only projects IBM Armonk, N.Y. 2008 >150 HR transformation based on Workday; complex projects San Francisco, Calif. 2007 <50 Workday-only projects; testing Kainos Belfast, UK 2011 >50 European-centric Workday deployments Meteorix Boston, Mass. 2010 >200 Workday-only projects and post-production services Global Global NA and Europe Europe Europe- centric Source: Forrester Research, Inc. Unauthorized reproduction or distribution prohibited.

Select A Workday Services Partner For The Next-Generation Of ERP 8 Recommendations Revisit Your Options Frequently In This Fast-Moving Market The Workday practices of many partners are growing at double- or even triple-digit annual rates, which means that their capabilities are a moving target. Expect to see fast expansion into new geographies, new industries, and new service lines as the market continues to heat up. This fast-pace of change means that you should revisit the partner market often; do not lock in to long-term deals. Remember: Small vendors are acquisitions targets. Ongoing M&A will create two major changes in the Workday landscape: 1) large providers that have small or nonexistent Workday practices today can leapfrog the competition through the right acquisition and catapult ahead to leaders in the Workday market; and 2) specialist suppliers will disappear, meaning that any contract with a smaller vendor should outline your rights during M&A, including exit clauses and knowledge transfer. Watch for today s rogue suppliers to gain formal partner status. Several partners that do not have formal partner status today are clamoring to get into the mix. Many larger systems integrators, including some of the larger India-based companies and outsourcers that are notably not present in today s Workday ecosystem already have Workday needs emerging within their established, long-term clients. Expect these providers to gain formal partner status, particularly as the complexity of Workday grows and global delivery becomes a critical need in the market. Industry-oriented leaders will emerge. Today, Workday only has one true vertical, its education and government sector, which has already attracted numerous existing partners. As Workday expands into other industries and continues to expand its platforms to let partners create industry add-ons, new leaders will emerge. Larger systems integrators and technology consultancies such as Accenture, Deloitte, PwC, and IBM are best positioned here because of the depth of their existing industry consulting capabilities. Supplemental Material Companies Interviewed For This Report Accenture Aon Hewitt Appirio Collaborative Solutions Deloitte IBM Jeitosa Kainos

Select A Workday Services Partner For The Next-Generation Of ERP 9 Kloud Meteorix PwC Towers Watson OneSource Virtual Endnotes 1 Workday s involvement in implementation projects effectively limits systems integrators from doing work in Workday accounts without formal partnership status. 2 Source: KPMG Acquires Workday Consulting Practice From AXIA Consulting, KPMG press release, August 4, 2014 (http://www.kpmg.com/us/en/issuesandinsights/articlespublications/press-releases/ Pages/KPMG-Acquires-Workday-Consulting-Practice-From-AXIA-Consulting.aspx).

About Forrester A global research and advisory firm, Forrester inspires leaders, informs better decisions, and helps the world s top companies turn the complexity of change into business advantage. Our researchbased insight and objective advice enable IT professionals to lead more successfully within IT and extend their impact beyond the traditional IT organization. Tailored to your individual role, our resources allow you to focus on important business issues margin, speed, growth first, technology second. for more information To find out how Forrester Research can help you be successful every day, please contact the office nearest you, or visit us at www.forrester.com. For a complete list of worldwide locations, visit www.forrester.com/about. Client support For information on hard-copy or electronic reprints, please contact Client Support at +1 866.367.7378, +1 617.613.5730, or clientsupport@forrester.com. We offer quantity discounts and special pricing for academic and nonprofit institutions. Forrester Focuses On Application Development & Delivery Professionals Responsible for leading the development and delivery of applications that support your company s business strategies, you also choose technology and architecture while managing people, skills, practices, and organization to maximize value. Forrester s subject-matter expertise and deep understanding of your role will help you create forward-thinking strategies; weigh opportunity against risk; justify decisions; and optimize your individual, team, and corporate performance. «Andrea Davies, client persona representing Application Development & Delivery Professionals Forrester Research (Nasdaq: FORR) is a global research and advisory firm serving professionals in 13 key roles across three distinct client segments. Our clients face progressively complex business and technology decisions every day. To help them understand, strategize, and act upon opportunities brought by change, Forrester provides proprietary research, consumer and business data, custom consulting, events and online communities, and peer-to-peer executive programs. We guide leaders in business technology, marketing and strategy, and the technology industry through independent fact-based insight, ensuring their business success today and tomorrow. 117385