Workday Releases Beta Of Its On-Demand Financial ApplicationsWorkday Releases Beta Of Its On-Demand Financial Applications

When PeopleSoft founder Dave Duffield publicly launched his startup Workday last fall, selling ERP through a software-as-a-service model was fairly novel. Since then, Oracle, SAP, and other established ERP vendors have gotten serious about the market, with growing sales in the still-small niche for subscription-based enterprise apps.

Workday Monday released the beta versions of its first financial and supply chain applications, following the human resources suite it released last year as its first product. Workday has just 15 customers, including fellow SaaS vendors Salesforce.com and RightNow Technologies. (Both offer CRM, which isn't in Workday's plans.)

The new applications include ones for handling supplier accounts, financial accounting and reporting, cash management, and customer accounts. Procurement, planning and budgeting, and orders and billing apps are in the works. The company targets midmarket customers with annual revenue of between $500 million and $2 billion. Subscriptions to financial apps services will run around $100,000 a year.

Besides price, Workday sees an advantage from having built its ERP system from the start with an emphasis on usability, Web access, and analytics. Workday's financial apps, for example, aren't designed just for financial reporting, said Mark Nittler, Workday's VP of applications, in an interview. So while there's a general ledger, there's also built-in analytics to help the marketing department look at sales and expenses by campaign type and region, to better assess campaign effectiveness. The apps also have a feature called Worktags that lets managers tag events in the system with keywords.

Established vendors are tentatively exploring subscription-based ERP. The most Workday-like offering is SAP's planned A1S ERP suite, aimed at midmarket companies. Planned for release next year, it'll be designed from the start for SaaS. SAP is planning a press event in New York next month, with CEO Henning Kagermann on hand, to give an update on A1S, provide demos, and have early users talk about their experiences. SAP already offers CRM and procurement on demand.

Oracle sells Oracle On Demand, which gives customers options such as subscription pricing and hosting. Microsoft has said its Dynamics Live CRM service will go on sale by the end of next month; it wouldn't be surprising if it brings other business apps to the SaaS model (Microsoft won't say).

SAP's on-demand business is growing -- up 46% in the first half of the year compared with the same period in 2006 -- but totals just $111 million for those six months. Oracle's On Demand business is up 40% for its fiscal year ended May 31, to $557 million. The on-demand model isn't necessarily easy money: On-demand CRM vendor RightNow's sales dipped 1.5% and it lost $5.7 million in the second quarter as it tries to move customers entirely to a subscription-based model for its hosted software.

Workday has good ideas, but the introduction of financial apps isn't likely to bring a customer rush. It still has to convince midmarket companies to embrace SaaS -- and ignore the SaaS rumblings from SAP, Oracle, and others.