Cloud HCM Competitive Landscape: SuccessFactors v. Workday


successfactorsThe corporate workplace is constantly changing, which means the Human Resources (HR) function must also evolve and move away from the status quo if it is to remain relevant. Today’s business leaders more fully recognize the importance of recruiting, developing, and maintaining corporate talent. According to Forbes, 2015 will be full of many HR challenges but also ripe with many opportunities. Forward looking business leaders are looking for ways to get on the front side of these challenges and opportunities and therefore have been very open to meeting with leading HCM solution providers to understand how their innovations can create value.

Over the last 24 months, we have observed an increased interest in predictive analytics and cloud based technologies for Human Capital Management (HCM). The business cases appear to be more compelling than in the past with many companies adopting global solutions. There are many options available inclusive of Oracle HCM Cloud, SuccessFactors, Ultimate Software and Workday to name a few. The market is in growth mode and customer adoption is of primary importance for these providers. Savvy buyers armed with precise supplier intelligence can run highly effective processes for securing these solutions, which is critically important given the high renewal rates in this space.

Given the high number of inquiries we have been fielding on HCM cloud commercial arrangements, we decided to share our perspective on two of the top providers in the space, Workday and SuccessFactors. After reflecting on many of our Workday vs. SuccessFactors commercial advisory engagements, we arrived at the following summary differentiators.

Approach to the Relationship (Enhancing or Establishing)

With an installed base of over 200,000 customers in 188 countries and hundreds of partner alliances, SAP certainly has an advantage as far as its ability to secure meetings and discussions to promote the SuccessFactors solution. If you are a current SAP customer, your inbox and voicemail is most likely full of messages from your SAP account executive asking for a few minutes to talk about your current SAP relationship and the benefits of integrating the SuccessFactors solution. Often cited benefits will include ease and speed of implementing, seamless integration with SAP’s on- premise solutions, and the overall enterprise solution accountability that can be provided from a single provider such as SAP. Given SAP’s predominantly IT grounded relationships, the office of the CIO tends to be the point of entry for SuccessFactors to gain access to the HR suite. Once engagement occurs, you should expect an aggressive SAP sales force that is armed with proposals  and a hand full of client success stories and references from long time SAP customers who have integrated the Successfactors solution without a hitch. For those customers who made prior investments in SAP’s on-premise HCM solutions, SAP will lead the discussions with a willingness to provide incentives to offset those prior license and maintenance fees in order to move to its cloud solution. SAP will make the incentives even more compelling if you are willing to consider SuccessFactors in a sole source environment.

Although Workday cannot leverage an installed base the size of SAP’s, it gets a lot of coverage as one of Wall Street’s darling growth stories. It gets the attention of Chief HROs who read the Workday buzz and hear from peers who love the product and the vision. Workday leverages its market coverage and spends its time and energy on securing time with the HR executive. From our perspective, Workday has been quite focused on selling first to the business and then using those interactions to obtain a broader audience with IT and other members of the evaluation team to gain their buy-in.   With Workday, you should expect them to highlight the benefits of their home-grown solution, emphasizing how it has been developed from the ground up within an organization co-founded and led by Dave Duffield, a pioneer in the HR space, who founded PeopleSoft back in 1987.   Workday may even offer the opportunity to meet Mr. Duffield as part of the selection process.   It is this foundation of leadership in the HR technology space that motivates Workday to fill its proposals with call outs to innovation excellence and building solutions tailored for the HR organization based on years of listening to and aggregating key requirements of the HR end user. Workday sees this as a core differentiator and therefore spends a considerable amount of time pointing out how SAP did not build their solution from scratch but rather acquired it from SuccessFactors.

Approach to the Relationship when Selection Led by Business. Edge goes to: Workday

Approach to the Relationship when Selection Led by IT. Edge goes to: SuccessFactors

Solution Capabilities and Packaging

UpperEdge is not a market research firm so we do not conduct research and publish reports assessing and comparing vendor solution offerings. UpperEdge is primarily an IT sourcing and negotiation advisor that regularly assists companies who are sourcing solutions such as Workday and SuccessFactors. As a result of advising on numerous transactions in this space, we aggregated the results of how our clients respectively assessed Workday and Successfactors to arrive at some consistent scoring themes.   For Core HR, Payroll and Benefits, the majority of our clients have rated Workday on top.   For functionality such as Recruiting, Succession Planning, Compensation, Learning and Performance Management, the majority of our clients assessed the SuccessFactors solution as better.

In addition to solution capabilities, it is also very important to understand and assess how Workday and SuccessFactors respectively package their functionality as part of the annual subscription. For example, Workday’s “Workday HCM” solution is a bundled offering that includes key functionality such as Compensation, Goal Management, Performance Management and Succession Planning (among others).   Workday forces you to subscribe to the entire bundle upfront and will not permit you to break apart the bundle.   You can also subscribe to an equivalent level of functionality (i.e. Compensation, Performance and Goals and Succession & CDP) as part of SAP’s SuccessFactors “Enterprise Bundle.” The primary difference is that SAP will often let you subscribe to the functionality on a component basis and in a manner that aligns with the timing of when you actually need the functionality. SAP typically does not offer this component model out of the gates, but if positioned appropriately, they will present this option.

Solution: Recruiting, Succession, Compensation, Learning and Performance Management. Edge goes to: SuccessFactors

Solution: Core HR, Payroll and Benefits. Edge goes to: Workday

Solution Packaging Flexibility. Edge goes to: SuccessFactors

Overall Commercial Flexibility

As we have covered in prior blog posts, it is critical to achieve highly competitive upfront subscription pricing along with long term price protections and flexibility. It is also critical you put in place a meaningful service level structure that holds the providers appropriately accountable for the performance of the solution.   As you may expect, Workday and SuccessFactors approach these areas differently.

From an overall subscription fee perspective, SAP’s SuccessFactors solution is typically lower. If strategically negotiated and supported by relevant market intelligence, SAP will provide deep discounting to win your business. Workday on the other hand is quite comfortable telling you they do not deep discount and acknowledge that the SuccessFactors solution will be cheaper.   Workday will inform you that they treat all organizations the same (regardless of the size), maintain integrity of pricing, and will not deep discount to win business as they feel the value of their solution is far superior to SuccessFactors. Even though Workday acknowledges that the SuccessFactors subscription will be less expensive, they counteract this by presenting numerous reports and findings that show the cost and time to implement the Workday solution is much less and shorter. At this point in time, the numerous Workday and SuccessFactors system implementation estimates maintained within our intelligence database, support Workday’s position.

In addition to more compelling upfront pricing, SuccessFactors has been more willing to put in place long term price protections that minimize the opportunity for cost increases during subsequent renewal terms. Workday has also shown a willingness to put price protections in place, however, achieving these protections typically takes significant back and forth effort with the results often not as good as those achieved with SAP.

For service levels, Workday digs its heels in and simply tells you they do not negotiate or modify their service levels or service level credit structure.   Workday will bring you back to the fact that they believe in treating all organizations equally and therefore do not make client specific modifications to the service levels or the service level credit structure.   SAP on the other hand, will show a willingness to negotiate and improve their standard service level credit structure both in terms of credit percentage and ability to terminate for service level non-conformance.

Overall Commercial Flexibility. Edge goes to: SuccessFactors

Given the enterprise application industry’s focus on the cloud, it is a bit of a land grab for the solution providers. Seeding the market is paramount to profits right now, so it is a great time to be evaluating competing solutions within the market. Both providers are extremely hungry to win your business and if you know what to ask for, you can ensure your company will be set up properly for the long haul.

We welcome your feedback and the opportunity to discuss how best to approach your upcoming discussions with SAP’s SuccessFactors and/or Workday. Please feel free to leave a comment and do not hesitate to contact Adam Mansfield amansfield@upperedge.com or co-author David Blake dblake@upperedge.com with any feedback or inquiries.

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