Mark Nittler is vice president at Workday and sets the strategic direction for Workday's enterprise applications.
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Why ERP Is Out, and Unified Finance and HR Is In
When I talk about Workday to prospective customers, analysts, and others, I spend a lot of that time on the inherent value of using Workday Financial Management and Human Capital Management together. Combining financials and human resources into a unified offering is unique to Workday, and fulfills a need in the marketplace that’s well overdue. That need stems from a significant shift in recent years from how companies were structured in the industrial era to what I like to call today’s talent-driven enterprises.
ERP, although still the dominant enterprise software model in place, was designed in the industrial era for enterprises engaged in the manufacture and distribution of goods. The genius of ERP was that it reorganized the various functional stovepipes that made up business software at the time into an integrated whole—most importantly, at its core, the fusion of financials and inventory/supply into a single system. In that model, people were primarily seen as labor—a commodity whose cost is to be minimized—so the HRMS was typically addressed separately, and only focused on the very administrative functions of personnel, payroll, and compliance.
Today’s enterprise is in a very different place. Indeed, in many companies today, the largest cost and primary value driver is no longer things in the form of inventory, it’s people in the form of talent. This poses a significant systems challenge, as the thing-based design of ERP clashes with the talent-driven design of modern organizations. This is why ERP has always had a rather uncomfortable relationship with the talent-driven enterprise.
Yet among the things that ERP got right was the idea of organizing the software around the driving concept of the enterprise. Extending this concept to today, the optimal system model replaces things with people, and talent management replaces inventory management as the organizing principle of the software. And to do this, talent management must be as closely aligned with financials as inventory was to financials back in the heyday of ERP.
At Workday, we certainly don’t consider what we offer as “ERP.” From the beginning, our mission was to deliver an enterprise cloud for HR and finance, and this solution has been a key driver for many of our talent-driven enterprise customers, including AAA NCNU, Allied Global Holdings, Life Time Fitness, Sallie Mae, and TripAdvisor. For these companies and others, a business management system that unifies HCM and financials provides efficiencies and insights far beyond the capabilities of the ERP model.
An example: Imagine that a P&L analysis points to a revenue shortfall for your fiscal quarter. State-of-the-art financial drill-down analysis may help you indentify which organization, product, or customer is responsible. But what if the reason for the shortfall cannot be determined through analysis of financial data? What if the reason for lower-than-expected revenue is that you have three open positions in the sales organization, and have had for six months?
The arms-length relationship between finance and HR that exists in ERP systems cannot deliver this insight. Separately, the finance department could identify where the shortfall occurred, and the HR department—if it knew where to look—could identify the hiring problem, but only a unified solution is capable of connecting the dots.
Virtually every execution decision in the talent-driven enterprise involves both human and financial resources, so connecting those dots is a mission-critical requirement. Organizations that recognize the value of these connections—and most importantly, act upon them—are best prepared for success in the modern world.
Workday is a leading provider of enterprise cloud applications for human resources and finance. Founded in 2005, Workday delivers human capital management, financial management, and analytics applications designed for the world’s largest organizations. Hundreds of companies, ranging from medium-sized businesses to Fortune 50 enterprises, have selected Workday.