Arena: Market Conditions Before Workday
HR and IT leaders at large employers · 2005 · United States
High setup and upkeep costsEntrenched systems
A large employer in 2005 ran its HR, payroll and accounting on client/server software from PeopleSoft, SAP or Oracle, installed in its own data center and customized to fit each department W26 W28. Every customization made the next upgrade harder, and a major upgrade cost about as much as a new implementation, so many companies stayed on old versions W26 W35. They still paid the vendor about 22% of the license price each year for maintenance and updates WDO-2. In January 2005 Oracle took over PeopleSoft and told its customers that the path forward was Fusion, a new suite due in 2007 and complete in 2008, with support for PeopleSoft releases promised only through 2013 WDO-1. Replacing the system that paid every employee was a risky project, and few buyers wanted to trust it to a new vendor W26.
How each step happened
Step 1 of 5 · 2005–12
One object model, one vendor-run version: no customization, no upgrade projects
Workday's innovation was to run HR, and later finance, as one version of one system for every customer. Its founders knew the problem from inside: Dave Duffield founded PeopleSoft and Aneel Bhusri had been its vice chairman. When they returned to PeopleSoft in 2004, Bhusri says, customers had customized their client/server installs until upgrades cost too much, and they would 'hit the wall of the architecture' W26. Oracle's hostile takeover removed them in January 2005, and in May they started Workday as 'the replacement platform' for HR and ERP systems run on premises W26 WDO-6. Against Oracle, which now owned those customized installs, the promise was that no customer would run an upgrade project again.
The design made that promise possible. Workday represents employees, budgets, charts of accounts and organizations as objects in one multi-tenant, in-memory system, and customers adapt it through configuration, not code W2. Workday runs the service, and because all customers share one version, all of them move when it updates: three times a year by 2012, with an improvement made for one customer reaching the others W2. Yale, leaving a customized Oracle system where every change was complex, noted that Workday's configuration needed no programmers W28. The single version is what the pricing in step 2 and the shared learning in step 3 depended on.
Rivals Oracle's post-takeover plan was Fusion, a new suite due in 2007 and complete in 2008, with PeopleSoft support to 2013 WDO-1. Fusion Applications became generally available only in 2011, and even then Oracle reviewed each customer's project before letting it start WDO-3 WDO-11.
Novel ArchitectureManaged ServiceFounder Domain Expertise
Step 2 of 5 · 2006–12
Counter-positioned against Oracle's maintenance base
Workday set its business model together with the architecture, so this step overlaps the first. Customers paid a subscription per user per month instead of $100,000 to millions up front, and the updates were part of what they paid for W26. In 2009 Bhusri said many customers had decided not to take the next major upgrade from their ERP vendor, because 'a major upgrade is much like a new implementation and it's cost prohibitive' W35.
Oracle could not make the same offer without hurting itself. Its customers paid 22% of the license price every year for maintenance, and in 2009 those fees brought Oracle $12 billion a year against $11.5 billion from new licenses, at a 51% operating margin WDO-2. A subscription that included every upgrade would replace the income that carried Oracle's profits. Larry Ellison dismissed cloud computing as nonsense in 2009 WDO-6, and when Fusion arrived in 2011 Oracle posted an on-premise price list first, with no public subscription price WDO-3. That delay gave Workday the years in which former PeopleSoft customers were choosing what came next.
Rivals Oracle announced Fusion HCM as a subscription only in 2012, with on-premise still offered WDO-3 WDO-5. SAP faced the same choice: Sony Pictures already owned SAP HR licenses, found implementing them unaffordable, and chose Workday W35.
Counter-positioningSubscription Pricing
Step 3 of 5 · 2007–12
PeopleSoft credibility lands large early customers who shape one product
A company choosing a startup to pay its employees is betting the startup will survive. Workday's answer was PeopleSoft's people: by early 2008 it had about 170 staff, 80% of them from PeopleSoft W26. Bhusri says Duffield's reputation made large companies accept a startup's product 'much sooner than you would see with a typical start up' W1. Workday planned to sell to companies of 1,000 to 5,000 employees in 2007 but won Chiquita, with 25,000 W1. Flextronics CIO Dave Smoley bought although, he says, 'they don't have exactly what we need now', because 'you're buying a relationship with a leadership team that is committed to a vision' W7.
These early large customers shaped the one product everyone used. Chiquita's global rollout pulled translations and country requirements forward, four or five languages at once W1. In 2011 Cornell and Georgetown were invited to help design functionality for universities W27. Because every customer ran the same version, each of these changes reached all customers, and the product that won the next deal was broader than the one that won the last W2. Customers grew from 201 to 326 in the year to July 2012 W2. The shared version also set a limit: Workday and Amazon ended Amazon's HR deployment because its needs differed from the broader customer base W15.
Rivals In February 2012 analyst Mark Smith found Oracle's Fusion HCM still not widely adopted, with former PeopleSoft customers switching to Workday instead of migrating WDO-4. That month Oracle paid $1.9 billion for Taleo, which Gartner read as a quick answer to SAP's SuccessFactors purchase and to Workday WDO-5.
TrustLighthouse CustomersCustomer Discovery
Step 4 of 5 · 2007–17
HR records become the foundation for finance
Financials launched in July 2007 on the same foundation as HR, but customers adopted it years after HR, so this step runs later than the one before W26. Finance used the records HR already held. When Unum chose HR, payroll, financials, procurement and expenses together in 2014, Workday described how an organization change entered in HR would update finance processes, such as expense approvals, in real time W32.
Finance usually came second. Yale put HR and payroll live in July 2015 and Workday Financials in July 2017, bringing purchasing, expenses and grants into one system 'to leverage Yale's HR and financials data' W28. By 2015 Workday had 1,062 HR customers and 160 finance customers WDO-7: each HR customer was a finance prospect whose employee and organization records were already in place. Finance also reused what HR had built; Workday called it the Power of One, meaning one version, one security model and one architecture for every application W34. Holding both sets of records is what made the system hard to replace in step 5.
Rivals Oracle sold HR and finance too, and Yale had run both on Oracle E-Business Suite W28. But Oracle's lines were separately acquired products, PeopleSoft, E-Business Suite, JD Edwards and Siebel, and Fusion combined their features on one shared platform only from 2010 and 2011 WDO-11.
Multi-ProductData GravityScope economies
Step 5 of 5 · 2015–26
Switching costs
Once HR and finance run on one system of record, leaving it means rebuilding everything around it. Yale's finance launch alone required more than 170 systems to be updated or retired W28. An Andreessen Horowitz investor counted hundreds of integrations per customer in 2026 and put an implementation at 6 to 18 months WDO-10. Workday reported gross revenue retention of about 97% for fiscal 2026, on revenue of $9.6 billion W20.
The same kind of barrier did not protect Oracle. Yale left E-Business Suite, and in 2021 CVS Health replaced its Oracle/PeopleSoft HR system with Workday, which by then ran HR for more than half of the Fortune 500 W28 WDO-8. The difference is what the customer is locked into. Oracle's customers were held by the cost of upgrading customized installs, which the single version of step 1 removed; Workday's are held by the processes and records they have built on it, the HR and finance data joined in step 4.
Rivals A 2013 Morgan Stanley survey found 10% of Oracle users planning to switch to Workday WDO-6. Oracle recovered later: Fusion HCM revenue grew 35% in a 2021 quarter, and in 2020 Forrester rated Oracle's current offering above Workday's while Workday led on strategy WDO-8 WDO-9.
Switching costs