Innovation in Financial ManagementHow Workday is Breaking the Barriers of Legacy ERP

2

Innovation in Financial ManagementHow Workday Is Breaking the Barriers of Legacy ERP

Contents

Innovation from the Ground Up 2

5 Steps to a Better Financial

Management Solution

Step 1: Rethink How Business Behaves 3

Step 2: Respect the Basics 6

Step 3: Repackage Into a Holistic,

Unified System 6

Step 4: Rebuild on the Latest Architecture 8

Step 5: Replace Costly Delivery

Model with a More Cost-Efficient One 10

How Workday Fundamentally Improves

Enterprise Finance 10

Summary 11

Innovation from the Ground Up

Today we are in the midst of unprecedented technology

innovation. Between mobile devices with interactive

touch screens, 3D effects in movies and television, and

almost ubiquitous Internet access from anywhere in the

world, it seems there is a new technology solution for

almost everything.

in•no•vate (verb): Make changes in something established, esp. by introducing new methods, ideas, or products

Why then, within the ERP space, has innovation had

difficulty getting traction? While the general public

becomes more savvy at getting information through

the Internet and various devices become easier to use,

business executives are still struggling to get timely and

accurate information about the financial status of their

organizations, even though all of the data they need is

captured right in their own systems.

1979 1985 1988 1989 1992 1993 1995

1996 1999 2001 2002 2007 2012

SAP Releases R/2 – ERP is born

Hong Kong reverts to Chinese control; Commercialization of WWW sets the stage for “ebusiness”

Windows 1.0 – GUI hits the mainstream

First commercial email (Eudora) introduced

Fall of Berlin Wall; Outsourcing / Off-shoring strategies emerge.

World Wide Web (WWW) is invented

“Reengineering the Corporation” by Hammer & Champy creates demand for business process agility

“The Balanced Scorecard” by Kaplan and Norton starts the Business Performance Management (BPM) market

First XBRL prototype presented to AICPA

SaaS concept introduced

The Sarbanes-Oxley Act ushers in a new era of corporate governance

SEC proposes allowing IFRS statements Today

3

This white paper tells the story of a revolutionary

approach to financial management and accounting systems.

It explains how Workday has built a solution that is relevant

to today’s challenges and opportunities by re-thinking,

re-architecting, and re-building a financial management

and accounting solution that leverages the best today’s

technologies have to offer. Founded by the industry

leaders who created PeopleSoft, Workday Financial

Management addresses the technical and business

shortcomings of aging ERP systems. Read on to find out

more about the extraordinary benefits that CFOs and

their companies can realize by considering Workday as an

alternative to traditional ERP/financial software products.

5 Steps to a Better Financial Management Solution

Step 1: Rethink How Business Behaves

Executives, managers, and knowledge workers need

information far beyond financial accounting data. They

need to be able to see and understand a full view of

the business—the “who, what, where, when, and why” of

business events and their impact on the enterprise. In

today’s climate of constant change, increasing regulatory

oversight, and instant information access, business people

need to have faster access to real information about

what is really going on with their business. Without this

information, they will not be able to change or adapt as

quickly as the market increasingly demands. So why can’t

traditional systems adequately meet these needs?

More Than Debits and Credits

Traditional ERP systems were built primarily to address

financial accounting requirements, not provide a full

view of the business. As a result, these systems are

based on the concepts of debits and credits, journal

entries, the chart of accounts, and the general ledger.

While this allows ERP finance systems to adequately

deliver financial reports to external parties (investors

and regulators) according to GAAP, they fail miserably in

serving the business people of the organization.

1 Jim Shepherd, What Comes After ERP? (Gartner Commentary) August 1, 2011

The truth is that ERP systems, while innovative in

their day, have difficulty keeping up with the evolving

business landscape. Although financial systems can

still crank out journal entries and Generally Accepted

Accounting Principles (GAAP) reports, the ERP technology

model has struggled to provide the agility, visibility,

and controls needed beyond basic accounting. New

requirements—such as the need for internal governance

and controls, rapid globalization, changing reporting

standards like IFRS and XBRL, and several new accounting

trends—have all been haphazardly appended onto the

rigid, unyielding ERP core. The result is excessively large,

complex, and expensive ERP “solutions” that monopolize

the time and energy of IT departments just to keep the

lights on.

Why can’t ERP do this well? The short answer is because

ERP was designed before these problems became

problems. The requirements that would be needed in

the future simply could not be anticipated, and when

ERP vendors tried to adapt, they couldn’t. If anything,

ERP solutions have become their own worst enemies

when it comes to their ability to meet the needs of

modern business. What is the solution then? Innovation

and agility, of course. ERP solved the original problem

of doing the accounting, but a new system is needed to

address the problems of today as well as those that will

come tomorrow.

“We are long overdue for another paradigm shift in the enterprise business system industry...The functionality has expanded, and the technology has gotten more sophisticated, but ERP systems are still largely the same as when Gartner defined the category in 1992.”1

– Jim Shepherd, Gartner Analyst

4

“Accounting is a requirement of business, but it’s not the reason for doing business. Business is about commerce.” – Mark Nittler, VP of Applications Strategy, Workday

Workday realized that it needed to capture a much

broader foundation of information beyond debits and

credits in order to adequately satisfy the needs of

the business user. To do so, Workday has modeled the

building blocks of business information:

• The resources acquired and used to support

workers and deliver value to customers

• The people (workers and business entities) with

which an organization does business

• The activities or events (buy, sell, hire, fire)

businesses engage in to achieve their objectives

Understanding this information provides breadth (across

all types of transactions,) as well as depth of detail (by

ensuring all appropriate information is captured when each

transaction takes place) that gives color to the “who, what,

where, when, and why” questions that may arise later.

This data is stored in what Workday calls the Business

Event Repository and forms the foundation for Workday’s

approach to reporting as well as accounting. Thanks to

the completeness of information captured, bolt-on data

warehouses are no longer necessary. The next step was to

design a way to access and group the data that makes it

meaningful to the many types of business users out there,

from accountants to executives to operational managers.

Unlocking the Chains of the Code Block

Workday took a long, hard look at what was inhibiting

traditional ERP systems from effectively delivering both

financial and operational reporting and insight.

Business Event

Whatevent occurred

Whendid it happen

Forwhich company

Forother Worktags

Whoinitiated the event

Howmuch was it

Forwhich cost center

Forother Worktags

Traditional Solutions Workday

Journal Based Business Event/Object Based

5

The difference between a Worktag and a typical tag is

that rather than being merely nominal, Worktags actually

link events to specific business objects. For example,

when an employee creates a purchase order or expense

report, some Worktags can be automatically added to the

transaction, such as the employee’s name, his department,

and his cost center. However, the employee could also

add additional Worktags, such as a customer (if the

purchase is for a customer project) or an initiative that

his team is working on. Each of these things (business

objects) is represented in Workday, so they are all

available immediately to be added as Worktags.

Once Worktags have been added to transactions,

reporting becomes a matter of finding all of the events

that relate to the specific business object and presenting

the data together. For instance, if you want to see Spend

by Department (say the Marketing department), Workday

simply gathers all events that were tagged with the

Marketing Worktag. If you want to see spend by cost

center, employee, or even a customer, you can get that

information very easily out of Workday as well.

Worktags are far more agile than traditional code block

fields. Rather than being completely reliant on a pre-

conceived, hard-to-change code block, Worktags can

evolve as business needs evolve. Each time a new

employee, customer, project, or organization is created,

they are immediately available to be used as Worktags.

And if there is something not yet tracked by Workday,

new Worktags can be easily added to the system for

better insight into financial and operational data.

Traditional systems are structured entirely around a

GL code block—the central core structure that defines

the chart of accounts and drives the accounting for the

business. Unfortunately, the code block is notoriously

inflexible; expanding it to capture information beyond

financial accounting is expensive and difficult for a

number of reasons:

• The code block is tied to physical data storage,

so any additional field or dimension would drive

significant (and expensive) system overhead.

• The code block is defined at the top of the

enterprise, so everyone using the system faces

the same set of fields. It is impossible to limit the

fields seen by individuals, and impractical to add

department-specific code block fields.

• Once implemented, the code block is figuratively

“set in concrete,” meaning the accounting system

cannot easily or economically accommodate

change. This rigidity results in the proliferation of

spreadsheets and bolt-on reporting solutions that

engulf ERP financial systems today.

Clearly, the limitations of the code block approach will

not support a system targeted at the broader set of data

needed to support the full business.

To replace the code block, Workday created the concept

of Worktags. Strongly inspired by the Web 2.0 concept of

tagging2, a Worktag is an attribute assigned (i.e., tagged)

to a business event, thus helping to describe the event

and enabling multi-dimensional aggregation, reporting,

and analysis of business information.

2 In Web 2.0 parlance, a tag is a keyword associated with or assigned to a piece of information, thus describing the item and enabling tag-based classification and information search. Tagging is easier and more powerful than fitting information into limited, preconceived categories or folders.

6

An additional benefit that Workday gains from taking an

event-driven approach is that it can also accommodate

multiple types of accounting principles such as U.S. GAAP,

IFRS, cash, or specific regulatory schemes. Any accounting

standard you choose can be derived from the same

source of data for accuracy and consistency across your

entire business.

Step 3: Repackage Into a Holistic, Unified System

Traditional ERP systems have evolved into a

Frankenstein’s monster of software. To keep these systems

functioning, vendors (and customers) wrap the old systems

with multiple layers of compensating bolt-on technology

(e.g., integration platforms, mobile platforms, reporting

systems, etc.). This strategy adds weight, complexity, and

cost to systems that are already too heavy, too complex,

and too expensive. Because Workday started from scratch,

capabilities available in traditional ERP only through these

technology wrappers and bolt-ons have been built directly

into the core of the Workday solution.

Step 2: Respect the Basics

In reinventing enterprise finance solutions, Workday’s

primary focus was to ensure the system provided

excellent support for the basics. No amount of innovation

will make up for a system that cannot pay suppliers,

receive payments from customers, or close the books.

A top priority for Workday Financial Management is to

support the basic transaction processing and accounting

functions of the Finance department. With the foundation

of data in the Business Event Repository, Workday

identifies which transactions have a financial impact

and can create the resulting accounting easily. Since all

activities are captured within the system, accounting

becomes a natural, seamless outcome of managing the

business. In this way, Workday Financial Management

includes the functionality the enterprise has come to

expect in the way of general ledger accounting, accounts

payable, accounts receivable, and the like.

7

This improvement over legacy financial systems is

analogous to a similar design challenge conquered in the

automotive world: how to incorporate use of a wide range

of personal technology innovations, including CDs, MP3

players, cell phones, and satellite navigation systems into

the car’s “user interface,” typically the dashboard console.

Initially, these new technologies were accommodated

with one-off adapters, which typically plugged into a

car’s cigarette lighter. However, in late-model cars from

innovative manufacturers, the “bolt-on” functions have

been repackaged into a completely redesigned dashboard

console. For example, an Apple iPod® can be plugged in

and operated with the radio controls. If the driver’s cell

phone rings, the sound system’s volume lowers. Workday

brings the same level of fundamental improvement to

the way enterprise financial systems support their users.

Features and functions built into Workday that are typically

wrappers or bolt-ons in traditional systems include:

• Natural Workspace Orientation: Through a native

web user interface, Workday is accessible from any

device with a browser and Internet connection.

Enhanced experiences for specific applications and

devices (such as Microsoft Outlook® or the Apple

iPad® and iPhone®) also are available.

• Role-Based Security: Permissions, management

approvals, and transaction limits are all built into

the fabric of the system and share the same core

structure as Workday Human Capital Management

for seamless and effortless security and controls

management.

• Workflow: The Workday system incorporates

built-in workflow. All processes are defined and

orchestrated using the built-in Workday Business

Process Framework.

• Business Intelligence: Embedded and actionable

business insight is included as part of the core system.

• E-commerce: New e-commerce standards are easily

leveraged, providing collaborative payments to and

from the business.

• Services Procurement: Workday avoids the

limitations of manufacturing-driven procurement;

the capability to purchase services, including

contract labor, is built in at the core.

• Governance and Compliance: Internal control,

month-end close, and auditability are built into the

fabric of the system.

• Integration Technology: Workday reduces the

burden of building and maintaining integrations

by delivering integration technology as part of the

foundation of the system.

Building these capabilities into the core of the system

reduces complexity and cost while making them much

easier to use and manage.

iPhone and iPad are registered trademarks of Apple, Inc.

8

Step 4: Rebuild on the Latest Architecture

The complexity, inflexibility, and expense of traditional

systems can largely be traced to the dated technology

on which those systems were built, including

relational databases, PC-based user interfaces, and

3GL development tools. Depending upon these old

technologies makes it extremely difficult, if not

impossible, for legacy ERP vendors to adapt to today’s

changes. Workday takes a modern approach to creating

enterprise applications by leveraging market-proven,

advanced technologies such as object orientation, web

services, service-oriented architecture (SOA), Web 2.0

technologies, and an event-driven functional design. All

of these new tools allow Workday to address and adapt

to the changing needs of today’s fast-paced businesses.

“The significant problems we face today cannot be solved at the same level of thinking we were at when we created them.”

– Albert Einstein

Object Orientation

The previous generation of enterprise systems

were designed around complex, relational database

management system (RDBMS) models, consisting of

thousands of tables that store fixed relationships between

business objects. These systems rely on redundant data

for the navigational aids that support data access. Not

surprisingly, business systems built upon RDBMS models

have become difficult to decipher, complex to manage,

inflexible in the face of business change, and expensive

to operate. The 30-year-old RDBMS core has become

one of the most significant limitations of the systems in

predominant use today.

Workday solutions are built differently. They embody

simplicity, agility, and economy because they are based

on an object model that works more like the real world.

Workday treats people, organizations, and things as

they should be treated—i.e., like people, organizations,

and things. Object orientation enables dynamic

relationships between different types of information,

without being locked into a rigid database structure. This

is what enables Worktags to be so fluid and accessible

from everywhere in the system. It is also what makes

supporting multiple accounting standards much easier

than in traditional RDBMS-based systems.

Modern Web Services and Service-Oriented Architecture (SOA)

No business solution is an island, although most legacy

ERP applications seem to work that way. Traditional

integration strategies—such as application programming

interfaces (APIs) and middleware—have helped, but in

the end, it is still the customer’s problem to make their

systems work together. As technology has improved,

however, Workday is taking on more of the burden

of integrations rather than foisting the problem of

integrations onto the customer.

The Workday Integration Cloud3 provides a comprehensive

solution that enables customers and partners to build and

deploy integrations to the Workday Cloud without the

need for any on-premise middleware. With standards-

based web services APIs, Workday provides complete

programmatic access to business operations and processes.

Rather than assume that the Workday system is the only

and most important system in the world, Workday expects

and helps facilitate smooth information flow for more fluid

and natural sharing of data.

3 For more information, download the “Simplifying Enterprise Integration with the Workday Integration Cloud” whitepaper on www.workday.com.

9

“Increasingly, customers want their middleware bundled with the application stack. The less integration work they have to do themselves, the more they like it.”

– Phil Wainewright, ZDNet4

Web 2.0 Social and Mobile Technologies

Workday embodies social computing philosophies and

Web 2.0 technologies, making it easy to learn and use,

taking the most successful approaches from consumer

web sites like Amazon.com and Facebook and applying

them to enterprise software. This approach means

Workday solutions change the traditional user-system

relationship. Rather than having user interfaces that

are completely utilitarian and unattractive, Workday

prioritizes the user experience for all types of users,

from executives to everyday employees. Through the

use of colors, icons, links, buttons, and drill-down

charts, Workday measures up to modern expectations

by providing a user experience that is intuitive, easy to

learn, and a pleasure to use.5

Workday naturally extends the modern user interface

to the mobile experience for today’s technology-savvy

users. Workday’s simple-to-use philosophy applies

easily to smaller, handheld devices such as smartphones,

iPhones®, and iPads®. Any device with a web browser and

Internet connection can access real-time data in Workday.

This accessibility, along with related mobile apps, are

all available without an additional mobile technology

platform or additional cost.

Built-in Business Process Workflow

Workday also provides embedded business process

management to control and ensure the appropriate

workflows, approvals, and reviews. Business process

steps are not hardwired; they are a sequence of business

events coupled together with workflow. Steps can be

added, removed, modified, or made conditional based

on specific criteria. Business processes can also be

configured for specific organizations (e.g., if different

rules were applicable only in specific regions), or

inherited for consistency across organizations.

This allows business processes to be configured to match

your organizations’ exact needs, even if they differ by

organization or region, while being controlled centrally

for company-wide control and oversight. In addition

to improved control, the business processes are easily

adjustable at any time after go-live. That is, if business

needs change, governmental regulations become stricter,

or expansion into new countries continues, the system

can adapt naturally while allowing you to maintain the

structure and control you want across your business.

4 “Another ERP buys into middleware,” Phil Wainewright, ZDNet, February 6, 2008, ZDNet blog entry. 5 For more information, download “The Workday User Experience” whitepaper on www.workday.com

10

Step 5: Replace Costly Delivery Model with a More Cost Efficient One

The traditional ERP business model is heavily rigged

in favor of the supplier: make the customer pay for

high cost perpetual license, assume all installation

and operational risk and cost, pay for consulting

and implementation, pay for upgrades, and pay for

maintenance. This model benefits the vendor more than

the customer, because at each step or change in the

market, the vendor can demand more money from the

customer to stay up to date. However, a new software

delivery model, Software-as-a-Service (SaaS), has become

a cost-effective and advantageous way to select and

deploy software across an entire organization. SaaS is

quickly becoming recognized as the delivery model of

choice for business applications thanks to benefits that

include faster deployments, more predictable costs,

transference of risk to the vendor, reallocation of IT

resources, and global accessibility, oversight, and control.

How Workday Fundamentally Improves Enterprise Finance

rev•o•lu•tion•ar•y (adj): radical; markedly new; involving or causing a complete or dramatic change; “a revolutionary discovery”

Thanks to the many innovations incorporated into

Workday Financial Management, organizations that adopt

Workday can expect to transform the enterprise finance

function in the following ways:

• Real-Time Information: Thanks to the object-

oriented, in-memory architecture, Workday shatters

the well-worn theory that you cannot combine

transaction processing and business intelligence in

a single system. By effectively capturing business

events and dynamically using Worktags, Workday

can do exactly that. Not only do you have a more

robust base of information, you can access it more

quickly—even at the point of decision-making—to

empower and enlighten your business decisions to

the benefit of your business.

11

• Continued Agility: Workday allows companies to

respond to market dynamics much faster and take

advantage of business opportunities as soon as

they are identified—even after implementation

and without a major technology overhaul.

Workday uniquely imparts three types of post-

implementation agility:

› Organizational Agility: With Workday’s

flexible organizational model, you can easily

and accurately model your organization

in real time. Business process will also

automatically update, taking into account

new reporting relationships between

individuals and organizations. This

provides better insight and process control

throughout your business.

› Process Agility: Web service-based, event-

driven applications and built-in workflow

allow enterprise processes to be easily

configured, adapted, and changed. Configure

business processes to exactly match

your needs for specific organizations,

and centrally control them for complete

oversight of your business.

› Informational Agility: Because information

in Workday is tagged, not trapped in

thousands of RDBMS tables, its availability

in the Workday system is determined by

need and use, rather than locked in by

initial implementation decisions. Add new

reporting dimensions whenever necessary

and never be constrained by a rigid,

immobile code block again.

• Better Control: To effectively manage risk,

governance and control have to be at the core of

the solution; they cannot be bolted-on. Workday

features configurable and transparent business

processes and controls, configurable security, and

a comprehensive audit trail built into the fabric of

the system.

• Economic Advantage: Workday replaces high-

cost traditional enterprise applications with

technology that costs less to implement, maintain,

and upgrade, thanks to the SaaS delivery model.

Overall application cost is lower because many

of the bolt-on functions that must be purchased

separately for ERP systems are already integrated

into Workday. Additionally, at a strategic business

level, Workday affords superior upside because

it enables the organizational agility required to

pursue evolving business opportunities.

Summary

Businesses today have an alternative to legacy ERP.

Workday is leading the charge with revolutionary

innovation that can give businesses a real competitive

edge by modeling the way that businesses operate and

providing the flexibility to fit your unique business

requirements today, and, perhaps more importantly, as

they change over time. Workday Financial Management

combines a comprehensive set of planning, accounting,

and business intelligence capabilities to satisfy a wide

range of internal and external audiences. In a single,

unified system, Workday uniquely delivers:

• Simplicity: Workday solutions are easy to

understand, implement, and use.

• Agility: Workday solutions easily adapt to business

change based on need and use.

• Insight: Real-time access to core transactional data

allows executives and managers to get meaningful

information faster than ever before.

• Confidence: Governance and control, built into the core

of the system, provide confidence in “the numbers.”

• Economy: SaaS delivery, Web 2.0 usability, and

built-in mobile and business intelligence capabilities

reduce operating and maintenance costs.

Workday, Inc. | 6230 Stoneridge Mall Road | Pleasanton, CA 94588 | United States 1.925.951.9000 | 1.877.WORKDAY (1.877.967.5329) | Fax: 1.925.951.9001 | www.workday.com

© 2012. Workday, Inc. All rights reserved. Workday and the Workday logo are registered trademarks of Workday, Inc. All other brand and product names are trademarks or registered trademarks of their respective holders. INNOVFINMGMT-10192012

Today’s businesses can no longer afford to be constrained

by financial solutions rooted in old technologies that have

been surpassed by innovation. CFOs should recognize

their aspirations to make a difference—in their finance

organizations, companies, and the business world—will be

catalyzed by the proper technology. The right technology

significantly enhances the probability of success,

while the wrong technology will thwart even the best

intentions and efforts. Workday uniquely empowers CFOs

and finance organizations with financial management

technology that is nothing short of revolutionary,

imparting unsurpassed agility, informational access, and

economic benefit.

About Workday

Workday is the leader in enterprise-class, Software-as-a-

Service (SaaS) solutions for managing global businesses,

combining a lower cost of ownership with an innovative

approach to business applications. Founded by PeopleSoft

veterans Dave Duffield and Aneel Bhusri, Workday

delivers unified Human Capital Management, Payroll, and

Financial Management solutions designed for today’s

organizations and the way people work. Delivered in the

cloud leveraging a modern technology platform, Workday

offers a fresh alternative to legacy ERP. More than 310

customers, spanning medium-sized organizations to

Fortune 50 businesses, have selected Workday. Visit us at

www.workday.com.