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Software-As-A-Service Faces Its Next Big Test

Dave Duffield, founder and former CEO of PeopleSoft who lost a takeover fight with Oracle, is about to take another run at the software market, this time without the software. His startup, Workday, will offer ERP applications as pay-as-you-go services. The pitch: ERP, fast and easy.

Any professional who has experience with these financial, HR, manufacturing, and other business apps will be intrigued--and suspicious. ERP is notoriously complicated, so the prospect of no-hassle implementation and management is hard to ignore. Then reality sets in. What about data security, scalability, regulatory compliance, systems integration, and customization?

Starting this week, Workday will offer human capital management applications, including services for staffing (recruiting and hiring, leave management), compensation (benefits management and employee enrollment), and employee performance assessment. Next year, the company will expand into accounts payable and receivable, procurement tracking, and other financial applications. Supply chain and resource management apps will follow. Duffield describes Workday's offerings as a "modern day ERP system."


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But businesses may not be ready to run their most critical processes on software managed by a third party. "There is an element of risk, since you're letting part of your business out the door," says Bernie Sims, project director for KP SalesConnect, Kaiser Permanente's sales force automation system, which is based on Salesforce.com's software services. Given the Health Insurance Portability and Accountability Act restrictions under which the health care industry operates, the HMO forbids the 650 sales reps and account managers who use SalesConnect from putting clients' personal data into that system. The data stays in Kaiser Permanente's "highly, highly protected" legacy membership and underwriting systems, Sims says.

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