Workday Global Payroll: theory meets practice

Workday, the US-based outsourced software provider set up by PeopleSoft founder Dave Duffield, unveiled its multi-country payroll roadmap this week in a move that could ultimately position it as a major player in the combined international HR/payroll field. But while it’s strong on vision, it’s got a number of gaps to plug in its international payroll capability.

The company – which provides Software as a Service (SaaS) IT outsourcing for HR and Finance – has started to flesh out its international payroll processing capability, and announced plans to release its first non-US offering (for Canada) this fall, with more to follow over the next several years. But for the foreseeable future, the bulk of Workday’s global coverage is going to come from other sources – specifically, from partnerships with third party multi-country payroll outsourcers, and an integration service that links up clients’ existing national providers.

Both approaches center on the Workday Integration Cloud, launched two months ago. Through the Integration Cloud, Workday provides pre-built integration to a variety of payroll systems, and also enables companies to build their own custom integration where needed.

On the partnership front, the company teamed up with leading payroll aggregator SafeGuard World International (SGWI) last fall, and it’s now in the process of integrating with SGWI’s rival Patersons – making it an aggregator of aggregators, if you will. Further partnerships with regional and cross-continent international payroll providers are also expected, although it’s not clear how far down the line Workday is in these discussions or how many there will be.

One shortcoming today is that this integration is only one-way – in other words, you can send data to your payroll provider from Workday’s HR system, but you don’t get the net payroll data back and you don’t get consolidated reporting. In a discussion with Webster Buchanan Research, Workday confirmed that it’s working on this kind of ‘in-bound’ integration as well, but the first fruits aren’t due until late 2011. (In the meantime, customers can get consolidated payroll reporting direct from the payroll aggregator itself.)

In addition to working with these two partners, multinationals can plug their existing national payroll providers into Workday’s Integration Cloud. This approach provides a pragmatic option for companies looking to maximize their existing IT investments and outsourced relationships – especially companies that are locked into long-term service agreements with national payroll outsourcers. It does mean, however, that they’ll have to continue to manage each individual country provider themselves, rather than working with one vendor across multiple countries – a key goal of multi-country payroll.

Another potential gap in Workday’s strategy is how companies tackle very large and very small country populations. Multinationals with a very large single-country employee base outside North America may seek a higher-end partner than Patersons or SGWI, which have historically peaked at managing employee bases in the mid-thousands (although they continue to scale up – SGWI now references one 10,000-employee single country site). So a company that switches to Workday from an Oracle or SAP system in the US may find itself having to stick with its existing in-house software system for other large country populations. That’s a little messy, even if mixed software environments are hardly a rarity for multinationals.

Likewise, for very small employee populations (one or two employees in a country) there may be more cost-effective options than a conventional aggregator.

So where does that leave Workday today? In practice, many of the multinationals that are considering switching to Workday aren’t yet focusing on payroll – they’ll be looking for evidence of a credible international payroll strategy, but their immediate focus is on migrating their HR set-up to Workday HCM. And for those that want to get going more quickly on the payroll piece, SafeGuard World International and Patersons boast some of the broadest geographical coverage in the multi-country payroll sector – so in many cases, they’ll be able to fill the bulk, if not all, of a client’s international needs. So in that respect, Workday has time on its side.

For the longer-term, then, the question is really how quickly – and how comprehensively – Workday can push forward with its partnership and development program to fill in some of the missing pieces of the jigsaw. In that respect, it finds itself in the same boat as every other multi-country payroll vendor.