One of the most closely-watched software startups of recent years will come out of stealth mode on Monday [6 November] when Workday officially launches. Founded for former PeopleSoft chief Dave Duffield, the company is regarded as a litmus-test for the potential of enterprise applications running online.

While companies such as Salesforce.com and RightNow Technologies in customer relationship management (CRM) have shown that even large companies are moving to the on-demand model of hosted, pay-as-you-go applications, it is yet to be proven that broader enterprise applications will follow. Although they have service-based offerings, enterprise resource planning (ERP) giants such as SAP and Oracle have so far focused their attentions largely on the traditional software space.

Workday plans a web conference for Monday but on its website says it plans “a complete business management service” that taps XML, web services and service-oriented architecture capabilities and spans finance, procurement, supply-chain planning, billing and other classic ERP characteristics. The company has already released its Human Capital Management module.

Four of the firm’s five-strong leadership team are formerly of PeopleSoft, leading some watchers to expect the firm will have particular strength in human resources (HR).

“Given Dave Duffield's deep knowledge of the HR space, they will have good insight as to how to apply a software-as-a-service model to the HR problem,” said Zach Nelson, chief executive of NetSuite, an on-demand provider of business applications.

“The biggest challenge they will have will be the length of time it will take for them to build a complete solution.”

AMR Research data on growth in the online applications sector suggests that HR is currently a slower-growth area than some others. It rose 13 percent between 2004 and 2005, compared to 300 percent for ERP generally, 60 percent for CRM and 125 percent for sourcing/procurement, the analyst said.

Other firms are optimistic that Workday’s arrival will bolster the credibility of the sector.

“It’s great to see another player joining the business web,” said Steve Garnett, chairman of Salesforce.com in Europe. “It is further testament to the power of the on-demand multi-tenanted model, reinforcing the fact that organisations around the globe continue to abandon the old model of software licensing to reap the benefits of efficiency, innovation and reduced costs.”