This week, ERP vendor Workday announced its intent to acquire CPM/EPM (corporate performance management/enterprise performance management) vendor Adaptive Insights. The deal will mean that Adaptive’s recent IPO filing will be scrapped and the company will become part of Workday. The price tag for this will be over $1.5 billion USD.
See Phil Wainewright’s analysis of the acquisition here.
Material change of control
While Adaptive’s CEO will continue to run the soon-to-be-formed Adaptive Insights business unit within Workday, this deal still represents a material change of control.
With the change in ownership of a company, there may also be changes to the products, product roadmaps, technology platforms, pricing, account territories, development teams, development efforts, etc. Smart software users plan for these material events, during the contracting of a subscription and during pre-deal and post-deal acquisition closure.
Both Workday and Adaptive are of a similar culture and their leaders are well-known to each other. They also have about 30 joint customers between them. And, both firms will want to retain customers. That said, it is often better to have something in writing rather than just a good feeling or a hunch.
The Punch List
If you are an Adaptive customer, you might want to do the following:
- Dig out your original contract (and any renewal contracts) with Adaptive. Was there any language within it regarding material change of control? Can/Should you take advantage of any of it now? Are there specific rights you should assert?
- (Re-)Negotiate your Adaptive Insights product renewal now. Once the deal is done, you’ll likely be negotiating with Workday not Adaptive. And, since Workday has to recover some of that $1.55 billion they paid for Adaptive, they might be tempted to raise prices. Someone has to help them rebuild their cash position. So, while prices could stay the same, wouldn’t you sleep better if you locked-in current pricing for many more years? (No, I don’t think pricing would go down post-acquisition!).
- Notify your rep if you were considering new Finance or HR software. You might be able to get discounted Workday pricing if you engage with the Workday sales team now IF and only if they’ll do a bundle pricing deal for you. Alternatively, do a renewal with Adaptive with a post-acquisition option to get additional price breaks if you also do a subsequent Workday deal. You can always work in an option for lower prices should the acquisition deal get consummated.
- Still waiting on Adaptive product enhancements? Better get those commitments in writing now as the new owners may not want to honor some vague, oral promise. Also, ensure performance penalties are in place should the acquisition trigger some sort of delay.
- Have a Plan B at the ready. While I’m doubtful any of these outcomes would happen in this combination, be prepared if:
- The product roadmap materially changes
- The product gets substantially re-written
- Users must be moved to a new technology platform
- Users have to rewrite their forecasting models under a new language/tool
- Leadership at Adaptive changes
- Adaptive loses many of its technology team
Retention of the Adaptive team, all of them, will soon be Workday’s responsibility.
If your firm was counting on a continued relationship with the Adaptive CEO (Tom Bogan), Founder (Rob Hull), or other team members, then what happens if they leave the company? Some Adaptive people could take their winnings from this deal and retire. Some might like working in smaller, scrappier startups not in a large enterprise software firm. Change is going to happen. What matters now is how well your firm plans for it.
All Adaptive customers should realize that Workday has a competing solution that has its own 3- year product roadmap. The questions you should be teeing up with Workday leaders might include:
- When, if ever, will Workday combine the products into one solution?
- How will this affect us?
- Which product line will persevere long-term?
Adaptive has a lot of customers; however, many of these are mid-size entities. Most of Workday’s customers are large enterprise firms with many of them focused on HR, not Financial, applications. As a result, some Adaptive customers may feel a loss of influence in the combined firm. They may feel as if they are now one of the hundreds of similarly sized customers. Adaptive customers may have to lobby harder for their requested product improvements. Can you accept this?
Homework for Workday customers
Workday customers should also undertake a little reflection, especially those customers who contracted to use the Workday Financial Performance Management solution. You will likely want more assurances as to its product roadmap and eventual longevity.
One customer has told us that his biggest concern is that this sizeable acquisition will act as a management distraction where a more mature, acquired solution, is given preference over an otherwise useful and attractive 'homegrown' offering in the current Workday portfolio for which he is already contracted and in the throes of implementation. Assurances and roadmaps will need to come thick and fast.
This solution is very tightly embedded with the Financials and HR products. Would Workday want to maintain two similar product lines long-term? Which product line would survive and which one would eventually get sunsetted? How will that scenario play out?
I’m not expecting this deal to dramatically upset the Adaptive apple cart. The fact that it will be a business unit of Workday sends a positive message to Adaptive customers that it has a big (and friendly) owner with deep pockets and a culture of innovation to which it can look with confidence.
Change is a constant and whether there was an acquisition or not, Adaptive would still get bigger. Adaptive’s original customers would have less influence in an ever-growing firm. So, the deal won’t overtly change much long-term. Short-term, some Adaptive customers need to act on their subscription renewals. That’s one big to-do in the next few weeks.