So this week's proposed acquisition of Adaptive Insights came as no surprise to me. However, I see 'traditional' FPA as stuck in the 20th century model of analysis.
Same old, same old?
When I view what the Adaptive's of the world are doing, and especially in discussing outcomes with customers, I don't see them as fundamentally different to what the Hyperion's and BOBJ's of the 20th century were doing with one major exception.
Today, line of business responsibility, control and action inside the budget cycle is more apparent and budget holders have greater input and insight into how FPA works. That has led to an acceleration of FPA processes which is a net good. So is this a defensive play or offensive?
Bhusri pushed back:
It's absolutely an offensive play and not defensive in any way.
All the things you just said were part of what Hyperion [to use my example] promised, but never delivered on. The reality is Hyperion was not something that was usually distributed out to business users. People quickly got into spreadsheets and then at the end someone would push it back into Hyperion. I was on the board of Outlook Soft for five years, and it was supposedly next generation of Hyperion. It was still a pretty cumbersome process. The implementations were cumbersome, the usability was not great. And frankly, one of the hardest things to do was getting data in and out of those systems. With the modern architectures, all those problems go away. So, basically in many ways, I'd argue cloud delivered on the promises of client-server.
Ok - but is that really such a big deal? Yes and, arguably no. Since 1996, when I produced the first publicly available labs report on OLAP and what then passed as FPA for Information Week, I've consistently said that the spreadsheet has to die. And consistently, colleagues and practitioners have said: Never! And they've been largely proven correct.
I'm aware that using modern FPA solutions while maintaining the spreadsheet metaphor, have helped to eliminate many of the nasties associated with spreadsheet production - e.g. version control, data inconsistencies and formula errors but it's not a fully done deal. In essence, I see this as a natural progression and an incremental improvement that was inevitable given technology's progress.
New tech changes everything
From an enterprise standpoint, this may be sufficiently 'new' to justify Bhusri's assertion that:
Back in the days that you're referencing, the technology wasn't there. There was not the idea of rich open APIs. There was not the idea of pushing the work out to the business users. It was still very much a centralized, controlled planning effort. Then, at the last breath of OutlookSoft they were beginning to look at operational planning before SAP bought it. But, they were nowhere there and they're still nowhere there. It's still very much a CFO-centric, planning-centric, FP&A-centric application. Maybe they were able to push out the results but the budgeting process was largely done in that department. I think that is different now.
So what we have are better ways to do the same thing we've always done?
Let's just be very clear and open about it. The CFO has the budget for all these systems. You have to satisfy the CFO before you can go into other areas. Some other vendors have tried to end-around it by coming into other areas first. But, our view, especially since we're selling the core accounting suite as well is that we had to delight the CFO. That is Adaptive's vision. That's why they were so attractive to us. They're very CFO-focused.
This absolutely makes sense to me. As I said in our conversation:
I don't care what anybody says about using big data, machine learning, all these buzz words that people like to throw around. At the end of the day we're looking at a financial transaction with a dollar value to it that resonates across every dimension that you could possibly imagine. And, by the way, is the only dimension that matters when it comes to valuing your business both today and tomorrow, right?
To which he quipped:
You can quote me on that, although it was your quote.
Quite. Moving on, Bhusri anticipated that Adaptive is perceived as more a mid-market solution but he was 'pleasantly surprised' to find that the company has a reasonable number of enterprise-class customers.
Look at our core markets for our financial products, they can pretty much handle our largest customers today. They have large healthcare, large financial services customers. But, what is new to them is enterprise selling.
As you know, we prefer to sell into the enterprise and Adaptive has done OK there. Will they scale into a Walmart anytime soon? Probably not but that's not to say it will never happen. They're in some pretty big joint accounts and performing well. So my view is they have the technology that for us is maybe three years out, while we have the people who are well versed in selling to the enterprise. Plus, as you're aware, Tom Bogan (CEO Adaptive) and I have known each other many years and I can say that we're truly aligned.
Bhusri reiterated that he wants to keep Adaptive as a separate business unit. In the short term, I see that as not only desirable but essential. Change of control always introduces cultural alignment issues that require careful management and a degree of ringfencing helps to reduce the risk of talent attrition.
Bhusri's motivation is to position Adaptive as a best in class solution that can be sold alongside other non-Workday solutions. I can't see that over the long haul.
Assuming the deal is consummated, then Workday must undertake a degree of engineering work to integrate issues such as UX, security and data model topics. In the end, Adaptive will take on the look and feel of Workday which then becomes the Trojan Horse for landing the transactional Workday system sell. In addition, it makes no commercial sense to continue developing Workday's in-house FPA offering. so while the aspiration to be neutral in a competitive environment may be there today, it is difficult to imagine that as sustainable for the long-term. In that context, Bhusri agreed that the market will decide.
Since it is very early days and Workday must be careful not to 'gun jump' for regulatory reasons, Bhusri was not prepared to go beyond the publicly available comments on these matters.
I then turned the conversation on to the future of the CFO's role. This is where I come back to my incremental argument.
The modern, 21st century CFO
While the CFO remains at the center of the decision-making process, the role and manner in which they operate is changing. With budget control decentralized to the LOB, CFOs can now take on new tasks that are of a problem-solving nature rather than number crunching oriented. In turn, this means that to use Bhusri's term, CFOs are morphing into "business partners and advisors." But in order to do that, they have to get down to LOB operations and understand what makes the business tick.
Adaptive have moved into other areas like sales planning. But to your point, I think about Robynne (Sisco) and how she's such a great collaborator in our business and collaboration between the office of the CFO and LOB is proving to be the real change. It's exciting for us.
Our big focus on Prism Analytics, if you were to ask us who we're seeing as the major buyer, it's the CFO. One of the best examples was we highlighted is a healthcare organization that wanted to understand patient profitability and procedure profitability. They took their data out of their healthcare systems and Workday finance data and were able to get to a level of understanding of what procedures, what doctor, whatever analysis they want to do they were able to wire that in three weeks and have it be functional right away. That was driven by the CFO's office trying to understand exactly the drivers that you are talking about.
But where does this lead? Vertical markets. Workday is already carving out niches in areas like education and healthcare.
I do think you're going to see Workday more and more becoming an industry-oriented company. You don't need that for HR. HR is just not that variable across industries. Just all the elements are. You need that more for finance. What's going to drive us into that industry component is going to be Prism Analytics. It's understanding the key performance indicators by industry. And you can only do that by diving deep into that industry.
I have to applaud Workday's ambition. The vertical market focus is a topic I see as vital to providing the right solutions for the 21st century. It aligns well with the manner in which the modern CFO role is evolving. It won't happen overnight but taking a lead now while nailing the critical FPA function today is the right strategy.
So what we have are two interlinking strands. One is that once the transaction is completed, Workday will have a credible FPA solution that will be accretive to earnings and allow the company to move from selling vision and roadmaps to having a product that's already proven in the market. That fulfills the FPA functional need while, in this case, opening the door to 21st century finance tasks and roles. Prism Analytics provides the solution for that new role while HR analytics remains as a best in class offering that can and will be used in conjunction with the finance tools but as a feeder system for metrics that matter.
In short, Workday is making an offensive play out of what at first seems like a defensive position. It is early days and as is always the case, the acquiring company has a big vision that has to become reality. But then Workday has always had an expansive vision and, so far, has delivered. I wish them and Adaptive well.