Workday today revealed its acquisition of Zimit, which extends its Professional Services Automation (PSA) offering with a Configure-Price-Quote (CPQ) engine specifically designed for services companies. Zimit was already a Workday Ventures portfolio company and there is an existing Workday-approved integration between the two companies' products. Terms of the deal were not disclosed and the transaction is expected to close in the next few weeks.
Zimit fills a gap in the CPQ market, which in the main serves companies who sell complex product SKUs with many different configuration options. These mainstream CPQ offerings don't cater for the needs of services-centric companies, whose quotations and contracts comprise a range of elements that you wouldn't find in a typical product quote, such as resources, skills, hours, timelines, stages and tasks. Zimit provides an online process, based on a solution catalog, guided selling and a pricing engine, which automatically produces a quote and ultimately a Statement of Work that defines the project or service to be delivered. Like other CPQ products, it has a certified integration with Salesforce, which many customers take advantage of.
Companies typically implement Zimit to replace time-consuming and error-prone workarounds based on spreadsheets and shared documents, resulting in improved responsiveness, significant time savings and better resource utilization. According to Pete Schlampp, EVP of Product Development at Workday:
Zimit ... is one of the first — and only — companies to provide services quotes in a matter of minutes.
Bringing Zimit into the Workday community is a natural fit and aligns with our mutual goal to automate complex finance processes.
The existing integration transfers the details from the Zimit quotation or SOW into Workday PSA to create the customer contract and project details. After the acquisition closes, the intention is to broaden the scope of this process to provide an end-to-end, quote-to-cash cycle that is applicable across a broad range of services industries. According to the release:
With Zimit, Workday will provide organizations with a comprehensive quote-to-cash process automation offering for services industries, including communications, media, technology, and professional and business services. The combination will provide organizations increased visibility across the entire revenue cycle and will help further expand the Workday product portfolio that is enabling the office of the CFO to digitally transform.
Services companies, PSOs and XaaS
Back in March, Zimit CEO James Cramer spoke to analysts at a Workday Ventures briefing. Founded in 2015, the company had posted "100 to 200% growth over the last couple years" he said. It sees demand from three main categories of business.
The first are traditional professional services companies, such as existing customers Workday implementation partner Alight and marketing services giant WPP. One of the big opportunities here in partnering with Workday is to connect information from quotes and SOWs into Workday's finance and HCM systems to help plan resource demand. Cramer explained:
Companies that are selling $500 million a year in services would really like to be able to forecast resource demand. That's a really challenging problem, when all of those quotes are being done in spreadsheets, it's a very difficult problem to solve.
The second category are professional services organizations within product companies, such as Dell Technologies and Workday itself among Zimit's current customers. Increasingly these companies need to quote for services alongside products, and need to do so in an integrated manner. Workday is a case in point, as Cramer explained:
Workday has a large, very robust services business, which is everything from implementation services in the classic sense, but it also includes learning services, it includes packaged integrations, it includes optimization services. They have something called prime where the other implementers are doing the work, but Workday is still involved — sometimes they're charging for that and sometimes they're not. All of that is currently live, connected bidirectionally with Salesforce.
The final category is the Everything-as-a-Service (XaaS) trend, where businesses are taking traditional products, services and experiences, and turning them into an ongoing service that is billed on a pay-as-you-go basis. Again, the mechanisms for quoting this type of offering are quite different from a traditional CPQ tool they may have used in the past. Cramer spoke about Cyracom, a translation service provider specializing in the healthcare industry, whose pricing is based on consumption:
As [Cyracom] provides a whole range of translation services — written, verbal, all sorts of stuff, which they monitor — they feed us that data. We price that data, we price that consumption, and hand it off to Workday, so Workday can invoice that and send it out to the customer.
Across all three areas, putting quotations into a fully digital system opens up the potential for companies to test new offerings, price breaks and other innovations. Cramer explained:
Some of our customers, now that they've replaced spreadsheets, and they've evolved their capabilities, in terms of how to quote services to begin with, what we're starting to have conversations [about] is, 'What should the price of the service be? Could my service change based on the demand? Could it be based different on consumption? Could it be based different as a function of volume? Could it be different based on region, or the combination of services?' All of those types of optimizations, customers are really looking into.
Zimit also has an integration with FinancialForce, which targets similar opportunities as the Workday relationship. However FinancialForce in June this year announced a new function of its own to provide service estimation, so is no longer dependent on the Zimit partnership for that capability. Workday has not said whether Zimit will continue to partner with FinancialForce after the deal closes. A FinancialForce spokesperson provided the following statement:
FinancialForce sees strong demand from our customers to deliver services estimating on the Salesforce Platform, to keep opportunity to project delivery all on one platform that connects CPQ, CRM, and PSA for a seamless experience for our customers. Thus we announced our own services estimating capability in June. We believe the right strategy is a connected model: once you put another solution in the middle, you create data, consistency, integration, and lifecycle issues for customers.
This is an interesting expansion of Workday's PSA offering and continues to extend its portfolio of offerings that complement its core finance and HCM applications. It's also in line with the strategy of deepening its offering to specific industry verticals. It's also likely to be an astute move, given the trend towards XaaS that diginomica has frequently called out. As Brian Sommer wrote earlier this year when examining the services CPQ market and Zimit's offering, this is a 'white space' opportunity where no automation currently exists in most companies.
[Updated early on September 9th to add comment from FinancialForce.]