Last week’s Workday Rising 2017 was an upbeat event attended by over 8,500 attendees with scores more viewing the event on a livestream. The event reminded me of how far/big the company has come since its founding in 2005. My first contact with Workday was in 2005 when the company consisted of Dave Duffield, Aneel Bhusri, Stan Swete and 18 or so like-minded souls.
Today, the company counts over 1800 customers of its flagship HCM solution and over 370 for its Financial Accounting software. The company only had 200 or so customers in early 2012, all of which were on HCM.
The Rising headlines
At Rising 2017, we saw Workday make a pronounced pivot away from its exclusive focus on back office transaction. The message, which had been carefully telegraphed to diginomica folk and others was around how its platform is being readied for Big Data (via its Platfora acquisition) and how all-new kinds of analytics and benchmarks will be incorporated into the dashboards of its software. Bill McNee did a very nice job of recapping these announcements. Like me and Den Howlett, Bill was around when Workday was founded.
While many of my peers wrote very positive pieces re: this show, they mostly missed several big points:
- Much of the new announced capability isn’t prime-time ready.
- The shift from a transaction solution provider to a Big Data AND transaction processing solution provider takes time.
- Workday’s competitors have been relentlessly aping Workday’s messaging and technology approaches for the last several years. Flattering though this may sound, competitive reworking of Workday's core message blunts some of Workday’s competitive advantage. A renewed focus on what Workday’s brand stands for is required.
Quest for growth
What helped Workday grow in its first 12 years may differ from what will propel it further for the next 12 years.
Worlday's early success centered on firms that bet on Dave and Aneel, personally, to create another PeopleSoft phenomenon. Those buyers bet on the team at a time when prospective customers were world weary of legacy ERP and were looking for something fresh and different.
Those prospects wanted a genuine cloud, multi-tenant HCM (and eventually Financials) solution. They weren’t interested in a hosted or single-tenant cloud product. They also didn’t want some ‘solution’ that was a kludge of on-premises applications with some surround-sound cloud mini-applications bolted on. And, they certainly didn’t want some vague promise of future-ware even while the market was flooded with lots of pseudo-cloud or partial-cloud solutions at that time.
In marked contrast to its competitors, Workday avoided the lure of buying other firm’s cloud applications and piecing them (with their various infrastructures, systems software, clouds, etc.) together with Workday’s solutions. Workday is the poster child for the one architecture firm.
But that was then. Where does Workday go and how does it continue to grow?
The Path Forward
Future Workday customers will likely be different from the initial ones. New customers won’t care as much about the history. New customers will have a different set of expectations and Workday will need to meet these or else see Workday Rising morph to Workday Flatlining.
What are these new expectations? I’d posit that the next-gen ERP buyers will want to do business with a vendor that:
- Offers new buyers new things years before competitor vendors.
- Provides more than just HCM and Finance.
- Possesses vast libraries of reusable algorithms, analytics and other machine language tools that solve large numbers of problems within their industry.
- Plays the white-hat, good-guy.
- Has a great customer satisfaction/service focused culture.
- Utilizes a number of open-source, low-cost technologies.
- Is accountable for the totality of the product experience.
How well does Workday stack up against these criteria?
Offers new buyers new things years before competitors offer them
Workday has had a clear technology advantage over other major ERP firms. Workday developed a single, multi-tenant cloud suite from the get-go and from a blank sheet of paper. In developing a single, multi-tenant codeline, it set up the basis for the platform we see today. In doing so, Workday could be nimble while competitors had to play both defense and offense.
Today, every vendor sounds like Workday. They’ve all got a multi-tenant cloud solution. They’re all moving to public cloud systems or creating one of their own. Everybody’s got an Alexa, AI, digital transformation, predictive analytic, etc. story to tell.
When I asked Aneel about this at Rising, he conceded that competitors are saying a lot of the same things but their progress is still behind Workday’s.
Maybe Workday is ahead of competitors in some areas but from my vantage point, ERP vendors everywhere are singing from the same hymnal. And the song they’re singing indicates that few vendors have made material, tangible and visible progress with these new technologies.
In the intervening 15 months since Workday acquired Platfora, Workday has re-worked the Platfora toolset to fit within Workday’s platform and infrastructure. Customers still need to wait for Workday and its partners to create new reporting dashboards, analytics, etc. using big data. Sad to say, this sounds an awfully lot like what Workday competitors are saying and delivering regarding Big Data: lots of potential but scarce few working solutions to bring to market.
Is this a problem? The new ERP world is very different to the past as it looks at businesses and their constituents digital exhaust in ways that radically redefine how value is created.
I heard a lot of the right things at Rising. I sense there is, at a minimum, competitive parity with the likes of SAP and Oracle (and now even Infor makes this list). What I can’t determine is if Workday still has a multi-year competitive advantage. I’ll wait for the next analyst briefing from them before I make that call.
While I suspect that part of the problem lays in the technology, (more of which later,) my colleague Den Howlett believes it has as much to do with companies not knowing quite what questions to ask, and consultants being short of clues about the right questions to ask
How different is this story vs. those of Workday competitors? Photo courtesy of TechVentive, Inc.
Provides more solutions than just HCM and Finance
In the ERP world, there is a definite advantage that accrues to vendors with wide and deep product lines. Customers prefer to get as much as possible from one vendor when functionality is similar across vendor offerings. It cuts down on the number of integrations the customer will have to support, a big support cost. It can sometimes support a more real-time environment and the use of a single data model helps avoid fights as to what we mean when we use terms like “customer” or “employee”.
Workday’s functional footprint is predominately back office Finance, Planning and HCM with a sprinkling of some supply chain capability, mostly for service based businesses. Will the company pursue Manufacturing? Doubtful. Alliances with the likes of Rootstock or Plex are more likely.
For large processes manufacturers (think pharma, chemical, oil & gas and food manufacture), SAP will be top-of-mind as it has so many of the required operational modules in those verticals. Equally, Oracle has strengths in the process manufacturing and mid-market spaces. Today, Workday wins in non-manufacturing sectors. To win in manufacturing Workday must develop super-rich integrations with firms like Plex. Accuride, a long-time Plex customer, is using Plex for its plant operations and Workday for global HCM and, possibly, accounting. Accuride had a very visible presence at this event and this could foreshadow more two-tier deals like this in the future.
Possesses vast libraries of reusable algorithms, analytics and other machine language tools that solve large numbers of problems within their industry
This has been the Achilles Heel of ERP vendors when it comes to using Big Data, AI and algorithms. It’s relatively easy to develop use cases for these tools but much harder to create viable products. Some ERP vendors expect systems integrators to bring vertical industry knowledge and bodies to bear in crafting the new age solutions for customers. Unfortunately, these third parties won’t want to share their intellectual property with others. If a customer wants access to this, they’ll need to engage the integrator for use of this intellectual property. Here’s the rub – in the SI world, no one is acting in the best interest of the customer. Self-interest rules instead.
Customers would benefit from a vast, open library of configurable, tunable tools that make their ERP solutions more digitally friendly. However, vendors aren’t showing much leadership. Worse, vendors often have too few of their team with the right data science, math, quant, statistics, social science, etc. skills to help their customers. Those skills are reserved for the vendor’s R&D group or startup that specializes in these solutions.
Plays the white-hat, good-guy in the space
Workday has been the ERP alternative to SAP or Oracle. Some prospects intentionally added Workday to selection deals just to teach the old leaders a lesson. Workday was seen as a more advanced and hungrier player.
Today, Workday is less of an upstart and more of an established ERP provider. To stand out from the other vendors, it must be something other than a hungry startup disrupter. It needs to be the white-hat wearing good-guy in the space if it expects to be the credible alternative to the long-term competitors.
Just last week I wrote:
Specifically, we’ve seen vendors suing their own customers for ‘indirect access’ to their own data. Some vendors have been especially aggressive in auditing customers. One major vendor reportedly changed their online contract terms and conditions over 100 times in the last five months.
Even SaaS vendors have been caught over-reaching (or shale-fracking their customers’ wallets) with stunts like:
- Asking for subscription renewals at materially higher prices even though the customer’s business is unchanged
- Asking for major price increases at renewal simply because they’ve raised their prices (although Amazon AWS has dropped their pricing 50 times in a row)
- Wanting customers to prepay three or more years of a subscription service upfront
- Agreeing to deals where subscriber counts can be increased but never decreased
Workday must find a way to balance the demands of Wall Street/shareholders for ever higher revenues and bookings while the pool for large enterprise customers shrinks. Note that Workday already counts 150+ of the Fortune 500 as customers.
It’s the brand Workday needs to clarify and defend. What will this brand stand for? In the past, it was all about being the most innovative ERP player out there with service at its core and a single architected platform. This was in stark contrast to its competitors. But today, the brand is starting to feel too me-too.
Has a great customer satisfaction/service focused culture
Workday certainly has a great culture. It has won and continues to win all kinds of great places to work awards. And Workday even touted a 98% customer satisfaction score (but I have no detail on how that was computed or who did it).
How Workday’s culture impacts the customer is something to watch out for. A very large airline I have to use a lot is well-known for its employees-first culture. At that carrier, passengers are a bother to the employees and they never let us forget that. I point this out as sometimes a culture that is great for employees (like Workday’s) doesn’t always mean it’s great for customers. Workday needs to make sure their great culture stays great for all of its constituents (e.g., customers, suppliers, partners, etc.).
Today, the best customer focused culture in HCM might belong to Ceridian. They do their own installs. If you have a problem, you email their CEO, David Ossip. I’ve done this twice for clients and it works.
ADP is moving the same way. I mentioned to their CEO, Carlos Rodriguez, that one of their accounts was struggling and a posse of ADP technicians was on-site the next morning to get things fixed. Even a hard-core skeptic like me was impressed.
SaaS software implies that a vendor must re-earn the business every month. But it’s less of a priority when a vendor has long-term contracts with its customers and demands large up-front payments.
While Workday seems to have much of this under control, one customer service/satisfaction area does need attention. In my own pre-Rising vendor checks, I heard from a couple of Workday customers that were grumbling about the cost to implement the solution.
Specifically, some old-school integrators were really pricing these implementations at high levels as they either still try to implement cloud apps with pre-cloud methods or because they think they can get away with high pricing due to skills scarcity. Either way, Workday can’t afford to have the bad acts of third parties drag down its customer satisfaction scores.
On the flip side, Workday hasn't been shy of booting big name SIs off a customer account.
Utilizes a number of open-source, low-cost technologies
Workday gets a great score here as almost their entire stack is either open-source or of their own development. The advantage to customers is that new customers can be instantiated with fractional cost to Workday. Competitors that license database and other technologies from third-parties will not enjoy this cost advantage and have to pass these added costs on to customers.
Releases them from the grasp of integrators and resellers - Customers want a vendor accountable for the totality of the product experience.
SaaS products can often be implemented with less on-site time than older on-premises products. However, not all tasks are capable of being phoned-in and, sadly, that’s what way too many ERP vendors and their implementers want to do.
Customers want a SaaS vendor to not only create the product but to also install and maintain it. They also want integrations to other apps and services to never break. You can say customers want a lot but that’s the nature of business today: customer expectations only increase over time.
Just some of the integrator pitches at Workday Rising – Photo courtesy of TechVentive, Inc.
Workday is trying to control their services ecosystem and their implementations. But, Ceridian may be further along in this area for now.
The problem Workday faces, and I keep coming back to this in one way or another, is that Workday doesn't have the engagement with larger customers that SIs enjoy. They are, in effect, a supplier to the SI rather than holding the primary customer relationship.
As a side issue, vendors will tell you that having a large services component doesn't fit with their business model, something the SIs are more than happy to endorse. The reality is that services are lower margin and resource consuming.
There’s a lot to admire with regard to what Workday has accomplished in twelve short years. The applications have matured and are now running in 200 countries for some of the planet’s largest firms. That alone is impressive. The twenty or so person firm I initially met with in 2005 now has over 7,400 employees and is a publicly traded firm.
Workday’s competitors have never cut them any slack. Workday has been a persistent target of attacks in competitors’ earning calls. For years, competitors have tried to assail the correctness of multi-tenancy and in-memory technology. And, through it all, Workday has persevered.
It’s the next twelve years that I’m wondering about. The top concern areas I foresee are:
- Can Workday expand its innovation lead/pace to give it a multi-year lead over competitors?
- How will Workday grow bookings without resorting to the shale-fracking, anti-customer activities of its competitors?
- Can Workday better manage its partner ecosystem?
- Where does the Workday brand go in the next decade?
At a minimum, Workday should:
- Retain its current M&A focus of acquiring small, core platform technologies and people.
- Make purpose driven development of Big Data driven dashboards and analytics a priority.
- Create a store of reusable library of customer tailorable algorithms, analytics and dashboard components. The Prism architecture and solutions should address this.
- Develop industry-specific dashboards that utilize lots of externally sourced Big Data
- Make AI something all customers, large and small, can quickly and inexpensively take advantage of.
- Develop bots that answer spoken questions, assess the responses, prepare options for users based on those responses, and, ensure the workflow is in place for the customer to act on any of these options. This will come from their new voice technology initiatives.