Workfront - a growing firm in an important space that could get crowded

Workfront, nee AtTask, may be one of the bigger enterprise software firms that you’ve never heard of. Yet, the company has a large number of enterprise customers and 3000+ customers in total. The products are in use in over 140 countries and they have a who’s-who of reference customers.

The firm likes to say it fills gaps between functional silos. It’s in these gaps that inefficiencies, sneaker-nets, higher costs, errors and delays lurk. Workfront possesses all kinds of integration, workflow and other tools that materially expedite work, improve user/constituent satisfaction, enhance data reliability, etc.  The company also has tools in the NPD (new product development), project/portfolio management (PPM) and planning areas.

I’ve heard vendors in the workflow and process automation spaces make similar pronouncements before. So, what makes Workfront different? Two things jump out:

1. Workfront possesses solutions/apps beyond workflow automation that assist in the macro-level planning of projects.  They have other tools that make project-oriented organizations more effective.
2. Workfront has certainly found a niche with dozens of media firms and other firms that are bringing their creative (i.e., advertising, marketing, branding, etc.) in-house. This allows them to get a toe-hold into a company and then land/expand into other parts of the customer’s organization.

At the 50,000-foot level, Workfront is trying to get companies to think more broadly than just in functional silos and accounting/business event transactions. It’s ambitious as it makes firms re-imagine what work is supposed to be about (Hint: It’s not what it was!). 

This is a theme that readers will also hear at ServiceNow and other firms: the way work is designed today must be changed to make business results better, faster, cheaper, etc.  Work doesn’t begin and end with a transaction processing system or a functional department. Work transcends internal and external organizational boundaries. If your process designs stop at the front door of your firm, they’re out of date. Work should cover the entirety of the value chain and address the needs/wants of all of the constituents affected by your people, processes and technology.

Customers

I spoke with lots of Workfront customers at their Leap 2019 conference this week: one was from a global insurer, another from a major bank card issuer, another from a major manufacturer, etc.  From those (unscientific) conversations, I noticed:

• There are a large number of Workday customers that Workfront also counts as customers
• To the one, every Workfront customer genuinely liked the solution/company
• Many of the customers (or the specific customer champions) were in the left portion of the Technology Adoption Life Cycle (TALC) curve. These are innovators and early adopters.

I also noted the overwhelming number of customers that started with Workfront from a media-related business need. Project leads and program management officers were present in quantity at this event.

Workfront will likely continue to use a land/expand sales strategy as too many tech buyers have difficulty seeing the ‘art of the possible’. A toolset like Workfront requires ideation and imagination by a prospective customer to realize all of the potential value opportunities it could deliver. Recognizing this, the company finds an initial entry point in the prospect’s organization and, in time, uses this initial project to further educate other business executives in the customer company.

Land/expand is a valid sales strategy when a software vendor sells an atypical solution to a prospect base that lacks any prior product experience with the vendor’s (or competitor’s) solution. In land/expand, the vendor must do a lot of the initial ideation for the prospect. As Workfront moves to other segments of the TALC (specifically, to the Early and Late Majority), they will certainly encounter large numbers of firms who don’t give their employees time to experiment with and learn about new technologies like Workfront and how those technologies could transform their firm.

As Workfront moves across the TALC, Workfront or its partners will need to pre-package more solutions for those less innovative prospects. The current tools orientation will need to migrate to a solution focus.

So far, the land/expand strategy has worked well (as it has for ServiceNow, Cherwell and others). Proof of this was shared with analysts as numerous accounts have grown from very modest subscriptions (often in one department in one location) to form-factor larger enterprise deals. We heard of many examples of this.

Partners

Workfront has captured the attention of Accenture Interactive, the digital arm of Accenture, and Deloitte. Unfortunately, I didn’t get time to probe this aspect of Workfront’s go-to-market strategy.

The numbers

Workfront continues to grow well and appears to be at or near Rule of 40 compliance now. The company also has a material ARR. The company’s CAGR and operating margins look good enough to go public; however, the company’s leaders have no interest in doing so for the immediate future. The company has installed a number of people on its executive team with public firm experience, though.

In a March 2019 press announcement, Workfront stated:

• 2018 revenues of approximately $200 million
• 3,000+ customers globally
• 1,000+ employees

That announcement also described a new equity fund raise of approximately $280 million.  Investors don’t put in that kind of money into low growth firms.

Announcements

Workfront made a couple of announcements at its Leap show. Google was front and center in a couple of these. Workfront’s now available in Google Cloud Platform and the company is integrating its solutions to Google’s GSuite.

The company also previewed a new User Experience and announced a furthering of its relationship with Adobe. Specifically, the new collaboration will provide “connectors for both Adobe Experience Cloud and Adobe Creative Cloud. Workfront also announced it has become a partner in the Adobe Exchange Program.”

Competition

Everyone, it seems, wants to reimagine the future of work. Frankly, vendors can’t drive automation of a task much further within a functional silo much more – they have to look beyond the silo for new greenfield productivity boosting opportunities. To really add value, ERP vendors, project software vendors, etc. have to find ways of delivering new efficiency and productivity savings if they want their customers or prospects to upgrade off of older solutions. New savings are essential to triggering the displacement of older products.

So, at conference after conference, software executives are talking about:

• The future of work
• Reimaging work
• Making work relevant
• Modern work management (Workfront’s mantra)
• Work in the digital era
• Etc.

It’s a message that’s eerily similar across vendors, even vendors in different market segments. But, that’s easy to understand as every vendor sees opportunity in the spaces between silos.

All of this similarity in messaging, especially from such different kinds of solutions, will likely create a situation where:

• Software buyers are confused as to which sector they should investigate for new products
• Competition for buyers in these new work improvement solutions will be big and that could impact margins

So, the real challenge for all vendors will be to gain first (or early) mover advantage. That’s how they’ll grab some of the early market share.  That works if incumbent solutions (e.g., ERP) don’t freeze the market with product announcements of forthcoming solutions.

The market won’t get clear for a while as I’m seeing some ITSM firms looking at work improvements through the lens of service tickets and ticket management. Some ERP vendors are only focusing on connections within/across their own transactional systems (and acquired products). PPM vendors may have difficulty expanding beyond projects and new product development areas in a customer as they lack the subject matter experts in other process areas or verticals. You get the drift: each kind of solution will focus, mostly, on its historical customers and then ease itself into newer, adjacent markets. That could take time.

The long-term assessment may be this:

• The fact that there a number of technology companies talking about the future of work might be a rising tide that lifts a lot of boats. All of this market discussion will spare many vendors from having to do a lot of evangelizing on why work needs to change. That could reduce sales costs and sales cycles. It could also help grow the market for these solutions markedly.
• Competition will remain strong as vendors in many sectors will try to claim the leadership mantle. A competitive market is almost always good for buyers and helps put downward pressure on pricing.
• Land/expand may not be a viable strategy for long as firms like Workfront will need enterprise-wide level sales efforts to thwart similar enterprise-wide deals from ERP vendors.

My take

Workfront’s  Leap 2019 conference was an unexpected surprise, if only for the size of the event and the large number of big company customers in attendance.

The success of Land/Expand is evident but Workfront may want to press its partners to develop more transferable solutions (e.g., vertical extensions) and to help close ever larger, enterprise deals from the get-go.

Competition will be inescapable for Workfront but as long as the space continues to grow, there should be plenty of room for Workfront and others to prosper.