What is Happening?
I just returned from Sausalito, CA after attending Workday’s fifth annual Technology Summit at Cavallo Point. Similar to previous Summits, Workday assembled an all-star group of HR and Finance-focused industry analysts to share their vision of the future and to emphasize it’s most recent successes and challenges. What is clear is that Workday’s HCM business continues to flourish, while its Finance offerings now moves beyond an early-adopter phase and prepares to enter the mainstream. Its recently announced Workday Planning solution should be a key catalyst to broaden the appeal of its cloud-based Finance offerings, as it adds even more value to a cautious and often reluctant CFO target audience.
Interestingly, Workday spent most of the day focusing on the power of its differentiated architecture that it claims is “built for change” – given its object modeling foundation combined with a tireless focus on metadata and now microservices. No doubt this has helped it evolve its technology infrastructure during a period of rapid and successive innovations, while insulating its customers at the application layer. However, we wonder if this emphasis might merely be a prelude to some broader thinking about potential customer deployment options that it is considering down the road, given the modularity of its architecture. While clearly not imminent, Workday appears to be testing the waters on the viability of running alternately on Amazon, Azure, or Softlayer, assuming that all of the contingent liability issues related to the nature of its HR and Finance solutions, and the data that are utilized, can be addressed.
No doubt, its solution architecture likewise helps provide an integrated and seamless 
delivery of a modern application stack, as we move away from yesteryear’s world of islands of automation in HR and Finance, to real-time access to transactional data, whether doing standardized reporting, more advanced analytics, or more modern predictive / what-if modeling. Having a secure single version of the truth is a powerful story to tell, especially for Finance executives still on the fence about the Cloud.
Why is it Happening?
No doubt, Workday has been an innovative juggernaut for the past 10 years. Having now reached more than 1,060 customers (70 percent of which are in production), and with an employee count in excess of 5,000, Aneel Bhusri’s (Workday CEO) assertion that Workday is entering its “Golden Age” seems apropos.
While cloud-based HR and Talent solutions have dominated new customer decisions for the past five + years (across all providers), soon to be released research by ISG suggests that we are now well past the inflection point and entering not only mainstream but late mainstream adoption over the balance of the decade. Seventy percent of the executives surveyed in a recently conducted ISG study (co-sponsored by HRO Today Services and Technology Association) indicate that they either already utilize SaaS for HR or will be within the next couple of years – with more than half of all existing HRMS systems and Talent platforms now slated to be replaced by SaaS-based HCM and integrated SaaS-based Talent suites between 2015-2018 (see Industry Trends in Human Resources Technology and Service Delivery Survey).
On the HR side of Workday’s business, the company clearly has succeeded in scaling its architecture and functionality to serve the largest of corporate enterprises (e.g., FedEx and Bank of America). At the same time, the competitive landscape is clearly heating up – with SAP claiming almost 900 signed on to Employee Central, and Oracle closing in at around 750 on Oracle Cloud HCM. Price competition is getting fierce, with incumbents offering creative packaging and steep discounts (often 50% or higher) just to maintain their footprint.
Workday has been working hard to fill gaps in its talent functionality, adding significant enhancements to its recruiting application – and announcing (to few surprises) that Learning will soon be part of its unified solution in late 2016. With more than 540+ payroll clients, the recently announced expansion of its relationship with ADP (available in Workday 27) should only enhance its ability to support its global clients.
On the Finance side, Workday recently announced it had 160 clients, with 90 now live (as of 3Q2015). Hallway chatter suggested that Workday will probably end the year at 180+ clients, up from nearly 100 a year ago. While all but a few of these clients are likewise HCM clients, their customer growth is indeed impressive – and suggests that 2016 could be the year that cloud-based Financials truly takes flight. Importantly, Workday announced that it had secured AON as a client (65,000 employees) – which opens up a new tier of potential customers that it can now target. In fact, Saugatuck would not be surprised to see Workday reach 300+ clients by YE2016, with the vast majority of these with employee counts greater than 10,000 (with some approaching 100,000 employees).
Betsy Bland, VP Product Management for its Financial offerings, shared some of their recent initiatives, including the fact that they are now taking share from Concur with their Workday Expense offering (20 recently customer conversions), and that they are making significant investments around direct material Inventory – which is critically important for their longer term success across a variety of verticals.
As we have emphasized for some time, the road to verticals runs through Finance – so it 
will be critically important to have success there first. While its emphasis thus far has been around industries that do not have a heavy order-processing backbone, this could change over time. In running through the roadmap, Scorecards get delivered in Workday 26, along with Predictive Analytics, with Planning / Budgeting in Workday 27. While some of the key functionality already exists there now, Workday will be adding a Budget Generator, Collaborative Worksheets and Collaborative Planning and Monitoring.
The big story in Finance is Workday Worksheets, which will serve as the foundation for its emerging Workday Planning solution. Utilizing a spreadsheet metaphor, Worksheets will provide a powerful real-time, in-context (and highly collaborative) analysis tool that is fully secure and compliant – a key selling point for CFOs in need of yet another impetus to make the leap. We really like the collaborative nature of how they have implement it, and look forward to seeing how this metaphor gets applied across the entire product family.
Market Impact
Bhusri said it best when he said that he had four key priorities: “Maintain the culture, Maintain (high) Customer Satisfaction, Maintain (high) Quality and showcase the growth in Financials in 2016.”
There was a lot of chatter by some of my industry analyst colleagues that Workday needs to open up, and become a platform player similar to what Salesforce.com and Microsoft have done with Force.com and Azure. In our opinion, Workday has plenty of runway ahead of itself, first creating then maintaining leadership in HCM, Finance and its emerging Analytics business, then pivoting and taking on a range of industry verticals – and not just the order processing light ones that it has focused on thus far.
As it fleshes out more and more of its supply chain functionality, a range of very large vertical opportunities will emerge that may encourage Workday to open its platform to partners and clients alike, and customers will no doubt encourage it to tackle Retail and Manufacturing, but Bhusri emphasized that the latter would not be something that would likely happen before 2020 at the earliest. However, even if it does open up its platform, the current platform is very special-purpose built for their own systems, and they would need a lot of engineering investment to make this a reality.
At the end of the day, we like that Workday is staying focused on their core mission at hand. With more than 300,000 SAP, Oracle and Infor application deployments, the opportunity ahead of it across its targeted segments is enormous. Staying nimble with a flexible technology architecture, while building a resilient set of client solutions looks like a good business plan to me.
For more information about some of the key announcements at Workday Rising, readers can go to the following Lens360 blog post authored by my colleague Alex Bakker just a few weeks ago “Seven Key Takeaways from Workday Rising.”
This article was originally published to Saugatuck's Research Library, then reposted as Workday – 2015 Tech Summit Update on Saugatuck's Lens360 blog.
