Look Out, SAP And Oracle: Workday Launching Serious Assault On ERP Market

By:  Bob Evans

CLOUD WARS — Hoping to combine its superb track record for customer success with a big recent acquisition in the operational-planning category, Workday has begun positioning itself as a full-fledged ERP provider whose modern technology and customer-centric approach will begin peeling customers away from market leaders SAP and Oracle.

Workday CEO Aneel Bhusri, whose firm until very recently has assiduously avoided using the term “ERP” to describe its SaaS Financials offerings, made it clear during a recent earnings call with analysts that as 12-year-old Workday approaches $2.4 billion in revenue for calendar 2018, it’s now eager to be considered as an ERP competitor of SAP and Oracle.

Asked if large-enterprise CFOs are seriously considering replacing their traditional on-premises ERP systems with cloud ERP, Bhusri said, “I think that with our combination of core financials plus procurement plus expenses and now planning, we can be an ERP replacement today.

“And it definitely seems to be the next area of focus from IT—first it was CRM and then HR, and now I think finance is the next big one to tackle.”

Many big companies have been deeply reluctant to consider moving their mission-critical financial applications to the cloud for a range of reasons, and in particular these two: business executives had grave reservations about the ability of the cloud to meet their requirements for availability, security, performance and more; and, those executives were not convinced that the relatively new cloud ERP apps could deliver the full range of functionality that global corporations require.

Both of those reservations, Bhusri said, are being swept aside, clearing the way for ERP/financials to be upgraded to the cloud.

“One of the reasons [cloud ERP] hasn’t taken off in the past is that the products, including ours, were just not ready to take over that operations of the truly large multinationals,” Bhusri told the analysts during the Q&A session.

“But from a feature/function perspective, we’re confident that they are ready today. So when these big corporations go off do their analysis, they’re confident with the fact that, ‘Hey, I’m not actually giving up anything on the functionality side and I’m making a huge leap forward on the technology side.’ ”

The trigger behind Workday’s transformation from a fairly broad provider of financial apps to a complete ERP-suite vendor was its acquisition 3 months ago of Adaptive Insights for $1.55 billion, a topic that dominated the earnings call with analysts.

And that market-category expansion will give Workday access to a far bigger opportunity than it has in just the HCM space, Bhusri said.

“Our investment in broadening our platform and extending our product capabilities is creating many levers to help us drive long-term growth. While Human Capital Management is our most-mature segment and has fueled much of our growth,” Bhusri noted, “HCM only represents approximately 25% of our total addressable long-term market.

So hello, ERP.

Here are a few of Bhusri’s comments from the earnings call that reflect Workday’s rapidly evolving position in the highly competitive SaaS business, in which Workday has been primarily known for its highly successful HCM products:

  • The power of successful customers combined with modern technology: Workday’s momentum is strengthening as “a vendor of choice for companies embarking on digital transformation across cloud finance and HR. Our customer-satisfaction rate remains among the highest in enterprise cloud software, and the success of our customers is an incredibly important part of our enduring business longer term.” Bhusri said that about 35% of the Fortune 500 and about half of the Fortune 50 have chosen Workday for core HR, and you will see in some of his remarks below how he expects that foot-in-the-door strategy to continue to be a major part of Workday’s success. “Our continued success amongst the largest companies in the world is a direct reflection of the value we place on live, happy and reference able customers.”
  • The transformative power of the Adaptive Insights acquisition: “As we have continued to push into the financials marketplace over the past several years, it has become very apparent that many companies first move into the cloud in the area of financial and operational planning. This market dynamic is the main reason we accelerated our path into planning with our acquisition of Adaptive Insights. With Adaptive Insights, we now have the ability to sell best-of-breed planning either as a standalone produce or as part of a broad ERP”—notice that “ERP” term again—”suite…. We are thrilled about the combination of Workday and Adaptive Insights, which will enable customers to better plan, execute, and analyze across the enterprise all in one system.”
  • The acquisition of a full-blown planning portfolio not only fills out Workday’s ERP suite, but also gives it many new entry points into customer’s sales cycles. “During the past few years of selling core financials, we recognized that our Planning products gave us a new entry into the sales cycle because the office of the CFO viewed planning as a good place to start in the transformation to the cloud—it’s a very strategic move. and very strategic to the office of the CFO.” But Bhusri realized that Workday’s planning products were limited, while Adaptive Insights had a much more-robust set of services. “So with Adaptive we very quickly got into the market with a company that Gartner classifies as leader in its Magic Quadrant, and that will open more doors for us for our broad financial-management suite.”
  • The Workday and Adaptive Insights sales teams can cross-sell into accounts they already know well. “We see big potential for us is in large enterprises that have historically not been a focus of the Adaptive sales organization. So they’re going to move into large enterprise, and of course Workday already has hundreds of large-enterprise sales reps that will be able to introduce Adaptive into the large enterprise accounts.”
  • Happy and successful customers tend to buy more products from the cloud vendors that made them happy in the first place! “Theres no question that we believe planning will accelerate some of the core financial business as well, but the most important factor is that Adaptive, much like Workday, is very focused on customer success. So if they’re able to get in the door and win even just the planning business, we’ll get a shot at the HR business and also the finance business down the road. It gets us in the door—and then we’re confident that we’ll prove ourselves from a customer-success perspective, and that’s one of the primary reasons we were so drawn to Adaptive: they have the same exact focus on employees and the same exact focus on customer success. Say you go visit a customer and they’re not quite ready to swap out their core accounting system, but you find that they are ready to take on a new planning system—well, that’s fine because we’ll get in the door and later on when they are ready to switch to core accounting, we ‘ll be the best-positioned cloud vendor from both a product-integration perspective and also from a relationship perspective.”