David vs. Goliath – Workday’s Value Proposition Makes the Difference

Workday just announced another stellar quarter and has demonstrated a great track record of success when looking at customer satisfaction ratings, customer renewals, and adding net new customers, all while consistently achieving revenue growth rates around 30%.  Regardless of whether your organization is either a Workday customer or has identified Workday for consideration as a potential future partner, here is what you need to know about Workday’s background and their value proposition going forward.

Workday started off as one of the first natively built cloud application developers, providing a best-of-breed HCM SaaS solution.  Their initial customer base was small to midsize organizations looking to replace legacy solutions while eliminating the burden of hosting and managing those solutions.  As Workday proved to be successful and cloud gained market traction, larger organizations and Fortune 500 companies began adopting Workday’s HCM solution.  This enabled Workday to build out its sales and marketing channels as well as its customer support organization.

Workday continued to evolve and enhance its offerings by launching a financial management solution, Prism Analytics, and a planning solution.  Then Workday acquired Adaptive Insights for its best-of-breed planning solutions to replace its home-grown planning product and has just recently announced the acquisition of Scout RFP, a source-to-pay solution for strategic sourcing and supplier management.

Workday has also developed a student information system for higher education, but we are going to put that aside for purposes of this discussion.

Targeting Two Operational Business Segments – HCM and the Office of the CFO

HCM obviously targets the HR group while the rest of the solutions mentioned above are geared towards the finance side of the house, which we will call ‘CFO solutions’ for this article.  Workday is forecasting a continued strong pipeline for HCM as well as a growing CFO solutions pipeline, that it expects will outpace HCM one day.

The Scout RFP solutions will become part of the CFO solutions as they target the Chief Procurement Officer, enabling procurement to reduce spend and achieve greater policy compliance, all of which falls under the purview of the CFO.

But you might be asking, how can Workday compete with the likes of established ERP leaders Oracle and SAP, who also offer and are investing heavily in their HR and FI cloud solutions.  Oracle and SAP enjoy very large customer installed bases and have deep pockets to scale and grow their cloud offerings beyond ERP.  Yet both are struggling, for different reasons, to get their customers to migrate to their cloud solutions.

Oracle claims to have the only complete cloud ERP solution, having re-written all of the underlying software code specifically for the cloud.  But Oracle has many hurdles to clear, such as missing functionality compared to Oracle’s numerous on-premise ERP solutions, poor customer relationships formed from a long history of neglect and indifference to customers’ concerns and needs, and lack of a compelling business case for migration outside of a technology platform upgrade.

SAP, on the other hand, does not have a comprehensive cloud ERP offering and they are trying to force their customers to migrate to S/4HANA, having announced that ECC will no longer be supported after 2025.  SAP customers currently enjoy SAP’s on-premise solutions that work very well today, just like Oracle’s customers.  While S/4HANA does offer additional business benefits to customers to potentially support a business case for adoption, S/4HANA does not provide a complete cloud solution yet, which means more future migrations and investments.  This undermines the business case for adoption and the 2025 end-of-support date even creates an opportunity to consider migration to other platforms.

Workday’s Differentiators

What we are beginning to see from Workday is a more comprehensive roadmap and compelling value proposition to support the business case for adoption.  First, Workday has been a native cloud company from inception, so all of their solutions have been specifically developed as cloud offerings, and their acquisitions also share this trait.

Second, Workday’s solutions, with the exception of financial management, are best-of-breed solutions, offering superior functional capabilities and user experiences than their competitors.  In speaking with clients who did competitive evaluations over the past 5 years, Workday almost always finished first from a capabilities and user experience perspective.  Clients did not always select Workday, but that was due to other reasons such as cost, strategic decision to be a one vendor ERP shop, or concerns with damaging a relationship with an incumbent vendor.

Third, and perhaps most importantly moving forward, Workday’s planning and analytics solutions offer additional business value, supporting a business case for migration.  If you look at Oracle and SAP, migrating to their cloud solutions primarily offers a technology platform upgrade, meaning at best, a company can do what it was previously able to do except now it is in the cloud.  That’s a lot of money and time for a company to invest without any tangible additional business benefits to justify an ROI.

Workday’s focus on planning and analytics is in response to the new value drivers for CFOs.  They enable greater insight into managing their businesses that goes beyond functional business processing, reporting, and record keeping.  Companies can accelerate their business growth and profitability, which creates a compelling business case for not only adopting Workday’s planning and analytics, but also core HCM and FI management which will be natively integrated.  Financial modeling can be done to show how the new capabilities will generate greater profitability, through a combination of reduced costs and greater revenue generation due to improved business insights and decision-making capabilities.

Additionally, as it relates to SAP specifically, we are hearing more companies preferring Workday’s functionality and user interface over SuccessFactors and some HR executives prefer Workday as a means of diversifying themselves from having a large SAP footprint.

Workday’s Approach

Workday’s preference is to pitch their value proposition and differentiators to the business stakeholders that are responsible for improving business performance – the offices of the CFO and CHRO.  These stakeholders are also the ones with budgets and authority for approving strategic initiatives, so expect Workday to try to circumvent your IT and sourcing and procurement teams.

However, we recommend organizations work together cross-functionally as a team, allowing the business stakeholders to conduct the business value evaluations, while the IT and procurement teams use their experience conducting the technology and commercial evaluations and leading the entire sourcing process to maintain negotiation leverage.

To be effective, companies need to align these cross-functional teams before Workday starts engaging in conversations with business stakeholders.  Business stakeholders have a tendency to show their excitement when presented with new functionality and will sometimes openly discuss the various ways they can envision deriving value from the solution.  Sometimes they will also be very candid about pain points and how much they desire to remove them.

While this information is valuable as part of the internal evaluation, sharing this with Workday (or any vendor for that matter) reduces negotiation leverage and undermines your team’s ability to secure the best deal possible that maximizes overall value, in both the short- and long-term.

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