Many large companies mistakenly concern themselves with merely the price of their deal without really knowing if it is the best that it can be or without fully knowing what other terms can be added to an agreement. With the absence of benchmark data, it is difficult to be totally educated on what deals Workday has been making with other companies of similar stature and where there are points of entry for further negotiation. To be armed with that data enables a position of strength when you are negotiating. Understanding just how low the price can really go and how many concessions you can really get, makes benchmarking key.
There are unique challenges with benchmarking your Workday deal. While many just consider discount percentage, key benchmarking factors also include:
- FSE counts (or full-service equivalents)
- Mix and number of SKUs
- Term duration
- Total list price
- Renewal terms
You also have to consider any type of payment deferral or payment ramp structure that might have been negotiated in your deal, as well as any renewal-term price protections, because all of those impact the discounting that Workday is willing to provide. The other challenge with Workday is they have different list prices that apply based on the total FSE count and those list prices are not published by Workday. Finding similar-sized deals based on these factors for comparable data points is a challenge which requires market data.
Like some other vendors, Workday often bundles SKUs together and presents one net fee for the entire bundle. Bundling doesn’t really give you pricing transparency, making benchmarking difficult. Workday also provides discounting on a line-item basis. It is not like the old on-premise days where you got your bill of materials and had one discount applied across the board, like with SAP and Oracle. It is done differently on a line-item basis, so while discount percentage typically was used as a helpful guide in benchmarking, with Workday, it’s a bit more challenging. Hence, the price per FSE per year for each SKU tends to be the most accurate metric to use for benchmarking.
As an example, a company may have a current Workday proposal with just HCM at $100 per FSE per year. A 2020 deal from another company may have HCM at $45 with a similar FSE size that you want to use as a benchmark. The challenge is knowing the history of the benchmark deal, as the two deals being compared could be very different.
First, the benchmark deal might not have been a net new deal in 2020. That deal could go all the way back to 2009, for example, where an early adopter purchased HCM for $35 with excellent renewal term price protections.
Alternatively, the benchmark deal may have had a subsequent renewal term price increase waived as part of a product footprint expansion, so that $45 data point may not be truly reflective of today’s market and that’s where you have to be careful with these comparisons.
Trying to negotiate a certain price point that is not realistically achievable in today’s market might result in missing out on other concessions. And having comparable data points reflecting current market conditions is also absolutely necessary when you benchmark. The quality and accuracy of your benchmark data points are critical to ensure that you are striving towards reasonable goals.
Based on the hundreds of Workday proposals and agreements we have reviewed as part of our client engagements, we have built a massive database of Workday-specific pricing and commercial term benchmarks. SmartDeal can help assess the competitiveness of your Workday deal by comparing your pricing and key business terms to other relevant deals in our proprietary database. To see if you qualify for a complimentary assessment of your deal, click here.