Workday And Adaptive Insights: A Strong Pairing

Earlier today I opened my laptop for the first time in 10 days (after a glorious family vacation to Yellowstone) – to Workday’s announcement that it is acquiring Adaptive Insights for $1.55 billion (in cash), inclusive of $150 million in unvested equity issued to Adaptive Insights employees. At 13x (+) trailing 12-months revenue of $114 million (33 percent y/y growth, 3,800 customers), investors Bessemer, Norwest, Salesforce, JMI and others will no doubt be pleased with their return on the $176 million invested across several venture rounds.

While the price tag might appear to be high – more than double what Adaptive Insights impending IPO was valued at – what is less surprising is that these two companies came together in the first place. The Workday leadership team has long known that powerful cloud-based financial planning, budgeting, forecasting, consolidation and modeling software is the most important beachhead to successfully penetrate the Office of the CFO. And Adaptive Insights is a clear leader in this category.

In fact, rumors have long circulated that Workday danced with several companies – including Anaplan, Tidemark and Adaptive – prior to announcing its own Workday Planning offering in 2015. Today that product has more than 250 customers. However, all but a handful are squarely focused around Workforce Planning, as Workday has not yet delivered competitive feature / functionality in the financial planning and modeling arena.

Don’t Derail the Train

Given this, the acquisition should be a win-win for customers. As Workday CEO Aneel Bhusri explained in the investor call earlier this morning, Adaptive Insights will be largely left alone to run as a stand-alone business. The good news is that Adaptive Insights has been integrated with Workday since 2015 – although Workday will move quickly to “harmonize” the Adaptive Insights offering, leveraging Workday’s UI, security and meta-data models. How this ultimately plays out within the context of Workday’s core mantra of “the power of one” is still unknown – but it would not be surprising to see a highly coupled model emerge, given the architectures currently in place. Workday Planning will become the de facto offering for Workforce Planning, whereas Adaptive Insights will become the core offering for both Finance and Sales planning (and any other functional domain it may pursue).

While Adaptive Insights began as a channel-driven mid-market focused player, it has been investing significantly over the past several years to both better scale and support large-enterprise customers (see Adaptive Insights: Poised for Continued Growth, 13Feb2018). In fact, 23 percent of the business now comes from Enterprise customers – which is up substantially over the past three years. With an overlap of only 30-40 customers, the enterprise-focused Workday salesforce should be able to quickly monetize the acquisition by upselling the Adaptive Insights solution into the 450+ Financial Management customers it already has (60 percent of whom are now live) – let alone leveraging it as a lead value proposition to drive new customer acquisition with large enterprise Finance prospects, and cross-sell to Workday’s existing 2,000+ HCM clients.

Given Adaptive Insights heritage, the acquisition should also help Workday evolve its nascent plans to go down market with targeted / packaged HCM offerings that appeal to mid-market customers. What is less clear is how Adaptive Insights highly tuned channel strategy will play out in the new scenario, and how many of its mid-market customers will flee over time that are hooked to other cloud-based systems of record (e.g., NetSuite).

Change in M&A Strategy

While the acquisition is the largest Workday has undertaken to date, the announcement clearly reflects a fundamental change in Workday’s M&A strategy. What the announcement suggests is that unlike many of its previous acquisitions that have focused on enabling technologies / capabilities or to acquire talent / teams (e.g., Rallyteam, SkipFlag, Platfora, Gridcraft, CapeClear) – Workday is now beginning to look seriously at a broad range of adjacencies that can help it maintain its rapid growth clip.

While it would be surprising to see Workday pursue Manufacturing in the near-to-midterm, my bet is that Supply Chain and a deeper / broader view of Procurement could be on the table over the next 12-to-24 months – both sectors that play well in the cloud, and that are ripe for further consolidation. As Bhusri emphasized, however, acquisitions of this type need to highly strategic for the company, and bring with them complimentary company values and culture.

While advanced analytics and data are clearly at the center of its evolving vision, it was very clear from the recent Analyst Summit I attended that Workday will continue to put the pedal to the metal around its core HCM and Finance offerings. At this point, HCM is highly profitable with an industry-leading position among enterprise customers. The acquisition of Adaptive Insights only strengthens and accelerates its market momentum in Finance – with a well-oiled solution that should provide significant cross-sell opportunity.

Net / Net: this acquisition will clearly help Workday accelerate its roadmap by 2+ years, and deliver significant value to customers. All-in-all, this should be exciting to see play out over the next 24 months. What will determine its ultimate success will be how well the go-to-market synergies are exploited / monetized, not only among large enterprise customers but in the mid-market as well.


Workday Rising 2017: Signposts of an Evolving Strategy

Earlier this week, I attended Workday Rising 2017 in Chicago, along with 8,500 customers, prospects, partners and industry influencers. While there is little doubt that its HCM and Financial Management apps continue to drive the vast majority of its top-line revenue growth, Workday used Rising as a forum to emphasize its continuing commitment to innovate, which is now squarely focused around its growing analytics and platform capabilities.

Source: McNee Associates LLC

Prism Analytics and the Rise of Workday’s Data Strategy. I had a chance to talk informally with more than twenty current customers (along with a handful of prospects), and across the board the feedback around the launch of Prism Analytics and its Data-a-as-Service initiative was very positive. Built on the backs of its acquisition of Platfora in 2016, the fully rewritten Prism Analytics provides powerful data integration / self-service data discovery / analytic engagement that can be used against both Workday and non-Workday data alike.

While Workday will no doubt continue to be known as a next-gen apps player, the launch of Prism Analytics combined with its investments in Benchmarking, Planning and Worksheets, are clear signposts of Workday’s “data” diversification strategy. Frankly, I think this is very smart, as it will not only provide value to existing customers, but will likewise help open doors to a range of new buyers – especially in the Office of the CFO – who otherwise might not yet be ready to commit to a core financials application overhaul. More on that below.

As CEO Aneel Bhusri emphasized in his keynote, Workday is evolving to become an important “System of Insight” (and in support of what Mike McNamara, CEO of Flex termed in his Weds AM keynote, the “Age of Intelligence” – see Vinnie Mirchandani’s excellent post for more on that). In support of this theme, throughout the conference Workday’s presentations were littered with the mantra of “Plan, Executive, Analyze” – new messaging that the brand will get behind that helps frame the scope and breadth of its evolving vision.

Cloud Platform – The Next Chapter. Combined with its investments in analytics, Bhusri shared further that, “Cloud Platform is a new chapter for Workday.” After a soft launch with Partners earlier in the year, Workday is now delivering a set of API-driven Platform-as-a-Service (PaaS) capabilities targeted to both customers wanting to extend their current application footprint, as well as SI Partners and ISVs looking to develop unique solutions at either the industry or business process level. We see this as an important competitive catch-up move, as SAP and Oracle can no longer use their rich PaaS toolsets as a unique competitive threat. In fact, this may help accelerate some large enterprise accounts to abandon their (often frozen-in-time) 20+ year-old legacy deployments now that they can have their cake and eat it too (in terms of off-the-shelf Cloud apps plus custom development capabilities from Workday).

Ten Year Retrospective. At Rising, I had the pleasure of catching up with Brian Sommers of TechVentive, who reminded me that he had seen me speak years ago at a Workday event in Chicago at the Intercontinental. After thinking about it, I realized it had been during Workday’s initial kick-off briefing tour in the late Spring 2007, when Workday first went to market. It was a lot of fun traveling on the five-city tour with Co-founders Dave Duffield and Aneel Bhusri, Deb Wolf (former VP of Marketing) and the rest of the Workday team as they unveiled their innovative new offering.

Source: McNee Associates LLC, N=23 customers attending Workday Rising 2017

Customer Satisfaction. But what was true then is even more true today. I walked away from Rising this year with a firm sense of continued strong momentum for Workday based on two simple questions asked of the 23 customers I spoke with. The first question focused on how “Satisfied” they were with their investments in Workday. The second question focused on whether they would be investing more or less with Workday in 2018.

In regard to the first question, I asked them to rank their level of satisfaction, with a “5” being Highly Satisfied, “3” being Satisfied, and a “1” being Highly Unsatisfied. As the chart illustrates, 96 percent rated their relationship “Satisfied” or better (52 percent “Highly Satisfied”) – with the biggest complaints being: 1) an inability to keep up with the pace of innovation, and 2) growing “skills” challenges, especially around getting the attention of both Workday and 3rd party consultants for routine project work. In regard to the 2nd question, 60 percent indicated that they would be spending more money with Workday in 2018 than in 2017, 36 percent roughly the same, with only 1 individual indicating that spending would be down moderately.

Customer Counts. Framing things in a ten-year perspective, Workday has now grown to 1,800+ customers, with projected F18 revenue in excess of $2 Billion. While virtually all of its 1,800+ customers have its core HCM offering, Workday is gaining significant traction across the range of application and analytics segments that it is now pursuing. Customer counts shared at Rising include:

  • 370+ Financial Management (58% of which are now live)
  • 500+ Expense
  • 300+ Procurement
  • 170+ Planning

I found the 170+ Planning customer count especially impressive, since the offering was only launched a year ago. At the 2017 Tech Summit that I attended in mid-May, the customer count had reached 110 – so it appears that demand is accelerating quickly. It was noted by Betsy Bland, VP Product Management, that 75 percent or more of demand has been driven around Financial Planning use cases, but they have been pleasantly surprised by its use for Workforce Planning and other non-financial use cases.

AWS and the Public Cloud. While I was surprised that a Public Cloud roadmap was not formally announced at the conference, Workday made clear that they are very committed to a Public Cloud option for their customers, and continue to invest to support the AWS platform. In the Wednesday morning Executive Q&A session with Industry Analysts and Influencers, it was made clear by Bhusri and David Clarke (SVP Technology Development) that “we are at least a year away from offering AWS . . . By the middle of 2018, we will have our 1st set of customers live in Canada [where it is being tested] . . . . However, for the next 5-7 years we will primarily be using our own Cloud.” At the same time, Workday shared that it would be increasingly taking advantage of cutting edge features on AWS that they would have a hard time matching internally – implying that eventually (in a 5-7-year timeframe) a majority of the Workday workload may reside in the Public Cloud.

Source: McNee Associates LLC

Summing Things Up. On Wednesday morning, in a side conversation with me just prior to the Executive Q&A session, Bhusri recalled the initial briefing roadshow of ten years ago, and brought up some of the demand forecasts developed in the early days of the SaaS / Cloud revolution. “[Looking back,] I think we are ahead of where we thought we would be in HCM at this point, but just a bit slower in Finance.”  However, Bhusri emphasized that the firm’s investments in Planning and Prism Analytics were likely to accelerate demand in Financial Management, sharing “if [the customer has] HCM, Planning, Prism Analytics and Benchmarking, it is only a matter of time before they adopt our Financials.”


Authored by on September 20, 2018


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