Workday Review—A Company Evaluation

Workday Company Viability

While Oracle has been in the shop with Fusion and SAP has been tinkering with its in-memory solution HANA for the past few years, Workday has succeeded in slipping under the radar with a cloud application platform that has "in-memory" at its core. As this technology becomes an increasingly important part of the competitive message of companies (according to research group Gartner), Workday is well-positioned to deliver on the needed technological functionality that companies will be seeking. Perhaps more than even the actual offerings that Workday provides; Workday's approach to how companies use the HR software is perhaps the best indication that this is a forward thinking company.

Workday has received a host of financial investments to help support development and go to market activities, including $85 million in recent Series F financing. While this is impressive in and of itself, the fact that the company has gone to a near $2.1B valuation in just three years is an even more compelling story. Indeed, with billings forecast to hit the $300M mark in 2012, total funding sitting at $250 million, and a revenue growth rate of near 100%, it's hard not to believe co-founder Bhusri when he hints at the fact that the company is close to cash flow break even. Welcome news for customers and the company alike, but co-founder Duffield wants to take the success even further, throwing down the gauntlet after helping raise $160M in venture capital (including $12M+ of his own money) by saying "we are planning to take this company public".

So where does the revenue come from in a software market where contraction is more common than expansion? Other companies of course. Indeed, one of the more interesting facts of Workday is that a great deal of revenue comes from would-be SAP and Oracle customers. In fact Gartner analysts estimated that in 2010 60% of Workday's HRMS revenues came from SAP, Oracle, and PeopleSoft (SOP) customers jumping ship. For any vendor to be able to take business away from Oracle and SAP is impressive, but for a company as small and new as Workday, it's proof that customers believe in the SaaS delivery and trust the Workday brand. Surprisingly though, it's also evidence that massive "rip-and-replace" processes are not as uncommon as once thought and appear to be trending upwards.

Workday has also now deployed two data centers in Europe, a clear signal that the company is making headway into the European market and hoping to increase their successes in the region further. In fact, Workday has actually successfully closed several deals in Europe, of which perhaps the biggest and most well-known (thanks to a scuffle with Oracle) is that of Thompson Reuters. Though the bulk of Workday's business is still conducted inside U.S. borders, Workday is confident that increased visibility in Europe will pay dividends. This company belief is furthered by the fact that EU-headquartered companies have stated that they are much more likely to give credence to a company with data centers located in the EU, but even more telling is the fact that research firm Gartner has seen a marked increase in fielded inquiries for a European Workday deployment. The company has also established a presence in both the Middle-East and Africa (EMEA), and a very early presence in the Asia-Pacific region.

Not surprisingly, given the software technology innovations Workday leverages, the company is strategically targeting organizations with dated ERP systems, and companies in need of a yet-to-be deployed global HRMS. While these are strategic markets to pursue, Workday also needs to be pursuing additional alliances, partnerships and integrations to further build out its offering. Namely, increased options for global payroll; functionality for HR application extensions (so customers can leverage Workday data); and social networking capabilities are all needed to fully solidify the Workday offering for now.

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