By all means Workday has been a picture book success story. A charismatic and iconic leader of the enterprise software industry with Dave Duffield, a talented day to day CEO with Aneel Bushri, an excellent management team, pretty much no critical reviews from the analyst firms, a partner ecosystem eager to partner with Workday (as I have only seen with Siebel earlier) and happy customers.
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So why be worried about Workday? It's simply too good everywhere and as Andy Groove wrote, Only the paranoid survive - so let's look at where the risks and challenges for Workday are going ahead - and why frankly, I am worried about Workday:
To be fair both SAP and Oracle have their own challenges in moving to the cloud - read more about them here and here.
There are three possible limitations that prevent a cloud vendor from going viral:
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So why be worried about Workday? It's simply too good everywhere and as Andy Groove wrote, Only the paranoid survive - so let's look at where the risks and challenges for Workday are going ahead - and why frankly, I am worried about Workday:
Not profitable
Despite a successful IPO, Workday does not seem to be able to turn the corner here. Granted - they are investing heavily in the Financial product, need to extend the HCM product etc. all while building out the sales force, pushing for a more global presence etc. All this costs money. But with all other indicators on green - it begs the question if the company is managing the bottom line as planned - or may have developed the Silicon Valley start up addiction of profits later.Competition revving up
Workday has been off to a very good start, and basically caught the two install base titans, Oracle and SAP flat footed. They first denied Workday's success (SAP) or thought their new products may be strong enough (Fusion, Oracle) to compete - but ultimately both had to cave and put down big money for the respective acquisitions of Successfactors (SAP) and Taleo (Oracle). Apart from Oracle and SAP now having an answer for talent management in the cloud, Oracle also took away a vendor that solved a key functional gap for Workday, recruitment, for which Workday partnered with Taleo. Workday now not only needs to differentiate harder - but also needs to build recruitment functionality that is expected in 2014 - far out for software.To be fair both SAP and Oracle have their own challenges in moving to the cloud - read more about them here and here.
In the cloud - but not viral
Given the initial weakness of the competition, I was really surprised how relatively slow Workday signed up customers. Once a cloud based vendor has a proven product, the vendor needs to strive to gain market share as fast as possible. Making the solution go viral is the strategy to follow. And HCM systems - at least for some part - are easy targets for viral adoption. LinkedIn has provided a good example with their skills mini feature. So a viral spreading of a skills application, a performance management application and even an e-learning application is very well achievable.There are three possible limitations that prevent a cloud vendor from going viral:
- Mindset
With the executive brain trust of Workday coming from the mainframe and client/server time, management may just not have grasped the opportunity - yet. - Non Elastic Architecture
Elasticity is the key enable for virality. If your architecture is not really elastic, you cannot execute this strategy as it will be too expensive to enable. - Customers don't buy that way
Certainly the customer is king in every sale. But if a vendor has transformative technology in their possession and does not try to change the sales process - it's their risk and potential loss and worst, demise.
To be fair to Workday - other cloud vendors have not managed to do likewise - create a viral pattern for the distribution of their software. But none of them had the opportunity to take a few years off and develop a new product with no revenue and customer pressures either.
Architecture Issues
Workday may have similar issues with their architecture as salesforce: If you come to the party early, your technology may become dated over time and you risk to be leapfrogged by later market entrants with newer technology and architectures.
I wonder, if presented with the chance to do it all over again, the Workday architects would have opted again for building their own proprietary cloud architecture. Certainly, the decision to build the user interface on Adobe's Flash and crossing the paths with Steve Jobs antipathy to all things Flash were a mistake. Hindsight is always 20/20.
Would Workday be more agile if running on AWS? I very much think so. Likewise you can't blame Workday leadership for being slow on capitalizing on Big Data, but now Workday needs to catch up here, with a first release of product expected in the 2nd half of 2013.
Spreading thin
As mentioned already, Workday needs to build a recruitment module, one of the more complex functions in a talent management suite. And while Workday may have planned to do so all along - the timing was certainly taken out of Workday's hands with Oracle's Taleo acquisition. Which leaves e-learning functionality to complete the HCM suite, with more localization and more core HR functionality to be built,too. In parallel Workday has committed to an ambitious Financials roadmap. And with more customers using their products, the number of demands for further functionality will not slow down. With average product functional maturity under 3 years, that's a normal consequence of the enterprise software business. But Workday needs to account for this. Already some users are noticing a slow down in new HCM functionality across the recent releases..
Groupthink amongst Friends
It's great to work with friends and colleagues you know and have been through battles of the past. But as the common experience creates a bond, it makes the group of executives also susceptible to the risks of committing the same mistakes (again). With only the CFO (from VMWare) and the Head of HR (from Flextronics, an early Workday reference customer) having never worn a Peoplesoft employee badge - the risk of groupthink amongst the Workday leadership team is palpable.
Worse, IMO Peoplesoft failed because of spreading resources too thin, while claiming similar functionality like SAP and Oracle, with a fraction of the development resources and missing to refresh a proprietary technology stack with PeopleTools. Can you see the potential parallels to Workday?
MyPOV:
Workday is a very successful enterprise software company, with a great corporate culture and market behaviour. When the cloud chapter of the book on enterprise software will be written, Workday already has earned its paragraphs. But so has Peoplesoft in the client server chapter, and ironically herein lie the reasons, why I am worried about Workday.
I hope the Workday leadership team will be alert, agile and live a healthy does of paranoia to address the risk on the path ahead and keep the enterprise titans SAP and Oracle a little longer on their toes.
Happy developments!