Workday’s 8/24/2016 Earnings Call — Non-Financial Thoughts

There’s been some great coverage of their latest earnings call, to include from Dennis Howlett at Diginomica and Larry Dignan at ZDNet (and please do point me to other high quality coverage).  Now I’m neither a financial or IT analyst, but I do think there are a few items from that earnings call which deserve a little more attention.  In addition to what was said explicitly, here’s what I “heard.”

The Power Of The Platform

Neither hyped by Workday on the call nor questioned deeply by the financial analysts, Workday Learning and Student will be generally available this month — although it’s still early days for these newer capabilities — and baked into their sales machine with good uptake.  More importantly for this student of definitional, models-driven development, there’s a growing body of evidence that Workday is not only getting substantial reuse (translate: reduced development time/effort/cost/errors) from their object model (e.g. corporate learning courses/classes/content and academic courses/classes/content have tons in common in terms of their attribution and behaviors) but that their approach to development has  reduced substantially the amount time/effort/cost/errors it takes to go from object model to delivered functionality.

When both Learning and Student first were mentioned, there were a number of comments to the effect that Workday might be biting off more than they realized to automate fully two such complex domains.  Now you can look across what they’ve done and see how much leverage has been achieved by recognizing the “patterns in the problem” and abstracting those patterns to the greatest possible extent as effective-dated metadata.  Of course this is how all modern software is being built, but you only get to do this systemically, thus getting maximum leverage from this approach for both vendor and customer, if you start from scratch, build your tools and methodologies to support this approach, and then impose strict and consistent discipline across the organization so that you’re not weighed down with exceptions.

The Power Of Interrogatory Configuration

I take a lot of teasing from my colleagues because of my emphasis on (some would say devotion to) some very specific design principles for enterprise software.  One of these is interrogatory configuration.  But what may have looked like foolish devotion to many is critical, in my view, to the vendor’s economics as well as to the customer’s sanity in the continuous implementation of true SaaS.  Now that many vendors, particularly those with broad functional footprints, are working on some flavor of interrogatory configuration, the teasing has let up a little, but it should come as no surprise that I was delighted to hear Aneel speak about the “tooling” on which they’ve been working to reduce implementation cost/complexity/time.

While aimed (at least initially) at expediting the most common implementation paths for mid-market, non-manufacturing businesses, I’m reading between the lines to discern, given their past conservatism, that they wouldn’t have mentioned this until they’ve cracked the very difficult technical and domain expertise challenges of doing this.  Aneel also mentioned that they’ll be talking more at Rising about what they’ve been doing, and I’ve got fingers crossed that we may see a demonstration.  This is potentially huge, now with mid-market but over time with everyone.

The Power Of The IBM Relationship — Not Just IaaS

I don’t think there was a mention of financials and IBM in the same breath, but I’ve been thinking a lot about the possibilities here.  IBM will be replacing their financials at some point, and I can’t imagine they would have gone to Workday for HCM (that’s confirmed) without thinking about the longer term pluses and minuses of bringing financials under the same architectural and object model umbrella.  In my opinion, it’s only that level of true integration that provides the right foundation for predictive analytics at the speed of human decision-making.

But that degree of integration is not possible with SAP as HCM and FI run on fundamentally different architectures there.  Plus S/4HANA only runs on HANA, and that competes directly with IBM’s DBMS market, something SAP didn’t do before.  As for Oracle, their cloud applications only run on Oracle, which obviously competes with IBM’s DBMS market.  Add that SAP and Oracle aren’t using (at least TMK) IBM’s cloud IaaS, and I think there’s a significant probability that IBM will move to Workday Financials when they’re ready for a next generation, true SaaS financials.

The Power of Partnerships That Go Poof!

First there was a lot of back channel discussion when Ultimate and NetSuite did their partnership.  General view was that this was a good move for both firms, a primarily defensive move in a world where mid-market companies show a marked propensity to want financials and HCM applications to be “integrated.”  There wasn’t as much discussion as I thought there should be at the time of how long this partnership would last once Oracle bought NetSuite, which was always assumed.  Well, now that the NetSuite SaaS experiment has been bought back into the Oracle fold, there’s a lot to consider for customers of both companies who saw NetSuite and Ultimate, in addition to their other pluses, as the NOT Oracle and NOT ADP.

I think Ultimate loses big time on this even as pressure is increasing from mid-market buyers to get fully integrated ERP, which includes HCM.  And I think this is a substantial net plus for Workday.  Those mid-market customers are still hoping for a truly integrated HCM/Financials suite, and that’s something that NetSuite can’t provide even though it can certainly be made to interface smoothly with Oracle’s cloud HCM.  And the uncertainty surrounding the channel competition (e.g., when does Oracle now offer its own cloud suite versus referring prospects to NetSuite? how does Oracle attach its own HCM suite to NetSuite or support a continued relationship with Ultimate?) bring opportunities in the mid-market for NetSuite’s competitors, now including Workday.

The Power Of Active Listening

I’ve been sitting in on a lot of earnings calls this year, educating myself about specific vendors and learning more about how financial analysts look at our market.  One thing that fascinates me is how blandly those financial analysts pose their questions.  I’m also amazed at how little attention is paid to the actual software, to its architecture, object model, development methodology, fit for purpose, etc.  In my mind, what goes on behind the curtain is just as important, maybe more important, than what you can see easily in a demo or read from an earnings call transcript.  There are many aspects of an enterprise software company which can be revised pretty quickly, from strategy to sales techniques to target market analysis.  But vendors are for the most part stuck with their software foundations, with the good and bad decisions they’ve made about those foundations.  While there’s always a certain amount of refactoring to be done, and smart vendors are always paying down their technical debt, the fact is that you cannot get to where most vendors want to be without having started as you meant to go on.  Now that would be a great topic for one of these earnings calls.