Belated Comments On Workday’s 2-27-2017 Earnings Call

[This should have been written and published in early March, but that’s when our kitchen remodel project went into what’s called demolition, and life at Bloom & Wallace has been pretty disrupted ever since.  It’s going to be gorgeous when finished, but first we have to survive the process.  And I can tell you from experience that designing and building from scratch, with us living thousands of miles away and only being onsite once a month, was less stressful than having our home turned into a construction site while we continue to live (or, as Ron says, camp) here.  But that’s a topic for a series of posts, of which this is the first one.]

I really enjoy listening to the best of our industry’s earnings calls.  Putting aside the detailed financial discussions, which aren’t my primary focus but may be yours, I learn a ton from the vendor’s executive commentary, and from the personal style of the presenters, about what’s actually going on in these firms and within their competitive landscape.  I also learn a ton from the questions of the financial analysts, the answers vendors execs give, and from what’s neither asked nor answered.

Workday’s latest earnings call, on 2-27-2017, caught my attention primarily because of what the financial analysts didn’t ask.  I was ready for some very specific questions about one initiative which goes to the heart of Workday’s ability to onboard customers better/faster/cheaper and to provide similar ongoing support throughout the continuous implementation which is foundational to achieving SaaS’s innovation benefits.  I was also ready for questions about another initiative which goes to the heart of expanding Workday’s addressable market “bigly.”  Well, I may have been ready, but either the financial analysts didn’t think this was the right moment for such questions and/or their interests are WAY different from mine.  Neither initiative was mentioned, not by Workday and not by the analysts, and so begins my tale.

At Workday Rising 2016’s Financial Analyst program, to a standing room only crowd (well, to be fair, the financial analysts all had seats, but there were definitely some Workday folks without them), Workday did a presentation on what I have long called interrogatory configuration.  Here’s a more recent commentary on this topic.   Just think of interrogatory configuration as the complete set of tools which speed up, systematize, and wring elapsed time, cost and errors out of the nearly continuous implementation which is a hallmark of true SaaS’ ability to support today’s rapid pace of business change by improving our ability to take up both new capabilities and reconfigure existing ones.  Workday had made real progress in this area and did a solid presentation on their goals here and progress toward those goals.  I kept waiting for one or more of the analysts present to jump on their chairs, scream eureka, and then, more calmly, ask a bunch of probing questions about the what, why, how, when, etc.  Instead, you could have heard crickets!

Then, toward the end of that same Financial Analyst program, in answer to the always asked (and on earnings calls too) question about whether or not Workday was going to commercialize their development platform/environment, I awaited Aneel’s carefully expressed view that this would be a different business and one which would distract Workday from their current applications and, more recently, industry build-out.  Instead, the earth moved (at least for me) when Aneel casually stated that they would be commercializing their crown jewels and, wait for it, by the end of 2018.   I nearly fell off my chair over such a public revelation of so important a development as a kind of throwaway line at the end of the day.  Perhaps by then the analysts were too pooped to participate, but there were few questions and even fewer sidebar conversations — and I was listening for both of them.

Meanwhile, I’m sitting in that session trying to calculate in my head the financial implications for Workday (not to mention the even bigger list of hard benefits, to include both cost savings and more rapid uptake of innovation, for their customers) from interrogatory configuration, e.g. improvements in operating margins, from materially lowering the time and cost to initial production, and the greatly expanded addressable market from unleashing their platform/development environment not to mention the related bragging rights and overcoming what some competitors (and industry analysts) have cited as a Workday weakness.  And while there were some mentions in financial analyst reports of the day of what I considered pretty momentous announcements, there wasn’t anywhere near the excitement that I had expected.  But of course such matters take time to digest, to probe more deeply through partner and customer reality checks, etc. — hence my expectation of nuanced questions on these initiatives at the February earnings call.

Little wonder then that I was so surprised when there wasn’t a peep about either of what I consider to be two important levers of Workday’s future addressable market and profitability, but what do I know?  Not one peep!  But I’m sure that Workday’s implementation partners are following both developments with great interest, the one because it could reduce sharply their implementation workload — really, everyone’s workload — and the related revenue streams, and the other because it could empower partners to build-out Workday where they have deep subject matter and/or industry expertise.

Of course I don’t have access to every financial analyst report covering Workday and her competitors, nor do I read every industry analyst report on this same competitive landscape, so I may well have missed some fantastically insightful coverage of these initiatives.  If I have, please, please send those to me.  Meanwhile, I’ll await coverage of Workday’s upcoming Tech Summit (I really hate to miss this, but cruising the Western Med intervened), their next earnings call, and then Workday Rising in hopes of learning more.