Workday’s purchase of Adaptive Insights proves competitors can’t kill it

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By Ross Garrett (Managing Partner)

Workday just purchased Adaptive Insights a leading provider of Enterprise Performance Management (EPM) software (or for normal people a budgeting tool). Many articles will be written about the synergies and market expansion this will create. However, statements by the CEOs of both companies should clearly demonstrate why people who say upstarts can destroy Workday have no idea what they are talking about. (All statements about the purchase are from this webcast the CEOs did found in Workday’s investor relations.).

For a quick history lesson, Workday purchased GridCraft in June 2015 to create a spreadsheet in their application for a budgeting tool. For the last 3 years they have been working on the product called Workday Planning. It has been very successful for HCM and headcount planning, but has struggled on the financial planning side. After 3 years, when buying Adaptive, Workday said that their planning tool would be accelerated 2+ years by the technology. They essentially abandoned their in-house tool for financials and relegated it to HCM only.

Articles are regularly written that upstarts will destroy Workday or that a deep pocketed competitor can easily just spend money and develop a competitor quickly. The Adaptive purchase should prove both of these theories are wildly inaccurate.

Workday, who sells $2 billion dollars of SaaS in this space, did one acquisition and spent 3 years of developer time on an EPM tool and just threw in the towel. This same company has delivered successful HCM, Payroll, Applicant Tracking, and Financial applications. Adaptive Insights had revenue of ~$170 million. Workday probably has at least 4 products of that size already. One would imagine they were uniquely positioned to execute and they couldn’t do it. Workday didn’t say they could never have caught up, but they did admit customers wanted a better tool right now so they had to make a splash.

What does this tell us about Workday’s competitors both small and large? Replicating the very complex business logic, scalability, usability, security, and the connectivity to other systems required of enterprise business applications is very difficult. To effectively overtake Workday you’d have to do it for many applications. Oracle is a good example. For years they’ve tried to get the PeopleSoft ecosystem onto their platforms, and they just announced another attempt to convince them to go to Fusion ERP. That acquisition shows that it can be very difficult to just pick up a technology and easily change its direction in this space.

Despite the fact that there are many applications in this space competitors cannot just easily replicate the Workday formula. What Workday has built is very unique and would take truly exceptional execution to match. However, in the next article in the series we’ll discuss a real concern that bears should be interested in when evaluating Workday.

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