Workday has filed its S-1 with the SEC as part of its IPO process. For the 37 months ending January 31, 2012, total revenues were $ 227 million, accelerating year on year, so let’s round off to lifetime revenues of $ 350 million.
The whole document makes interesting reading especially if you are a lawyer or an accountant. Personally, I went into a froth thinking about the likely economics at “325 customers, including large, global companies such as Aviva International Holdings Ltd., AIG, Inc., Flextronics International, Four Seasons Hotels, Georgetown University, Kimberly-Clark Corporation and Lenovo”
I profiled the Flextronics Workday project in my recent book.
“It was the meeting where our IT council gave me the green light to proceed with a major global project to consolidate 80 different HR systems across the world. We had settled on our existing ERP vendor’s software,” says David Smoley, CIO of Flextronics, one of the world’s largest electronics contract manufacturers. “I thanked them for approving such a large project and then I surprised them. I told them I may come back to them in the next month with a ‘better, faster, cheaper’ option.”
“The proposal from Workday saved us more than 40 percent over the life of the project, with even larger savings in the first year. By going with Workday we were able to reduce our team size by more than 60 percent.”
David saved plenty on his initial implementation project because he used a small set of Workday consultants compared to a proposal from a large outsourcer for the on-premise project alternative. But it is a a gift that keeps on giving. He has eliminated three major TCO elements going forward – hosting, application support and upgrades.
a) Many on-premise customers continue to pay IBM, HP, SunGard $ 1 to 2 a GB a month for their storage costs and even more for the compute servers and networks and data center costs. Included in Workday’s subscription price.
b) They pay Accenture, Infosys and others for 5, 10, 15, 50 bodies to support/tune their applications after they go live. Included in Workday’s subscription price.
c) They pay a Cap Gemini or another SI to upgrade releases every 2 to 4 years. Those projects are expensive when you factor the change management chaos they create and related testing. Workday has smoothly migrated its customers in background across 16 releases so far.
By my estimate for every 1$ a customer pays to SaaS vendors it saves $ 3 to $ 5 in on-premise costs around those 3 elements. Elements a and b could be squeezed if outsourcers moved to multi-tenancy models as I wrote here, but they have not.
So while investors salivate about Workday’s IPO, I think customers owe Dave and Aneel and Stan and the entire team at Workday an even bigger hug. Workday has saved them over a billion so far, and yes, that gift will keep on giving, till on-premise vendors knock some sense into their hosting and application management partners to move to shared service models.