Workday had a solid quarter - listen to the earnings call here. Actually given the state of the economy, you could call it a blowout quarter. On the heels of Salesforce's earnings report this week that I commented on yesterday, I looked for similarities and differences with other vendor performance during the pandemic.
Workday clearly benefited from a dramatically increased focus on employees during the pandemic. As Aneel Bhusri, the CEO had indicated in this interview I did with him in May and said on the earnings call "I've never had so many CEO conversations on the HCM product line. And I think the issue of employee health, mental health, physical health, how are they doing working remotely, how are they working on new projects. This new world of skills and a different world around talent become a number one priority for the CEOs." I was particularly glad to hear Aneel say : "We are not an ERP vendor...We are quick to implement HR and finance systems, really oriented toward employees and running the business in a very agile environment." I have told Workday for a couple of years now they have opportunistically been using the ERP term when they don't have much in the way of industry-specific operational capabilities
Workday has benefited from its growing portfolio of smaller applications like Workday Adaptive Planning, Prism Analytics and Spend Management and around workplace reopening protocol applications in partnership with Salesforce and IBM. Bite size applications with quick payback, and ability to be implemented remotely are selling in this market. Even SAP is finding its Amplify set of bite-size applications, not big honking S/4 projects are doing well.
Workday's Extend platform is gathering steam. Pete Schlampp -- Executive Vice President, Product Development said "I think we have about 100 different applications live today. One of them that just went live this quarter was a company that had built a self-assessment capability inside of Extend so employees could self-assess as they were getting ready to return to work and determine whether they were ready. So Extend is about any type of use case just extending the surface area of Workday." Workday has been careful to focus its platform at customers, not to open it up to a broad ecosystem of vendors like Salesforce has. It may need to consider doing so now. As we have seen during the pandemic, vertical "edge" applications have taken off - telemedicine, last mile logistics, PPP loan processing, digital mortgages and many more (see more in my comments on edge apps in this video here ). If Workday had some of those on its platform, its quarter would have been stratospheric. Workday could itself be using its platform to deliver industry applications. IFS is reporting field service traction in its asset intensive customers, ServiceNow is starting to see similar in financial services and healthcare.
Most cloud applications are benefiting from an overall annoyance with on-premise systems. Besides their age and expense, on-prem applications took companies way too much effort compared to cloud applications as they moved employees to WFH. SaaS applications have a massive opportunity ahead of them - in industry and geography reach. Us analysts recently had a fun time around the "funeral" of on-premise applications, but I resurrected "Mr. OP" for now. As I said, unless SaaS applications expand their functional reach and automate migrations, customers will lift and shift on-prem applications to hyperscalers and move to cheaper third party maintenance and support.
To, the last point, it is nice to see Chano Fernandez promoted to Co-CEO. It should free up Aneel to focus on product and strategy. It will be good to see him expand the Workday footprint.
