There is no doubt that the union of Adaptive Insights and Workday is a good deal for both entities. Both are respected organisations and as many have said there is a good cultural fit. Both companies have an open and welcoming culture.
But what are the deeper motivations and wider market implications of the deal?
1. Stepping up Workday’s financial credentials
Workday built its reputation and market presence on the success of its HR (Human Resource) applications. And sometimes, when a brand is so strong, it is difficult to persuade the market that you also do other things rather well.
Workday has made strenuous efforts to increase its presence and prove its credentials in core financials. The acquisition of a fully-fledged, born-in-the-cloud planning, budgeting, forecasting (PBF) consolidation and reporting solution widens its credentials with the finance community. After all, Adaptive Insight’s culture was driven by its founder’s (Rob Hull) desire to improve the lot of finance professionals struggling with a notoriously cumbersome planning process. It was a case of a career accountant in industry saying, I reckon I could do this better and launching a company and culture that shared his passion.
The upsell opportunities for Workday are obvious. There is a ‘captive’ HR customer base and the addition of Adaptive Insights gives them another touch point in financials. Customers that are not ready to move to the full ERP may be tempted by the PBF capability. On the other hand, HR customers that have already embarked on the ERP journey will be excited by the expanded portfolio of financials.
2. Preparing for an era of predictive analytics, machine learning and AI
AI and machine learning is still experimental in the modern finance function. FSN’s 2017 research (The Future of Planning, Budgeting and Forecasting) found that at the moment, these technologies are mainly confined to large finance functions in organisations with more than 10,000 employees and even then, a very small minority of 14%.
One of the main obstacles to progress is the difficulty of assembling a repository of trusted financial and non-financial data. But of course, an ERP system is effectively a ‘walled garden’ of well codified and nicely behaved financial data that can be more fully exploited by predictive analytics.
AI and machine learning will take-off initially in ERP systems and the benefits for, say, workforce planning where Workday has natural strength, will be an irresistible development, quickly followed I suspect by machine-learning fuelled predictive analytics in revenue forecasting as well.
3. Giving Adaptive Insights an anchor
Some will say that Oracle’s acquisition of NetSuite was disruptive for Adaptive Insights. It may have limited Adaptive’s prospects with NetSuite customers whose heads would be turned to Oracle’s cloud-based planning applications. It is also difficult for best of breed vendors such as Adaptive Insights to make strides in a highly competitive and crowded market of specialist PBF applications. Workday is a welcome safety net that provides a captive audience and considerable upside potential.
4. The market is bifurcating
The financials market is polarising. Some businesses will prefer the specialist unified environment of the CPM (corporate performance management) market for their PBF applications. Others will see the benefits of having PBF as part of their ERP environment. There is no right or wrong answer but introducing more choice is very welcome.
Other vendors, who are more niche (neither fully fledged CPM or ERP) could now be in the firing line. We should expect more consolidation in the market. And we have been there before in the nineties, when many ERP vendors acquired CPM applications.
That era didn’t work too well. The promised integrations didn’t materialise, and many companies were left disappointed. So beyond culture, geographical and financial fit, the success of this deal will judged ultimately on the quality of the integrations that are achieved.
Workday’s commitment to unifying Adaptive Insights with Workday—not bolting it on is supremely important. Workday says the “Power of One will stay intact, equipping our customers with access to one data model, one security model, one user experience, and of course, one Workday community that enables them to plan, execute, and analyze in one system”.
If they pull that off, then history will mark this moment as a good step forward.