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The reason for Workday's acquisition of Adaptive Insights, announced Monday, seems clear enough to industry analysts, even if the $1.55 billion price raises eyebrows: Workday gains a corporate performance management platform that's already being used by some of its customers. This acquisition also quickly adds capability Workday needs to stay competitive.
These two firms have a history. About 10% of Workday's existing 450-plus financial customers are using Adaptive Insights, which has been a certified Workday partner since 2015.
Workday has one ERP product, its Workday Planning system, with some overlap to Adaptive Insights. Workday Planning provides financial and workforce planning capabilities, and it will now focus on workforce planning as a result of the acquisition, a company official said on a conference call with financial analysts that was held shortly after the announcement. The deal is expected to close in the third quarter.
Workday's performance management was lacking
Corporate performance management, or enterprise performance management (EPM), is seen as an adjunct or add-on to a larger corporate financial system. These tools provide analytics and modeling for budgeting, forecasting and planning.
The financial performance management tools are "a logical extension of the overall financial package that runs the business," said Brenon Daly, research director for financials at 451 Research.
But Daly was surprised at the price for Adaptive Insights -- a firm that is growing "solidly, but not exceptionally." Moreover, Adaptive Insights was set to go public, and Workday "had to effectively outbid the public market," he said.
Doug Henschenvice president and principal analyst at Constellation Research
The pressure on Workday "is now increasing," given the growing competition, said Liz Herbert, a vice president and principal analyst at Forrester Research.
Workday has been making major investments in its ERP platform and analytics, Herbert said, "but these investments take away resources that could be building other functionality." The acquisition gives the firm the means to "broaden its capabilities quickly."
EPM is a key piece of the ERP suite, Herbert said, but Workday is lacking in this area. In the most recent Forrester Wave analysis of vendors in the EPM space, both Oracle and Adaptive Insights came out as leaders, but "Workday Planning did not make the top 10" in this evaluation, she said.
"Workday will get a major boost in EPM capabilities with the acquisition," Herbert said.
Adaptive Insights speeds Workday's roadmap
"It's a good, though expensive, deal for Workday," said Doug Henschen, vice president and principal analyst at Constellation Research. He said the acquisition "clearly accelerates" Workday's move into financial and operational planning.
Workday, in a blog post, said the Adaptive Insights acquisition will "fast-track our financial planning roadmap by 2+ years."
The upside is much faster time to market in this capability than Workday could have developed organically, "but it was a pricey acquisition at roughly two times the targeted valuation of Adaptive's planned IPO [initial public offering]," Henschen said.
Henschen said he was recently at an Adaptive Insights customer event and was impressed by its plans to scale up the technology. It had long had a reputation for having more midsize customers, "but it was clearly making efforts to meet the needs of more enterprise customers."