Workday Looks To Top $2 Billion, And Its CEO Is Convincing Me They Can Do It

(Note: After an award-winning career in the media business covering the tech industry, Bob Evans was VP of Strategic Communications at SAP in 2011, and Chief Communications Officer at Oracle from 2012 to 2016. He now runs his own firm, Evans Strategic Communications LLC.)

When Workday recently raised its guidance for FY18 to $2.13 billion, the high-flying SaaS company also said it sees huge new growth opportunities in not only its core HR applications but also in Financials, Analytics, Platform-as-a-Service and customers based outside the United States.

Confounding some competitors' claims that it's a one-trick pony with a strong HR business in the US but little else, Workday revealed in a recent earnings call that it's ready to aggressively build out its product portfolio with data-centric offerings essential to the emerging digital economy while in parallel scaling up its operations on a global level.

Workday CEO Aneel Bhusri was unmistakably clear in his opening remarks on the call: the company remains unconditionally focused on growth, expansion, and increasingly higher rates of customer success.

"We have laid the foundation for future growth for many years to come," said Bhusri, who co-founded Workday in 2005 with company chairman Dave Duffield.

"While our HCM and Financial Management suites will continue to be the primary drivers of growth in the near term, the introduction of Workday Prism Analytics and Workday Cloud Platform sets the stage for Workday to expand our total addressable market and become a more strategic supplier to our customers, with both initiatives representing billion-dollar opportunities."

Following that earnings call, the company's stock price was thumped by financial analysts concerned that projected rates of growth were slowing.

I've got nothing to say about that stock-price issue because my purpose here is not to debate stock prices, but to look at the fundamental abilities of leading cloud vendors to meet the needs of business customers here in the early days of the profound generational shift to the cloud.

And I believe that Workday is well-positioned to remain among the world's leading cloud vendors, particularly as it expands beyond its SaaS-only roots and into the platform layer (PaaS) of the cloud. Here are several reasons behind that belief:

• For its Q3 ending Nov. 30, Workday posted total revenue of $555 million, up 34%, including subscription revenue of $464 million, up 37%. Subscription revenue always has been, is today, and always will be the core element of Workday's business, and the company's ability to grow that at 37% on an annualized run rate of well over $2 billion is powerful evidence that big corporations continue placing strategic bets on Workday.
• In some cases, Financials apps are for the very first time kicking open the door for Workday's core business of HR apps, indicating high potential for a more-balanced portfolio of high-growth products. Bhusri pointed to two large opportunities the company expects to close in Q4 wherein "Financials is actually the driver in both cases." While he went on to caution that those two big potential wins can't be extrapolated into a broad-based trend, those buying decisions nevertheless represent entirely new instances for how Workday is viewed in the corporate world.
• Workday's broadening the modules with its Financials apps well beyond standard transactional products, with Workday Planning now having more than 200 customers.
• In the high-potential category of Data as a Service, Workday Benchmarking uses aggregate data on an opt-in basis from more than 1,900 global organizations with a total of 26 million individuals to offer metrics so customers can evaluate their performance relative to peers and identify ways to optimize performance.
• Always strong in the U.S., Workday continues to build out its global operations to fully support customers working across the world. CFO Robynne Cisco said international markets offer "significant future growth opportunities," and noted that in Q3, revenue from outside the U.S. reached $116 million, up a whopping 48%.

But perhaps more than any particular financial results, a powerful reflection of Workday's strength in the highly competitive cloud-computing marketplace of today and tomorrow is its ongoing and unwavering commitment to ensuring customers have successful experiences with Workday people, products and services before, during and after going live.

This isn't the first time Bhusri has brought this up—it's always been a top priority at Workday, where co-founder Duffield for many years wore the dual hats of CEO and Chief Customer Officer.

Asked by an analyst to encapsulate what's driving Workday's growth, Bhusri pointed to various factors but highlighted these two: "Two things are our sales execution, which has really improved in the last 12 months—our win rates are consistently high.

"But I'd also say that if there's anything that is really continuing to drive our success, it's becoming clearer and clearer over time that that is the level of customer satisfaction we're able to achieve," Bhusri said.

"And it's creating somewhat of a network effect, where customers are talking to other customers and saying, 'Hey, if you're going to go down this path and you want to have a successful project'—and believe me, no one wants to have an unsuccessful project!—'then Workday is a safe choice.' "

Specifically citing Coca-Cola as a "very happy" customer that's just gone into production, echoed a comment he'd made in his opening remarks when he said that "our relentless focus on customer success is a unique differentiator in our marketplace and is a major reason for the continued growth of our customer base across the globe."

And all of those customer wins for cloud HR and cloud Financials, and all of the combined repercussions of those "network effects," will bring us closer to the day when the SaaS model for corporate financial management is the rule rather than the exception—and when that happens, Workday's already-strong position will become even more appealing.

That tipping point is looming, Bhusri said.

"I think it's a big positive when all the vendors in a given marketplace are talking about a shift to the cloud—it creates demand. This is a huge market—the Financials market is twice the size of the HR market," said Bhusri.

"The biggest thing that all of us in this market are looking for is the signs that this is beginning to tip from on-premises to cloud."

I just launched a Facebook page. Let's connect: Bob Evans IT.

This article originally appeared on Forbes.