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Workday: This Cloud Player Looks Primed for Long-Term Growth

August 20, 2014 | About:

The opportunity in distributed computing has opened up enormous opportunities for several players, and Workday's (NASDAQ:WDAY) first-quarter results show that it is benefiting as much as possible from it. Determined by strong interest for applications such as Workday Recruiting and Workday Financial Management, the organization's revenue has increased speedily. Workday's Human Capital Management solutions have also been selected by companies like Hewlett-Packard (HPQ).

It is aggressively investing in its products to land all the more such clients despite rivalry from established players such as Oracle (ORCL). As a result, despite the fact that Workday posted a 74% year-over-year bounce in revenue in the first quarter, its net loss extended because of investments in item improvement, showcasing and sales. Nonetheless, the organization's standpoint for the second quarter was better than anticipated, demonstrating the strong selection of its solutions.

A robust viewpoint determined by engaging products

Workday expects its revenue for the second quarter to be in the scope of $173 million-$178 million over the consensus estimate of $171.3 million. For the full year, the organization sees revenue of $730 million to $750 million, the midpoint surpassing the consensus estimate of $735 million. Besides, Workday expects its subscription revenue to develop 69% to 73% year over year.

The reason behind such fast development might be ascribed to Workday's item advancement. It has redesigned its customary application following system with inventive technology with Workday Recruiting, its newest application. Workday Recruiting is witnessing strong interest, received by more than 70 companies since its dispatch in April. Workday credits this success to a strong advancement group with more than six design partners who are focused on bringing inventive business solutions to the table.

What's more, Workday revealed Workday 22, which includes more than 350 new HR and fund features. The striking point about Workday 22 is that, out of these 350 new features, 68 have come straightforwardly from customer ideas and data.

Looking ahead, the organization is dealing with the advancement of Workday 23, based on requests from customers and partners to host applications in Workday datacenter. This move will widen its scope in enormous information analytics.

Strong customer development

Workday included more than 60 new customers amid the first quarter, bringing its count to 675 customers.

HP was a huge name customer that picked its HR solutions. It is currently using Workday's cloud-based HR software to dealt with its 300,000-strong workforce across 100 countries. Furthermore, HP has chosen to adapt Workday's service by empowering different companies to incorporate the cloud-based HR stage into their current data technology infrastructure.

In the wake of spending 15 months to coordinate Workday's solutions into it stage, HP has picked up strong insights with respect to the advertising. Amid the execution phase, HP incorporated information from 400 separate applications across fluctuated functions including payroll and account.

As per HP, since Workday's stage is cloud-based, it will give adaptability to customers by empowering extensive prototyping, which is impractical in non-cloud platforms. Since HP will now push Workday's solutions, the organization can hope to see an increase in connect rates of its HR solutions.

Also, Workday is seeing development in different areas. It had a record number of monetary customers in the first quarter, winning in excess of 80 new clients for its fiscal solutions. Separated from this, the organization is focused on driving customer satisfaction by furnishing them with forefront support when they send new software applications. This will help Workday keep up strong recharging and maintenance rates of customers.

Oracle's danger

Workday's development is impressive as it has had the capacity to develop at a staggering rate despite rivalry from Oracle, which is making huge moves in HCM. Oracle has several partners, including Accenture, KPMG, Cognizant and so forth that use its HCM software. It as of late overhauled Oracle HCM Cloud, furnishing it with new mobile usefulness, improvements in the user experience and better analytics. With everything taken into account, Oracle included more than 200 new features in its latest HCM upgrade.

What's more, Oracle has a strong sales power. The organization has sales representatives in more than 60 countries for its cloud products. Also, there are around 19,000 affirmed consultants confirmed to sell its HCM, ERP and e-trade products. In such a scenario, it is essential for Workday to keep enhancing its solutions as it runs the risk of being outmuscled by Oracle.


Workday is relied upon to develop at a superior rate than the industry normal. Throughout the following five years, the yearly earnings development projection for Workday stands at 49%, while the industry normal is less than 20%. Furthermore, the organization has a strong accounting report.

As a result, it can keep making aggressive investments in its product offering up to tap the cloud opportunity. The stock is up just 10% in 2014, yet it can improve over the long haul because of its impressive customer development and inventive solutions.

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