Ardent Partners recently took a briefing with the leadership team of Workday (led by Eric Washer, vice president of product strategy) to discuss its recent acquisition of Scout RFP (“Scout”), a cloud-based strategic sourcing solutions provider. You can read more about our coverage of the agreement between the two Bay-area solution providers by clicking here.
Background on the Deal
Workday began as a provider of cloud-based ERP tools for financial operations, HR, and enterprise planning. But like most ERPs, Workday saw the opportunity to move into basic procurement with the addition of procurement tools, like requisitioning and supplier management to its ERP platform and then developing more robust eProcurement capabilities. In short time, its customer roster grew to more than 650 companies and slowly, Workday found itself more and more competitive in the procure-to-pay space, particularly with businesses already using its ERP system. At this point, Workday’s leadership sensed an opportunity to expand its focus on the procurement/spend management market by developing a broader solution suite that extended to upstream strategic sourcing – the question that remained was “build or buy?”
It was no coincidence that Workday had gotten to close to Scout over the past couple of years. For starters, Workday (via its Ventures group) was an investor in Scout in the past (read about our prior coverage, here). The two companies have also been strategic software partners, with a common technology stack and “synergistic” solutions. Workday believed that, with Scout, they would be able to deliver on their “Power of One” strategy with security and user experience across the two solution sets, and in a reasonable time frame. Workday also considered Scout to be “a technology-minded company that puts customer experience and user adoption first.” Finally, both companies had a high number of customers in common and this commonality was believed to help accelerate the integration of Scout
Scout RFP, a Workday company
Workday intends to retain the Scout name, and will rebrand it as “Scout RFP, a Workday company.” This is absolutely no surprise as the one-time upstart and industry darling has created an enormous amount of goodwill that drives engagement up in the procurement realm (and drives pricing higher in the M&A realm). At year-end, Workday was finalizing its new go-to-market rules of engagement, and pushing forward on both their legacy cloud-based ERP platform and their newly-acquired source-to-contract product suite from Scout. Workday will continue to compete against the likes of Infor, Oracle, and SAP, and will pursue modernization of its entire financial and ERP infrastructure (with its own procurement solutions remaining a part of that). Workday believes that adding Scout to its portfolio will help it compete with industry heavyweights. The company also plans to give the CPO a louder voice when considering Workday’s solutions across the bigger, broader value proposition.
Workday is accelerating their go-to-market with Scout as a standalone product to all Workday customer segments, regardless of whether they are a workday customer or not. They see Scout as a vehicle for penetrating into the office of the Chief Procurement Officer (CPO), in addition to the Chief Financial Officer, and providing Workday with the opportunity to expand its sales of financial operations and now spend management solutions. But, the timing on this is still to be determined, according to Eric; they still need to separate some procurement and AP capabilities from the core platform in order for it to be able to sit atop an SAP system. Eric stated that this is a short-term priority.
Innovation Themes
Eric laid out six innovation themes that Workday intends to deliver with its acquisition of Scout over the course of the next year. These are:
- Accelerated Modernization Effort. Workday will gradually release new and innovative features in 2020, including: virtual assistance, machine learning, and mobile capabilities “to bring front-line users a modern, consumer-like feel in the P2P process.”
- Supplier management. Workday will jointly develop capabilities to help customers drive onboarding, certification, qualification, ongoing monitoring, performance, risk management, and analytic capabilities for their suppliers.
- Analysis and Insight. Workday will embed its Prism Analytics capabilities into both the Workday and Scout platform, which will provide insight from third-party sources into transactions in real-time using in-memory processing capabilities
- Deepen Health, Education, and Government. This is a cross-company theme, and the two companies will continue to develop deep industry capabilities to serve the public good.
- Link and “Productize” Source-to-Contract. Workday and Scout will collaborate to provide data, security, and insight sharing between their platforms to encourage compatibility and throughput.
- Land and Expand. Finally, Workday will continue to innovate so that it can up-sell more of its procurement solutions to current Workday and Scout customers.
Final Thoughts
With the Scout acquisition, Workday has announced its entry into the competitive and exciting supply management (sourcing and procurement) solutions arena. Now it must execute and is doing so by driving full-steam ahead on integration, go-to-market, and longer-term planning. Workday did not offer a timeline for major milestones, but advised that announcements would be made soon. We’ll keep an eye on the two companies and their go-to-market in 2020, and hope to hear more from Eric and his team at Workday as well as our friends at Scout.
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