SMAC revolution enhanced SaaS adoption
Previously in the series, we discussed Workday’s (WDAY) recent fiscal 3Q16 results. Let’s look at how Workday’s strategy of venturing into adjacent markets boosted its revenue growth.
The advent and arrival of the SMAC (social, mobile, analytics, and cloud) revolution gave way to SaaS (software-as-a-service) offerings. In turn, increased SaaS adoption led to the emergence of players like Salesforce.com (CRM) and Workday in the enterprise software market. The market is largely dominated by Oracle (ORCL) and SAP (SAP). The massive revenue growth of SaaS providers, especially like Salesforce.com, can be ascertained from the fact that in 2013, it became the first SaaS vendor to be added to the top 10 software vendors list.
Product portfolio and geographical reach
Usually, SaaS companies start within one specific software niche. Then, they extend their offerings to adjacent markets to find new revenue growth drivers. Workday followed the same route. It started with HCM and went on to spread into the ERP space like accounting, recruiting, time tracking, and purchasing, as the above chart shows.
In September 2015, Workday announced Workday Learning. Workday Learning is an LMS (learning management system) that will be built in the company’s core HCM (human capital management) and financial management offerings. It provides job training and professional development resources. It enables users to share learning materials with their peers.
The company generates the majority of its revenue from the US. It’s geographical expansion mode. It opened a new office in Dublin, as we stated previously in this series. Aneel Bhusri, Workday’s co-founder and chief executive, stated that “We are expanding our suite of applications and investing in global capabilities.”
Since the majority of the company’s revenue comes from the US, the appreciation of the US dollar (UUP) against other currencies had a minimal impact on the company’s results.
You can consider investing in the iShares US Technology ETF (IYW) to gain exposure to Workday. IYW invests about 0.24% of its holdings in Workday.