Despite customers demanding easier ways to engage and source with software providers, there are some vendors that are holding the line on the status quo. Complexity continues to rule the day for many software sourcing transactions, and the Workday renewal is an excellent example of this.
Years ago, when NPI began seeing Workday renewals and new purchases on a regular basis, transactions were relatively easy to evaluate. Initial purchases were typically driven by RFPs and healthy competition was involved. The number of SKUs in any given transaction was manageable – 10 on the high end, but typically fewer. Workday’s pricing for these deals was typically flat during the term and the vendor was eager to win the business.
Since then, Workday renewals have become more complicated. There are more moving parts per deal as the number of SKUs expand within and across the HR and finance silos. More moving parts mean more complexity and that has paved the way for Workday to find new and unique ways to extract revenue from its customers.
Why It’s Harder to Determine if You’re Getting a Fair Deal on Your Workday Renewal
Increasingly, NPI is seeing bundled pricing at renewal time, making it more challenging to assess the competitiveness of an as-is renewal versus a renewal involving new SKUs. Workday is offering plenty of incentives to adopt its ever-expanding service portfolio, which is good for customers that need these services as the deal window will likely be open.
The vendor is also clearly experimenting with pricing and what the market will bear as NPI has observed a widening range of pricing for similarly scoped deals.
Aside from bundling, there can be some tricky math with how Workday calculates and chooses to show your renewal increases. This is particularly true if you had growth during the expiring term and are expecting more growth during the upcoming term.
Negotiation Opportunities for Workday Renewals
Below are some observations and suggestions for optimizing the outcome of your Workday renewal negotiations:
Demand pricing transparency and granularity. It’s always a red flag when a vendor packages its renewal offer into a slide presentation. Workday customers looking to commit 7 to 8-figure spend should not accept a PowerPoint-style offer where the details are not being shown. Line-item pricing is a must.
Price increases tied to the Consumer Price Index will be tricky this year. Historically, NPI has seen a CPI of 1.2 percent used for renewal-based price increases. But there are clear indications this year will be different as the CPI spikes. The impact on renewals could be material but could also lead to some potential negotiation opportunities.
Familiarize yourself with Workday’s Innovation Index. For customers working on their first renewal, or even their second, you will see a new pricing approach where your annual spend will be increasing each year based on Workday’s Innovation Index. This adds an additional wrinkle to both the annual contract value and the Expansion Table governing future growth. NPI is observing some gotchas that didn’t exist in the past (contact us to learn more).
Acquisitions are making pricing for some SKUs harder to negotiate. Some SKUs are being reconstituted such as Talent Optimization, which had its origins in the Core HCM SKU, and Workforce Planning that came from Workday’s Adaptive Insights acquisition. Strategic Sourcing originates from the vendor’s ScoutRFP acquisition, where some clients may have separately purchased this pre-acquisition. As Workday fully absorbs these offerings into its portfolio (and others), changes to pricing and SKU make-up should be expected and a fresh analysis of if pricing is within fair market value territory should be conducted.
Material changes in headcount can lead to savings or overspending, depending on how your approach your renewal. Significant contraction or expansion of headcount (“FSE” in Workday’s taxonomy) add difficulty to assessing the competitiveness of your renewal. NPI has observed much variability in terms of customer treatment. This is one more reason why your next Workday renewal process should include price benchmark analysis. It’s the surest way to determine if pricing and terms for your calibrated renewal are best-in-class.
Know Workday’s motivations and see how they align with your current and future-state requirements. New SKUs including Journeys, Help and Extend represent areas where Workday is highly motivated to drive adoption. For customers that need this functionality, there are deal windows to be had. For those that don’t, beware – Workday will be pushing these offerings hard and what may seem like a good deal now could lead to underutilized “shelf-ware” and toxic spend down the road.
If you have a Workday renewal on the horizon, NPI can help you identify opportunity for material savings. We are not a reseller and our guidance is 100 percent objective. Reach out to us to learn more.
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