Workday's fiscal first quarter was solid, but billings growth came in below expectations and there are signs that the company---like other software as a service players---is seeing stiffer competition from incumbent enterprise software vendors.
The human capital management cloud vendor delivered better-than-expected first quarter results and revenue that was up 57 percent from a year ago.
As for the outlook, Workday's guidance was in line with expectations.
The catch is that Workday's total billings growth was 31 percent, which was below the 35 percent that was expected. JMP Securities analyst Patrick Walravens said that Workday needs to improve its pipeline and sales execution. Workday is increasingly selling human capital management software with financials, but needs more throughput.
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Walravens noted that companies like ServiceNow, Marketo and NetSuite all delivered quarters that showed seasonality. The upshot is that SaaS companies are seeing more competition from the incumbents.
Now there's no reason to panic. Workday just landed Coca-Cola and Dell as customers.
Workday CEO Aneel Bhusri was asked by Jefferies analyst John DiFucci whether Oracle has been cutting prices and being irrational to win deals. Bhusri said:
I don't think it's any different in terms of their tactics in the first quarter than it has been in previous quarters. I mean, I would say every quarter is an ebb and a flow. I would say right now Oracle has their act together better than SAP. SAP seems to be in a bit of disarray. So from our mind, that sort of all evens out.
The big takeaway here is that Workday, which is now on a $1 billion annual revenue run rate, is now seeing the same seasonality other enterprise software vendors are seeing. What remains to be seen is whether incumbent enterprise software players can undercut on pricing and bundle to replace the on-premise applications with their cloud offerings.