Big Fish, Little Fish—What Does HR Tech Consolidation Mean for Workday Clients?

Aggressor, Omnipoint, Jeitosa, Kloud, Meteorix, CPSG, DayNine, Appirio. One-by-one these boutique Workday implementers have been picked off and swallowed up by the big fish: Deloitte, Aon, Mercer, IBM, Accenture and Wipro, the first India-heritage company to acquire its way back into the ecosystem. (Though Wipro was previously a Workday partner, it does not currently have that status.)

Much has been written about the benefits and risks of these consolidations from the provider or industry perspective, but what do they mean for Workday clients and prospects, particularly those that have not yet deployed? Though some benefits are clear—clients of the newly consolidated companies will certainly gain from deeper bench strength and enhanced methodologies and accelerators —the lack of competition may create a number of downsides.

Once upon a time, there were several small Workday-focused system integration boutiques. As Workday grew, they also grew, expanding their certified workforce from handfuls to hundreds and gaining significant experience over the years through the many Workday releases. As the Workday solution evolved over time, they did, too. Because they were smaller organizations with much lower corporate overhead, they anchored the low end of the price range and kept other players in line in competitive pursuits. Their size and agility helped them attract, retain and grow talent in a high-turnover market. The deepest expertise often resided in these boutiques.

As these little fish (with less than 50 employees) grew to medium-sized fish (with between 500 and 1,000 employees), they attracted the attention of the big fish (with between 50,000 and 200,000+ employees) that decided they were just the right size to gobble up. For some of the big players like Aon and Mercer, acquiring boutiques allowed them to build a new Workday deployment capability that complemented their related businesses, such as HR consulting and HR outsourcing services. For Deloitte, IBM and Accenture, these acquisitions meant they could quickly scale to the demand for their system integration services for Workday and reduce the competition in the market.

These consolidations have left clients, especially very large, global clients, with very little choice. To get the depth of experience with other large, global deployments, clients are limited to a small handful of global system integrators (GSIs). Most of the boutiques that are left have experience primarily in the mid-market and the smaller side of large enterprise.

Workday clients stand to gain the following potential benefits from industry consolidation:

• A fuller set of services, including the transformation/process re-design, system deployment and change management that most GSIs are able to offer;
• Access to other cloud deployment and integration services, including SaaS platforms, such as Salesforce, and a range of private and public cloud platform options, digital automation and analytics;
• Access to both technology and delivery services across HR, Finance, and other business support areas that some of the GSIs can provide;
• Support from GSIs that are better able to fund continued growth to meet demand and have more established global delivery models;
• Ease of buying since many large, global buyers already have established relationships with these companies, and
• Easier access to the big fish that previously had no experience in the medium-enterprise methodology or scaling for smaller, shorter deployments.

Clients, however, are likely to see the following drawbacks:

• The loss of deep experience, innovation and agility that boutiques were able to deliver. With GSIs, they are likely to no longer be the “big fish in the small pond”;
• Exposure to potential brain drain and internal turmoil that may occur as a result of the culture clash between boutiques that attract top talent because of their start-up, entrepreneurial culture and GSIs that employ 200,000 people and all of the policy and procedure that come with that size;
• The escalation of prices, both for deployment and ongoing post-production support, since boutiques typically had significantly lower pricing and kept overall market prices down through competition, and
• Limited choices as alternative approaches, staffing models and price points disappear.

Today’s savvy buyer therefore should:

• Watch out for bait-and-switch techniques in which you meet the A team and get assigned the Z team. You will want to interview and check references on the individuals working for you. Pay particular attention to experience with geographies outside of the core service area of the acquired firm. (Just because Wipro buys Appirio doesn’t mean that its legacy employees suddenly have Workday experience.)
• Avoid high turnover. Be sure to ask about recent turnover levels and check this with references, as well.
• Look for specific certifications and experience in the modules you are deploying and with companies that have like scope, scale and geographic presence.
• Don’t assume that bundling everything with the system integrator is the best deal from a financial or quality perspective. You may want to specifically consider alternatives for strategy and selection, target operating model and organizational change to ensure you bring diverse input to your future state.

What are the questions at hand?

Because competition among the human capital management (HCM) software-as-a-service (SaaS) leaders is driving subscription rates down, system integrator costs are often the hurdle that buyers need to get over to make their business case work. As the lower cost competitors get absorbed, what will keep fees for deployment and post-production services from continuing to escalate? Will Workday invite some new boutiques into its ecosystem, possibly subsidizing early growth or development of capabilities? Or will it increase its own share of the deployment pie to drive competitive behaviors? Will we see more little fish gobbled up in an effort to break into the lucrative Workday ecosystem? And how might this consolidation be mirrored with the other leading SaaS solutions for HR and Finance?

It can be a challenge to navigate a changing market, especially one that is evolving so rapidly and in such unpredictable ways. Keeping an eye on the dynamics of the food chain and how it impacts your business goals is a key part of understanding your business technology options.

About the author

Deb leads ISG’s Human Resources Technology practice, drawing upon extensive in shared services, outsourcing and HR management to help clients define and implement their HR technology and service delivery strategies. Deb helps enterprises assess the business case for Human Capital Management software-as-a-service (SaaS) solutions, understand the capabilities and experience of leading HR SaaS providers and integrators, and formulate and execute effective negotiation strategies for HR SaaS software and implementation. She has authored ISG’s annual survey on HR Technology and Service Delivery Trends since 2014. Deb has 29 years of experience and has been involved in more than 150 HR engagements across HR administration, payroll, benefits, talent acquisition and HR technologies.