According to a recent report, the global cloud-based ERP market size is expected to grow from $45.3 billion in 2020 to $101.1 billion by 2025 at a CAGR of over 17%. SaaS-based enterprise services provider Workday (Nasdaq: WDAY) recently announced its fourth-quarter results that continued to outpace market expectations.

Workday’s Financials

Workday’s fourth-quarter revenues grew 15.9% to $1.13 billion, ahead of the Street’s forecast of $1.12 billion. Non-GAAP EPS was $0.73, also ahead of the market’s forecast of $0.55. For the quarter, net loss decreased to $71 million compared to loss of $120.7 million a year ago.

By segment, Subscription services revenues grew 19.8% to $1.01 billion while professional services revenues declined 8.2% to $125.4 million.

For the full year, Workday’s revenues grew 19% to $4.32 billion and GAAP loss was $1.19 per share compared with a GAAP loss of $2.12 per share a year ago.

For the first quarter, Workday expects subscription revenues of $1.018-$1.02 billion and professional services revenues of $139 million. Workday expects to end the year with $4.38-$4.4 billion in subscriptions revenues and $590 million in professional services revenue. The market was looking for revenues of $1.16 billion for the quarter with an EPS of $0.58.

Workday’s Acquisition

Recently, Workday announced its plans to acquire Denmark-based Peakon for approximately $700 million. Founded in 2014 by Christian Holm, Dan Rogers, Kasper Hulthin, and Philip Chambers, Peakon is a platform that works to improve employee engagement, inclusion, and growth. Prior to the acquisition, Peakon had raised $68 million in four rounds of funding from investors including Balderton Capital, Atomico, EQT Ventures, Indivest Partners, Heartcore Capital, and Tommy Ahlers.

Workday plans to leverage the acquisition to build a continuous listening platform that will allow customers to capture real-time sentiment, facilitate ongoing feedback, and access personalized, prescriptive recommendations for actions. It will also merge Peakon’s technology that determines and distributes surveys and information with its own employee insight tools to help leaders with the ability to discover and respond to employee needs and behaviors.

Besides acquisitions, Workday continues to grow its product portfolio and accumulate accolades. Last quarter, it was positioned as a Leader in the 2020 Gartner Magic Quadrant for Cloud HCM Suites for more than 1,000 Employee Enterprises, for the fifth year in a row. For the fourth year in a row, it was awarded the Best in KLAS in enterprise resource planning for Workday Financial Management, Workday Human Capital Management, and Workday Supply Chain Management solutions for healthcare. In terms of product enhancements, it recently announced the release of a COVID-19 vaccine management solution that integrates real-time HR data with immunization information, thus providing customers with the insight and resources needed to help foster healthier workforces and safer workplaces.

Workday’s PaaS Strategy

I find Workday as a promising player within the PaaS segment. Unlike some of the other players who have chosen the API path, Workday has opened its platform, Extend, to partner to build and customize applications and extensions on top of the capabilities already delivered on Workday to meet business needs. Extend allows organizations to leverage a familiar user, administration, and reporting experience and enforce the same security controls while gaining real-time access to Workday people and financial data for additional business needs.

Since its release last year, Workday has seen use cases such as the development of a compensation review app that simplifies budget allocation during the comp cycle, a training validation app that ensures line-worker certification and safety in compliance with FDA, a student counseling app that connects students with mentors, and a billing app that interfaces with paid learning content. Companies like Netflix and IBM are citing examples of increased efficiencies due to the use of apps that have been developed on Workday.

Workday’s PaaS strategy remains focused on System Integrators catering to enterprises, and enterprise IT extending functionality. It is yet to open its platform to ISVs. The company believes that its customers are getting great value from Extend and is seeing its customers “build mini apps or an extensions“, but it does not see the benefit of opening its platform to ISVs right now.

Its stock is trading at $236.70 with a market capitalization of $56.81 billion. It hit a 52-week high of $282.77 last month and a 52-week low of $107.75 in March last year.

Rival Anaplan (PLAN) also recently delivered a strong quarter.

Anaplan’s Financials

Revenues for the quarter grew 24.7% to $122.5 million, ahead of the Street’s forecast by 2.9%. Adjusted loss for the quarter was $0.07 per share, compared with the Street’s forecast of a loss of $0.10 per share.

By segment, subscription revenues grew 25.7% to $112.6 million and professional services revenues grew 14.2% to $10 million. Its dollar-based expansion rate was 114%.

Anaplan expects revenues between $126.5-$127.5 million, significantly higher than the Street’s estimates of $127.16 million. For fiscal 2022, Anaplan expects revenues between $550-$555 million, higher than the Street’s estimates of $553.44 million.

Anaplan’s Collaboration

Recently, Anaplan announced its collaboration with AWS to enable its enterprise planning application to be made available on AWS. The collaboration will expand the reach of the Anaplan platform and will deliver added value to its customers by helping to efficiently leverage solutions of AWS and easily integrate with AWS data sources and advanced intelligence capabilities. It will also provide its customers with flexible data management over data residency, thus allowing customers to comply with requirements and simplifying the use of Anaplan across global teams and markets.

The partnership will also build on the recently announced Anaplan PlanIQ with Amazon Forecast by allowing for seamless access to third-party data, like weather patterns and forecasts, into Anaplan PlanIQ. The integration will allow modelers and planners to leverage advanced machine learning-based forecasting capabilities to embed forecast predictions directly into their planning processes. Anaplan’s connected planning will, in return, help use these forecasts to improve overall business performance.

Anaplan’s PaaS Strategy

Anaplan too has an active PaaS strategy. It opened its data platform a few years ago, to allow organizations and developers to build apps to solve planning problems. Anaplan has been extending its platform use cases by partnering with several consultants to get them to build apps that make it easier to perform a wide range of activities including financial forecasting, project management, and merchandise planning on Anaplan directly. The platform offers 100s of Anaplan, Partner, and Community created Apps in services ranging from finance, supply chain planning, sales, workforce management, marketing, IT, and training. It also allows developers to build accelerators that are basic applications that can help organizations jump-start the process of building custom planning models and apps on the platform.

Its stock is currently trading at $65.89 with a market capitalization of $9.2 billion. It touched a year high of $86.17 in February. The stock had fallen to a low of $26.04 in March last year.

I think both Workday and Anaplan should take a page from Salesforce’s playbook on PaaS. Salesforce has figured that a successful PaaS strategy needs not only an open platform but a marketplace as well.