That news in and of itself is interesting for Okta, clearly. It’s interesting for Okta’s investors — one of whom also happens to be Workday CEO and co-founder Aneel Bhusri — and it’s interesting if you are one of those cutting edge IT managers who wants to drag his or her enterprise into the cloud. But not for many other people.
But the strategy is something that other up and coming cloud vendors should take note of. Cloud software companies have mostly succeeded in spite of corporate IT departments. We’ve heard this “Robin Hood”-like tale since the early days of Salesforce.com. Small groups and divisions sick of the unusable, unintuitive legacy systems of old download a free or cheap app without permission, and adoption spreads throughout the company until CIOs finally have to accept it and pay for it. It’s the great bottoms-up missionary story of the cloud.
But the reality is we’re more than 10 years into this snails pace “revolution,” and cloud-based software is still a tiny, tiny percentage of enterprise software spending. A few large companies have been built but none with the heft of Salesforce.com. Most who look promising, like Yammer, get taken out early by deep-pocketed competitors who don’t want this skunk works threat to get any more legitimacy.
There are two big reasons that companies are dragging their feet in adopting something that the Valley elite would have you think is inevitable. The first are real concerns about control and security. IT departments aren’t nearly as freaked out about those as they used to be. But the other problem is that even the biggest cloud companies are still selling point-products.
The cycles of enterprise software swing from companies buying so-called “best-of-breed” software to the allure of having “one throat to choke.” The former refers to systems they cobble together with the best, say, ERP system or CRM system or database on the market. The latter comes when companies get sick of managing that crazy quilt and decide they want a single vendor to deal with — even if the actual software is worse.
Some cloud companies have argued that after the last few years of an SAP-Oracle-IBM hegemony, companies are ready for a wave of best-of-breed products again. But I’m not so sure. The memories of all of those expensive, kludgy PeopleSoft and Siebel implementations of the 1990s are still pretty well locked in the industry’s brain. For the cloud to finally get the escape velocity it needs — these vendors may need to Voltron it up, band together and pull each other up into the enterprise. “Mainstream buyers want things to work across the board,” McKinnon says. “They don’t want one solution, they want a whole package. The reality is no vendor has that. That’s why we need to partner up if we’re going to see the cloud become mainstream.”
It’s particularly important for a company like Okta. Okta makes the identity layer for cloud systems, so it’s not one of those cloud systems that people will install on their own like Yammer or Asana or Dropbox. It has to be sanctioned by a company’s IT gurus and typically only when those gurus are really serious about the cloud. It’s much closer to the traditional enterprise software model with a real sales force.
When I ask Okta’s CEO Todd McKinnon — who trained at the knee of Marc Benioff — about a company like Atlassian that has no sales people and a $100 million business anyway, he doesn’t express envy or admiration. He simply says, “Imagine how big they could be, if they did have a sales force.”
The perfect leader for this Voltron crew is Workday’s Bhusri for three big reasons.
The first is that he splits his time between Workday and being an investor at Greylock, where he has funded companies like Okta and Cloudera. He is not only building a core part of the enterprise stack himself — he is in a position to fund and build the other pieces.
The second is Workday’s heft. It’s the Tesla of cloud companies. Tesla didn’t market itself as being green, it marketed its luxurious sex appeal. Likewise, Workday is the only cloud vendor who started life without all of the cute song and dance of “Hey! Let’s just be grassroots and sell software to small companies for cheap.” It sold with the promise of being more modern and better than Oracle and SAP. Now, it’s filing to go public, which will give it even more heft.
And then there’s the sense of mission. For those who don’t know the Quentin Tarantino-worthy “Kill Larry” story, Workday is one of those rare companies that started life with a massive cash commitment to build the next huge enterprise software giant. That cash came from Greylock and ironically, Oracle’s CEO Larry Ellison. Back in 2004, when Ellison launched an unprecedented hostile take over of PeopleSoft, founder Dave Duffield and Bhusri fought it tooth and nail. When they lost, they took the $600 million Duffield made and decided to build Workday. Peoplesoft’s Revenge.
It has taken six years. But the company has done exactly what it said it would in 2006, back in the very first article ever written about them. (As luck would have it, by me.) It is replacing systems inside huge companies for large amounts of money. It is second only to Salesforce in how seriously big customers take it. Now is the time for Workday and Salesforce to bring the rest of the industry with them.