HR Software

Why is Workday So Expensive?

February 15, 2021
  •  
10
Brett Ungashick
Founder

If you have ever evaluated HRIS systems and included Workday in your list, you will have noticed that the cost of buying, implementing and maintaining Workday is far higher than with any other peer system. You might be asking yourself, "Why is Workday so Expensive?"

We have helped over 700 businesses buy new HRIS systems in the past few years. Without fail, every time that Workday has been included as a finalist their proposals have represented the highest priced option for our clients.

From a software fee standpoint, Workday is in a league of their own. They have a ~$265K annual minimum for software fees and cannot sell a deal for less than that price point. Generally, Workday's annual software fee pricing is 50-70% higher than their peers.

However, the software fees are only the beginning.

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Workday also charges some of the highest implementation fees in the industry. Generally, Workday's one-time implementation fees are about ~150% the annual cost of the system (i.e., $300K in software fees means roughly $450K in one-time implementation fees).

Workday only administers about 20% of their implementations and the vast majority of their projects are completed by certified implementation partners, such as Accenture, Deloitte and OneSource Virtual. Because of this variance, the implementation fees can vary significantly.

Finally, there is also a high ongoing cost to administering and supporting a system as robust as Workday. More often than not, a company needs to hire one or two full-time HRIS managers whose sole responsibility is running Workday's system. Companies will also sometimes purchase a set number of consulting hours each month from their implementation team to complete ad hoc projects.

When you factor in all of these costs, it's no surprise that Workday is the most expensive HRIS platform on the market today. But, the question becomes, why are companies still willing to pay such a hefty price tag for Workday?

Blog: How to Negotiate an HRIS Agreement

Enterprise Configurability

The main reason that Workday is so expensive is because it is a highly capable system.

Many HRIS systems are 'off the shelf' solutions meaning the processes, formats and features cannot be altered. These types of systems force a company to adapt their processes to fit into the box that the system provides.

Workday is the complete opposite. Virtually nothing in the Workday system is set in stone, which allows the system to morph and configure to any process and workflow that a company requires.

There is quite a bit of value in having a system that can do anything that an organization requires of it.

Unmatched Product Architecture

Another reason that Workday is so expensive is due to the single database architecture that they have built the system on.

Many HRIS systems grow and add new features by acquiring 3rd party HR tools and bolting those tools onto their existing system. While this can be a helpful shortcut to adding features and functionality quickly, it comes at a cost.

Systems that grow in this manner often are not fully unified from the user's perspective. This means that data may need to be entered multiple times into different parts of the system and reporting data may not be available in real-time.

Contrary to the growth-by-acquisition approach, Workday has primarily taken a growth-by-development approach which has allowed them to build new features on the same, existing code base. Additionally, when Workday has acquired companies, they have forced those companies to rebuild their technology on the Workday code base, rather than bolting on systems after-the-fact.

Blog: The Most User Friendly HRIS Systems (with screenshots)

User Experience

Generally, there is a linear relationship between how much functionality an HRIS system has and how clunky the user experience becomes. This is because as you add more features and functionality, the interface gets more crowded and overwhelming for users.

A pretty system is usually very limited from a functionality standpoint and a robust system is usually very unappealing from a user interface perspective.

One of the things that makes Workday's platform great is their ability to balance both: enterprise configurability with consumer-grade user experience. This balance is one of the reasons they are often chosen over equally competent peer platforms.

Finance Capabilities

Workday no longer considers itself an HRIS company. Yes, that is where they started and yes, that is how most companies know about them. However, Workday has spent a lot of effort in the past few years becoming an enterprise-wide system.

Workday now offers accounting and financial planning functionality that can marry HR and Finance needs.

This functionality contributes to why a Workday quote can be higher than peers. It's also worth keeping in mind that Workday has to divert some of their best engineering talent away from the HRIS side of the product to build these Finance tools.

Blog: The 10 Best HRIS Systems for a Growing Company

Selection Bias

Part of the reason that Workday prices their system and implementations so high is so that they can disqualify companies that are unlikely to be a great fit for Workday.

As we mentioned above, Workday is a very powerful and robust system and it is often too feature-rich for smaller companies to fully take advantage of.

Rather than having those companies buy Workday and then fail to take advantage of all of Workday's capabilities, Workday has decided to price out the smaller end of the market so that only companies who are ready to support the system can afford the platform.

Brand Marketing

Finally, there is an irrational brand marketing component to the Workday pricing. Workday has taken a page out of Apple's book by using a high price to indicate 'luxury' to consumers. Workday has spent significant money on TV and brand advertising too.

All of these efforts create a prestigious brand image in buyer's heads which can often lead businesses to choose Workday over a system that has a better ROI or is a better fit for their current state.

If you're shopping for an HRIS and would like some guidance, it is worth learning about OutSail's free HRIS advisory services

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Brett Ungashick
Founder
Brett is the founder of OutSail. He spent the early part of his career selling HR software before switching sides and going to work for the people buying the software.

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