Workday Throws Down The Gauntlet On Employee Engagement: Acquisition of Peakon

The market for employee surveys, feedback, and engagement tools is massive and it just got bigger. Workday announced plans to acquire Peakon, an enterprise-grade employee survey and feedback company, and integrate it deeply into the platform. (Deal was around $700M.)

Let me give you some perspective.

The market for employee listening platforms is hot. Today Qualtrics, which SAP acquired for $8 Billion in 2018, is going public with a valuation of over $20 Billion. Glint was acquired by LinkedIn for around $500M in late 2018, and companies like Perceptyx, Medallia, SurveyMonkey, Gallup, UKG, and Towers Watson all sell more than $3 billion of software into this space. (Qualtrics total revenue, including EX and CX, is $723M annually and growing at 36% year over year).

The problem is that this market is very fragmented. Companies buy many feedback tools (occasionally companies standardize, but it’s rare) and different business units use different platforms. So when the CEO or CHRO wants to get an enterprise view of “Employee Voice,” as we call it, it’s very difficult.

And the problem is getting trickier. Similar to what has happened in Voice of the Customer, companies want an end-to-end view of Employee Voice. And this data is business-critical: these systems need to trigger feedback based on various employee activities, send alerts to service centers or executives, send nudges to managers, and automatically send alerts for fraud, harassment, or safety problems.

In fact, the direction of this market is toward “action platforms” – systems that hear what employees are saying and respond to problems in real-time.

Well Workday, who has been nosing around this market for years, is now fully in. The company will acquire Peakon and integrate the product set into the entire Workday platform.  (Peakon is a Danish company and considered a premier provider like Perceptyx, Qualtrics, or Medallia. The company has more than 600 corporate customers and 175 employees).

There are a lot of positives to this deal.

First, Workday customers will now have an integrated survey, analytics, and development planning solution built into the Workday platform. Just as Ultimate Software acquired Kanjoya and created a $200 Million business selling surveys to their customers, Workday will have a totally integrated survey, feedback, and Employee Voice solution for its 3,000+ enterprise clients. And this means these companies can stop buying other tools and standardize on one.

Second, Workday and Peakon can advance the market. As I wrote about in the report “Shortening The Distance from Signal to Action,” the direction of this market is toward closing the loop from feedback to resolution. Today Medallia and Qualtrics can do this – but not tightly integrated into the HCM system. With Workday-Peakon, an employee who is just hired can get an onboarding survey which sends a message to the manager or L&D department if there are problems; an employee who moves locations can get a triggered survey to give feedback on new payroll or tax issues; someone with a bad review can give feedback that goes to HR… and … well you get the picture. The scenarios are endless.

Third, there is something extra here. Peakon is introducing an innovative employee development product called Peakon Grow, a beautifully designed performance development tool. Before this acquisition, I coached Peakon that it would be a tough sell in a crowded market. Now I’m not so sure. Grow, which I describe a bit more below, is a well designed new conversational tool that leverages survey feedback to give managers and individuals development plans. It fills the gap between survey feedback, performance appraisal, and growth.

I believe Workday wants to build this out. Workday’s Performance Management offering is limited now: this lets the company rapidly introduce something more competitive.

The fourth thing I’d mention is that Peakon and Workday have a strong cultural fit, and this is an important point. Workday is not buying revenue here, they’re acquiring a great software team. And this is different from what happened at SAP with Qualtrics.

While SAP and Qualtrics are both high-charging sales cultures, there’s a reason they’re spinning off. Qualtrics is moving too fast for SAP, so they want to chart their own future. (In some sense that spinoff puts SuccessFactors in a weaker position now that this deal is launched.)

In the Workday case, Peakon is a collaborative, design-centric company that focuses on innovation and quality, not pure revenue growth. Based on my conversations with Workday, these teams will get along well.

Remember that Workday, as successful as they are, is trying to stay ahead of the Employee Experience Crusade. With the new introduction of Talent Marketplace, Workday People Experience, and the upcoming availability of Career Hub and new modules in Learning, Workday is moving past pure ERP-type features into more user-delightful areas.

Big Implications For The Market

For the market, this significantly raises the bar and could even threaten Qualtrics. Post-acquisition the big players will be Medallia (CX and EX), Qualtrics (CX and EX), Glint (Microsoft owned and EX), Workday, and dozens of specialty providers like Perceptyx, Towers, Mercer, and others. If Workday integrates these products well, one could imagine most Workday customers to stop doing business with the other vendors and move toward Peakon. That will push the other vendors to partner closely with Oracle, SuccessFactors, ADP, and the other HCM Players.

Note that Qualtrics has raised over $1.5 Billion in their IPO, giving them a massive war chest. I don’t think they’ll be sitting still – we can expect them to push ahead with more acquisitions in both CX and EX, probably making the a more significant competitor to Workday over time.

Let’s see how this goes, but to me, this could be a big win for Workday.

Resources For The Year Ahead

The Employee Experience Crusade – Join our newest research program.

Our Big Reset Research – detailed reports on everything we’ve learned from the Pandemic.

HR Technology 2021: The Definitive Guide – everything buyers, vendors, and investors need to know about HR Tech for 2021.

The Josh Bersin Academy – “The World’s Home for HR” – join more than 30,000 HR professionals to learn about EX, public health, technology, and more.

Pandemic Response: Building Resilience – the most in-depth study of ten best practices for business resilience.