A Closer Look At Workday's Student Opportunity

William Blair’s Justin Furby believes Workday Inc WDAY's emerging Student opportunity — which includes core systems such as records, enrollment and curriculum management — “is not well understood by investors, and yet it is a compelling one within the higher education vertical.”

The analyst maintains an Outperform rating on the company.

Considerable Opportunity

Furby mentioned that the higher education market in the United States has been a focus for Workday for a long time now, and the company is estimated to have 100 higher education financials and HR customers, accounting for 5–10 percent of its annual contract value (ACV).

“We see considerable opportunity ahead selling HR/financials systems into this market, though we note that Workday recently opened up an entirely new opportunity through the release of its Student offering in the fall of last year,” the analyst stated.

Furby estimated the size of the market at $1.3 billion in the United States alone, while noting one large university mentioned Workday’s Student subscription fees were about 1.5 times that of the HR and financials products.

Potential To Gain Share

“We believe this market could add one to two (or more) points of incremental subscription billings growth over the coming years, which provides us with added conviction in Workday’s ability to sustain 30 percent-plus subscription revenue growth in the medium term, while financials continues to inflect,” the analyst went on to say.

In addition, Furby pointed out that the student information system (SIS) market seemed to be on the verge of a huge replacement cycle, and that recent conversations with partners and higher education institutions indicate that Workday had a meaningful opportunity to take share of this market over the next few years.