Workday Inc (WDAY): Is This SaaS Company a Good Bet?

Peer groups

salesforce.com, inc. (NYSE:CRM): salesforce.com, inc. (NYSE:CRM) is a leading SaaS-based CRM solution provider. SalesForce.com recently signed a nine year contract with Oracle. According to the deal, SalesForce.com will use Oracle’s products as core infrastructure. This will help the company re-orient its investment and resources toward its core business of application development from the development of its infrastructure.

The company also acquired ExactTarget last month. This acquisition will help it venture into Cloud based marketing solutions. ExactTarget has been considered a leader in this segment of business. So this will also help the company gain a considerable market share.

The company has also hired ex Oracle exec Keith Block, who has been attributed to have changed the sales business to become a multi-billion dollar business with record revenue and high margin. His experience in sales will help salesforce.com, inc. (NYSE:CRM) increase its sales and thereby its profit margin.

NetSuite Inc (NYSE:N) is a cloud-based ERP service provider. NetSuite Inc (NYSE:N) provides its solution to SMB. The SaaS based ERP solution is still at a nascent stage, which is expected to grow in high double digits in the coming years. The company has been able to gain the large enterprise order to provide ERP solution at the cost of incumbent Oracle and SAP.

We believe that going forward, large enterprises will also move their in-house ERP system to cloud based SaaS. This will help NetSuite Inc (NYSE:N) gain market share at the expense of the in-house solution offering companies. Recently, the company has launched its e-commerce product SuiteCommerce, which it will sell as part of its holistics ERP. This will also increase its chances to win large ERP business.

Conclusion

Workday Inc (NYSE:WDAY) is set to expand its product offerings and undergo international expansion in the coming year. I believe the company has been able to gain market share in HCM and its financial product offerings will allow it to further strengthen its position with its existing customers. The company has been targeting SMB in the past. With its new product offerings, it will be able to increase its customer base to include Fortune 500 companies. Based on these factors I recommend investors buy Workday.

The article Is This SaaS Company a Good Bet? originally appeared on Fool.com and is written by Lalit Kumar.

Lalit Kumar has no position in any stocks mentioned. The Motley Fool recommends Netsuite and Salesforce.com. Lalit is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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