Covid-19 is forcing businesses to finally modernize their HR and financial systems

Smile-worthy sales gains at Workday are being driven by more companies working remotely.
Smile-worthy sales gains at Workday are being driven by more companies working remotely.
Image: REUTERS/Brendan McDermid
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As professional workers in the US continue to work remotely due to the pandemic, many are discovering their HR and financial systems aren’t set up for this modern situation.

For companies that haven’t switched to cloud-based service providers, accessing sensitive and confidential documents can still require some roundabout measures. “They are having people sneaking onto their business to download some reports and being able to provide the financial numbers” Chano Fernandez, Workday’s co-chief executive officer said during a conference call on Nov. 20.

Opportunities in the cloud

Even without secret office visits, many businesses are realizing they need to modernize the various systems they use to manage employees (known as HCMs), in order to survive the pandemic and better accommodate long-term remote work arrangements.

This shift has benefitted HR and financial services companies like Workday, ADP, and Oracle, which sell HCMs.

A wider industry trend

Workday’s most recent earnings had the highest annual gains among its HCM competitors, who have also highlighted how Covid-19 has increased new sales and adoption of cloud services. Workday’s revenues for the third quarter were $1.11 billion, up 17.9% compared to last year, and its subscription revenue was $968.5 million, an annual increase of 21.3%.

In late October, ADP said new business bookings for its employer services increased by 2% for its first quarter for fiscal 2021. Its segment margin increased by 120 basis points, helping profits grow by 3% to $602 million.

In September, Oracle Corporation, the US computer technology and cloud services company, said revenues for its cloud services and license support during its fiscal 2021 first quarter were $6.9 billion, up 2% from last year, and accounted for 74% of the company’s total revenue. Subscription revenues also grew by 4% to $2.8 billion and Fusion, its enterprise resource planning software applications were up 26%.

Long-term stickiness

Unlike Netflix, Peloton, and Zoom, enterprise human resource and finance software will likely maintain its subscription revenue as the pandemic’s effect on businesses wane. The industry’s ability to integrate into many core business functions, as well as long-term trends for the popularity of remote work in the US, makes their products harder for companies to drop.