A tale of two companies – Workday and Unisys show the gulf between as a service vendors and the legacy providers


We all know that the IT vendor community is undergoing an unprecedented transformation. Right now, “as a Service” based vendors are the clear long-term winners in the disruption caused primarily by cloud, but also by the rest of the SMAC’D gang (Social, Mobility, Analytics, Cloud bound by digital transformation), and the inability of traditional IT vendors and buyers to maximise the value of technology.

This is clear in their ability to draw crowds to their customer forums, (Dreamforce, AWS re-invent are just two examples) interest from media, analysts and the way in which “as a service” providers have been embraced by the non IT technology buyer.

The fear that they instill in the legacy vendors when the legacies try to compete on function and the “cool” factor could not be more clear. What is clear is that the share market has placed a premium on these vendors just as it did on the Internet vendors leading up to 2000. Clearly the question is: Are we in an unsustainable bubble? The jury is still out on the sustainability aspect. Many of the early innovators of the SaaS and IaaS market will maintain and enhance leadership (salesforce.com, AWS as the prime cases), but others will rise and deflate quickly as the market realises that for many individual firms there is less substance and more hype.

When one looks at equity market valuations it is clear that the legacy vendor is being treated as the poorer cousin in the tech stock market environment.

Perhaps no two firms shows this more starkly than Workday and Unisys. 

Unisys can date establishment  in 1886. Over it’s history it has merged and acquired, risen and fallen, transformed markets and lagged behind. In 1986 when it was formed with the merger of Sperry and Burroughs it had over US$10B in revenue and 120,000 employees. Clearly those glory days are behind it, but it does still maintain a profitable business and loyal customers and employees.

Workday was formed in 2005. Whilst it has only had a history less than 10 years, it has also acquired, risen and transformed markets. It has not had the time to fall or lag ….

What is stunning is to compare the way in which the share market has valued these two firms. Nothing shows it better than the following simple comparison.

Unisys has revenue seven times that of Workday, makes a profit, albeit on a narrow margin, yet is valued at approximately 7.6% of Workday. 

One can reasonably argue that the share market is irrational, perhaps it is, but nothing more clearly highlights the unshakeable belief that the legacy vendors will rapidly struggle to survive and the rise of the “as a service” provider. Another way to consider the shift is to take the perspective of the start-up and emerging organisation of today. Does a start-up look to the likes of Unisys, Fujitsu and HP for advice and technology capability or does it look to Workday, salesforce.com or Bluewolf. The answer is increasingly clear. Do you go to your parents for fashion advice?

Bottom Line

If you are a legacy vendor you need to change. Look around, the majority of your legacy vendor peers will fall off the radar in the next 5 years unless they can transform radically. The “as a service” vendors may benefit from an irrational market, but they are the model of the future. 

About capioIT - Phil Hassey

capioIT is an advisory firm focused on helping organisations to understand emerging technology in emerging markets. CEO Phil Hassey established the company in 2010
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One Response to A tale of two companies – Workday and Unisys show the gulf between as a service vendors and the legacy providers

  1. Pingback: Tata Consultancy Services market cap exceeds a combined Xerox, CGI, Unisys, Capgemini, Fujitsu and CSC with $10 Billion left over | capioIT – Trusted Advisors in Emerging Technology

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