Pull back the IT curtain of any large enterprise, and you'll find thousands of applications in use.
Some might be used daily by the bulk of the workforce, others by a handful of specialists. But it's easy to see how that figure can only grow. More companies shun the notion of using a single vendor for products across multiple functions in favor of subscribing to the latest, best-of-breed cloud product. Hybrid work has meant even more applications.
While that may frustrate CIOs who prefer to keep application suites streamlined, it's encouraging for Workato CEO Vijay Tella. His startup's technology integrates those applications together and provides companies with a granular look into how employees do their work each day. With that insight, they can then begin automating workflows like employee onboarding or processing customer orders.
"When you've got thousands of applications, there's a lot of fragmentation," Tella told Protocol. "It's the biggest opportunity in software."
Some providers — particularly those with ambitions to provide do-it-all software suites — already offer such services within their own systems or are trying to create them. But it's rare for employees to just use one application. Instead, it's typically a hodgepodge of different software that are employed: Salesforce for the sales team, ServiceNow for the IT team, SAP or Oracle for ERP, Workday for HR, WorkBoard as a collaboration tool, Asana for project management, Jira for developers, Slack for messaging, Zoom for video and so on.
"I really don't see a single vendor providing everything," said Tella, a pioneer in the market who was an early employee at software integrator TIBCO and served in executive positions at Oracle and Skype. "How companies work is not really captured in any of these applications. That is not the domain of any particular application, it will never be."
That's where Workato comes in. It links disparate applications together, giving users the choice of using ready-built "recipes" or creating a custom API. Either way, customers end up with a new, unified data layer that lives above the application suite.
"Cloud, software-as-a-service, IoT and mobile are only contributing to further and further fragment the application portfolio. These organizations desperately need technology to integrate business processes," Gartner analyst Massimo Pezzini said.
Massive potential, major competitors
The market potential for tools that can integrate applications on the back end is massive. It hit $2.5 billion in 2019, according to Pezzini, roughly a 47.5% increase over the prior year. By 2024, that is expected to grow to $6.2 billion. Investors have taken note, pouring $110 million into Workato in January and giving it a $1.7 billion valuation, per PitchBook. Overall, it's raised $221 million.
Tella's firm is small but growing rapidly. Pezzini estimated that Workato's revenue doubled in 2020 to around $50 million, and has been outpacing the growth of the overall market. Workato wouldn't comment on Pezzini's estimate but said revenues tripled in 2019 and more than doubled in 2020.
But Workato is not alone. In fact, the market has as many as 160 providers, Pezzini said. Among the most-watched is Zapier, which offers a similar technology catered to small businesses. It's valued at $5 billion after mostly shunning venture capitalists. There are also smaller rivals like SnapLogic (valued at $308 million) and Jitterbit (valued at $160 million), as well as bigger competitors like Informatica and Boomi. The use of stored data to automate business processes also pits Workato against robotic process automation providers like UiPath and Automation Anywhere. Given the overlap, some experts, including Pezzini, think those vendors may try to acquire smaller Workato rivals.
And then there's MuleSoft, which Salesforce purchased in 2018. Combined with the pending Slack acquisition, the company is positioning itself to become the unified platform for work within an enterprise.
"Salesforce and Workato will definitely be competing more and more going forward," Pezzini said. But "the net impact is going to be reducing the addressable market" for Workato, because Salesforce customers will be less likely to need it, he added.
Tella says MuleSoft and Workato compete regularly for key "keep the lights on" projects like employee onboarding. After six months, however, Tella says the deals begin to expand significantly to address the "huge backlog" of disparate applications.
"We win those deals on the basis of being better and more modern than them on integration. And over time, people absolutely do replace MuleSoft," said Tella. MuleSoft did not respond to repeated requests for comment.
Tella might be right there. Workato seems to stand out for its ease of use: MuleSoft caters more to technologists, but non-IT personnel are able to use Workato because it's more of a low-code/no-code approach. Salesforce, however, is trying to change that with MuleSoft Composer, which uses no-code technology to integrate applications into the Salesforce platform. (The company says the product, which was unveiled this month, is "the first chapter of its vision," but it's unclear exactly how Salesforce plans to expand.)
Salesforce and others like SAP that are equally trying to serve as the core software support system will continue to face the challenge of up-selling to enterprises that are hesitant to use just one vendor.
"Whether it's trying to pipe data through or trying to actually create a central place of interaction with customers … consolidating it to just sacrifice a bunch of functionality to be all in Salesforce or Workday is not necessarily the right answer," said Menlo Ventures partner JP Sanday. (Menlo has invested in Workato competitor Usermind.)
While the competitive landscape is tough now, Tella expects it to get even tougher.
"There will always be newer players that are coming in. It's a big tent," he said. "They'll be more of the incumbents that are going to try to reposition themselves as a holistic end-to-end platform."
The market, however, remains massive, which means there could be room for many winners. By pitching itself as a neutral provider, Workato has the opportunity to differentiate itself. But first Tella has to convince CIOs, many skeptical of adding another new vendor, of the need to add another layer of software to an already large stack.
