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Workday Contract Negotiation Playbook

Workday Contract Negotiation Playbook

Executive Summary: Before signing a Workday subscription, CIOs must pay close attention to 17 critical contract clauses. These include items like Subscription Scope (defining which modules and user categories are licensed), Pricing/Fee Structure (FSE metrics, discounts, and escalators), Term and Renewal (length, auto-renewal notice), Termination (for cause/convenience), Data Protection (privacy, ownership), Data Exit (access/retention post-contract), Service Levels & Support (uptime guarantees and credits), IP Rights (customer vs vendor content), Indemnification (infringement protection), Liability Limits, Confidentiality, Audit Rights, Assignment/Change-of-Control, Price Changes (CPI or new fees), Force Majeure, and Dispute Resolution. Each clause should be clearly defined to avoid any surprises. In short, customers must clearly define what they receive, what they pay, and how the relationship will end. Negotiate to cap price hikes, secure data access after termination, insist on fair exit terms, and ensure any auto-renewal or change-of-law triggers favor the customer. Oversights in these areas can lock in high costs and rigid terms; a proactive strategy and expert help (e.g., independent licensing advisers like Redress Compliance) are vital.

Key Contract Clauses – Detailed Breakdown

1. Subscription Scope (Modules & Use Rights)

  • What it covers: Exactly which Workday products/modules and user categories (FSE groups) are licensed, including any add-on features or bundled services.
  • Why it matters: Ensures you only pay for what you use. Workday sells many modules (HCM, Financials, Planning, etc.) and uses complex Full-Service Equivalent (FSE) categories. A clear scope avoids shelfware – paying for unused modules – and ensures that reporting and maintenance align with your actual environment.
  • Common pitfalls: Taking Workday’s standard module bundles or FSE categories without review. Overly broad definitions can inflate license counts (e.g., counting seasonal or part-time staff as full-time equivalent staff). Ambiguous terms may let Workday bill for features you don’t need.
  • Example language: The draft Order Form might list “HCM, Payroll, Recruiting” for all employees in the “Full-Time” FSE category (100%). The customer might consider negotiating the addition of a “Seasonal Worker” category at a lower percentage (e.g., 15%) and removing a module (such as Advanced Reporting) that is not needed immediately.
  • Negotiation tips: Itemize modules on the contract; consider only core modules first, and add extras later at pre-agreed terms. Clarify FSE calculation: by defining worker categories full-time, part-time, contractors) Precisely, Anand is negotiating the percentages for part-time staff contingent workers. Involve HR/ and finance early to align definitions. Co-term new modules with the main contract to avoid staggered dates.

2. Pricing & Fees (FSE Calculation, Discounts, Escalation)

  • What it covers: How subscription fees are calculated (often per FSE or module), pricing tiers/discounts, and any price escalators (CPI, “innovation fees,” service cost increases).
  • Why it matters: This dictates the total cost of ownership. Workday’s pricing can hide expensive add-ons in bundles. Without transparency, you may overpay and face unknown escalations. Clear pricing prevents surprise inflation.
  • Common pitfalls: Accepting opaque bundled pricing or non-binding discount commitments. Overlooked clauses, such as CPI increases or innovation fees, can add 3–5% or more to the annual cost. Additionally, failing to secure a pre-negotiated “growth band” discount can result in millions of dollars in lost revenue as FSEs expand.
  • Example language: The agreement might be stated as follows: “Pricing based on $X per FSE for HCM, with a CPI-based increase each year.” In practice, negotiate to fix first-term fees, cap annual increases (e.g., max 2% or flat), and secure a growth-tier discount table (e.g., >10% growth = 2% off, >50% = 10% off).
  • Negotiation tips: Demand line-item pricing for each module and request Workday’s undiscounted list price versus the net price. Push for fixed discount tiers and clear rules for changes to FSE counts. If possible, lock in multi-year pricing or caps on inflation to ensure stability. Benchmark costs using peer data or independent reviews before signing.

3. Term and Renewal

  • What it covers: Contract duration, renewal terms (auto-renewal or not), and notice periods for renewal or non-renewal.
  • Why it matters: Commits you for a set period. A long-term contract with auto-renewal can lock you in at unfavorable rates if not negotiated. Getting renewal timing and terms right ensures you maintain leverage and avoid unintended extensions.
  • Common pitfalls: Overlooked auto-renew clauses and short notice deadlines (e.g., 60–90 days to cancel). Accepting long, multi-year terms without exit flexibility. Failing to specify renewal caps or rights to renegotiate triggers steep cost increases at renewal time.
  • Example language: The draft may state, “This agreement renews automatically for additional one-year terms unless Customer notifies Workday 90 days before term end.” Instead, customers push to shorten the notice period (e.g., 60 days) and reserve the right to renegotiate pricing.
  • Negotiation tips: Set the term to match your roadmap (e.g., 3 years is a common duration). Include an option to opt out or pause for convenience at each renewal without penalty (or at least negotiate a one-time mid-term exit if objectives aren’t met). Insist on renewal price caps or fixed renewal rates (rather than open CPI hikes). Diary deadlines and formally signal intent to renegotiate well in advance.

4. Termination (For Cause/Convenience and Effects)

  • What it covers: Conditions under which either party can end the agreement (e.g., material breach, insolvency), as well as any termination provisions for convenience.” It also outlines the consequences of termination, including the return of data and continued access to the system.
  • Why it matters: Ensures you can exit if Workday fails (breaches SLA or infringes IP) and clarifies what you’re entitled to (data retrieval, credits, etc.). A contract that allows Workday to terminate easily leaves you vulnerable.
  • Common pitfalls: Vendor-friendly terms often allow termination only for cause, without granting customers the right to terminate the agreement at will. Customers may also overlook negotiating termination assistance (e.g., read-only access post-exit). Missing these leaves you stuck with no recourse for poor service or inability to switch providers.
  • Example language: A typical clause might allow Workday to terminate the agreement immediately if the Customer breaches the license terms. Customers should negotiate mirror rights: if Workday breaches (e.g., repeated outages), allow termination or remedies. Also, push for a no-fault termination window shortly after Go-Live (in case the implementation fails).
  • Negotiation tips: Ask to add or expand Customer termination rights for material breach by Workday (such as SLA failures or data breaches). Even if no convenience termination is allowed, ensure the post-termination exit plan (data export) is robust. Consider linking termination effects, such as data access, to better terms in other agreements (e., implementation contracts).

5. Data Protection & Privacy

  • What it covers: Obligations for handling customer data, compliance with privacy laws (such as GDPR and CCPA), security standards, and any additional data processing agreements.
  • Why it matters: Workday will process sensitive personal and business data. The contract must ensure compliance with all applicable data laws and that customer data remains protected and owned by the customer.
  • Common pitfalls: Relying on generic privacy policies rather than binding contractual commitments. Overlooking region-specific exhibits or failing to incorporate updated security certifications. Accepting vendor data use provisions that are too broad.
  • Example language: The contract should state, “Customer owns Customer Data, and Workday processes it only on Customer’s behalf under the Workday Universal Data Processing Exhibit (UDPE).” If missing, negotiate the inclusion of the UDP, E, which embeds GDPR clauses and Workday’s Binding Corporate Rules.
  • Negotiation tips: Insist on Workday’s most recent Data Processing Exhibit or privacy terms. Verify certifications (e.g., ISO 27001, SOC 2) in writing. Clarify who can access your data and ensure confidentiality obligations extend to all subcontractors. If in highly regulated industries, add specific compliance requirements.

6. Data Access & Exit Assistance

  • What it covers: The customer’s rights to access their data and receive it back, as well as how Workday will assist during termination or transition (sometimes referred to as transition services). This includes any limitation on data retention or deletion.
  • Why it matters: At contract end or if you switch systems, you must extract your data. Without clear terms, you risk losing data or paying high fees to retrieve it. Data exit terms ensure a smooth transition to a new system or archive.
  • Common pitfalls: Contracts may allow Workday to delete data shortly after termination, with minimal customer access. A lack of a defined format or timeframe for data export can cause costly delays or data loss. For example, not negotiating exit assistance can trap you in the system after term end.
  • Example language: A balanced clause might read “Upon non-renewal or termination, Customer may access its Workday environment in read-only mode for at least 60 days, and Workday will export all Customer Data in a standard format at no additional charge.”
  • Negotiation tips: Push for a defined post-termination access period (e.g., 60–90 days) and clarify the formats (e.g., reports, raw data, etc.). Negotiate that Workday will not delete data until it confirms a successful export. If necessary, build in extension rights or paid support for data migration. Document the process during implementation to streamline the exit later.

7. Service Levels (Uptime & Performance)

  • What it covers: Guarantees for system availability (uptime), performance metrics, and remedies (usually service credits) if the service falls below agreed levels.
  • Why it matters: Ensures the SaaS is reliable for critical operations. If Workday’s availability or response times drop below the required levels, SLAs provide a basis for credit or termination.
  • Common pitfalls: Workday’s default Service Level Agreements (SLAs) may be minimal (e.g., 99.5% uptime, limited coverage hours) with weak or no penalty clauses. Customers often accept these defaults without negotiating stronger terms or clear remedies.
  • Example language: Workday might promise “99.5% uptime, excluding planned maintenance”. To protect operations, a customer may seek 99.9% uptime for core modules or accelerated response times and specify credits (e.g., a 5% service credit per 0.1% below the target).
  • Negotiation tips: Review the SLA carefully to clarify “availability” (excluded events?), define maintenance windows, and request meaningful credits or termination options in the event of repeated failures. Gauge how critical the incremental uptime is (e.g., an extra 0.2% may be worth insisting on). If standard SLAs are fixed, ensure that credits are enforceable and calculated transparently.

8. Support & Maintenance

  • What it covers: The level and scope of support services included (helpdesk hours, response times, local language support) and any additional paid support tiers.
  • Why it matters: Adequate support ensures issues get resolved quickly. For global enterprises, 24×7 or multilingual support might be necessary. Clarified support terms avoid unexpected costs for premium support.
  • Common pitfalls: Accepting only the basic tier by default (business hours support). Not verifying whether updates and maintenance downtime are handled proactively. Also, some customers overlook the importance of including system updates or technical training within the contract.
  • Example language: The standard may say, “Standard Support includes email/portal support during business hours.” A customer may need “Enhanced Support with 24×7 phone support and a 4-hour emergency response for production-impacting issues.”
  • Negotiation tips: Determine your support needs upfront and specify them. If global operations require it, negotiate extended or round-the-clock support. Consider penalties if Service Desk response times are not met. For key go-lives or projects, include additional support commitments or training, as needed

9. Intellectual Property (IP) Rights

  • What it covers: Ownership and usage rights for software IP, customizations, and customer data. Also, any licenses granted or restrictions on customer-created content.
  • Why it matters: Protects your proprietary data and configurations. Ensures you retain full rights to your business processes, reports, and data generated within Workday. Avoids any vendor claim on what you create.
  • Common pitfalls: Broad vendor clauses that allow them to use aggregate customer data or improvements. No definition of who owns workflow configurations or custom report designs. Some contracts may also restrict porting integrations.
  • Example language: Ideally, “Customer retains all rights to Customer Data and any custom objects, reports, or configurations developed by Customer. Workday may not use Customer’s confidential data for any purpose other than providing the service.”
  • Negotiation tips: Emphasize that Workday has a license only to operate on your data, not ownership of it. Clarify that any extensions or third-party code integrated belong to the customer or are separately licensed. If you contribute to best-practice libraries, define usage rights. In short, ensure all IP stays with you.

10. Indemnification (IP & Third-Party)

  • What it covers: Vendor promises to defend or compensate you if the software infringes third-party IP rights (patents, copyrights, etc.) or breaches other warranties. Also covers any third-party claims arising from the use of the service.
  • Why it matters: Protects your company from lawsuits or claims due to the vendor’s software. Without strong indemnity, you could be stuck fighting an infringement claim alone.
  • Common pitfalls: Vendor indemnities may have high thresholds (only for gross negligence or after expensive process steps) or carve out common issues. Customers sometimes fail to clarify the scope (e.g., what if a third party sues you for access rights?). Another issue is that customers pay for their defense before the vendor intervenes.
  • Example language: Workday should agree “to indemnify, defend and hold Customer harmless from any third-party claims that the Service infringes intellectual property rights, provided Customer notifies Workday promptly and cooperates.” A pitfall is a clause that requires the Customer to prove damages or pay litigation costs upfront.
  • Negotiation tips: Seek a straightforward IP indemnity for licensed functionality (not for customizations or third-party apps). Limit your obligations (e.g., refrain from unilaterally changing the product). Ensure the claims process is practical. If possible, obtain the vendor’s insurance information. Also, consider requiring a cap or exclusions for breach-of-privacy claims.

11. Limitation of Liability

  • What it covers: Caps on damages each party can claim and any exclusions (e.g, typically caps at a multiple of fees paid, excludes indirect or punitive damages).
  • Why it matters: Defines your maximum risk exposure. Unfair caps or broad exclusions (like barring all liability for data breaches) can leave you unprotected. Conversely, a too-low cap might not cover real losses from downtime.
  • Common pitfalls: Vendors often cap liability at a small portion of fees (e.g., one year’s subscription) and exclude liability for security breaches or confidentiality violations. Customers may initially accept these, but this can be catastrophic if a breach occurs.
  • Example language: A Workday contract might state, “Workday’s total liability is limited to the subscription fees paid in the prior 12 months.” Customers can counter that “actual damages (including data breach costs and regulatory fines) should be excluded from the cap”.
  • Negotiation tips: Ask to raise the cap (e.g., to 2 times the fees) or tie it to the total contract value. Carve out exceptions: at a minimum, no cap on indemnified third-party claims, intentional wrongdoing, or breach of confidentiality. Push back on unlimited exclusions – for example, limit the “no liability” list. Ensure you receive credit for service failures that exceed trivial amounts.

12. Confidentiality

  • What it covers: Obligation of both parties to keep each other’s confidential information secret, including the survival period after the contract ends. Often includes definitions of what is “confidential.”
  • Why it matters: Protects sensitive business data, strategies, and system information. Ensures the vendor treats your data with the same care you treat theirs.
  • Common pitfalls: Some agreements specify confidentiality obligations only during the term or for a short time after (e.g., 2 years). Vendors may carve out broad exceptions (like using aggregated data). A short survival or vague definitions weaken protection.
  • Example language: A clause might read “Each party will hold Confidential Information in confidence for 3 years after termination.” Customers can negotiate indefinite protection (at least for trade secrets) and refine the definitions (excluding only truly public or independently developed information).
  • Negotiation tips: Ensure confidentiality obligations survive termination (often recommended to be indefinite for data and IP). Define confidential information clearly. Add customer rights to injunctive relief in the event of a confidentiality breach. If Workday is multi-tenant, confirm that no cross-tenant data sharing is considered a “confidential” breach.

13. Audit Rights

  • What it covers: The vendor’s right to audit the customer’s use of the service (to ensure license compliance) and any reciprocal rights for the customer to audit the vendor (less common). Also includes audit notice and frequency.
  • Why it matters: Compliance audits protect the vendor, but they must be conducted fairly and transparently. Without limits, audits can disrupt operations. Customers should also gain visibility (e.g., audit third-party contract compliance).
  • Common pitfalls: Contracts often allow unilateral audits at short notice (e.g., 2 days) and frequent intervals, with penalties for any under-licensing. This cannot be very often. Customers often require an audit review of their processes.
  • Example language: Workday might include “Workday may audit Customer’s use once per year with five business days’ notice; if overuse is found, Customer pays back-dated fees.” Customers can negotiate a notice period of up to 30 days, limit audit frequency to once per year (or upon suspicion), and require a written summary.
  • Negotiation tips: Clarify notice periods (at least 30 days), timing (normal business hours only), and who bears audit costs (only paying for actual overuse). Insist on using accredited auditors. Add a clause that allows for mutual audits to verify vendor compliance (e.g., for data handling or service-level agreements). Also, limit penalties to no more than the fees that would have been charged, with no retroactive interest or penalties for administrative differences.

14. Assignment & Change of Control

  • What it covers: Rules for transferring the agreement in the event of a party’s sale or reorganization, as well as any rights to subcontract or assign responsibilities.
  • Why it matters: Ensures the contract can move with your business if you merge or divest, and that Workday can’t escape obligations by reassigning to an unrelated entity.
  • Common pitfalls: Workday may reserve the right to assign to any affiliate without notice, while the customer might be barred from assignment even after a merger. This can trap or confuse new owners.
  • Example language: Workday often includes “Workday may assign the Agreement to any of its affiliates without consent.” Customers should seek “Customer may assign to a successor or affiliate in the event of a merger or sale; Workday must notify Customer of any assignment and remain liable.”
  • Negotiation tips: For flexibility, get the right to assign to a parent or purchaser. Limit Workday’s assignment to affiliate reorganizations and require notice if a third party acquires Workday. Also, consider what happens if Workday outsources support – require that subcontractors comply with the same terms and that Workday remains fully responsible.

15. Price Changes / Additional Fees (CPI, Tax, New Charges)

  • What it covers: How Workday can adjust fees due to inflation indexes (CPI), pass through new taxes or regulatory costs, and introduce new fee categories (such as “cloud maintenance fees”).
  • Why it matters: Prevents surprise fee hikes. Vendors sometimes use broad language to trigger increases beyond the negotiated base, eroding savings. Customers need predictability in budgets.
  • Common pitfalls: Accepting open-ended CPI clauses or vague “permitted pass-through expenses.” Workday historically added fees (e.g., “technology enhancement fee”) that can significantly increase costs if not properly managed. Customers may miss negotiating caps or exclusions on these.
  • Example language: A clause might say, “Fees increase annually by the greater of CPI or 3%.” Customers can opt to cap increases (e.g., a maximum of xx 2% per year) or remove indexing. Also specify that Workday bears any new governmental levies.
  • Negotiation tips: Carve out or cap CPI adjustments. Exclude fees not agreed upon at the time of signing (such as innovation or maintenance fees). If a pass-through is unavoidable (e.g., changes tax sales tax), require documentation and establish limits. Encourage a clause stating that all fee increases and new charges must be mutually agreed upon and documented in writing.

16. Force Majeure & Service Continuity

  • What it covers: Excused delays or failures due to events beyond control (natural disasters, war, cyber-attacks, etc.). Often defines what qualifies and the notice required.
  • Why it matters: Clarifies risk if an epidemic or cloud outage occurs. Both sides should understand who is responsible for mitigating events and whether customers get any remedy if Workday is down due to force majeure.
  • Common pitfalls: Force majeure clauses can be overly broad, exempting Workday from liability for downtime (e.g., “unforeseeable acts”). Customers sometimes ignore this, not realizing it may excuse service disruptions indefinitely.
  • Example language: A typical term might excuse failure if it’s “unavoidable”. Customers should ensure reasonable limits (“unreasonable means to avoid” or “beyond Workday’s control”). Also negotiate response obligations: “Workday must notify Customer and restore service as soon as practicable.”
  • Negotiation tips: Narrow the definition to truly unforeseen events. Add requirements for prompt customer notification and remediation plans. If critical, discuss business continuity: e.g., Workday might allow limited access even during widespread failures. While you may not eliminate all risk, ensure that commercial force majeure events trigger only temporary relief, not the total abandonment of service.

17. Dispute Resolution & Governing Law

  • What it covers: Forum for legal disputes (court vs. arbitration), venue, governing law, and any class action waivers.
  • Why it matters: Affects legal strategy if problems arise. Some contracts mandate arbitration in vendor-favored jurisdictions (e.g., California) or ban class actions, which can disadvantage customers.
  • Common pitfalls: Workday may insist on U.S. arbitration (for international customers) and its choice of law (California law, arbitration). Customers may overlook this and find themselves unable to attend a local court.
  • Example language: The contract might say, “All disputes resolved by arbitration in Santa Clara, CA, under U.S. law.” A customer could negotiate to move the venue to a neutral location or allow court litigation in their country or state, and remove or limit class-action waivers if they are deemed unfair.
  • Negotiation tips: Consider aiming for a neutral or local venue, especially if the meeting is outside the U.S. Also, consider preferring court adjudication for injunctive relief (e.g., to quickly halt a breach). At minimum, ensure you have the right to seek urgent injunctive or statutory relief in courts despite arbitration clauses (an oft-overlooked carve-out). If Workday refuses to change location, insist on clear arbitration rules and a single arbitrator.

Major Challenges for New Workday Customers

  • Opaque Pricing & Leverage: First-time buyers often lack visibility into Workday’s internal pricing (list vs net) and have less leverage without a renewal backdrop. This can lead to accepting higher per-FSE costs. Benchmarking and competitive bids are critical to overcome this.
  • Complex FSE Model: Workday’s FSE worker categories (full-time, part-time, contingent) and “growth events” add confusion. Customers risk miscalculating baseline vs true usage and paying steep overage costs or missing discount tiers. A thorough audit of workforce data and scenario modeling is needed.
  • Module Bundling Pressures: New customers may be offered large bundles to “get a deal,” leading to unused modules. Uncertainty about future needs can cause overcommitment. Careful scoping and staged rollouts help avoid the “shelfware trap.”
  • Renewal & Auto-Renewal Surprises: Ignoring renewal clauses can result in surprise auto-renewals at inflated rates. New customers may not anticipate that missing a short notice period locks them into renewal on the vendor’s terms. Establish a renewal review process early.
  • Data & Exit Uncertainty: First contracts often don’t prioritize exit terms. Without firm data retrieval rights, customers fear being locked into a system that they cannot easily exit. Ensuring data portability and exit assistance up-front is often overlooked until late in negotiations.
  • Integration and Compliance Work: Workday implementations have heavy integration needs (payroll, ERP, benefits). Contract terms for supporting these (or who bears the risk of integration failures) can be murky, leading to costly disputes. New customers should map integration deliverables and related service-level agreements (SLAs) to ensure seamless integration.
  • Standardized Vendor Contracts: Workday provides a “Universal” MSA that tends to favor the vendor. New buyers, unfamiliar with typical deviations, may accept defaults as a result. They face challenges identifying which standard clauses are negotiable. Independent advice or checklists are invaluable to spot unfavorable boilerplate.

Vendor vs. Customer Positions (Typical Negotiation Stances)

ClauseVendor-Favorable PositionCustomer-Favorable Position
Subscription ScopeAll modules bundled with Workday’s default FSE categories (many at 100% weight).All modules are bundled with Workday’s default FSE categories (many at 100% weight).
Pricing & FeesOpaque bundled pricing, CPI-based increases, new “innovation” fees, no cap on growth.Only core modules licensed; custom FSE categories/weights (e.g., seasonal 15%).
Term & RenewalFixed pricing schedule, transparent list discounts, fixed escalator cap (e.g., 2%), and negotiated growth-event discounts.Shorter initial term (3 yrs), auto-renew only yearly, 60-day notice, with right to renegotiate or exit.
TerminationLong initial term (4–5 yrs), auto-renew for full term unless a 90-day notice.Right to terminate for material breach by either party; include a clean exit (data export, short read-only).
Data ProtectionPrivacy per standard UDPE, broad vendor data use rights (aggregate analytics).Custom experience corporate transactions; vendors may assign vendor risk and ongoing liability.
Data Exit AssistanceCustom experience corporate transactions; vendors may assign vendor risk and ongoing liability.Higher cap (multiple-year fees or contract value), carve out for breach of privacy/security, and indemnified claims.
Service LevelsDefined export process (e.g., CSV/standard reports), 60+ days of read-only access, extended support if needed.Data deleted soon after termination; no guaranteed export format or timeline is provided.
Support & MaintenanceStandard support tier, no guaranteed response times. The customer-critical issues.99.5% uptime (5.5 hrs downtime/yr), limited credits, and business hours. The vendor only.
Intellectual PropertyVendor retains the use of the customer’s anonymized data and a broad license to any improvements made.Low cap (one-year fees), broad exclusions (no data loss/liability % acts of employees).
IndemnificationLimited IP infringement indemnity (often only for gross negligence), strict process.Strong GDPR/CCPA compliance, strict limits on vendor data usage, and enforceable security standards.
No convenience termination for customers, strict cure periods, and minimal exit support.LCustomer-positivep99.9 %+ uptime for core services, meaningful edits or allowances for termination triggers, and 7-day support for priority issues.
ConfidentialityCuspositive customer experiencerporate transactions; vendors may assign vendor risk and ongoing liability.Cap on annual increases (e.g., CPI max 2%), no surprise fees (like “innovation”); any new fare fees require mutual agreement.
Limited to annual audits with 30-day notice urs, and the vendor bears its own and the audit costs, including dispute remediation.Obligations are limited in duration (2-3 years) and scope, with broad carve-outs.Frequent audits on short notice (e.g. 5 days), result in customer fees for errors.
AssignmentBroad infringement cover for standard service, clear claim process, expenses covered by the vendor, and no frivolous exclusions.Broad definition (including things like attacks or outages) absolves the vendor from liability.
Price Changes / FeesCPI or index adjustment each year, pass-through of any new costs, no caps.Narrow definition requires prompt notification and mitigation, with no unlimited relief for extended outages.
Force MajeureWorkday can freely assign/ subcontract; the customer cannot assign without consent.Indefinite protection for trade secrets, narrow exceptions (only lawful independent info), and customers.
Obligations limited in duration (2-3 years) and scope, with broad carve-outs.DiCustomerssolutionArbitration in Santa Clara, CA; California, A narrow class action.

Negotiation Playbook: Preparing and Strategy

  • Early Preparation: Begin by forming a cross-functional team (including IT, HR, Finance, and Legal) to define requirements, identify essential modules, forecast growth, and establish a risk appetite. Collect current workforce data for FSE modeling. Research alternative solutions or benchmarks (e.g., Oracle, SAP) to build leverage. Compile a list of non-negotiables (e.g., data ownership, term length) and desired concessions (e.g., renewal caps).
  • Contract Review: Obtain Workday’s Universal Main Subscription Agreement (UMSA) and Order Form drafts early. Line-by-line review is essential. Use a redline approach: mark every clause where vendor terms deviate from industry norms or your needs. Compare with your internal standards and any competitor contracts. Identify “deal breakers” (e.g., unlimited liability exclusions) and prepare fallback positions.
  • Define Strategy: Based on requirements, decide which modules and contract length to pursue. Determine pricing targets and acceptable increase levels. Plan negotiation leverage, e.g., by showing interest in competitors or participating in a multi-vendor request for proposal (RFP). Set clear request for proposal (RFP) goals (such as cost savings, flexible terms, and strong data rights) and walk-away triggers.
  • Communication: Engage all stakeholders early to align priorities and ensure a unified approach. In negotiations, stay fact-based and keep documentation of performance issues or alternatives. Clearly articulate the business rationale for each ask (e.g., justify lower renewal increases by citing budget constraints or usage trends).
  • Leverage Benchmarks: As Gartner-style analysis suggests, customers benefit from bringing data to the table. Use industry peers or analyst data to justify targets (for example, share typical 30–50% discounts off the list price). If possible, consider engaging independent market intelligence firms to demonstrate your informed approach.
  • Iterative Tactics: Begin by negotiating the main commercial points (scope, price, term). Don’t leave legal “gotchas” to the end – address renewal caps, data rights, and indemnities early. If Workday resists certain terms (like termination rights), ask for trade-offs elsewhere.
  • Renewal Positioning: Even at the initial contract stage, plan for renewal. Negotiate protective clauses now (such as fixed pricing or rollover options) so you have room to maneuver later. Document usage patterns and value realized during the contract to strengthen your position for the next round.
  • Know When to Get Experts: For complex deals or when internal expertise is limited, consider bringing in specialized consultants. Independent licensing experts (e.g., Redress Compliance) can validate FSE calculations, model pricing scenarios, and spot unfavorable terms. They also have historical data on what other customers paid and what concessions Workday has granted. Consider engaging such experts: before final signature to review the draft contract, and before renewals or expansions to benchmark terms and manage costs.

In summary, success comes from thorough preparation, an assertive yet collaborative negotiation posture, and the willingness to walk away on unfavorable terms. By addressing each clause with a customer-centric approach and leveraging external expertise, CIOs and sourcing leaders can secure a Workday agreement that aligns with enterprise needs while minimizing unnecessary risk.

References: Research and industry guides on Workday negotiations were consulted, including independent advisory firms’ playbooks and SaaS contract best practices (e.g. Redress Compliance Negotiating Workday Contracts: A CIO’s Playbook, Mastering Workday Negotiations; WorkdayNegotiations.com Enterprise Guide to Workday HCM/Financials Contracts; Alpha Apex Group 10 Tips for Negotiating your Workday Contract; Vendr How to Negotiate a SaaS Contract; BinaryStream Key Clauses in SaaS Contracts; etc.). These sources provide insights into pricing levers, legal pitfalls, and strategies for achieving more favorable terms.

Author

  • Fredrik Filipsson

    Fredrik Filipsson brings two decades of Oracle license management experience, including a nine-year tenure at Oracle and 11 years in Oracle license consulting. His expertise extends across leading IT corporations like IBM, enriching his profile with a broad spectrum of software and cloud projects. Filipsson's proficiency encompasses IBM, SAP, Microsoft, and Salesforce platforms, alongside significant involvement in Microsoft Copilot and AI initiatives, improving organizational efficiency.

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