Executive Summary
Workday’s comprehensive suite often comes with hidden costs in the form of shelfware – modules and licenses that companies pay for but hardly use. Enterprises can optimize their Workday licensing by aligning licenses with actual usage, avoiding over-purchasing, and negotiating flexibility into contracts. Many organizations over-license Workday modules due to upfront bundling deals or optimistic growth forecasts, leading to underutilized (or entirely unused) subscriptions. To reduce waste and costs, CIOs and IT leaders should conduct regular usage audits, identify underused modules early, and adjust their licensing strategy accordingly. Key actions include rightsizing license counts to current workforce levels, deferring or piloting new modules until a confirmed business need is established, and engaging independent experts to benchmark and renegotiate contracts. By proactively managing entitlements and treating each renewal as an opportunity to optimize, enterprises can avoid shelfware, ensure they only pay for value received, and ultimately reduce their Workday spend without compromising capabilities.
Problem Statement
Workday’s licensing structure is complex and can lead to inadvertent over-licensing. Each Workday module (HCM, Finance, Payroll, etc.) may have different licensing metrics – often based on employee count (Full-Service Equivalents), but sometimes usage or capacity-based metrics for certain products. Workday also frequently bundles multiple modules into all-in-one packages, which blurs the cost of individual components. This complexity makes it difficult for enterprises to gauge if they’re getting full value from each module. Common licensing strategy pitfalls include buying too many modules upfront and overestimating growth:
- Upfront module bundling: Workday sales often encourage bundling extra modules (e.g. Recruiting, Learning, Analytics) into the initial deal with attractive discounts. While this can lower unit costs, it also locks the customer into paying for modules they may not deploy immediately. Without clear line-item pricing, organizations might not realize how much they’re paying for each piece, and dropping an unused module later can become challenging. The result is “shelfware” – subscriptions that sit idle because the organization wasn’t ready or didn’t truly need the functionality.
- Aggressive growth assumptions: In initial contracts, companies may license Workday for a projected future headcount or to accommodate potential additional acquisitions. Workday contracts fix a minimum employee count for the term, so if growth falls short, the excess licenses remain unused (e.g., paying for 10,000 employees when only 8,000 are on Workday). Similarly, some firms pre-purchase modules expecting to use them in a later phase that gets delayed or canceled. These optimistic assumptions inflate costs and create shelfware when reality doesn’t match the plan.
Compounding the issue, Workday historically favored multi-year, bundled agreements that limit mid-term adjustments. Suppose an enterprise finds a module underperforming or notices a drop in their user count. In that case, they usually cannot scale down until the next renewal, meaning wasted spend persists for the entire duration of the contract. In summary, the complexity of Workday’s licensing, including varied pricing models and bundled SKUs, as well as common planning pitfalls, can lead to over-licensing and underutilization. Enterprises end up paying for more than they use, highlighting the need for a smarter optimization strategy to avoid shelfware.
Challenges
When managing Workday licenses, enterprises often face several key challenges that contribute to shelfware:
- Unclear module usage post-deployment – Once Workday is deployed, it can be not easy to track which modules and features are being utilized. Organizations may lack clear visibility into usage metrics for each module (e.g., the number of employees who completed courses in Learning or the number of recruiters actively using Workday Recruiting). This lack of insight means underutilization can go unnoticed until a renewal is near.
- Lack of license tier flexibility – Workday contracts typically lock in a fixed number of licensed employees (or units) for the duration of the term. There is usually no ability to “true-down” (reduce the license count or drop modules) mid-term, even if your workforce shrinks or a module isn’t used as expected. Without flexible tiering or downgrade rights, companies are forced to pay for peak entitlements they don’t need year after year.
- Over-purchasing for anticipated growth or M&A – Many firms license Workday based on plans (e.g., projected employee growth or an upcoming acquisition) to secure pricing in advance. If those plans change or take longer to materialize, the company ends up over-licensed in the interim, essentially subsidizing phantom users. Similarly, buying modules “just in case” of expansion leads to shelfware if those expansions don’t happen on schedule.
- Difficulty accessing license consumption data – Measuring actual consumption of Workday licenses can be challenging. Workday’s administrative tools may not readily indicate how many licenses are actively in use versus those that are inactive, especially for module add-ons. It often requires internal analysis to correlate logins or transaction counts to license entitlements. This data gap makes it challenging for IT asset managers to identify unused licenses or to build a case for cost reduction. In some cases, companies rely on Workday or third-party tools to audit usage, but it’s not as straightforward as on-premise software license tracking.
- Sales bundling of rarely used modules – Workday’s sales strategy of bundling can include incorporating niche modules or new products (e.g., a Help Desk module, Skills Cloud, or a niche analytics tool) that may sound beneficial but aren’t core to the initial project. These extras often become shelfware if they’re not central to business needs. Because they were bundled, organizations might not even break out their cost, and at renewal, the vendor might insist on keeping the whole bundle. The lack of transparency and the inclusion of “nice-to-have” modules that were never fully adopted create a shelfware trap.
Each of these challenges can result in paying for capacity that does not deliver value. Addressing them requires diligent monitoring and a proactive approach to Workday license management throughout the contract lifecycle.
Shelfware-Prone Modules Benchmark
Not all Workday modules carry equal risk of shelfware. Below is a benchmark of major Workday modules, their typical licensing models, common usage scenarios, and an assessment of shelfware risk with signs of underutilization:
| Workday Module | Typical License Model | Common Usage Scenarios | Shelfware Risk | Signs of Underutilization |
|---|---|---|---|---|
| HCM Core (Human Capital Management) | Per employee (FSE) subscription covering all employees. | Core HR system of record (worker data, org management, HR processes) for the entire enterprise. | Add-on module, often priced per employee or included in an HR or HRIS bundle. | Underutilization signs: HR staff still using spreadsheets or legacy systems for processes that Workday could handle (indicates not all features are adopted). Minimal employee self-service activity (low logins), suggesting employees aren’t engaging with the system beyond basic needs. |
| Recruiting | Signs: A very low number of courses are offered or completed in the system. Many employees have never logged into Workday Learning. The company continues using a third-party LMS or informal training methods despite owning this module. | Applicant tracking and recruiting workflow management (job postings, candidate applications, interview process). | Medium – If purchased without full adoption by talent acquisition teams, it can sit idle. Some firms continue using a specialized ATS in parallel. | Signs: Few job requisitions or candidates tracked in Workday relative to hiring volume. Recruiters bypass Workday (using external tools or manual processes). Low login rates by hiring managers or recruiters. |
| Learning | Add-on, typically per employee license for an enterprise Learning Management System. | Employee training and e-learning platform (course content, compliance training, certifications). | High – Frequently bought in bundles but often not rolled out or populated with content initially. If the organization lacks a training content strategy, it may remain unused. | Signs: Performance reviews or goal plans not completed in Workday (managers still doing reviews offline or in spreadsheets). Low usage of talent dashboards or succession plans. If Workday shows only a small percentage of employees with updated goals or reviews, the module has not been fully adopted. |
| Talent & Performance | Add-on (often per employee) for Performance Management and Talent Planning. | Performance reviews, goal setting, succession planning, and talent assessments for employees. | Medium – Depends on HR’s readiness to run performance cycles in Workday. Sometimes bought with HCM but not fully implemented due to change management issues. | Add-on analytics platform; often a tenant-level subscription, possibly tied to data volume or a flat annual fee (not per user). |
| Prism Analytics | Signs: A portion of the employee population is still paid through external providers (indicating that Workday Payroll wasn’t deployed there). The payroll module may be implemented in a single country or across multiple countries. If payroll staff usage is low or error-prone, and they rely on outdated modules, the module’s value is likely to be limited to covering multiple countries. | Advanced analytics and reporting combining Workday data with external data sources (for HR or financial reporting). | Signs: Few or no Prism data sets and dashboards created. Business users continue exporting Workday data to Excel or external BI tools rather than using Prism. If only a tiny team of specialists accesses Prism or the data volume ingested is far below the purchased capacity, it’s underutilized. | Signs: A portion of the employee population is still paid through external providers (indicating that Workday Payroll wasn’t deployed there). The payroll calendar may be implemented in a single country or across multiple countries. If payroll staff usage is low or error-prone, and they rely on outdated modules, the module’s value is likely to be limited to covering multiple countries. |
| Adaptive Planning | Subscription based on named planning users (seats) and sometimes scaled by overall company size. | Financial, workforce, and operational planning & budgeting. FP&A teams and business managers collaborate on budgets, forecasts, and what-if scenarios. | Signs: Finance staff still primarily use spreadsheets for budgeting despite having Adaptive. Only a small subset of the licensed planner seats are actively building or updating models. If months after purchase, there are few active models or the planning process hasn’t moved into Workday, the tool is underused. | Core financial and accounting system – general ledger, accounts payable/receivable, expense management, and financial reporting for the enterprise. |
| Financials (Workday Financial Management) | Per employee or enterprise subscription (often tied to FSE count, as most employees generate financial transactions indirectly). | Signs: A portion of the employee population is still paid through external providers (indicating Workday Payroll wasn’t deployed there). The payroll business intelligence (BI module may be implemented in only one country while covering multiple countries. If payroll staff usage is low or error-prone, and they fall back on outdated systems, the module’s value is limited to covering multiple attempts. | Medium – When acquired, it’s usually with the intent to use, but shelfware happens if the implementation stalls or users stick to old Excel models. Over-licensing can occur if too many planning user seats are purchased compared to the actual number of users. | Signs: A portion of the employee population is still paid through external providers (indicating Workday Payroll wasn’t deployed there). The payroll business intelligence (BI) module might be implemented in only one country while covering multiple countries. If payroll staff usage is low or error-prone, and they fall back on outdated systems, the module’s value is limited to covering multiple attempts. |
| Payroll | Signs: A portion of the employee population is still paid through external providers (indicating Workday Payroll wasn’t deployed there). The payroll business intelligence (BI) module might be implemented in only one country while covering multiple countries. If payroll staff usage is low or error-prone, and they fall back on outdated systems, the module’s value is limited to covering multiple attempts. | Signs: A portion of the employee population is still paid through external providers (indicating that Workday Payroll wasn’t deployed there). The payroll module may be implemented in a single country or across multiple countries. If payroll staff usage is low or error-prone, and they rely on outdated systems, the module’s value is limited to covering multiple countries. | Signs: A portion of the employee population is still paid through external providers (indicating Workday Payroll wasn’t deployed there). The payroll business intelligence (BI) module can be implemented in a single country while covering multiple countries. If payroll staff usage is low or error-prone, and they fall back on outdated systems, the module’s value is limited to covering multiple attempts. | In-house payroll processing for employees, typically in countries where Workday Payroll is available (U.S., Canada, UK, France, etc.). Replaces third-party payroll services in those that become shelfware. |
| Spend Management (Procurement) | High – Companies sometimes bundle Workday Procurement/Expenses with Financials, but then fail to roll it out enterprise-wide (perhaps sticking with another procurement system or not enforcing its use). This module can languish if procurement teams don’t adopt it. | Managing purchase requisitions, purchase orders, supplier contracts, and employee expense reports in Workday. Often part of the finance suite for end-to-end spend control. | Add-on module priced per employee (often per employee per month in supported countries). Licenses may be regional (e.g, separate for US Payroll, UK Payroll, etc.). | Generally, an add-on is priced per employee or by spend volume (often included with Financials deals). Covers procurement, supplier management, and expenses. |
Note: Shelfware risk ratings assume the module was purchased. “Low” does not mean the module is unimportant – rather, it implies it’s typically utilized if owned (as with Core HCM). “High” risk modules are those often bought ahead of need or with unclear ownership, thus more likely to be left idle. Actual risk varies by organization.
Optimization Playbook
To proactively optimize Workday licensing and avoid paying for shelfware, CIOs and sourcing leaders should follow this step-by-step playbook:
- Conduct an internal entitlement and usage audit – Begin by auditing all current Workday entitlements (modules, number of licensed workers or seats, contract terms) and comparing them to actual usage. Gather data on which modules are deployed and how extensively they’re used: for example, user login statistics, transaction counts, or process completion rates in each module. This internal audit will highlight immediate gaps (e.g., modules purchased but not implemented, or far fewer active users than licensed) and quantify the shelfware. By establishing a usage baseline, you create a fact-based foundation to drive optimization decisions.
- Use test environments or pilot programs for new features – Before committing to additional Workday modules or expanding usage, leverage sandbox environments or pilot programs to ensure a smooth rollout. Workday provides sandbox tenants; use them to trial new functionality with a limited user group. If Workday or a partner offers a free trial period for a module (or a short-term evaluation license), take advantage of it to assess real usage and value. The goal is to avoid buying modules “sight unseen.” For example, when considering Workday Prism Analytics or a new Learning module, negotiate a pilot phase (even 3–6 months) to evaluate adoption in a non-production setting. Only roll it into your paid contract once you’re confident it will be used. This approach prevents spending on features that sounded good in demos but don’t gain traction internally.
- Identify high-shelfware modules and challenge their renewals – From your audit, pinpoint which modules show clear signs of underutilization (e.g., very low usage metrics or delayed deployments). Flag these for scrutiny ahead of renewal. Rather than rubber-stamping everything in the renewal quote, be prepared to challenge the need for each underused module. If a module hasn’t delivered value, consider sunsetting it: either remove it from the subscription or swap it for a more useful module. Begin this analysis well before the renewal date, allowing time to discuss options internally (such as whether we truly need the Workday Learning module, given that only 5% of employees use it) and externally. When approaching Workday’s sales team, use the data: for instance, “We see minimal usage of Module X, so we’re not inclined to renew it at the same volume or cost.” This puts the onus on them either to justify it or concede to adjustments. Challenging shelfware at renewal can lead to cost reductions or reallocated spend to areas with better ROI.
- Reassign or downgrade licenses for low-usage roles – Optimize license allocation by aligning license levels to actual user roles and needs. Workday’s licensing (especially for HCM) often counts all employees, but ensure you’re taking advantage of any worker categorization to lower costs. For example, if your contract allows weighting part-time or seasonal workers less (e.g., a part-time employee counts as 0.5 or 0.25 of a full-time employee), make sure those categories are defined and applied so you’re not overcounting FTEs. Likewise, review any role-based licenses: if certain users (like occasional HR contractors or light users of Adaptive Planning) don’t need full access, consider reducing their license type or count. This might involve revoking access for inactive users, consolidating tasks among fewer power users, or switching to a lower-tier option if Workday offers one (for instance, some modules may have tiered packages or read-only user options). The principle is not to pay for premium licenses for users who hardly use the system. Regularly updating your user roster and removing licenses for departed employees or redundant accounts also prevents license creep over time.
- Engage independent licensing advisors for benchmarks – Given the complexity of Workday contracts, consider bringing in an independent Workday licensing expert (such as Redress Compliance or UpperEdge). These advisors specialize in vendor licensing and have benchmark data from other clients to tell you what a typical company of your size should be paying and using. They can conduct an external review of your usage versus entitlements, identify any unusual contract terms, and help formulate effective negotiation strategies. Independent experts provide a reality check – for example, they might reveal that you’re licensed for 20% more employees than you have, or that other companies negotiated flexible terms you lack. This expertise is especially valuable before renewals or major expansions. An advisor can also run an objective shelfware assessment, validating which modules are underused relative to industry norms. Importantly, they serve as your advocate (rather than the vendor’s), ensuring you’re not leaving money on the table. Benchmarking your deal and usage gives you leverage to demand better pricing or to re-scope the contract in line with actual needs.
- Negotiate renewal protections and flexibility clauses – When it comes time to renew or amend your Workday agreement, use that opportunity to bake in more flexible terms that guard against future shelfware. Key clauses to pursue include:
- True-down rights: Negotiate the right to reduce your committed license counts at renewal (or periodically) without penalty if your actual employee count or usage is lower than expected. For example, if you contracted for 5,000 workers but only have 4,500 active, a true-down clause would allow you to adjust pricing to the lower number in the future. Without this, you’re perpetually paying for licenses you don’t use.
- Ramp-up (phased deployment) pricing: If you’re adopting a new Workday module that will take time to fully roll out, seek a ramp-up arrangement. This could mean paying a reduced fee in the first year while implementation is in progress, with the cost “ramping” to full price only when usage reaches a certain threshold. This avoids the common scenario of paying 100% on day one while the software is still being implemented (classic shelfware during implementation). Workday may not offer this by default, but enterprise customers can negotiate, for example, 6 months free or a 50% fee for year one for a module that won’t be fully live until year two.
- Co-term and modular flexibility: Ensure all modules have co-terminous end dates (so you can renegotiate everything together for maximum leverage). At renewal, push for the ability to drop or swap modules without heavy penalties. If Workday’s standard terms bundle everything, negotiate exceptions – explicitly carve out the option to discontinue a specific module if it’s not delivering value, or to replace it with another Workday product of equal value. Having this written in protects you from being forced to renew software.
- Price protections: Cap annual price increases and secure long-term discounts for any future expansions. For instance, negotiate that if you add 10% more employees or a new module later, it will come at the same per-unit rate or better. This prevents being overcharged in the future and reduces the impulse to over-buy now “just in case” (since you know you have a fair option later).
By incorporating these clauses, you build flexibility into your Workday relationship, making it easier to adjust the course if your needs change. In sum, negotiating for these protections at renewal time is critical to avoid falling back into over-licensing traps.
Clear Recommendations
Immediate Actions (Next 1–3 Months):
- Perform a rapid shelfware assessment: Right away, convene your IT asset management or Workday admin team to identify any obvious shelfware. Review which Workday modules are live versus which you’ve paid for. For each module, gather basic usage stats (users, transactions) to spot glaring underuse. Immediately flag any module that is deployed but hardly used, or purchased but not deployed at all. This quick check will inform where to dig deeper.
- Freeze unnecessary spending: Put a temporary hold on purchasing additional Workday modules or expanding licenses until you complete a thorough review. Communicate to Workday’s account reps that you are evaluating current usage. This sets the expectation that renewals or add-ons must justify their value. In parallel, avoid committing to any new multi-year module bundles at this time; defer those discussions until you have a clear understanding of your needs.
- Engage stakeholders and establish governance: Inform relevant stakeholders (HR, Finance, Procurement, and IT operations) about the initiative to optimize Workday licensing. Establish a governance team or steering committee to regularly review Workday utilization and licensing. Assign owners for each major module to be accountable for its adoption. By creating cross-functional visibility, you’ll more easily gather information (e.g., if HR bought Recruiting but recruiters aren’t using it, find out why) and build a united front for negotiations.
- Consult independent expertise (if renewal is near): If your contract renewal is approaching in the next few months, consider consulting an independent licensing advisor now. An expert can quickly audit your contract for any urgent issues (like auto-renew clauses or one-way uplift clauses) and help prioritize negotiation points. Even a short engagement for a second opinion can reveal quick wins – for example, they might spot that you have the right to reduce some licenses that you weren’t aware of. Acting on these insights before the renewal notice period lapses is crucial.
Mid-Term Actions (Before Next Renewal / Ongoing):
- Implement continuous usage tracking: Develop a process to monitor Workday usage every quarter. This could involve generating regular reports on login counts by module, business process completion statistics, the number of active versus licensed users, and other relevant metrics. Track trends – for instance, is the adoption of Learning increasing or flat? Are there modules enabled that no one touches? Use these metrics to guide adoption efforts or identify new shelfware early. Consider dashboards for application owners to see their module’s utilization.
- Optimize license allocations and data quality: Over the next couple of quarters, cleanse and right-size your Workday tenant in line with contract terms. Update worker classifications (so that, say, contractors or interns are correctly categorized to count less toward licensing if your contract allows). Remove any user accounts that shouldn’t be there (e.g., employees who have left, test accounts using licenses, etc.). Ensure that the number of active workers in Workday matches what you truly need licensed, no more. By true-up time, your active count should be as lean as possible (without hindering operations) so you don’t pay for ghost users.
- Drive adoption or plan the retirement of underutilized modules. For each identified underutilized module, decide on a course of action: either improve its adoption or prepare to discontinue it. If the module is still strategically important, invest in training and change management to boost its usage (e.g., launch a campaign to encourage managers to complete performance reviews in Workday Talent, or have Finance formally mandate using Adaptive Planning instead of spreadsheets). Increased adoption can convert shelfware into value. Conversely, if a module isn’t core or a better solution exists, start planning an exit. For example, if Workday Learning isn’t gaining traction and the L&D team prefers another platform, plan to shift fully to the other platform and drop Workday at renewal. Having a clear decision well in advance of renewal ensures you’re not scrambling at the last minute.
- Benchmark and budget for renewal: A few quarters ahead of renewal, research market benchmarks for Workday pricing. Understand what discount levels and terms similar companies have (using resources from advisors, peer networking, or published reports). This will help set targets in your negotiation strategy. Also, begin budgeting for the renewal based on an optimized scope – for instance, budget assuming you will not renew certain shelfware modules, and perhaps reallocate some of that budget to areas of higher need or new projects. By the time renewal discussions begin, you’ll have a solid business case internally for what you want to retain versus cut, grounded in both usage data and market facts.
At Renewal (Negotiation Phase):
- Treat renewal as a new negotiation: Approach your Workday renewal as if you were a new customer evaluating options, not as a routine administrative extension. This mindset will encourage you to question everything you’re paying for and push for better terms. Internally, get executive alignment (CIO, CFO, CPO) on the mandate to reduce costs and eliminate shelfware, so everyone is on board when tough decisions are presented to the vendor.
- Negotiate assertively to remove or swap shelfware: Come to the table with a clear list of what you do not intend to renew (backed by usage evidence). For each module or component identified as shelfware, inform Workday that it must be removed from the contract or significantly repriced. Be prepared for pushback – vendors often resist unbundling – but stick to your data-driven position. If outright removal is difficult, propose swapping it for something else of equivalent value that you need, as an alternative. For example, “We will drop Module A (unused) and in exchange consider adding Module B that we plan to deploy, at no net increase in cost.” This gives Workday a way to preserve revenue while eliminating a useless piece.
- Secure flexible terms in the future: Use your negotiation leverage at renewal to inject all the flexibility clauses discussed earlier. Ensure the new contract allows for adjustments to lower employee counts if applicable (avoid locking in a higher baseline than your current actual workforce). Add those true-down and ramp-up provisions so that you won’t end up with new shelfware in the next term. If Workday’s proposal includes multi-year pricing, insist on price protections with a cap of at most one increase per year, as well as the right to opt out at renewal without penalties. It’s much easier to obtain concessions before signing the renewal than after.. Verify co-terming; you’re renewing Coree HCM, and there is a simple Adaptive Planning option on a different schedule. Try them in entrepreneurship negotiation.
- Documented communication of the new entitlements: Finally, once the renewal agreement is reached, clearly document the licenses and modules you will have going forward and communicate any changes to the relevant business owners. If a module was dropped, ensure both IT and the business know it will no longer be available (and have a plan to transition off it smoothly). If new terms like usage bands or flex categories were added, brief your team on how to monitor those. This ensures that the hard-won optimizations are realized in practice – the organization will only pay for what it intends to use, and everyone is aware of the plan. Set a calendar reminder to revisit usage vs entitlements halfway through the new term to stay on track and avoid shelfware creeping back in.
By following these recommendations at each phase – immediately addressing glaring waste, continuously governing usage, and negotiating smartly at renewal – enterprises can systematically eliminate shelfware and keep their Workday investment tightly aligned with business value.
