Next chapter please! Workday CEO Aneel Bhusri reads the future and shoots down the 'SaaSpocalypse'

Back in the top job, Workday CEO Aneel Bhusri has opened what’s pitched as the firm’s ‘Chapter Four’ with the release of Q4 numbers that saw total revenue jump 15% year-on-year, beating Wall Street expectations. Subscription revenues were $2.360 billion, up 15.7% from the same period last year, while net income was $145 million, up from $94 million a year ago.

For the full year, total revenues of $9.552 billion were up 13.1% from fiscal 2025, with net income of $693 million, compared to $526 million the previous year.  Subscription revenues were $8.833 billion, an increase of 14.5%.

So, all good. Mind you, such is the fractious short term mindset among investment analysts at present that none of this was enough to prevent a stock price slip as forward projections failed to live up to the numbers in their heads...

Chapters

Bhusri returned as CEO earlier this month following the departure of Carl Eschenbach. The changing of the guard represents a new chapter, the fourth, in Workday’s history, says Bhusri:

First was the founding of the company by Dave [Duffield] and myself back in 2005, based on a new idea of HR and Finance in the cloud and built on a set of core values around employees, customers, innovation, integrity and fun. The second chapter was the period of hyper-growth that led to our success with many organizations around the world and product & technology leadership in HR and Finance. The third and most recent chapter, which started in 2023, was all about operational excellence and efficiency as we grew into a Fortune 500 global company.

So, what’s to come with Chapter Four? Bhusri says:

it’s a return to focusing on innovation. When we founded Workday, we transformed the enterprise by reimagining HR and Finance in the cloud. Now, we have the opportunity to transform it again by re-imagining HR and Finance with AI, and taking advantage of this new vector of growth.

‘SaaSpocalypse’, if we must...

But wait a moment - surely the “SaaSpocalypse’ that has so agitated the Wall Street red braces brigade is going to see the end of Workday anyway, swept away by home-made AI alternatives, isn’t it? Bhusri understandably is having no truck with such paranoid fantasies:

I personally just don’t see that happening. Our application domains are really, really hard to build. I've been working in the HR and ERP space for over 30 years. These are true systems of record that must process transactions with absolute accuracy and speed, enforce complex security models, and comply with statutory and regulatory requirements all over the world. That kind of complexity is very hard to replicate. No amount of vibe coding is going to produce an HR or ERP system.

And importantly, our underlying business processes are deterministic by nature. There is a start and end to a business process. Its goal is to deliver consistent, auditable outcomes. AI, for all of its incredible capabilities, is probabilistic by nature. It reasons, predicts, and recommends based on patterns and likelihoods. Maybe it will eventually become a state machine—a system that follows the same steps and gets the same result, every time—but it is not there today. You can’t have probabilistic outcomes in running a payroll, it needs to be 100% accurate and completed, 100% of the time.

What will happen, he predicts, will be a “marriage” of deterministic enterprise apps with probabilistic AI, a union that will have three offspring:

• A re-defined user experience that is prompt based

• A greatly improved business process automation and execution platform, with work done by agents and humans.

• Much deeper, AI-generated insights.
  
  All that and higher ROI for users, says Bhusri:

This hybrid world and architecture is exactly what Workday is building today. Marrying the best system of record for HR and Finance with the reasoning capabilities of domain specific LLMs (Large Language Models), that’s the future. It’s like peanut butter and jelly, they just go together. And it’s all rooted in the trust we’ve built with our customers over the past 20 years from managing their systems and their most critical data.

As for how SaaS firms need to ‘ride out the storm’ of the ‘SaaSpocalypse’:

I think that the keys for all the enterprise apps companies are to make sure that they have the right data model to inform the Large Language Models, and make sure they're getting the best reasoning results. In order to do that, it's a big investment in APIs, and we're pretty far along on that path, but I think that's going to be the case for all the SaaS companies.

Oh and one last thing:

Every one of these AI leaders actually runs Workday just for what it's worth - Anthropic, Google and OpenAI all run Workday..

My take

Those of you who know me know that I am an unabashed optimist.

Welcome back, Aneel!