Workday Rising 25 - Workday’s "bold, bodacious” AI vision, viewed from the ‘cheap seats’

December marks Carl Eschenbach’s third year at the helm of Workday, first as co-CEO with company founder Aneel Bhusri, then as sole custodian from January 2024.  This week he’s been at the forefront of the company’s most high-profile event of the year, Rising, as the Workday faithful gathered in San Francisco to hear about the current and future direction of the company.

Watching from the ‘cheap seats’ in the UK - ‘cheap seats’, copyright Dennis Howlett, formerly of this parish - I was struck by the confident articulation of the firm’s commitment to AI, which was a natural extension perhaps to the pragmatic approach to the subject that Bhusri used to adopt when questioned. Workday has never been part of the hype cycle hysteria that has over-shadowed the past couple of years, but has instead spent its time and money carefully and strategically.

At a meeting with analysts at Rising this week, Eschenbach continued that practice, albeit perhaps with some understandable buzz coming off of a successful keynote session to open the jamboree:

We really leaned in to this year's innovation keynote and I think displayed probably the most bold bodacious vision we've ever outlined for technology innovation. We clearly are bringing to market the most powerful agents that serve our markets in finance, in HR and in industries we actually announced some industry agents today as well as planning agents. And what I hope everyone recognize is, in the industry right now, it's not about the quantity of agents you're bringing to market. It's the quality of agents and they have to drive real business value. They have to drive real outcomes. 

To that end, he argued, Workday has this year showed off real world examples of the agents that were announced at last year’s gig:

We want to make sure no customer is left behind in this transition with AI. And what I mean by that is we are doubling down our investment on our core products because a lot of times these days, everyone go student body right and only talks about AI. When in fact, we have 11,000 customers stronger using our core products, leveraging it more than ever and asking us more. They run their business on Workday. They pay their employees on Workday, they provide benefits, and we need to continue to lean into that going forward to make sure they're getting the best value they can out of the existing platform.

Paying off 

From Workday’s own perspective, AI is paying off. Some 75% of net new customers in the most recent quarter included AI as their first purchase while 30% of sales back into the existing customer base are buying AI. Meanwhile AI new Annual Contract Value (ACV) has been doubling year-over-year. That was information that was disclosed during the most recent quarterly results announcement, but Eschenbach used Rising to drill down further:

In the last year, our growing AI momentum has gone from over $250 million to greater than $450 million, growing 50% year-over-year…Just in the last year, [our agentic AI SKU has] gone from less than $50 million to more than $150 million in ARR exiting Q2. And when you pull this together, this is growing right now in driving about 1.5 percentage points of ARR (Annual Recurring Revenue) growth in the overall business.

This year’s event was also notable for some intriguing partnerships and acquisitive moves on the part of Workday. For his part, Eschenbach pitched:

The largest companies, the most innovative companies in the world are coming together with us to be part of the Workday platform. Whether it was today, we saw [Microsoft CEO] Satya Nadella on stage with us.We saw Microsoft come out and talk about engaging and building an agent on top of Workday. We saw Snowflake be part of our Data Cloud that we announced, same with Salesforce, same with Databricks. And I can go on and on. So the platform is resonating, and today was just a glimpse into what we think is possible in the future.

Partners and platforms are close to Eschenbach’s heart and career:

I grew up, most of my career before coming to Workday three years ago, in companies that were truly platform companies, and I love platform companies in enterprise software, I think the holy grail is to become a platform company. It means people are building in through and on top of you. And that's what we want to become, [while] at the same time, being a great applications company. There are very few companies in our industry who can say they have both the best applications and they're a platform company, and we're one of them.

A year ago, there were around 600 to 650 partners in the Workday ecosystem, he observed, while today there’s over 1,300. Meanwhile activity on the platform keeps increasing:

Over the last five years, we've gone from 46 million contracted users on our platform to 75 million today. Over the last five years, the number of annual transactions happening on the Workday platform has gone from under 200 billion to 1 trillion in the last year. 

Then there was the surprise announcement of a planned takeover of Learning & Development (L&D) tool provider Sana Labs for a cool $1.1 billion. Eschenbach positioned this as “one of the most impactful acquisitions we've made in the history of Workday”, explaining:

Sana Labs is a way for you to enter Workday, to start Workday and be in Workday for your entire work day. This is the new front door. The new UI for Workday is AI. And Sana Labs is going to give us that, and it's going to be super powerful.

My take

There's something special happening here at Workday. There's 30,000 people at this conference this week, wanting to hear about what we're doing to help them navigate the future. It's been an amazing 20 years, but I will tell you, the next 20 at Workday is going to even be stronger.

A bold assessment from Eschenbach, but one that seems deserved from the ‘cheap seats’. The conference took place just after Oracle saw its stock price and valuation leap up after some major contractual commitment announcements from CEO Safra Catz. The markets responded with even more AI enthusiasm than we’ve become used to in recent times.

But can this hold? Is there an inevitable course correction ahead for the sector? And if there is, is the pragmatic stance taken over the years by Workday likely to shield it from the worst of any downturn? Eschenbach opines:

Let's say the macro slows and we have to moderate because our growth areas aren't growing as fast as we can or we want, we're going to continue to lean in to investing in AI because of what I just laid out earlier - our unique position . Even in down markets, the people who recover fastest on the other side when things turn are the ones who never stopped investing in innovation and in technology, and that's exactly what we're going to do here.

Overall, a good week for Eschenbach and Workday. Check out diginomica’s dedicated Rising 25 content hub here.