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Workday Rising EMEA 2023 - Carl Eschenbach's priorities for when he becomes sole CEO at Workday

Phil Wainewright Profile picture for user pwainewright November 20, 2023
Summary:
Soon to be sole CEO of Workday, Carl Eschenbach last week set out his priorities for this new chapter in the enterprise technology vendor's story.

Rising EMEA 2023 Carl Eschenbach and Angelique De Vries - Workday
Carl Eschenbach and Angelique De Vries (Workday)

Aneel is not going anywhere. I won’t let him.

Come February, Carl Eschenbach is set to become sole CEO of technology vendor Workday, the company co-founded by Aneel Bhusri, with whom he has been sharing the co-CEO role since his appointment last December. Speaking about his priorities in that new role in a session with media and analysts at the vendor's Rising EMEA conference last week, he took the opportunity to make clear that Bhusri will still play a crucial part in the company's leadership when he hands over the CEO reins, while remaining Chairman of the Board. Eschenbach goes on:

He's going to be my boss as Chairman of the board, but I’m telling him I'm his boss, because he's not going anywhere — he's staying with us, because we want his mind, along with what Sayan [Chakraborty] and our product and technology teams are doing, to continue to lead innovation.

It's a big moment for any tech vendor when the founding CEO steps back. Emphasizing his commitment to Bhusri's ongoing involvement in product and platform development sends a strong signal about continuity as Eschenbach takes over. Innovation will be his "foremost" priority going forward, he says.

AI, while important, is just a part of that. Although Workday isn't charging customers at the moment for new generative AI features, it will clearly impact revenue at some point in the future, he says. But he also notes the potential impact on driving down the vendor's operating costs. He explains:

When I think about ... what we're doing in marketing, or we're doing with sales or the CFO or finance organization, I think we too are going to leverage AI in how we operate in our business. With that, we will get cost savings which we will then reinvest into driving growth. So I think there's two sides of the equation.

What's on the priority list?

So apart from driving innovation and keeping Bhusri on board, what else is on the priority list? He goes on:

Number two ... I think we have a tremendous opportunity to grow our international footprint, our international business ... Right now we get about 25% of our business outside of the US, yet it represents more than 50% of our addressable market. So this is a big push for investing heavily internationally, as we look at exploring these markets.

The success of the EMEA team in recent months is a case in point, under the leadership of Angelique de Vries-Schipperijn, who joined Workday as President of EMEA a month before Eschenbach became co-CEO. In Workday's Q2 earnings call, he had highlighted the progress here in building a predictable sales pipeline for both HCM and Finance, often sold together in the medium enterprise market. But the investment this requires isn't just in sales and marketing — localization and working with partners are equally important elements.

The partner ecosystem is therefore Eschenbach's third priority, and some change is likely on the way. He says:

We have an amazing set of partners around the globe, they've done a tremendous work of deploying our solutions ...

We think there's a lot more we can do through co-innovation, through resale, through co-sale with one another. And so there's just a big push on what we can do with the partners in our channel from where we're at today. I think that's critically important.

Financials is an area of opportunity where he believes Workday should be "doubling down," especially as existing HCM customers take that next step of modernizing their finance systems. He says:

We shared some statistics at Rising in the US, where we said that about 20% of the financial workloads have moved to the cloud. It's significantly different than what's moved to the cloud for HCM. And we think we're in a unique position to actually capture a lot of those workloads as they move to the cloud, especially if they're an existing Workday HCM customer.

We absolutely think Workday’s in a unique position to capture those workloads as they move into the cloud around your ERP platform and your general ledger. We talk about it in the context of the full platform suite that we're taking to market. I think that's really starting to resonate.

When you're a platform ...

The platform message is particularly important at a time when enterprises are looking to reduce the complexity of their IT estate and drive end-to-end efficiencies. He elaborates:

When you’re a platform, then things start to consolidate on top of and around you. We are becoming the platform for enterprises to support their most mission-critical assets — their people and their finance. If you look at the CHRO organization, the finance organization, they have a tremendous amount of scope creep in applications, they have best-of-breed solutions everywhere. When you have a platform, you start to consolidate on top of that, you simplify your operating model, you drive the total cost-of-ownership benefit. We as a platform now are seeing that happen time and time again with our customers, either on HCM or on financials.

More importantly, when we speak to customers, especially prospects that are making a decision for enterprise platform, they're no longer separating HCM and financials. They’re looking at one platform and wrapping planning around the whole thing — because when you're planning in the financial space, you're often planning around your workforce.

So I think we have a really compelling story to drive productivity gains and help people drive growth. But we also have a really strong compelling total cost-of-ownership solution because we are a platform.

His final point touches on M&A, noting that Workday's strong balance sheet and market capitalization means it has deep pockets to fund acquisitions. With Workday's quarterly financials due out soon, the company is in a quiet period so he can't talk specifics, but as a general principle, he says:

If we can find acquisitions that align with our culture or in cases where technology offerings can easily fit or snap into our go-to-market and distribution engine, we will continue to think about M&A.

My take

There are no surprises here, but it's useful to see what you might call Eschenbach's 'manifesto' laid out so clearly. The devil, of course, is in the detail of how all this is going to be achieved.

The desire to boost growth outside of the US market in particular comes through as perhaps the most distinctive change in emphasis, coupled with the linked expansion in the role of the partner eocsystem. Answering a follow-up question by email, Eschenbach confirmed to diginomica that, "Expanding Workday’s footprint globally is among our largest untapped opportunities and is a top priority for us." But what does that mean in terms of specific areas of investment that perhaps have not had enough attention in the past? The email response cites strong regional leadership, continued product development and go-to-market resources aligned with the financial management business. But in any region outside the US, the level of investment required to match the different custom and practice across multiple countries is significantly higher than in the single contiguous market of the 51 United States. There's a reason why that larger portion of the addressable market has proved elusive.

Then there's what the email describes as "an even greater strategic focus on our partner ecosystem to turbocharge the value our customers get from Workday — whether that’s through new solutions or expertise." There are two elements to this. One is around complementary products, such as the recent expansion of the partnership with payroll provider ADP and the introduction of an AI Marketplace. The other is expanding the scale and reach of the consulting partner ecosystem to deliver and support Workday implementations across different geographies and industries — especially among the medium-size enterprises that are becoming an important target segment internationally.

What makes this even more of a juggling act is Workday's strategic focus on customer satisfaction as a core metric. The company used to proudly boast of a 98% score on this metric. The figure remains in the upper 90s today, at 96%, but only if you count the core HCM and finance products and exclude Adaptive Planning customers, where the metric comes in at 87%. It's still a great score, especially by the standards of the enterprise applications industry — and Workday has historically always set great store on keeping it above the 95% mark. The challenge now is to achieve all of these growth goals across many different countries and regions, including a growing focus on medium-size enterprises, while working with an expanding partner ecosystem, and still maintain that excellent customer satisfaction score. The experience with Adaptive Planning shows that a skew towards smaller companies and faster, more light-touch implementations is often incompatible with this kind of goal. But who knows, perhaps the ability to apply new AI tools to improve operational performance will make it easier to achieve than has been the case in the past.

All of this means there will be plenty to keep an eye on over the coming year, as Workday settles into the new leadership regime under Eschenbach as sole CEO. It's clear that he has fully bought into the company's culture and mission, and there are no signs of any sudden shifts in direction ahead — more a case of a slight leaning into the tiller and a nudge into a higher gear. Steady as she goes!

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