Workday announced a strong set of Q2 numbers and the appointment of a new co-CEO to join Aneel Bhusri in the shape of company veteran Chano Fernandez, who now assumes responsibility for customer relations.
Describing the appointment as “a natural progression” for Fernandez, Bhusri said:
In his expanded role, Chano will now oversee all of our customer-facing activities, including sales, customer services and support and many aspects of marketing…Chano joined Workday back in 2014 as our President of EMEA and has taken on more and more responsibilities over time, most recently as co-President of the company. He is an amazing values-based leader and has driven his teams to great success over the years.
While the likes of SAP and Salesforce have recently moved away from their own co-CEO structures, this is a return to the model for Workday as Bhusri noted:
My co-Founder, Dave [Duffield] and I operated as co-CEOs for almost five years, and the model worked great for us and for the company. I wholeheartedly expect the co-CEO structure will also work great for Chano and me.
Chano is taking on all of customer services and a lot of marketing and that's half the company. For me, I'm more of a product person and strategy person, and I personally would like to get back to working with our product teams and our venture teams and our strategy teams on where we go in the future. And then it's super important that we maintain the great culture that we have, so working with employees is critical too.
So much like it was with me and Dave, two like-minded people are better than one in the CEO job. It was my best experience at Workday when Dave and I were co-CEOs, so I'm thrilled to be able to share the role with Chano. He's a much stronger operational leader than I am…Over time, we'll figure it out. We're great friends and we'll figure out the right mix over time.
For his part, Fernandez said he believes that “businesses seem to be settling into this uncertain environment” caused by COVID-19 and that Q2 has seen strong performance for Workday. Revenue for Q2 2021 was $1.06 billion, up 19.6% year-on-year, while operating loss fell to $16.8 million, down from last year’s $122.5 million. Subscription revenue rose 23.1% to $931.7 million.
Fernandez pointed to nine new global 2,000 HCM customers and two Global 2000 Financials deals. New HCM customer wins during the quarter included Air Liquide, the State of Oklahoma and German manufacturer Thyssenkrupp Group, while notable go-lives included General Motors, Eli Lilly and Bridgestone Americas. Financials go lives included the likes of Prisma Health Nebraska Medicine and Shelter Insurance.
The pandemic has not dented spending priorities, argued Bhusri, and in some cases has acted as an accelerant for decision-making:
We're quick to implement HR and finance systems [that are] really oriented towards employees and running the business in a very agile environment. So on the HR side, very simply, with the pandemic and with all the other issues facing companies right now, employees are front and center for everybody. You should think about HCM not just as a back-office system, but an employee engagement system. But also with the pandemic, companies have had to change their business processes radically, and they're changing them on a weekly basis. The legacy systems just can't do that. So we saw some hold-outs of companies that were working with legacy systems just decide, ‘Hey, we just need to make the plunge and go into the cloud even though we're in the middle of the pandemic.’
Similarly on the finance side, the flexibility starts [with] their planning system - the ability to recreate and generate plans on a really rapid basis, based on a system that can go live within a month, and our core accounting system, where you can close the books without having anybody in the office, completely remotely, [and] can be live in 6 to 9 months. So I think companies are in a place to continue to invest in these data transformation areas, and they're embraced in the cloud. And HR and finance are still very important.
He added that the COVID crisis has also elevated HCM as a CEO agenda item:
I've never had so many CEO conversations on the HCM product line. I think the issue of employee health, mental health, physical health, how are they doing working remotely, how are they working on their projects, this new world of skills and a different world around talent, it's working to become a number one priority for the CEOS. So that is definitely elevating the CHRO position within the company.
Looking further ahead, Fernandez was upbeat on prospects for the months ahead:
We've seen improvement relative to what we saw in Q1, which is encouraging, and we're moving closer to pre-COVID levels, but we aren't yet quite back to this from a pipeline build perspective.
The biggest negative impact of COVID has been seen in some obvious verticals, such as travel and hospitality, he said, but that's balanced by other areas where the pipeline building is encouraging, such as local government financial services, technology and media.
A strong quarter and another positive reaction on Wall Street. The elevation of Fernandez is an interesting development. Bhusri’s comments about the previous co-CEO balance with Dave Duffield having been his best experience at Workday was a telling insight. How this new double act rolls out in practice will be something to watch over the coming months, but on the face of it, the division of labors as pitched at this point looks to be pragmatic and potentially very productive.