Workday co-CEO Carl Eschenbach on the impact of AI, job market landscape in 2024

We want to talk about the health of corporate America and its workforce. And joining us to do that is Workday's co-CEO Carl Eschenbach. He is set to take over as sole chief executive next month. Carl, welcome.

Well, thank you. It's good to be back here.

Solo this time.

Solo this year. Yeah, I remember sitting here last year with my co-CEO and founder, Aneel, and Joe was questioning us how this co-CEO thing actually would work.

I told you this would happen, though.

What was that?

You're going to end up— eventually there will be a CEO.

Well, when I joined 13 months ago, Joe, we put a stake in the ground with the announcement and said we would do a transition in a year and Neil would move to an exec chair. And, and that's exactly our plan of record and what we're going to do at the end of this month. And I will tell you, you know, a lot of people question the co-CEO thing and whether it can work or not. And I think it's gone incredibly well. In fact, I think we have a blueprint on how it should be done. And there's a number of reasons for that. I think, you know, Aneel and I, we have a tremendous amount of respect for one another. We have a deep trust for one another. We have different skill sets. We come from different backgrounds. And I hope me joining him as co-CEO the last year has freed him up to go focus on what he's best at— an incredible, incredible technical mind. I think he's one of the greatest technical minds of our generation. And he's let me run and operate the company. And I think it's worked out well and it's It's been reflected in our business results through the first 3 quarters of this year. So it's gone really well. So it can work, Joe.

Who was with John Reed? That was a mess. Remember Citigroup? Do you remember that? Oh, there's a lot of— there's a lot of things when it doesn't—

history is littered.

Yeah, it is. Yeah.

We go back to Rome.

Yeah.

Consuls, right?

Yeah. No. And we actually had to talk about it at another conference. We did. You interviewed Anil and I and, and talked about how it could or should work. And I'm proud to say I think it's worked really well and our workmates have accepted me. I'm thankful for that. And Neil has.

We're thankful because we don't have room on the set.

Well, we made room last year. We did. We did have 2 people here.

Got kind of close.

Yeah, absolutely.

Your stock has done incredibly well, up almost 75% over the course of the year. What happened? What, what, what was pushing things and what's the next hurdle that you have?

Yeah, well, I think, you know, thank Thanks to, you know, our nearly 19,000 workmates around the world, our partners, and the customers truly appreciating and seeing the value of our platform has really helped our stock grow. We've, we've had a very durable and diverse business model, Becky. We sell both at a segment level, at the largest enterprises and in mid-market, but then we sell across multiple verticals. And we don't have an anchor tenant or customer, you know, that we need to have reliance on because we're so broad in what we do. I do think last year we launched a number of key growth initiatives that will continue to push into the new year in February. Number one, we're focusing on our international growth. Today we get 25% of our business outside the US, yet it represents more than 50% of our addressable market. So we're investing internationally. We also are investing heavily in our financials platform. People obviously see us as the market leader when it comes to human capital management. But our financials platform is a major growth engine for us. In fact, we're seeing most customers start to think about how do I deploy both at the same time. We call it a full platform sale. So we think that's another big growth driver. We've modified how we partner around the world. We leverage the ecosystem much more broadly to get operating leverage on the go-to-market side of our business. And lastly, I think the innovation engine at Workday is alive and well. And Neil helping, you know, lead that in our product and technology organization will only continue to fuel our innovation. And we have a deep data moat that many others don't have in the enterprise with more than 65 million users on our data platform. So I think there's a lot of good reasons. But really, it comes back to my workmates around the world and how they're performing.

Part of what, what you all do is help with job applications. And there's a lawsuit that has been filed that says basically the AI product that you have to help companies sort through lots of applicants coming through, has biases and has discriminated against this one gentleman who's filed this report or this lawsuit. He says that it's got biases that are built in. And as a result, if you can't get past Workday, he can't get hired.

Yeah. You know, Becky, we're aware of this lawsuit. I can't comment on it, obviously, but I think we respectfully disagree. We've been doing AI for more than a decade. We've built AI deep into our platform. And we've been approaching it in a very responsible way. In fact, you know, at this conference here this week, we hear a lot about AI and we hear a lot about responsible AI. And over the last decade and more over the last 5 years, we've been working with regulators around the world, in the EU, in the US, and even at the state level to make sure that AI is being implemented in a responsible way.

So, well, let's just talk about it, not necessarily in this case, but it is a big question that's been raised of all AI. It can only— it will have biases based on whoever engineers it, that it will be as discriminatory as its programmers were, that those kind of biases are kind of unavoidable.

Yeah, to a certain extent. I think, you know, the output of your AI is only as good as the data you're putting into it and the data model. When you think about Workday, our data is highly curated. It's 65 million users on a common platform, and that's where we're training our AI model off of. So it's very secure, it's protected, it's highly curated. So it's very different to do an AI where you're training off the internet. So I think we are different in how we think about it.

I'm curious if there are trends or insights that you're seeing now, meaning this year, is there anything different? You have so much access to data around workers, how people work. how people are getting hired, when they're leaving, why they're leaving. Is there anything new that you're seeing in terms of sort of trend lines?

No.

I mean, you know, last year I think there was, there was a pullback in hiring, you know, because of the uncertainty in the economy. You know, this conference last year, all we talked about recession, hard landing, soft landing. This year we don't talk about that as much. I think people are much more cautiously optimistic. We do see hiring continuing to happen. We've seen some layoffs recently, but we do see hiring trends continue.

What about, what about like T&E budgets? You can see how people spend. Every, every employee who's putting in their receipts, are they going to more restaurants? Are they not? Are they, are they cutting down on Ubers? Are they like, I mean, are there things that sort of surprise you when you see where people are?

I don't think I'm seeing anything different. Our data is telling us anything different than what we saw last year. I think, you know, business travel has picked up again. You know, the hybrid workforce is allowing people to move and have mobility. And we're seeing things change in that dimension of the business. But no, overall, you know, Andrew, not much has changed year over year. People are being very responsible. They're trying to drive, you know, operating margin expansion. And I think the way you do that is by thinking about how are you going to get productivity gains. Right. Right. By having a platform like Workday. Where you're focused on the employees, you're trying to get them to be more likely to stay longer, which reduces attrition, and that drives productivity gains. And therefore, you have money to invest in the business. So that's where we're spending our time focusing.