The Signal Interview
Two weeks after he told 1,750 employees they were being laid off in the interest of “prioritizing innovation investments like AI,” Carl Eschenbach is not buying the idea that artificial intelligence will replace vast swaths of the workforce.
“I don’t think it’s going to destroy jobs at all,” Workday’s CEO says in an interview from its headquarters in Pleasanton, California. “This is about augmenting humans in the workforce and driving a step function change in human productivity through the use of technology.”
Workday, a supplier of workforce management software that competes with the likes of SAP and Oracle and carries a near-$70 billion market valuation, has stated its belief that the future of work will be “human-centric” — even as it pitches clients that they should bring AI agents into their workforces as “digital employees”, using the same onboarding process as any new recruit first logging into their HR system.
Eschenbach, who remains a venture partner at Sequoia Capital more than two years after moving from a board seat to an executive role at Workday, says his years working with startups taught him “there’s nothing more important than people.”
His decision to cut Workday’s own headcount by 8.5% followed similar cuts by other tech companies, including rival Salesforce just days earlier. But it was not about replacing humans with their digital successors, he insists: it was a matter of aligning resources to strategic priorities. Workday needs to step up investment in the technology reshaping every workplace, he says, because there’s an opportunity to provide clients with a “single platform for all labor, both human and digital.”
Workday’s workforce
Most restructurings are about cutting costs, and Eschenbach has promised investors in recent earnings calls that Workday will push to expand its profit margins. But he says these cuts were principally about “driving innovation” and taking advantage of the “tectonic shift” AI represents. By this time next year, he predicts Workday may have more people on its payroll than before the layoffs, but they will be increasingly focused on its AI priorities, and more broadly spread around the world.
“We’re going to just be smart about where we hire our employees in the future,” Eschenbach says, pointing to markets where human employees typically demand lower salaries than in California. Workday opened offices in Costa Rica not long ago, he notes; it has roughly 2,000 people in Ireland; and in India, it is expanding from Pune into Chennai.
Wherever they are based, Eschenbach sees AI “freeing up” employees from mundane daily tasks, ushering in a new era of productivity in which people’s skills will be more valued than their educational pedigrees. Eschenbach, who captained the wrestling, baseball, and football teams at this northeast Pennsylvania high school, had the chance to attend a four-year college on a wrestling scholarship. Instead, he chose a two-year electronics technician diploma to help launch a career that took him through tech groups like Lucent, Inktomi, and VMware.
Technology will be critical to “reskilling” employees to work more thoughtfully, collaborate better, and improve relationships between managers and their direct reports, he says. “Some people call them soft skills; I think they’re human skills.”
Onboarding digital employees
If digital agents are just a new form of labor, they will need the same level of governance and controls as any employee, Eschenbach argues.
“Think about a human,” he says. “When we get onboarded, we come into a system, we get registered. Someone says, ‘What do you have access rights to? What applications are you going to use? What data can you see? How secure are you?’”
There are no such hoops for AI agents to jump through, he observes. “They just pop up, they start getting access to data. They’re not secure. They don’t have governance around them… That creates massive risk.”
It is a sales pitch as much as a theoretical point: earlier this month, he launched the Workday Agent System of Record, a set of tools to help clients such as Accenture and Amazon Web Services manage their AI agents alongside their human workforce.
“Everyone talks about this agentic world,” he says, but “if you talk to CIOs, CHROs, or CFOs, they’re also nervous about the potential sprawl of agents in the enterprise and not being controlled.”
The ROI on AI
Like many of his peers, Eschenbach sees companies moving past a period of AI experimentation and committing more serious investment this year. The demand for AI agents among its 10,000-plus enterprise customers is “tremendous,” he says. But his optimism comes with a note of caution.
“When it comes to quantifying the return on the investment that people have made [in AI], it hasn’t been there as much as people had anticipated,” he says. Companies will still spend, he adds, “but they’re going to be smarter about the ROI that they can expect. And if they don’t see that, they might not invest as heavily as they once thought they would.”
Questions about whether Workday’s own investments would drive stronger revenue growth prompted Morgan Stanley analysts this week to lower their price target from $330 to $275. High hopes for AI spending have powered Big Tech valuations since Eschenbach became Workday’s co-CEO in December 2022, but investors are waiting to see stronger returns from companies such as Workday, whose stock is down more than 10% in the year since he took sole charge.
DOGE coin
One customer clamping down on spending is the US government, where Workday has talked of a potential $2 billion market opportunity if it can update the aging systems federal agencies use to manage their people and budgets. Workday has invested in chasing federal contracts over the past 18 months, winning over the US Department of Energy and the Defense Intelligence Agency, and telling analysts that more than 80% of Washington’s HR management and enterprise systems have yet to move to the cloud.
The newly created Department of Government Efficiency has set out to slash federal spending, but Eschenbach said he saw no risk to that opportunity from the Elon Musk-fronted group. Instead, he said, it could be “beneficial” to his company “if something like DOGE is enforced in the right way.”
“If you want to drive efficiencies in the government, one of the things is to get off of the antique platforms you have today and move them to a modern architecture to reduce costs. And that’s what we can help the government do,” he says. “We think DOGE can have a positive impact in the future. I don’t know if it materializes in the next six to 12 months, but over time, we really think it’d be helpful to someone like Workday.”