Workday’s Last Workday? AI and the Future of Enterprise Software

Episode Summary

Executive Summary: The episode argues that AI is enabling a new enterprise software platform shift that could finally make entrenched systems like Workday vulnerable. Joe Schmidt contends that while Workday remains highly defensible and important, its user experience is outdated, AI features are mostly superficial, and buyers are increasingly ready for faster, agent-first, lower-friction alternatives that can genuinely replatform HR, ITSM, and CRM workflows.

Main Topics: Why enterprise software is being re-evaluated (Priority: 5/5): Schmidt explains that many major enterprise incumbents were built for the last major shift—from on-prem to cloud—and are now being challenged because AI changes what core software can do. Workday as critical but unloved infrastructure (Priority: 5/5): Workday stores essential HR and compensation data, but employees and admins dislike using it; Schmidt argues the product is indispensable yet frustrating and outdated in daily use. AI as a true platform shift (Priority: 5/5): The conversation frames AI as analogous to the cloud transition: AI-native systems can materially change workflows, not just automate small tasks, opening the door to replatforming. Why incumbents are hard to displace (Priority: 4/5): The guests discuss high gross dollar retention, entrenched customer relationships, and the difficulty of ripping out systems like Workday, Salesforce, and ServiceNow once adopted. What an AI-native Workday should look like (Priority: 5/5): Schmidt outlines the desired properties of next-gen HR software: fast deployment, workbench-native configurability, agent-first interfaces, open integrations, strong security, and compliance. Incumbent AI claims vs real product change (Priority: 4/5): He argues that many reported AI revenue metrics are more procurement theater than actual product transformation, with 'AI ARR' often reflecting shallow spend rather than new capabilities. Human-agent interaction and permissioning (Priority: 4/5): The discussion expands beyond HR into how enterprises will manage agents, permissions, tracking, and access to enterprise data across tools and workflows.

Key Arguments: Workday and similar systems are deeply embedded because they solved real enterprise problems during the cloud era, but their day-to-day user experience has barely improved since the mid-2000s. AI creates the first credible chance to rebuild core enterprise systems in a way that changes the actual work being done, not just the interface or surrounding tools. The hardest enterprise software to replace is already-installed software, which is why incumbent retention metrics are so strong; however, AI may create enough functional difference to trigger switching. Workday’s current AI efforts may be more about procurement optics than true agentic functionality, so headline AI revenue should not be mistaken for a full replatforming. A new HR platform must be faster to deploy, easier for administrators to configure, and natively designed for agents and automation rather than retrofitted with them. The strongest near-term path may be 'brownfield' replacement—going after customers already using legacy systems—if the new product solves painful workflows better than the incumbent. As enterprises adopt more agents, permissioning, compliance, and data access coordination will become central product requirements, not just back-office features.

Data Points: Workday gross dollar retention: 97% - Schmidt cites this as evidence of Workday’s extreme defensibility and category leadership. Personal Workday logins by Schmidt: 3 times in 12 months - Used to illustrate that even a technology investor rarely needs to use the system, despite its importance. Time to find compensation information in Workday: 6.5 minutes - Schmidt describes a specific frustrating user experience navigating a basic employee task. Workday Extend license cost: $25,000 - Referenced as an example of the high-friction, procurement-heavy model for building on top of Workday. Workday AI ARR: $400 million yearly run rate - Mentioned by the host as evidence that Workday is actively monetizing AI-related offerings. Workday AI ARR growth: triple digits year on year - Used to emphasize that incumbents are not standing still, even if Schmidt doubts the depth of the change. Deployment timeline for AI-native systems: 30 to 60 days - Schmidt argues this is possible for modern AI-native enterprise implementations, versus traditional long deployment cycles. Traditional deployment timeline: 12+ months - Contrasted with AI-native deployment speed to show how much implementation economics can change.

Pivotal Quotes: "No one likes doing like these crazy tasks inside of Workday. No employee likes interacting with Workday. No one wants to go into this portal." — Joe Schmidt: Core thesis on Workday’s poor user experience and the emotional wedge for disruption. "You have been a hostage to Workday, and we will free you" — Joe Schmidt: Describes the 'brownfield' replacement opportunity for startups challenging entrenched incumbents. "The way that this core system works for you today can be so fundamentally different." — Joe Schmidt: Explains why AI-native enterprise software is more than an incremental upgrade; it can replatform core workflows.

Implications: AI-native enterprise startups may have a real opening to replace legacy systems by delivering faster deployment, better UX, and agent-ready workflows. For incumbents, superficial AI branding won’t be enough; they must reinvent core products or risk losing the next platform shift.