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Session Name: Enterprise Problems Worth Solving
Announcer Om Malik Aneel Bhusri
I’m looking forward to this one where Om has a chat with Aneel Bhusri, the found of the iconic Workday.
Om Malik 00:13
Thanks, Joe. I had a surreal moment there. It was like, “We at a Cloud conference or is it [inaudible] we’re talking about?” I’m actually going to go for that. Thank you for, Aneel, for coming. I’ve been trying to get Aneel to come to structure for almost a year. Between and him the President, I was trying to see who I could get first and I got you. Thank you, I’m pretty excited. I’m a big fan of Aneel and I have known him for a very long time.
Aneel Bhusri 00:48
I’m a big fan of yours and I’d like to have a conference named after me. [laughter]
Om Malik 00:51
I have a site named after me, too. You can do that, you know. You can call it the Workday Developer Conference. The Aneel Day at Workday. There’s a lot of things we could go with that, right? But, let’s talk about some Cloud stuff. How is Workday doing? I know you guys went public and stuff. How are things going?
Aneel Bhusri 01:13
So far, very well. We went public in October of last year. Our stock has done quite well. We raised an additional 600 million last week through a convertible. We’ll probably do some small acquisitions and make some other investments. We’re up to 2, 100 people. Over 450 large enterprise customers, Fortune 500 types of customers. Last quarter our subscription business grew – which is our main measure of growth – over 80%. By all measures, things are going very well. The two big things for us are to take our leadership from HR and move it into financials, and take our leadership in North America and move it overseas. That’s where I’m spending my time these days.
Om Malik 01:56
When you look at the business you guys are doing, what are they things you learn as a Cloud-based application? What are the big takeaways from the Workday story so far? Where people who are building new companies right now that they could learn from?
Aneel Bhusri 02:13
The number one takeaway is that most any problem that you are going to face in the enterprise Cloud, someone in the consumer Cloud has already faced it – to leverage that experience base. I’m fortunate to be good friends, as you know, with the LinkedIn folks, with Reed Hoffman in particular. Whether it’s scaling out, we started out Workday with a traditional enterprise architecture. Had a couple outages, talked to my buddies in consumer, got a good feel for what scaled out consumer architectures look like? User interface, big data, mobile – you look at all the key technologies that are in enterprise Cloud, they have their roots in consumer. I’d encourage any enterprise entrepreneur to buddy up with their consumer guys. Along the way, you can share your insights on privacy and security with the consumer guys, because where I think enterprise does a good job. The other thing is there are applications that– and companies have tried to avoid the CIO. I think you have to embrace the CIO. Lesson one for us in the early days was we did quite well with the HR organizations. They loved the application. We get to the CIO and they would bounce us out. We learned over time how to provide value and show value to the CIO. Now our sales cycle starts very quickly with, “When are we going to get HR excited or finance excited… how do we get the CIO on our side?”
Om Malik 03:33
Do you think the small companies have to start focusing on the CIO on day one?
Aneel Bhusri 03:40
It really depends on the application. For us, in HR and finance you don’t run lots of HR applications. You don’t run lots of finance applications. It’s all or nothing. We’re replacing legacy systems, so for us we have to go through the CIO door. I think in the early days, we might have tried to avoid it because the Cloud was viewed as disruptive to the CIOs. I think today more than 50% of the CIOs welcome the Cloud. I think if you have a point solution that you can get around the CIO and sell the business, yeah that’s great. But, if you want to really have a big footprint within a customer, you’re going to have to deal with the CIO.
Om Malik 04:17
How did you guys deal with them? How did you convince these CIOs to switch from legacy systems to your architecture, your system? It’s not like these guys didn’t have a lot of investment in the previous generation technologies.
Aneel Bhusri 04:32
Yeah. There was a lot of investment. In some cases, in our old applications from PeopleSoft. Typically, it’s around an upgrade cycle. Customers are on an old version of PeopleSoft or SAP or Oracle, they’re faced with an upgrade. They don’t have a choice. They’ve got to get onto the new version. A systems integrator will show up with a proposal for 10, 20, 30 million dollars. The customer says all I’m going to get is a new version of an old system, that doesn’t really buy me much. Let’s look at alternatives. At that time, we come in and what we offer is a consumer Internet style user experience. A business model in terms of our applications that is built for today’s business, not ERP which is 20 years old. Lastly, a cost model that is about half of the legacy systems. If you’re facing that upgrade, that’s the time to look at alternatives. If you’re not facing an upgrade, most customers will probably wait because it’s hard to make a business case if you don’t have to make an investment already.
Om Malik 05:24
Do you think there is a macro upgrade going on because of the Cloud, emergence of Cloud and the client-server generation coming to an end, so to speak?
Aneel Bhusri 05:33
Wholesale upgrade. We’re going to see it over the next 10 to 15 years, much like client-server replaced the mainframe over a 10 to 15 year cycle, these are wholesale replacements. When we replace SAP, Oracle, or PeopleSoft, we’re actually truly turning off that HR system and turning on the Workday system. Or, the customer is turning off the legacy system, we’re not. I suspect that if a customer chooses a Cloud vendor, like Workday or SalesForce, they’ll stick with us through this generation of technology. In the case of CRM, we’re deep into that replacement cycle. You don’t hear about on premise Siebel deployments anymore. You only hear about Cloud and you generally hear about SalesForce. You’re beginning to see the same thing in HR and the early signs of it in finance. I absolutely believe we’re in the midst of a 15-year replacement cycle.
Om Malik 06:19
You see only a couple of big Cloud applications. There is SalesForce and you guys are there. Google Office you can through in there, Microsoft Office 365. There’s not that many Cloud applications which have come. Do you see anything out there which has a chance of breaking out and becoming big?
Aneel Bhusri 06:46
It’s unclear if you look at the past as any indicator, the big companies are built around core systems of record. Now they’re called core systems of engagement. There’s the sales, marketing, customer record. Used to be Siebel, now it’s SalesForce. There’s the IT area. ServiceNow is doing a great job there. There’s HR and finance or ERP, used to be SAP. PeopleSoft, Oracle and now Workday. There are not many of those big systems of record. The other area of productivity which is Google and Microsoft, the last area which hasn’t been touched yet are all the industry-specific applications. If you’re in healthcare, for you your core system is a patient record system. For manufacturing, it’s a supply chain system. For an investment bank, it’s a trading system. The Cloud has yet to hit those areas. If you’re going to see the next wave of innovation, it will be in those very specific applications tied to whatever industry that you’re in. When I look at areas like file sharing, collaboration I can see why Dropbox is doing so well as consumer utility. I wonder longer term if collaboration and analytics actually just get built into the CRM Cloud or the HR finance Cloud or independent Cloud that remains to be seen.
Om Malik 08:00
That was my next question. What do you think of guys like Box, there is a lot of excitement around the company. What kind of future do you see for them?
Aneel Bhusri 08:09
I think it’s a great, great company. It’s led by a great guy, Aaron Levie. Hard to see how they fit longer term. I think candidly, they end up being part of someone else’s ecosystem. At the end of the day, if you think about business applications, you automate transactions, you analyze results, you share the findings. Over time, customers want a unified experience across those three steps. With Workday and SalesForce, you can do the transactions and increasingly you can do the analytics. We made our push into big data analytics just recently. I expect over time, collaboration and file sharing will be a part of it. The question will be do we do it through a partnership with folks like Dropbox or Box or build it ourselves, or do we acquire a company? I think that same thing applies to SalesForce as well.
Om Malik 08:55
Do you think this whole integration of data into applications or data analytical tools like Hadoop into Workday, is that the trend we are going to see more and more?
Aneel Bhusri 09:09
It’s huge. We announced last November our big data initiative and it’s built on Hadoop-type technologies. We haven’t announced it yet but it is Hadoop or a Hadoop-type platform. Customers from day one have been asking us for the ability to bring third-party data into the Workday system. Our analytics are really good at working on the Workday data. With the big data platform, you can bring in all kinds of data including Workday data. Same user experience, same security model. That’s really important. If you want to provision a user for analytics, you shouldn’t have to get them a new training manual and there should not be a training manual in the first place, but a new security password. It should be all part of the same system. What we’re seeing so for is that it’s less about big data. It’s more about the variety of data. Customer have lots of different types, but in terms of customers that have petabytes of data they want to analyze, they’re not that many of those. Frankly, I think the concept or the term big data scares off a lot of people. Big data technologies are really valuable to bring in. Twitter feeds, Facebook data, weather data, sensor data. You could do an analysis on a marketing campaign based on the location that you could never do in a relational database that you can only do in these platforms. I think you’re going to see this world emerge where you won’t be able to separate out applications from analytics. They’ll be part of the same system. The big data technologies will enable that.
Om Malik 10:38
Do you think all apps, if they have to be successful and scale, they have to think of themselves as a platform and work with other platforms?
Aneel Bhusri 10:48
I think they have to think of themselves as a platform for access and integration. I’m not sure you have to think about yourself as a platform for development. We’ve chosen not to provide a development platform. There are good ones out there from SalesForce, from Microsoft, from VMware. I don’t think the world needs another development platform. We provide a rich set of APIs and a rich set of integration tools to make it easy for third parties to plug into Workday. I think that’s really important for us. We have to make it easy for customers to connect all the systems they want into Workday. If they want to build a custom app, we’re happy if they build it in force.com and then integrate it into Workday. It doesn’t have to be on the Workday platform. We’re taking on such a big part of the market. HR and financials is a 40 billion dollar market. We’re competing in global markets where we have the capabilities and the product for a 150 countries. That is a big enough investment and I think for us, being a development platform would be a distraction.
Om Malik 11:42
What happens to the old fashioned way of thinking about apps? What happens to Oracle, for example, or IBM?
Aneel Bhusri 11:52
They’re all making their moves into the Cloud. I think IBM’s purchase of SoftLayer was a very intelligent purchase. HP seems to be doing the right things in terms of their Cloud. Oracle and SAP are making acquisitions. The only question is can they translate those acquisitions into a true Cloud story? I’m personally skeptical but I’m also biased on that conversation. When I think about what’s happening in the legacy versus Cloud world, all the Cloud vendors have the right products but they’re having to build out the distribution/ channels. The legacy guys have the distribution channels but not the products. We’re in a little bit of arm’s race of who is going to get there first with both the products and the channel. I’m optimistic that the Cloud vendors in most cases are going to win that battle.
Om Malik 12:36
Right. What are you doing next as a company? You said finance… how are you looking at the world at large in order to grow your footprint, your customer base for that matter?
Aneel Bhusri 12:49
The big bet is financials. We feel very good about where we are in HR. Most outside analysts view us not just ahead from a Cloud perspective, but on a pure functionality perspective we’re ahead from the legacy systems in HR. We’ll start moving attention to financials. If HR is a 10 billion market, financials is three times that size. Financials is sort of the hub of an enterprise. It’s the place where the CFO has all the dollars. It’s the place where the financial data is really the key record data of whatever business you’re in, whether it is trading data or manufacturing data. If you win HR and finance together, you’ve effectively won the ERP market. When I think about what we’re trying to do– at PeopleSoft we were probably second or third in the client-server wave. I think we have a chance to be first in this wave. So, it’s largely building out those HR and finance apps, but building it out this time around with built-in analytics based on big data technologies. Building it with a better consumer Internet experience. Building it with mobile and then taking it globally.
Om Malik 13:51
What percentage of your usage comes from mobile apps?
Aneel Bhusri 13:57
Off the top of my head, I wouldn’t know. But, I’m going to guess it’s approaching 25%, that would be a guess. It’s been a slower uptake more because customers have been careful about rolling out these capabilities. Many of our large customers are still big Blackberry shops. We haven’t really put a lot of effort into building for the Blackberry platform. But as they shirt to Android and iPhone, the attach rates are going up pretty dramatically.
Om Malik 14:25
Dave was talking a little while ago that they are taking a lot of big data and chopping it up into little applications for Revlon’s [inaudible] and making it easier for people to access. Will you have to do something of that sort for your applications too?
Aneel Bhusri 14:46
In terms of chopping up the data? I think the whole world of big data is really going to be driven by customers. Dave is talking about his own shop. Our job is to provide the tools and the data model, so we’ll provide you with an HR financial footprint, we’ll provide you with the warehouse. If you’re an insurance company, you’re going to be looking to do different analytics than a manufacturing company will do. You’ll figure out what data you’ll pull into and over time, we’ll work with the customers to build templates. I think the limitations on big data analytics is only limitations on your own creativity. You can parse it to small pieces, you can do big analytics. You can kind of do whatever you want.
Om Malik 15:25
Let’s talk about your other role. I know sometimes you play VC on the Internet. What are you seeing in the world at large, from enterprise software, from Cloud applications end point?
Audience Member 15:40
I think this is the most exciting time in enterprise technology in the last 20 years. When I look back to the early 2000s, most enterprise startups were basically trying to wedge in and co-exist and not offend the large incumbents. I was on the board. I was the chairman of a company called Data Domain, and were absolutely trying to wedge in around EMC and NetApp and not take them head on. Today, give the rapid acceleration of technology and innovation technology largely from consumer, you see a new generation of enterprise companies that are going directly at the incumbents. Whether it’s pure storage building out an enterprise-class array. Whether it’s Cloudera, which at the end of the day is a next-generation database taking on relational databases, these are companies that are not trying to compete on the fringes but are actually trying to go after the big markets. I think we’re in the midst of the most exciting wave of enterprise innovation since the client-server wave of the late 90s.
Om Malik 16:40
Cool. Before I go, last question. When is Cloudera filing for an IPO? I know they got a new CEO.
Aneel Bhusri 16:48
They got a new CEO yesterday. I’m probably not the best person to answer that question. Get him on stage for your next conference.
Om Malik 16:54
You’re on the board, man. [laughter]
Aneel Bhusri 16:56
They don’t tell me anything. You know that. They don’t tell the board anything. I didn’t even know we were getting a new CEO.
Om Malik 17:01
I’m sure they tell you everything.
Aneel Bhusri 17:02
I’m kidding, I’m kidding. The company is doing extremely well and in all honestly, Mike Olson was a fantastic CEO. He made the decision he wanted to build the company to get ready for an IPO, so we went out and get a public company CEO who is a fantastic guy, Tom Reilly.
Om Malik 17:19
Right. Thank you, Aneel. I’m privileged that you could come and spend time with us. Hopefully, we will see you more often at our events.
Aneel Bhusri 17:27
Thank you, thank you. Take care.