Elena Berger speaks with Joe Schmidt IV, partner on the enterprise team at Andreessen Horowitz, about the vulnerability of entrenched enterprise software platforms.

The conversation centers on Schmidt's controversial piece 'Workday's Last Workday,' which argues that AI represents a platform shift significant enough to challenge the most defensible enterprise software companies.

Schmidt explains why A16Z's enterprise team has been writing 'obituaries' for established SaaS platforms, focusing on how AI-native alternatives could finally provide compelling reasons for enterprises to rip-and-replace core systems like Workday, ServiceNow, and Salesforce.

The Platform Shift That Built Workday vs Today's AI Opportunity

Workday emerged from the cloud platform shift when founders Dave Duffield and Aneel Bhusri rebuilt PeopleSoft as a cloud-native system after losing it in a hostile takeover to Oracle.

The previous shift was architectural - moving from on-premise CapEx to multi-tenant cloud OpEx - while today's AI shift fundamentally changes how work gets done and systems are experienced.

For 20 years, enterprise software innovation focused on point solutions built on top of core systems because the underlying user experience couldn't be meaningfully differentiated.

"For the first time, you can actually go to a CHRO or CIO and say, the way that this core system works for you today can be so fundamentally different" - Joe

Why Workday Is Both Critical and Universally Disliked

Schmidt calls Workday "the most important and least loved product in enterprise software" due to its 20-year-old architecture built for internal IT teams rather than end users.

"I am a technology investor. I went in to find my compensation information in Workday. It took me six and a half minutes" - Joe, describing the user experience problem

Despite the poor user experience, Workday maintains 97% gross dollar retention because switching costs are prohibitively high and no compelling alternative has existed.

"No employee likes interacting with Workday. No one wants to go into this portal" - Joe, explaining the universal frustration with current enterprise software

Workday's AI Strategy Falls Short of True Innovation

Workday reports $400 million in AI ARR growing triple digits, but Schmidt argues this represents "procurement innovation" rather than genuine AI transformation.

"When I talked to professionals about the flex credits, people would just start laughing" - Joe, describing market reaction to Workday's AI offerings

Building applications still costs $25,000 for a Workday Extend license plus consultant fees, with no truly agentic experiences being delivered to users.

The AI revenue appears driven by CIOs needing to show AI spending rather than actual workflow transformation or user experience improvements.

Six Properties of an AI-Native Workday Replacement

Rapid deployment in 30-60 days using AI agents for implementation versus Workday's 12+ month timeline with expensive consultants.

"Workbench native" capabilities allowing HR teams to build solutions directly rather than paying $25,000 plus consultant fees for basic customizations.

Agent-first architecture where AI handles routine tasks and users stay within their existing tools rather than navigating complex portals.

Open integration capabilities, enterprise-grade security and permissioning, and built-in compliance for heavily regulated HR environments.

Market Validation and Competitive Response

Schmidt interviewed Fortune 500 companies using Workday and received responses like "I would buy this from you if it existed right now."

Workday's defensive moves include bringing back founder Aneel Bhusri, conducting two layoffs, and acquiring companies like Sana to fight off emerging threats.

"We're seeing the cracks in the most defensible businesses in the world, and it's a really exciting time, and the race is on" - Joe

The opportunity extends beyond HR to other entrenched categories like ITSM and CRM where similar platform vulnerabilities are emerging.

HR Software as a Bellwether for AI Enterprise Adoption

HR software historically hasn't been at the forefront of enterprise technology adoption, making it a key indicator of when AI reaches mass enterprise acceptance.

Schmidt envisions a map where coastal tech hubs are 'lit up' with AI adoption while the rest remains dark, with HR transformation signaling broader enterprise AI takeoff.

As agents become more prevalent, HR systems become critical for managing agent permissions and roles within enterprise hierarchies.

The anthropological significance of HR software reflects broader workplace norms, benefits expectations, and how humans interact with AI agents in professional settings.