Workday's layoff is part of a growing list of tech companies cutting employees. But the company says it didn't overhire and is instead taking steps toward realignment.
Like other tech companies, Workday's headcount grew during the COVID-19 pandemic and the company is now cutting its global workforce. But unlike some tech companies, Workday pointedly said its 3% cut -- which amounts to approximately 525 people -- is not due to overhiring but to a realignment.
Workday could have opened itself up to questions if it said it overhired during the pandemic. The firm makes demand planning software designed to help companies plan for the future and adjust their workforce sizes for expected product demand. Economic outlooks are part of the demand calculus.
Workday's payroll has grown significantly in recent years, and similar to other tech companies that are cutting payrolls, this layoff is a fraction of this growth. It currently employs 17,500 people, a 40% increase compared with its 2021 fiscal year, when it reported its headcount as 12,500 in financial statements.
In a letter to employees, co-CEOs Aneel Bhusri and Carl Eschenbach said that Workday this month developed "a refreshed vision, strategy and core set of values that we firmly believe will pave the way for our next phase of growth."
We plan to increase the size of our global workforce.
Aneel Bhusri and Carl EschenbachCo-CEOs, Workday
They continued: "These moves are not the result of overhiring, and in fact, we plan to increase the size of our global workforce in FY24." Workday's 2023 fiscal year ends today.
The majority of cuts Workday is making affect its product and technology organization, according to the statement by Bhusri and Eschenbach.
Workday does see a "challenging" economic environment ahead, the co-CEOs wrote. That may be especially true for HR departments, where budgets are forecasted to remain flat this year.
Trevor White, an analyst at Nucleus Research, said the slowing job market affects HR vendors. Customers typically pay vendors based on employee usage.
"When that retracts, so does revenue," he said, adding that slowing job growth also decreases demand for HR tools.
Stagnant HR budgets
"With the current economic uncertainty, I think that a lot of HR departments are going to see budgets cut or remain stagnant," White said. "For the last few years, with record low unemployment followed by the chaos of the pandemic, HR departments were getting treated to larger budgets."
Some tech vendors have acknowledged hiring miscalculations in their layoff announcements.
In explaining Salesforce's 10% workforce reduction this month, CEO Marc Benioff noted that "we hired too many people" as "revenue accelerated through the pandemic." Similarly, Google CEO Sundar Pichai told the company's employees that it "hired for a different economic reality than the one we face today." Google cut 12,000 positions.
Microsoft's CEO Satya Nadella, in a blog post on the vendor's reduction of 10,000 jobs, said that customers are optimizing "their digital spend to do more with less." Although Microsoft saw considerable employee growth in the past two years, it didn't say it overhired but was realigning to where it sees customer demand.
Workday offered analytics and modeling systems for planning before it acquired Adaptive Insights for $1.5 billion in 2018. That acquisition added to its planning tools capabilities.
In a customer flier on "Better Demand Planning," Workday broadly explains what these tools can accomplish.
"As demand planning becomes more sophisticated, you move beyond simple trends into a more multifaceted and nuanced understanding," according to the brochure. "For example, predicting there'll be less demand for your skiwear this winter because a competitor launched a new product line, snowfall is low, and the economy is tight, so fewer people are taking ski holidays."
Patrick Thibodeau covers HCM and ERP technologies for TechTarget Editorial. He's worked for more than two decades as an enterprise IT reporter.
