I don't think you need an introduction to Carl Eschenbach at all.
Or you, Kash.
Carl's been a COO, been a CEO. How many of you know somebody who's been a CEO and has been a COO and a CFO and a venture capitalist? Anybody knows anybody? No. Okay, so there you go. Yeah, that is truly unique, but I just thought about it.
Yeah.
How many people have worn these multiple hats?
Yeah.
It's only one person that I know.
I don't know if that's a good thing or a bad thing, but I have done a lot. I'm very fortunate and had a blessed career, and I'm super excited to be here with you, Kash and Jan. Thanks for having me.
Thank you.
So if you were Zane, the CFO of the company, "My boss has been a CFO." Zane's sitting in the audience somewhere.
Yeah.
He's somewhere here, but... Yeah, there he is.
Yeah, he's hidden in the back. But, Zane, if you have any questions for me that I want to deflect, they're all going to Zane.
I really want to talk-
He can sit as far back as he wants, I'm still gonna get them.
Exactly. The free cash flow margin to non-GAAP operating margin, percentage bridge. No, we want to talk-
We should be okay.
Yeah. So Carl, thank you so much, and congratulations. I think we, we met many, many years back, I think it was 2007.
Yeah, our IPO.
It was a year. The IPO of VMware, and Aneel had started Workday in 2005. Did you ever know, did you ever think you could be running an application software company when you were running the business operations of VMware?
No.
Did you ever?
No, I probably didn't, right?
Yeah.
I knew of Aneel, obviously, from his PeopleSoft days and all of the success he had, and then the launching of Workday. I was very familiar with it. In fact, speaking of CFOs, Aneel, who I love dearly and is my partner now, stole at the time my CFO, my chief accounting officer, and my investor relations person-
Yeah, that's right.
All within two weeks to take Workday public. So, that was... That's, unfortunately, how I became CFO for a while when they went public, and I was upset with him, but not no more. He's a great partner, and I'm great to be on the journey with him.
He stole his future CEO as well—from VMware, it sounds like.
Yeah, that's probably true. I don't know.
That's great. Aneel, if you're listening, it's all good stuff. This is fantastic. So Carl, you've been even on this journey before, you're no stranger to technology, but Workday is an application software company. How do you look at this company five years from now? Let's say you come back to the 2028 Goldman Sachs conference, and we'll put you on the... This is a beautiful stage, by the way, but some clients ask me, "So how come Carl's not on the bigger stage?" We'll definitely get you on the bigger stage. So what does the company look like five years from now? What do you want it to look like five years from now?
Yeah. So let me start with why I'm excited, maybe, Kash, and why I jumped back in after an amazing seven-year journey at Sequoia. And what I learned in those seven years, and combine that with my 30 years of operating experience before I went into, if you will, Sequoia. And I actually think the transition from, well, VMware to Sequoia was a good one. I think I'm a better operator, a more skilled executive and leader at this point, and I have really enjoyed my first 9 months here at Workday. You know, I'm not new to Workday in the sense that I was on the board for five years. I spent five years on the board, so I knew the company. Obviously, I knew Aneel. I knew a lot of the leadership team-
Mm-hmm.
A lot of them worked with me in the past.
Mm-hmm.
And then I was always, you know, part of helping recruit some new leaders to the company. So it's not like it was new to me.
Mm-hmm.
I will tell you, the one thing that attracted me to Workday, and still is very much attractive to me now, nine months later, is the culture.
Mm-hmm.
Aneel and Dave built an amazing culture at Workday over the last 18 years, and it's one that I always thought was powerful and the foundation for everything Workday does. And indeed, now, nine months later, I can tell you that is true. And now having this experience, both on the venture side and the operational side, you know, I think about Workday in three different categories. Number 1, the strategy of the company, to your question: where are we going? I think about innovation and how we continue to innovate. If we're not innovating every single day, both organically, inorganically, and on the go-to-market side, right? I always say if the world's innovating faster than you are outside your company, than you are inside your company, death is near, so we need to always be innovating.
Mm-hmm.
And then lastly, we need to execute. And execution is very simply defined as a discipline of getting things done, and I think we're executing very well. And if I look out five years from now, I think the vision we have to be the digital enterprise backbone, right, that supports companies' two most important assets, their people and their finance, through a full platform approach, being able to do planning, execute, and analyze it, all under the same architecture, I think that's where we're gonna differentiate ourselves, both today and in the future.
Mm-hmm.
I think we're, we're very well positioned in both good times and bad. Despite whether you have a headwind or a tailwind, I think Workday is very, very much positioned in a good place at this point and going forward. We're very unique in that the business is highly resilient.
Mm-hmm.
It's a highly resilient business. We have over 5,000 core customers. We have 10,000 in total when you combine it with our planning product.
Mm-hmm.
We have a great go-to-market motion in landing net new customers with a nice balance of selling back into that installed base.
Yeah.
So it's highly resilient because of the diversity of the business, and if we can continue this motion we have today by becoming that full platform for the enterprise to support those two mission-critical assets-
... I think the future is quite bright. It's great. People tell me that this does not surprise me the least at all, it's a fresh breath of energy at Workday. It's like all of a sudden, some new clarity, some new energy, and people are fired up, really fired up, fired up even more. I mean, Aneel fired people up as well, but now they're even more fired up. My question for you was, despite all the macro pressures, you are one of the very few companies that actually did not have to lower your guide, whatnot.
Is it just the execution under the Carl Eschenbach effect, or is there something else to the Workday product portfolio and how important you are, that's allowed you to be a more consistent performer than many others who have to take down their guidance?
Yeah.
And take down the numbers?
First, Kash, you know, it's not the Carl Eschenbach effect. Hopefully, I have some impact in partnering with Aneel, but, you know, Workday is way bigger than an individual at this point. There's no doubt I know enough about myself. I am probably, you know, energetic and optimistic about everything and really focused on driving energy. I think energy and enthusiasm are contagious, so I do like to operate in that way. But there's no way that, you know, our company at Workday is, you know, performing at the level because of one person. I'll say that right up front. It's because of my 18,000 Workmates around the world and my partnership with Aneel. And I'll go back to why I think it's resilient.
Mm-hmm.
I say we're highly resilient because we have a diversified, you know, customer base, a diversified go-to-market, and that is extremely durable. If you look at our retention rates, you look at our upsell, cross-sell capabilities back into our customer base, and then yet landing net new customers, it's one of a kind in the software industry today. And I think despite some of those headwinds that you're talking about, our value proposition is only strengthening.
Mm-hmm.
Why? Because people are focused on creating a new level of productivity through their employees, giving them a different experience, and if you do that, I think ultimately what happens, you have lower attrition, so your people stay with you longer, they're much more loyal, and your productivity continues to rise. At the same time, when you're dealing with an uncertain macro, there's a lot of changes that someone like a Zane or other CFOs have to deal with. And having a platform that will allow you to run scenarios and do planning, regardless of what's happening in the economy.
Mm-hmm.
Is something that's highly valuable. And as people now start to think about their financials that traditionally have been on-premises-
Mm-hmm.
And now moving to the cloud, I think that gives us a unique market opportunity, too. And then the last thing I'd say is, as we continue to work with customers, both existing customers and new customers, they're not looking for Workday to deliver a solution.
Mm-hmm.
They want a platform. What I mean by that is we are more and more selling full platform, both HCM and financials, at time of sale to customers and wrapping planning around it, and that's definitely something that we see picking up momentum in the market.
Mm-hmm. And on that very thought, right, so Workday's got a lot of products, as many of them organically developed, some through acquisitions. How do you simplify the product portfolio and make it so tangible for the customer that you remove more and more of the friction, as one might naturally introduce as you expand the product portfolio, just more reasons for the customers to say, "No, maybe this, maybe, maybe not that." How do you simplify that.
Yeah.
... buying process?
It's a great question, Kash. I'll answer two different ways. First, you know, traditionally, we've landed with an HCM platform or product or an app. You called it an app or financials as an app, but I think more and more we're being seen as a platform company.
Mm-hmm.
More and more people are taking a lot of those best-of-breed solutions they bought over the last three to five years, when you saw this hypergrowth and new products, new offerings from the startup community, and now they're consolidating them on this platform that we have, whether it's financials or HCM.
Mm-hmm.
So there's a consolidation happening, and I think we have a strong total cost of ownership message for our customers, you know, both existing customers and new.
Mm-hmm.
Now, to answer your question, we do have a lot of SKUs, and we sell them, you know, as a one-off SKU every single time, and we're going through an exercise internally right now to figure out how can we remove the friction-
Mm-hmm.
... between our sales organization, our channel, and our customers, to be able to sell more suites.
Mm-hmm.
Sell more holistic platform solutions as opposed to one-off SKUs.
Mm-hmm.
Now, if you're an existing customer, one of the things we have going for us right now, we have this notion of selling back into the base. We have two different sales force. We have a sales force that lands net new customers, and then once it's landed, it's passed over to a customer base team, and they drive, you know, additional SKUs. So the customer base team is very quickly driving a significant, you know, uplift in our customer base-
Mm-hmm.
... through selling them these additional SKUs, but it's still one at a time, and we're gonna move to suites and packaging in the next 12-18 months to reduce the friction between us and the customers.
Got it. Gili?
Yeah, I mean, touching on that, Carl, thanks so much for spending the time with us today. I think, you know, we'll talk about HR definitely a lot today, but one of the questions I actually had was around ERP and that full platform that you were just talking about. I think that that ERP has been a laggard in penetration to cloud and that migration, and especially now with digital transformation and tight IT budgets. What do you see as being the unlock and allowing customers to really be ready to make that step and choose Workday in doing so?
Yeah, it is a great observation. We just went through a study where we looked at the percentage of ERP or FMS that's still on premises-
Mm.
- versus the cloud.
Mm.
Right now, we estimate, both our estimation and the industry as a whole, estimate somewhere only between 20% and 25% of workloads have moved to the cloud.
Mm.
So that just shows you the size and scope of the opportunity. And listen, I think rightfully so, your CFOs are conservative, right? They're not open as much as people in the HR community to take a system of record and put it in the cloud.
Except Zane. Except Zane.
Zane's the best. Like, yeah, he's conservative, but he's great. He's, you know, I'm so lucky he's here. Thank you. But I think they are conservative when it comes to moving financials, a system of record to the cloud. So I think we're in the early days of this shift to the cloud.
Mm-hmm.
To be frank, you know, our competition is helping us in the sense that they're asking their customers to move off premises and move into the cloud.
Mm-hmm.
When that happens, we get a seat at the table to have a discussion with those potential prospects to, you know, deploy the Workday, if you will, financial platform. If they're an existing HCM customer from Workday, there's even a higher propensity for us to sell, you know, a full platform, to your point-
Right.
... and wrap planning around it. So we're in the early days of this financial movement, which is why we, as a company, are investing quite heavily on the go-to-market side and building out, a sizable FMS direct sales force, incremental to the other people who sell everything.
Oh, so interesting. And I guess this begs the question around generative AI, and when we think about the opportunity in front of Workday, and the sheer amount of data that you have around the workforce and the knowledge workers all around the world, how is that helping you both within HR and ERP and the go-to-market motion that you just talked about?
Yeah. So listen, this is a revolutionary technology, right? It's a major tectonic shift, probably like we haven't seen in the last 30, 40 years. And I think, first, people need to lean into it. But they also want to lean into something that's safe, that's ethical, and responsible as well. And when I think about this AI movement, I think about what is the output of generative AI or AI or machine learning?
Mm-hmm.
I think it's only as good as the input. I think this is where we have a really big differentiation. We have over 60 million contracted users on our platform, and we're processing, last year, 600 million, right, transactions a year through our platform.
Mm-hmm.
When people talk about a large language model, I call ours an enterprise large language model that no one else has.
Mm-hmm.
In a multi-tenant cloud, same architecture, same code base all the time. So we have the ability, you know, to train off of a very large LLM that others don't have.
Mm-hmm.
We can drive business outcomes for our customers, like skills. We focus on how do we look at skills as opposed to jobs or job risks? How do we do talent optimization? How do we give people journeys? So we have all of this AI ML deeply built into the platform for the last 10 years. At the same time, we also have announced, via our Extend product, what we call an ML Gateway, a machine learning gateway.
Mm-hmm.
So if people want to take an outside LLM, integrate it into Workday, we'll allow them to do it so. Whether it's from one of the hyperscalers or OpenAI or anyone else. So we are leaning into it. We think, quite frankly, we're already monetizing it. I know a lot of people ask the question is: How do you monetize generative AI, and what are you gonna do? We believe we're already monetizing it. Look at it through our competitive win rates versus our competition, and we look at it through our renewal rates, we look it through customer satisfaction. And all of those are, you know, at, you know, company historic levels right now-
Mm-hmm.
... because we have it built in from day one. Now, that doesn't mean we're not gonna bring new, you know, SKUs, if you will, or offerings to market, and we're gonna monetize them, but we're not gonna do it every single time. What we don't wanna do to our customers is nickel-and-dime them and say, "Every time we add some additional capabilities around AI or generative AI, we're gonna charge them.
Mm-hmm.
They do pay us a subscription fee every year. They pay us an Innovation Index uplift at time of renewal. We wanna make sure we're giving to our customers. Now, if it's gonna take away from our compute capacity or impact the OpEx on our end.
Mm-hmm.
... like bringing in, an outside LLM, we will find a way to monetize that. So we're gonna really think through the monetization strategy, but I would say we're already monetizing it if you look at some of the areas that I've talked about, competitive win rates, renewal rates, and customer satisfaction on the Workday platform. But we're unique. We have a large data set that no one else has. Our competition has on-premise, they have in the cloud, they have single tenant, right? Some multi-tenant. They have hybrid. We have a multi-tenant cloud, everyone on the same code base that we've been training off for years, and that number only expands. The 600 million transactions I talked about this year, that's up from 450 million last year. A pretty good data set to train from.
Definitely.
So if you're on-prem, you don't need a copilot, right? I mean, if you're in the cloud, you'd need a copilot.
Amen.
I was just trying to be funny, guys. Come on.
Yeah.
Copilot on-prem doesn't make sense, right? Okay.
That was good. Now, yeah, sorry, I didn't get it at first. But yeah, we're in the cloud. We're going to the cloud.
You need a Copilot. So, there are different software companies that have announced pricing for AI, so that like 60% uplift. Other companies, $30 per user per month. Those seem quite high. I really wish all these companies are able to get their price realized by the marketplace, but what you're talking about is a different way of monetizing. So how do you get paid? I know that your customers expect you to provide some level of that AI functionality-
Yes.
... in the product itself. Are we to see a reconstituting of the product line, and you have, financials AI plus version or financials without AI? Or do you just say: If you want financials, it's gonna come with X, Y, and Z, and the price is this, whereas the previous price, it's-... not comparison, because it's apples and oranges. How are you thinking about how you get paid for it?
Yeah, I think, Kash, what I was trying to articulate, it's a combination of both, right? We believe we owe our customers some innovation in the platform, like the team and Aneel and Sayan, who runs product and technology, it's done for the last 18 years. And they do pay us, and they pay us an increase every year for that innovation.
Yeah.
So we will monetize it through, you know, what I was articulating earlier. At the same time, if we see opportunities, for example, we have a product called Talent Optimization, right? That is based on our Skills Cloud, and that's 100% AI/ML driven.
Yeah.
It's a new SKU. We've optimized for it-
There you go.
We're charging for it, and it's one of the fastest SKUs we've ever had. So it's gonna be a balance of both.
Mm-hmm.
But you're not gonna just see us come out and say, point-blank, "Here's a, you know, FMSPlus or HCMPlus, and here's a big uplift on one, you know, product or the other." We're gonna be smart about it, and we'll share a little bit more about the innovation around AI and generative AI at our Rising conference in three weeks from today.
Yeah. Here in San Francisco. We've put a plug. You should tell me so-
Yeah, there you go.
When is Rising? And, so three weeks from now?
Three weeks from today, we kick off Rising at Moscone.
Excellent. Excellent. Yeah, thank you for keeping me in confidence.
We expect to have, you know, 15,000 of our closest friends and partners who trust us with their most precious data, in town.
That's great. I'm looking forward to it.
Yeah.
We've not had Rising in San Francisco for a while.
Yeah.
Yeah.
Obviously, the COVID.
The pandemic.
Yeah.
Yeah, exactly. Exactly.
Sure.
I wanted to get your thoughts on. I could go in multiple directions. This is such a fascinating conversation. But, HR, there is a view that it's, it's mature. Do you have a different view on maybe what the definition of maturity is? Maybe there's more innovation to come from Workday. How do you think about it?
You know, it's a great question, Kash. And to be honest, when I was thinking about, you know, taking Aneel up on the amazing offer to, you know, partner with him, and serve here at Workday, a lot of people said: "Workday? Like, you know, aren't they mature? Aren't they grown? Is there growth? Is there opportunity?
Mm-hmm.
One of the things that excites me most about Workday, as we sit here today, is that opportunity.
Mm.
Right? We're less than 10% penetrated, even on HCM, you know, in the market.
Mm-hmm.
If you go international, it's less than 5%. I think what people do is, a lot of times they look at Workday, we have more than 50-
Based on the number of seats, right? Is it-
Yeah, exactly.
Yeah.
If you look at Workday, we have 50% of the Fortune 500, right? And we have 25% of the Global 2000. So people say the market's sold out.
Mm-hmm.
I remind people, that's 2,500 accounts in the world. One has 50% opportunity left, the other has 75%. If you look at the incremental opportunity, especially in some of the verticals we're going after-
Yeah.
... state, local governments. 13 states across the U.S. have made decisions to go full platform transformation.
Mm-hmm.
That's a lot of opportunity. You look at our penetration in healthcare.
Mm-hmm.
You look at our penetration in retail and hospitality, which just became our second billion-dollar ARR vertical.
Mm-hmm.
After financials. It's huge.
Mm-hmm.
Then you look at two other areas that we're investing heavily in, it's our international opportunity. We get 25% of our revenue outside of the U.S., including Canada.
Mm-hmm.
75% is from right here in the U.S., and that kind of goes along with the Fortune 500 and the Global 2000 penetration. But we have a tremendous opportunity internationally.
Mm-hmm.
Then we also have a really unique opportunity that's playing out quite well, that the company has focused on, and we call it the medium enterprise. We have the large enterprise, if you will, segment, and we have the medium enterprise segment as we've gone down market, and that is one of our fastest growing market segments. It was started and launched here in the U.S.
Mm-hmm.
Based on the success we have here in the U.S., we're taking and replicating that across into international markets.
Mm-hmm.
We're really excited about that as we've gone down market, not into the SMB, but the medium enterprise.
Mm-hmm.
The interesting thing there, Kash, is we've gone down market into the medium enterprise. Those customers have a tendency to buy full platform.
Mm-hmm.
I'm not talking full platform HCM or full platform FMS. They bought-
The whole thing.
... true full platform, and they wrap planning around it. That's a huge opportunity for us as well. So when people say: "Is there opportunity?" I just share some of that.
Yeah.
That's what gets me excited, that's what gets the company excited, it's what gets the partners excited.
Yeah.
There's plenty of runway for us to find growth. Now, listen, a lot of the initiatives we're putting in place, like new partner programs, to leverage partners more than we ever have, the international build-out-
Mm-hmm.
... focus on the medium enterprise, incremental resources to go after the FMS.
Mm-hmm.
These things don't play out in the first six months of this year, right?
Right.
But we're starting to see signs and evidence of our pipeline in these certain areas-
Mm-hmm.
... to, you know, that's starting to grow, which tells us, let's keep leaning into some of the hiring we're doing.
Got it.
So there's opportunity.
Yeah. You have this habit of reading my question. The next question is gonna be hiring. Yeah. So you finished with hiring, and I want to ask you two things. When you look at your customers, and they've got 60 million people on the payroll, are you noticing any trends where, you know, hiring industry- tech industry went through layoffs and such? Are we at a point where your customers are feeling, you know what, maybe Jan Hatzius, the Chief Economist of Goldman Sachs, has been right all along, and he's been saying, "Well, recession, not so sure about that." Maybe you should have listened to him and started to invest in strategic initiatives, and maybe... Or maybe I'm just making this up. But this is, this is the truth, right?
Yeah.
Where do you see your customers, and where do you see yourself? If your customer is starting to hire, would you also consider ramping up hiring? I mean, that would be a very... non-consensus thing with industries like, "Oh, got to show profits," and which is good, right?
Yeah.
But then when, if growth were to come back-
Yeah.
Do you have enough people? Do you need to start to hire?
I'll, I'll go backwards just 'cause it's top of mind on hiring.
Yeah.
We continue to hire at Workday. Specifically, we're focused on two areas, right? That's our product and technology, you know, organization, especially when it comes to AI and ML. Aneel and Sayan are doing an amazing job with the recruiting there. At the same time, we are investing in go-to-market. Because of some of those opportunities that I spoke about earlier-
Mm-hmm.
We are investing in the go-to-market side, quota comparing, quota capacity-bearing people. We continue to invest in-
Mm-hmm.
Especially around Financials. So we are hiring where we see opportunity. We're being smart about it, right? We're being measured. We're not gonna overhire, but we are continuing to hire, and we're attracting amazing talent.
Mm-hmm.
If I can say so, Kash, I feel like right now at Workday, we're a little bit of a magnet for great talent.
Mm.
We can attract, you know, people like Zane-
Mm-hmm.
a brand new CMO, Emma, who's now leading, you know, Emma Chalwin came from Salesforce-
Right.
Ran all marketing, field marketing globally for them in demand. We've hired a whole bunch of, you know-
I hear they were able to attract a CEO as well.
Yes, exactly. I don't know. I'm super grateful to be here. But we are hiring-
Yeah.
I feel like we're a magnet. We have people boomeranging coming back.
Yeah.
So we're doubling down because we see the opportunity, and we're just getting some amazing talent. People to run operations, people like a new CIO we hired-
Mm-hmm.
you know, Rani, this lady's amazing. We hired new people to run our federal business and services, so we're getting world-class talent to join us, so we are hiring. As far as what we're seeing from our customers-
Mm-hmm.
We did see... You know, we have a recruiting tool on top of Workday, so we can kind of gauge what's going on. We saw a slight slowdown in hiring from Q1 to Q2. And, you know, our recruiting platform in the U.S. alone, we actually, you know, recruited 22% of all jobs in the U.S.-
Wow!
In the May timeframe.
Mm-hmm.
That's how active our platform is, so we get a good insight on what's going on in the market. I think what people are really trying to do is not focus on just recruiting, right? But they're focusing on getting the people with the right skills to work on projects. People are focused on projects and outcomes, and to do that, you don't recruit based on a job req. You recruit based on the skills that are required-
Yep.
Right, to fulfill against a project scope that you have defined, and I think that's what we're doing with AI/ML and our Skills Cloud. People are looking to reskill and upskill.
Mm-hmm.
Their workforce to get a step function change in productivity, and that's what we're seeing people really focus on. And we're at the forefront of that. No one else has a skills platform like that. There's a reskilling of the workforce taking place, that gives us a lot of optimism about the hiring going forward. That being said, it's a competitive world, as we all know.
Yeah. The lull you saw, is that getting better? Are you seeing any improvement in your customers hiring for positions?
You know, we'll see how it plays out in Q3.
Yeah.
The Q1 to Q2, I'd say we saw a slight slowdown. We'll see how it plays out here in Q3. In the summer months, for most people are always a little bit slower, so-
Yeah.
I can't comment on, until we get to the end of the quarter, what we're seeing.
I agree with you on reskilling. Gili and I are learning generative AI.
Yeah.
We're learning LLMs and things that we didn't know how to-
Copilot.
Copilot, yeah. Co-copilot, pilot, and, LLMs and vector databases, and people ask me, "What do you think of vector databases?" I'll get back to you. And, you study it, and you're like, "This is brand-new stuff, right? Just mind-blowing." So I'm gonna do a quick pulse check, and it's standing room only here, which is great. Thank you so much. If you have a question, please raise your hand. We'll get to you. Must be the-
While people are warming up, maybe I'll ask a question, and then.
Yes, please
... we'll come back to the crowd.
All right, Gili, back to you.
Yeah. I just had one or two if, if the crowd is quiet. When it comes, you talked a lot about international and mid-market and the co-selling, upselling opportunities. How-
Mm-hmm.
You also talked about being the digital enterprise backbone of... Which I think is, like, a great tagline for that, and the motto for, for what Workday is looking to do. How do you, how do you determine and, observe or evaluate the opportunities in front of you and determine which ones to build or buy or even partner, as you sometimes do internationally?
Yeah. So we, we think about, if you will, innovation in three different areas. Organic innovation on the technology front, and we're doing really well there. We continue to bring new solutions, new SKUs, new products to market that run on top of our platform. We also continue to innovate on the go-to-market side with new channel programs. Like I said, we see the financials opportunity we're building out there, so we continue to innovate there as well. And then we also listen to our customers and our partners, and we seek their advice as to what they would like to see from Workday when it comes to technology.
Mm-hmm.
We would always love to innovate organically ourselves-
Yeah.
Right? We'd love to build it. If we can't, we will think inorganically about how do we go out and find this technology that's strongly adjacent to our platform that we can acquire, that will allow us to accelerate our growth going forward. So, you know, we do all three today.
Mm-hmm.
On the M&A front, specifically what we're talking about, we look at three different dimensions, whether we would acquire a company.
Mm-hmm.
First, culture. I talked about culture. The very first thing I mentioned on stage today was talking about culture.
Mm-hmm.
They have to be a cultural fit. Number two, they have to have a strong adjacency or a technology fit that we can integrate into our platform, one of our two platforms.
Mm-hmm.
And then third, does this snap nicely in our go-to-market and distribution strategy? And if we find those three, right, and there's customer demand-
Mm-hmm.
Or partners are saying: "Workday, you should think about this," we will, you know, look at M&A. We're inquisitive, we're, you know, always looking in the market. We have a strong capital position, but we're never gonna be, I think... You know, Aneel and I are so locked in on this together. We're never gonna be the company going out and doing that massive, you know, M&A.
Yeah.
We're much more of technology tuck-in and accelerate their growth through our distribution channel, and it's got to tightly align to our culture and the technology integration.
Okay.
That's how we think about it.
... Thank you. I think we have a question right here from Mo.
This is my colleague who covers European software, Mo. Hi.
Hi, Carl. When you speak to system integrators, they obviously praise the architectural elegance of the Workday suite. You talked about shifting to platforms, but one of the areas that's been cited is the functional capabilities, particularly on the financial side, and addressing many international markets. And also from a vertical standpoint, you have the kind of services industry heritage. So where are you in terms of, like, the capabilities on the manufacturing side and international side on the core financial, say, to challenge SAP or Oracle more there?
Yeah, it's a great question, and as you know, there are certain industries or verticals that we have not, you know, focused on with our financials platform. One of them being, if you will, manufacturing. At this time, we're focused on the industries where we know we can win, and we can actually drive a full platform decision, whether it's, you know, services, whether it's healthcare, whether it's state and local government, we're landing some of those bigger companies, right, to run on our financials. We have launched products like Accounting Center, one of our fastest product, right, we've ever taken to market, that chief accounting officers want to, you know, think about how to do accounting. We have Prism Analytics that allows you to do more analytics.
So when we think about it, we think about how do you plan, how do you execute, and then how do you analyze across the financials platform? But there are certain verticals, like manufacturing, we haven't leaned into as aggressively, as maybe, you know, people would want us to, but we have enough opportunity in those key markets. We don't want to get distracted.
As we wrap up, I have two quick things I wanna ask you. One is, as you talk to CIOs and CEOs, what, what are your thoughts on where their heads are at for calendar 2024 budgets, and how are they approaching tech investments, that sort of thing? Then finally, to wrap it up, what do you think are the key challenges faced by Workday in the next-
Yeah.
... five, seven years?
Yeah. So your first question, we've said for the last three quarters, we haven't really seen any big, you know, change in the macro. You know, especially large transformational deals like HCM or financials. Listen, they're getting extra levels of scrutiny.
Mm-hmm.
There's extra levels of approval that's needed. CFOs are absolutely, you know, in a lot more conversations than they were a year ago.
Mm-hmm.
That being said, since the environment has remained quite consistent, you know, we couldn't be more proud of our teams on the go-to-market side. We have a strong value proposition, a strong total cost of ownership message, and people are absolutely consolidating from best of breed to best of suite or best of platform. So, you know, I'm so proud of our teams and how they've executed over the last three or four quarters. Now we got to keep it going, Kash. As far as our challenges going forward, like, you know, I'll go back to innovation. We need to continue to think about how we innovate.
Mm-hmm.
How do we disrupt ourselves, leveraging new technologies like AI, generative AI, to bring automation more and more to our customers? How do we continue to, you know, foster that notion of a platform? People talk about, you know, you know, the back office. Listen, we're a front office company.
Mm-hmm.
We're supporting your financials and your people. They face off to your customers. We're a front office platform that allows people to be very, you know, much on the toes and not the heels of their foot, and we're gonna continue to lean into that. But, you know, I think innovation is probably the biggest challenge, and how do we disrupt ourself before others do? And then the last I'd say is making sure we maintain the culture.
Mm-hmm.
The culture is special. We need to maintain it from this day forward. Aneel and Dave built a special company. You know, I feel like a huge responsibility to continue to, you know, push that forward, while still finding growth, but never at the expense of the culture of this company. And then last, recruit-
Mm-hmm
... retain the industry's best talent.
Mm-hmm.
Because, Kash, there is no substitution for great people.
Yeah, that's right. Yeah. Well said. Well said. With that, let's give a round of applause for the man who is a CEO, former CFO, former CEO, and a venture capitalist. One of a kind.
Thank you so much.
Thank you so much, Carl.
Appreciate it.
Pleasure. Yeah.