Good afternoon, everyone. Thank you for joining us here today. Welcome to Workday Rising. We have a great afternoon planned for you today. My name's Michael Magaro, Vice President of Investor Relations here at Workday. Excited to see so many familiar faces in the crowd. Many of you have been at these Workday Risings for many years now. We have lots of new people here as well. Appreciate all of your interest and continued support of Workday. For those of you joining us on the live stream, welcome as well. We have a great afternoon planned. In just a minute, Robynne will kick things off with some opening remarks to get us started. Then we'll have Tom join us to share an update on Adaptive Insights. We'll move to Petros, who's going to discuss our long-term technology journey.
After a short break, Emily's going to host a customer panel discussion, followed by Jim, who will focus on how we deliver a superior customer experience. Chano will then discuss our go-to-market growth levers, and Robynne will finish our prepared section with a discussion on driving enduring growth. We'll bring all the presenters back to the stage at the end to answer any questions that you all may have. As you can tell, it's a packed agenda full of some great discussion on our business and long-term strategies, so let's get started. Before I turn it over to Robynne, I'd like to draw your attention to our safe harbor statement. Much of the information we'll provide today is forward-looking in nature, involves risks and uncertainties, which may vary significantly from our actual results.
We also make use of non-GAAP financial measures, which we provided reconciliations for in the appendix at the end of the presentation. With that, please join me in welcoming to the stage Co-President and CFO, Robynne Sisco.
Thank you, Mike. Welcome. Thanks for being here. We really appreciate you taking the time to make the trip out here to Las Vegas and join us today for our 2018 Financial Analyst Day. I hope that a lot of you were able to make the opening keynote this morning. For those who were not able to make it, Dave shared that Aneel is not here this week. He's not attending Rising this year due to a serious illness in his family. Unfortunately, he can't join us today, and our thoughts are with him during this very difficult time. For those of you who were able to make the keynote, there are a few things that we hope that you took away from this morning's session. First, our concept of plan, execute, and analyze all in one system, something we introduced last year.
We're continuing down that path today and making great progress against it. This is how companies want to work today, Adaptive is a very critical piece to that picture for us and accelerates our roadmap to allow our customers to plan, execute, and analyze all in one system for the first time ever. Now we're actually also extending that through the Workday Cloud Platform. We hope you saw that data is most powerful with Workday, that the power of one really makes a lever on the data. Machine learning will make Workday predictive. Talked a lot about that this morning as well, all of the great things that we're doing with all that amazing customer data and the ability to build predictive analytics to allow our customers to predict and get insights into their data that they've never had before.
Lastly, that customer success remains a core differentiator for Workday. Jim talked about our customer satisfaction ratio of 98% again this year, which was really great to see. You'll hear more about that from several of our speakers this morning. With that, I'd like to turn the stage over to Tom Bogan, Chief Executive Officer of Adaptive Insights.
Thank you, Robynne. All right. Thanks very much. Nice to see everybody. As Robynne. My first Workday Rising, and it's really been incredible. As you know, we completed the acquisition of Adaptive Insights roughly a year ago. The early plans around customers have been, and happy to share that detail outwards. I'd like to just give you a view on Adaptive. Some of you may have during our IPO, some of us may look. We have amazing customers. There's a broad distributor base for segments and all verticals.
Horizontal solution servicing those customers. We're operating in a large size by our Workday colleagues at [inaudible]. It's a significant opportunity, a significant TAM. Organic, this is Adaptive only subscription revenue growth for the 12 months ended the end of July, was 36% for the preceding 12 months. We've been recognized as a leader by all the industry analysts. We're in the leaders quadrant for Gartner, have been recognized by a leader by Forrester as well. When we look at the segmentation of our business, one of the things is how much of it comes from the low 5%? Enterprises that we describe as organizations [inaudible] , and you in that segment can see. Solve getting a holistic. Most of our customers, even if they have [inaudible] , they're still us.
When we should all [inaudble] . These spreadsheets, you end up with planning teams tend to end up, as opposed to sense. One of the challenges that we have, our solution Adaptive Insights Business Planning Cloud, it's rich capabilities that at various corporation segments, by far, these are finance forecasts, strategic plans, P&L, the operatives, associated business, as well as balance sheet and cash flow analysis as well. We've always done workforce in a very few model [inaudible]. This is part as well as we see a great with the Workday our workforce announced a solution, capacity, planning various scenarios, receptivity in the. We also have, because it allows you to create that you can model like Excel.
Examples of customers who in Adaptive Insights would be airlines that route profitability analysis for all the routes they fly all over the world using Adaptive to do that analysis. We also have a software manufacturer doing analysis using Adaptive. One of the things that's interesting to point out is [inaudible] . One of the big decisions is that we've got a full engine. That allows you to then create any model perspective of your business that makes the investments that we've around performance [inaudible]. We have architecture done historically. The changes to their most complex functional models ends up being they compute-specific. One of the changes in ability to compute those models.
We've also gone to a services-based architecture that the product runs on more contemporary resource technology. It's also important that we have today doing very sophisticated use cases. 10 to the 18th, I'm told, is a quintillion, which is the number of cells our customers can model in Adaptive today. There's very robust scalability capability already in Adaptive. Robynne, if you had a chance to see the keynote, the Innovation Keynote this morning, we talked a lot about the power of one. One of the things when we meet with Workday planning customers, one of the things they tell us is really important to them is the rich integration of the entire Workday experience in one canvas. That's a single data model, it's a single security model, single user experience.
That's exceptionally important for those customers, and it's very powerful, it's very motivating because it allows them to do their work more effectively and more efficiently. Over the next two Workday releases, over the next 12 months, we'll support the power of one with specific investments that we're making on the Adaptive platform, including drill-through integration, so we can go from a, if we're looking at a budget to actual comparison inside Adaptive Insights, we can look at those actuals, we can go all the way back to those transactions inside the Workday financial system. Or the ability, if we have an open req in Adaptive Insights, the ability to automate creation of that req when we're ready to trigger that, when we're ready to action that inside Workday. We'll continue to support all platforms. We'll be platform-agnostic.
It's what you have to do with a planning system. Our go-to-market motion will certainly be to sell with Workday customers, but also to sell into finance organizations who aren't yet Workday customers. As we thought about go-to-market, we're exceptionally encouraged by the early feedback from Workday customers as we've met with existing planning customers and discussed with them the journey to migrate their solution to Adaptive Insights, as well as new potential Workday customers. I would say from an Adaptive perspective, the ability to go into, look at my friend Chano over here, the ability to go into some of these large enterprise customers, there's a credibility. I think it's Chano in the Spanish accent, I really do. The credibility to walk into those customers and be able to have conversations is really impressive.
I will share with you, and when Petros comes up, you can ask him afterwards, one of the things that the Workday team really focused on during diligence was our ability to drive scalability and high degrees of performance, because that's one of the things that we were working on, and it was an important diligence consideration as we went through the discussions. Finally, we'll continue to sell Adaptive on a standalone basis in large enterprises that aren't existing Workday customers. We'll sell it in middle market and SMB, and we'll continue the momentum that we had around those go-to-market motions. We're very excited about the early days. With that, let me turn it over to Petros to go through technology and products.
I should come back. Good afternoon. Tom was going to try to pronounce my last name, but he gave up, I think, last minute. Name is Petros. I'm the individual who they hide in the development dungeons of Workday. I'm the unpresentable one. They never bring me out unless it's come to a point right now they want me to tell you a story. I am one of the very first, I'm of the first handful of employees at the company.
I know pretty much what we did, why we've done it. At the same time, down in those development dungeons, this message comes down from all the marketing FUD that comes from our competitors, which are pretty much what they're trying to do is put us aside so everyone considers us as yet one more HR or finance vendor, just producing more features and functions to sell more software. That is very far away from the truth. That's the story I'd like to tell you today, refresh you of where we were born, where we were created, and why we were created this way. Let's start by touching initially, if I can get this thing to work. This graph I have always used, and I think it's something that people understand. It's the basic of the S-shaped curve, where technology is introduced.
Companies, they grow over it, and then at some point in time, another technology comes, and the success of a company is how do you jump from one curve to the other. That's probably true if you look at who our perceived competition is because they started back in time. Workday, though, was not born that far back. We were born in 2005, 2006. We were born at the time where it was a post-Enron time, and we were born at the time when the consumer internet, it was a post-consumer internet time as well. From the very beginning of the creation of our DNA, we knew that we had to be everything about auditable, everything around security. SaaS, the word SaaS and cloud didn't exist.
I think Salesforce was the only one out there and a few best-of-breed vendors that were actually delivering on what we call today the SaaS or the cloud model. We had the opportunity to try and find exactly at what point there's a convergence of what we described as even in the keynote of a business trend with a new technology that we need to acquire. We did select one, and that particular one was around object orientation. I will talk to you a bit more about that later. In these S-shaped curves, you'll find that every time there's a trend, normally companies are born. New companies are born. In the world that we are, it's actually the creation of industries as well. Let me step back a bit. I go back in time, all my life I've been in the enterprise world.
I started my life actually in mainframe systems, HR systems, payroll systems, financial systems. I've implemented them, I've built them. One of the components about transactional systems, the way I think about them is like made out of concrete. They were made at a certain point in time. Someone did the mold. When that was done, then transactions go in. They're made as vaults. They're where the persistence layer, it's all about the sacred cow is the actual transaction. It's not about getting the data out. It's about putting the data in. If you go through time, I think the best thing that happened from flat file systems, what came along was relational technology. Companies were born there as well. They were basically building their applications on relational technology. The power of relation was having SQL.
You had a language to actually interact with that piece of concrete to get the information out. To this day and age, if you look around, most software vendors out there and enterprise vendors, still their architecture is based on that RDBMS system. Something that we did not want to do. The thing about relational technology, if you think about it, we think of it as two-dimensional. It's about rows and columns. When you get that information out, what do you do? You'd normally put it in a spreadsheet, which is yet again, rows and columns. There was an actual need. Businesses, though, don't need the report. They want to engage. They want to interact with that information. They want this notion of dimensionality. Dimensionality wasn't coming out of relational systems, out of the concrete.
A whole new industry was created, and that's the one around analytics. The way to think about analytics, that's the way I think about it's a different material. I'll describe it as wood. You know the Jenga game, that you have pieces of wood that you put together? You're extracting the data again, you're moving it to some other system over there with a different technology, and now you have little cubes, but you're aligning them together, you're getting more little cubes, so you can have insights of information. Great. Now you have dimensionality. There's one key problem. You've stopped the clock. You're analyzing information that's over there, and your transaction information is somewhere else. Your execution is somewhere else. It's like driving a car down a freeway, looking at the rear view mirror all the time, whilst you should be looking in front.
These companies are out there, you could start using names of companies that you know exactly what I'm talking about. On the analytical side, what are they? The cloud vendors are being created in that space. They're changing their databases into columnar databases as well, so you can have capabilities of drilling very fast in large amounts of data. When it started, it was the first move from the world of OLTP into OLAP. Comes along, here's another business need. It's not just about transacting and having somewhere we need a notion of dimensionality. The next thing I want to get done is we want to model. Modeling engines, transactional, the concrete didn't work very well with that. Neither did the wood. Another industry was created, and that's around modeling. Modeling is when you start doing this if-then scenario.
The way I think about modeling, I think of it like clay. Think of pottery. You keep it moist, you can change it, you can spin it, whilst you're keeping the motion on it, you can actually do things with it until you get the shape you want. I don't know, you bake it, at some point, you go and you put it on the concrete. It's a whole different world, yet again. You're taking data out of one system, stopping the clock, moving it somewhere else. There's an additional complexity about modeling, though. Modeling means you're creating a miniature version of your company. Whatever you've implemented in your general ledger system, on your transactional, you have to redo it again. You have to create that miniature.
You have to create your hierarchies, you have to bring your accounts, you have to say when your open and closed periods are. You have to create a whole security model around it as well. You should have the capability of running balance sheets, income statements. You're simulating things all the time. Really, if you think of those three components, even at the keynote today, we're always talking about the same thing. We're talking about plan, we're talking about execute, we're talking about analysis. These are the three pillars that customers do their business on. If you look at between these little spheres you see there's a dark matter. That dark matter is full of spreadsheets floating around, HR and financial, I call them elves, in a very loving way, running around with these spreadsheets. Consulting dollars are floating around there.
ETL tools and technology moving around there. This is pretty much the state of the art that we found when we created Workday. This was for the taking. In reality, what we want to do is bring those three worlds, the complete business, is those three worlds together, is where you can plan, you can execute, you can analyze. If you look at the previous, where I talked about the dark matter, our trick when we created back in 2005 and 2006, is how can you extract time from this? How can you close a close period shouldn't take a matter of months. It could be done instantly. How do you extract time? How do you incorporate the notion of timely data? Timely data, not staleness of the data, right?
Basically, if you're driving a car, you need to look at your rearview mirror, but you need to glance and look forward again. That's the only way you can speed that circle to go round and round and round and round. Proof of this, where people, the industry and the world just accepts looking at the rearview mirror. If you think about a balance sheet or an income statement or profit and loss, it's as of a date, the period ending. That's the way we run our businesses, looking behind at what happened, right? You should be able to walk in in the morning, a CFO, and run a balance sheet at quarter end. Every morning. You're going to watch what's going to happen at quarter end. You lose a big deal, that will affect what you need to do.
You will have time to take action. You need the technology. You need to move into a whole different world to solve this problem without using what you had at the time. What we set out to do, there's very many brave people out there, but none as brave as Dave and Aneel. I would say we had to come up with a material, I call that material silicon, to bring those three components embedded in the same material from the ground up. From the ground up. When Dave and Aneel said they were starting Workday, you knew people were saying, "Who wants another payroll?" Really? They're going to build another general ledger? How many more general ledgers do we need around here? The answer is yes, we do. Yes, we do. That's what we set out to do.
Let me tell you a very core concept here of how you make this work. If there's anything else I want you to walk away with, I want you to understand this. The way systems are built, transactional systems are built, analytical systems are built, you have the data in one area, you've got the business logic somewhere above. The developers are the ones that define how they control the data integrity that's underneath. What you do is, basically, you've got to predict every movement a user wants to have. There's all this traffic going up and down. Traffic is going up and down. If a developer hasn't decided what information you want to drill in, forget it. You're not going to get it. You have to go back to the wood again.
What we did at Workday, we used the notion of object orientation, which is not separating the business logic with the data, but the business logic and the data are in spheres. Imagine the data, we wrap around the business logic in small little units we call objects. There's multiple of them. One's around position, one's around jobs, one's around journals. There's relationships. You've got to think in the third dimension. There's relationships going between them. That's why at Workday, you can run a balance sheet, you can click on the salary line, you can let users get lost all the way in, they can come out they can find someone's name and address or phone number. Why? It's the power of objects. It's the power of the non-relational component.
The next thing you could do at Workday, which I think was one of the main reasons that we are around, you run a report, right. Reports normally are dead, right. You print them, you take them somewhere else. You run a report, you see it on the screen. Every component on it is live and hot. You can click it. You're back in the object model as well on the object graph, and you're running around, and you can actually take action. You can take action on that particular use case from a report that you've run. Very powerful notions. As most things we do at Workday, you build it, you make it work, and then you spend the rest of the effort about scaling it and make it performant. You've seen this slide since this morning. You've seen it once.
One community. Our customers can talk to each other. They can share artifacts. David Clarke talked about a marketplace. That's the whole idea. It's just one. It's one community. The second thing is we talked about a security model, but we haven't really explained what that security model means. The security model is normally when you buy companies. By the way, if you buy all these three solutions from the same vendor, it doesn't mean that they work with each other. If you have a transactional system and an analytical system, and you say, "Oh, no, it's transparent," they talk about single sign-on. The user exists in more than one area. They sign them off, they sign them on. They use LDAP, and they use active directories, and they use our friends like Okta to give you this seamless. You exist more than once.
In Workday, one security model means you exist once. I know who you are, I know who you work for, I know what data access you have, and if you get reorged, that completely changes. One. This is part of the journey that Tom mentioned that Adaptive's going to go through right now. The same thing Platform went through when we got analytical tool two and a half years ago. That we're going to create one, that every user going to exist once in the system. That's what we talk about when we talk about one security. The next thing about one user experience. Yes, user experience. This is beyond just spraying everything with blue and orange.
In Workday, one security model means you exist once. I know who you are, I know who you work for, I know what data access you have, and if you get reorged, that completely changes. One. This is part of the journey that Tom mentioned that Adaptive's going to go through right now. The same thing Platform went through when we got analytical tool two and a half years ago. That we're going to create one, that every user going to exist once in the system. That's what we talk about when we talk about one security. The next thing about one user experience. Yes, user experience. This is beyond just spraying everything with blue and orange.
It's beyond saying, "I'm going to right-click here, and I see a menu here, and I come over here and I right-click, and I see the same menu as well." The user experience is not just the interface. The user experience is how the data works as well. The idea, the way I described around the balance sheet. You can run it into the future. You should be able to do a plan, not every quarter, because it's very difficult to refresh the data. It should be a first-class citizen. You should be able to be right in there with it. The third one, which is the key that holds it all together, is the data architecture. Everything is under one data architecture. An example is you talk about planning.
Planning tools, when you talk about workforce planning, they think of the cost of the employee, the equity, how much you pay them, expenses, custodian for boots, helmets, laptops, or what have you, and that's what they want to move around. Allocation costs, they move it over to a different system. That's not the way workforce planning in HR department thinks of the people, thinks of headcount. How are you going to organize them? How are you going to move them around? Bringing the data components together is where you have, you're running a plan, you see yet again a name or something, or an organization, and you can drill all the way back into the object graph and find that particular position of what you have. That's what we're talking about, the power of one.
It's a journey that we have with Adaptive, the same journey we had with Platfora. The key, the glue that holds us together, the connective tissue is data and how we treat that data. The notion here we use is timely data. Not all data has to be treated the same. If you're making an adjustment of a salary of an individual, you have to be a millisecond away. If you close a period, you can actually move that data, not from the expensive side of the graph, somewhere else that actually do the analysis if you want. You can close a payroll, you can dehydrate that information and rehydrate it if you need it as well. It's all about the timeliness of that data. That yet again, the building material we're using here is back to silicon.
It's not three materials, we're trying to get one. I refer to it as a silicon blob. The next thing is enterprise system has to communicate with outside world. This is beyond just bringing data in. We did this a long time ago. In 2008, we bought a company called Cape Clear. It was an ESB, and we realized that the only way that if you have an enterprise system and you pull an enterprise system out, you got all these wires and roots hanging underneath. That's the complexity. Our integration story, SOAP APIs, RESTful APIs, we took all that and we took the ownership on in the cloud. You need data. Right now, Workday Prism Analytics. You can bring in data from the outside world, your operational data, you can analyze it like any other analytical tool that you're using.
One thing we learned about this journey is you can't have enough RESTful APIs. That's all we're working on. There's another component as well when we talk about the outside world, and mainly people are talking about the outside world of data. The outside world of data, there's also users. Users, the interaction is not just within the Workday system, in the enterprise system. There's actually use cases outside as well. Users I'll give you an example. If you take 401(k). 401(k), a company says they support 401(k). You put amount of money in, you can actually get a match in. That information's in the silicon blob. That's in the enterprise system. But where do you manage your 401(k)? Could be in Morgan Stanley, it could be in Fidelity, whatever else you use.
You've got to sign off from here, and then you have to go to another system and sign on and actually do your allocations by percent of all the investments you want to do. The use case, you need to bring it in one place. That's the area we're moving into right now. We describe it as a People Experience. There's two words. One is the Workday Cloud Platform, which is tools, and one of the deliverables of that is called the People Experience. You will have heard the Workday Cloud Platform used many times. We announced it last year. We've got 30 customers on it, and we're embellishing it with more goodies.
More tools are going into the Workday Cloud Platform, to the point where the same platform that the customers will be using, we'll be externalizing is the same platform the application developers and developers are using within Workday. When it comes to that interactive layer, right now we are not The People Experience, it's in the oven. It's being baked, it's in the prep kitchen being chopping all the good bits and getting it ready. We will fill out a space for bringing the external use case of users together under one user experience. This is a white space, by the way, that we've left because we're too busy doing other things, but we're going to venture into it, and other companies are actually there. Using our RESTful APIs, taking our data, and using it back into our customer sites. That's going to be the People Experience.
Let me stop there right now, the Silicon Blob, and bring up a slide, which curiously enough, is the same slide that Tom was talking about. That talks about the bedlam. Talks about we spend so many hours, efforts, and money from the very beginning of securing our customer data. The data of the customer belongs to them. We haven't got access to it. We don't see it. Data privacy, compliance, GDPR, SOC. We spend more time with lawyers than what we do with engineers. Engineers actually have to work with lawyers at Workday. We spend so much time. Data is absolutely sacred. Only for our customers to do what? They run a report, they click back into a spreadsheet again, move that data into PowerPoint, and then you've got bedlam again. There was a company, it was about four or five years ago.
I remember driving in in the morning, my boss called me, Aneel called me. He said, "What's going on? Is it us?" I said, "What are you talking about?" What happened was, four or five years ago, there was something with North Korea about some movie that was made. I don't know if you remember that. All right. The company got attacked and some data was taken. All right. That company runs on Workday, so that why I got the phone call. What went wrong? Well, what went wrong is what happened, the attack went after their emailing system. In the email, all of the financial files and managers, what do you think they'd done? They'd run a report and put it together in an email and started emailing it. That was compromised. It's really annoying from a Workday point of view.
We spend all this time to protect data, what do customers do? They will actually put it at risk. We have to find a mechanism of bringing it back in again, so they never do that in the first place. I'll give you another one. Customers get phished, right? We give them tools to do 2-factor authentications. Some of them don't do it. It's no different like going to the ATM machine. You put your card in, you take your money out, you go around the corner, you get mugged. Whose fault is it? The user or the bank? Doesn't really matter. The bank has to take the responsibility. We have to find mechanisms that we do not allow because we can't prevent them. How do you stop that habit of taking information out? It's a very evil temptation to go through.
We realize that we live in a world where spreadsheets rule. Okay? We could fight it all we want. We're not going to win that battle. In fact, I would have thought that even a dead accountant, if you went in their hand, they'll have a white fist, you'd be opening their fingers, what they have in there? A spreadsheet. They're never going to let it go. The same way a bank will say, "Use credit cards, use a biometric mechanism to pay. Don't use cash." That's the beauty of the Uber and the Lyft, right? They've got nothing, but they've got value. I don't carry money. I've got value. That's the world we need to move into. We accept that spreadsheets exist. We provide our customers something called a worksheet. It's a fully blown spreadsheet, fully collaborative.
By the way, enterprises don't collaborate with chit-chats and yammering around the place. They collaborate around data sets. Folks that work with me, when we do a comp cycle, if we're doing equity adjustments, anything that we're doing, we create a spreadsheet, worksheet, we collaborate, we can see it in them. We can call, we can Skype, we can do whatever it is around that data set. Think of it like a Google Doc. We provide that to prevent our customers to have this crazy evilness of putting their data at risk. Another one. What's the other reason you would take data out? You want to do presentations, right? You've got a QBR, for example, a quarterly business review. How does that work out? Three to four weeks process. Finance comes along, creates a template in PowerPoint, four slides.
You've got to put up there your org chart and all your HR information. I want some finance information, some expenses, and what have you. Couple of slides, I want your goals, MBOs, SWOT analysis, and how you're going to fix it. Right? That process takes weeks because that email goes out with this template. Managers are all over it, filling it. HR and financial elves are doing all this work, getting it together, and they're emailing it and try to collaborate with email. Right? It takes, yet again, here's another one, how do you extract time? We're producing something called Livepages. Think of it of spreadsheets together with PowerPoint. However, it's plugged in to the Workday data. Same security model, nothing changes.
Really, what finance will do, they will produce a template, but it's prepopulated with your orgs, your attrition, your headcount, and everything else that you need. You can actually collaborate with a narrative. You're done in three days. Right? Because the night before, your HR and financial elves are just putting Humpty Dumpty together again. We need to prevent individuals from having a reason to go out there. I'll pause there and let's change the subject for a minute. S-shaped curves. We started recreating in 2005. We didn't have the legacy of the past. We'd learned what relational could do. We decided we're going to go down the object graph. We learned from the consumer's internet and the outside world. What next? Right? We're building the Silicon Blob. You can see that we're doing that.
We're trying to extract the time and actually add value and allow the people who make the sausages, the turbines, the pastries, selling insurance, do what they do best, and not spend all their time on back office operations and messing around with the managers' time either. At what point in time do you jump to a different technology, or do you absorb a different technology? If not, you die. Here's a story that I found interesting. Sony. What they figured out back in the late 1800s is how to stop time on paper, and the technology was used was chemicals. That's what they used. The great Kodak. They actually hired someone, and I think his name was Steven Sasson, 24-year-old kid, that they brought in early 70s to see what's the next trend in Kodak. He came up with a digital camera.
He said, "Instead of solving it with chemicals, we will solve it with bits and bytes." He built this thing. It was a big, bulky thing. He iterated it three to four or five years. Of course, it was not quite perfect, and they knew. He said, "It'll take us 15, 20 years before we get the pixel perfect that we get on paper, that we can actually get it onto digital as well. It'll take a long time." Remember, you got Canon and Nikon, and they had all these cameras and the mirrored cameras and what have you. Kodak decided that they're going to cannibalize their chemical and paper manufacturing, what have you, and they skipped. Jumped in the chasm, they fell in the chasm. Sony, on the other side, decided, they weren't even in the space of photography in any shape or form. What did they do?
They actually put all their efforts on digital. To this date, today, I think this week, they said Sony is the number one seller of digital cameras. They went into a space they didn't even think existed. Nikon, which were the number ones, and Canon, they've fallen off. Yes, they do. Look at the professional world, they lost the market share. Same thing is going to happen with Tesla. I'm a huge Tesla supporter. Both Jim Bozzini and myself, I think we're the executive sponsors of Tesla because they're customers of ours. We're disturbing the market. What are we going to wait to see? We're going to see the combustion engine manufacturers respond to that. What do they respond? They respond with FUD. It's exactly the same thing. They respond with FUD. Only Teslas burn. None of those have accidents. It's absolute nonsense.
They have to change. They have to respond to that. If the direction is you have a company that's taking risks and it's going to win, everyone has to follow. Their answer is that. They're going to come out with hybrids of some kind. Eventually, you got to watch, the same thing is going to happen in other industries as well. The same way that we said object orientation was the what that we used to generate the company, what's going to happen right now? Everyone talks about machine learning and talking about artificial intelligence. Again, I don't like to use the word intelligent. Machines aren't intelligent. They don't have emotions. They don't have judgments, that's okay. They say artificial intelligence is the peak of where we're going to get to and the Terminators and what have you.
Machine learning is the mechanism of getting there. You've got deep learning when it comes into that. We have an object graph. You will hear with machine learning, they use the term graph a lot. Knowledge graph. We announced skills graph. We've been working on machine learning for the past two to three years, two and a half years. We've bought four or five companies. We've acqui-hired individuals, we are bringing them into the ranks, now that's exactly what we're working on. We're applying that to our object graph. When you're talking about machine learning, here's a little data point for you. This morning, I think someone mentioned that right now we have a multi-tenant system. We're sitting on more than 31 million lives. I think we clock on about two to three million a quarter or something like that, whatever the number is.
That's a goldmine. By the way, those lives are active. These are people that have work, active employment in companies. I've also been told that the competition can claim we've got more than 40 million lives. Yes, that's a data lake. You've killed that data. You've taken it somewhere else. Someone's got to sync it, copy it, obfuscate it, scrub it, maintain it. We know people have left one company, they haven't updated that. Workday is active. It's real life. It's really active information. It's a goldmine that we can surface information from that. In the meantime, this data, it's going to be a journey, we've got to realize this personal data in our Workday system, there's 15-20 attributes which don't belong to the company, belong to us as humans.
Because that data, the company protects that data, what we do is we are not allowed to analyze that information because that information's in there. Last year, we announced benchmarks, and this is where we ask customers to opt in. We had, at that time, I think there was 180 last year that opt in, and we're clocking into 370 this year. The trend is slow, but they allow us to look at neighborhoods of their data and give them comparisons with other companies as well. That is the future. In the meantime, though, we are focusing our guns in looking at our applications and making them smarter. We are automating business processes. Idea would be a closed process. You run a report, you're looking for abnormalities.
You go back, you make your offsets, you make your adjustments, you run the report again, then you're back to all your financial close running around trying to fix them. They take days, sometimes weeks to do a close. Detecting abnormalities over and over again, machines do pretty well. Our first task, if we're standing here next year, there'll be a large percent of our workflow, our business processes, events will be fully automated. Our notion is, at some point, we could talk about lights out back office. That's a crazy thing out there, but that should be our end goal as well. When things get more mature, we will be able to open up and go cross-tenant. Cross-tenant. Then we can start surfacing some very interesting information back to our customers from that information. In reality, our competition will change.
At that point in time, we are competing with the ACNielsens, the Dun & Bradstreets, and the Radfords of the world. The world will change. With that, as a summary of what we do at Workday, I would say the way you think of transactional systems or enterprise systems, I think of them as the beast, really. Everything the customers do, they're trying to feed the beast, and the beast sometimes will give them information. This has to turn around. Pete Schlampp talked about augmented analytics. The time should come when the beast serves the business and not the other way around. That's why the north star, the power one, is so, so important to keep together, so we can actually extract the time on our silicon blob and get that plan, execute, and analyze as quickly and continuous as possible.
That's the end goal. Really, we're on a journey from a SaaS company to a DaaS company, we have a platform as well, a PaaS component to it as well. I think we've arrived when Workday is no longer a noun but becomes a verb. Whilst other companies are calling their machine learning, giving it names, Leonardo, Einstein, right? What are we going to go to? Run off and call Isaac Newton and call my man Isaac will give me all the business answers? No. It's Workday. It'll become a verb. You will Workday it. You will Google it. For me, it's immensely exciting, and that's why I love our tagline. The future is ours, and we are built for the future. With that, I think you need to take a break. Thank you.
Thank you, Petros. Real quick. Stay with me. We're going to allow 5 or 10 minutes for Q&A for Petros and Tom. I'm going to ask Tom to come back up. We do have mics on the side, just raise your hand. Before we go to break, we're just going to do 5 or 10 quick minutes of Q&A.
Thanks very much. Hey, Petros, over here. Brad Zelnick with Credit Suisse. That was very helpful. You talked about a lights-out back office as something that we can envision down the path and the advantages of an object database and the object graph. Where do you see technologies like robotic process automation fitting in with your vision? Is that something you end up doing? How do you see that maybe complementing the vision?
It's a blurred line. It's actually a blurred line. It's interesting how robotic automations come to life. I was talking to someone the other day, I said, "Do you remember the word BPEL?" They said, "What are you talking about?" I said, "BPEL. ESP, they had BPEL," right? It was a language you used to orchestrate your integrations. You could fire them all, they went off. What happened to it? Young developers don't even know what I'm talking about. We tried it then, right? That was because it didn't have a feedback mechanism. There was no feedback mechanism like run a payroll, hire them up until they come back. There was another one. They were talking about composite applications. You remember that? Right.
The idea that on the top, then we will orchestrate these things together, you can create the app, the meta app, the app of the app. What happened to that? Too complex to build. Way too complex to build. Here we are right now, we have the technology. Now it's got a different term. There's a different acronym. It's no different than what we're talking about here as well. You have the capability of instrumenting a sequence of events or business processes, you have the intelligence right now to know what they're doing. For as far as Workday is concerned, that's a blurred line.
Hi, it's Keith Bachman over on the other side. I wanted to ask a question about Adaptive. You've mentioned that it's certainly a compelling product, a lot of interest. The feedback we've gotten is a little bit different than you've characterized it in that there's a journey to get the data models the same. It will be one data model. My question is there a risk of stalling out a bit? What I mean by that is we've talked to some customers, including , that don't really want to implement Adaptive Planning until the data models are in fact common, not going to be common, because it'll create a re-architecting situation when there is commonality. I'm just wondering, do you see a risk for those Workday customers that are interested in Adaptive to stalling out, if you will, until the common data model exists?
I think the experience we have talking to customers, those early customers, is actually that a lot of them are going to come over and do conversions to Adaptive and such. We're actively working with multiple customers on that. I think it's probably less about the data model, because we'll make that as seamless as possible for customers. I think to go from Workday Planning to Adaptive, there's a re-implementation. Some of the things that they had to do to implement Workday Planning initially, they'll have to re-implement on Adaptive. We're working with customers to make that as seamless as possible. I think our guidance to customers has been, if you have a solution that's working well for you and Workday Planning is working effectively, then stay with that. You should assess the benefits of converting potentially to the Adaptive platform.
As I said, we have many, many customers doing that.
I would actually say, beauty of the one code line. I think about we change the system all the time, and people don't even realize we're doing it. Other than, yes-
Yeah
If people ask me, yes, implement Adaptive. What about the accounts and the users? Don't worry about it. One day you're going to wake up, and it's going to be working a different way. Run your business. Remember, this is like you think of Google and Amazon, right? You don't get an email that's saying something's going to change. You are changing it under covers all the time. That's the power of the technology of Workday. That's the way we think about things. In fact, when we did the due diligence, right?
Right.
The conversation we had was whiteboarding the architectures and how compatible they were to actually work together.
Hi, over here. Hey, Tom and Petros. This is John DiFucci from Jefferies. It's a related question to Keith's question. It does sound like even though it's a lot of work to change the data model and Aneel has said, even on the conference call when you announced the acquisition, that the data models were actually very similar and that was an advantage. The one thing you just said, Petros, about the power of the one code line.
It's different. Workday is written in a different language. It's your own proprietary language than what Adaptive is written in, and it's never really been addressed publicly, but I would assume, and especially because you went through what Platfora went through, but I think Platfora being an analytics company and not nearly as complex, I think, as what Adaptive Insights is. Meaning Adaptive Insights probably has a lot more business logic in the application. Are your plans to actually rewrite Adaptive, not change the business logic, but rewrite it using Workday code? If you don't do that, where's the power of one?
That's a very good question. It is one code line. If you look at the Adaptive, if you will, they have one code line they're modifying. They're not splitting codes and have version A's and version B's and version C's. It's not about having one technology. We use a plethora of technologies, right? But we view it holistically for the customer. It's just one thing the way we're moving it along. Over time, the way we describe them, you use Platfora, for example. This is an analytical engine. That's what it is. Analytical engines by nature do what? They just do reads. That's all they're really doing. But Platfora right now will be doing reads and writes. The accounting hub that we announced today, right? It will be generating transactions. It's not to think about a code line. All right?
This has got a different accent than this one. This one is Java, and this is Python. It doesn't really matter. The drumbeat, right, of moving the customer along on the same version, that is the whole idea, right? People get caught up. I had someone talk to me about, said, "How do you do your deployment of the software under the covers?" I said, "We use some OpenStack. We VMware. We've got containers." "Oh, that's not the power of one." I said, "What are you talking about? That's got nothing to do with it." The end result is the way the experience the customers have, they don't know what's going on behind the scenes, right? You don't want to go in the kitchen, right? Never go in the kitchen. What about you want to eat your food, right? It's the same thing.
There's a lot of stuff moving around the place, but it's one thing, and the drumbeat for the customer is the drumbeat. By the way, every 6 months, an update. We do an update every weekend. The reason we put them in 6 months is because we allow you to consume it. Customers can consume it that way. They can't consume like a machine run of features coming your way, right? They can get their project. Don't think about Python versus Java.
Yeah. I think, John, the other thing is it's really about the user experience. You want to be able, if you're inside the Workday canvas, you want to be able to plan in Adaptive. The example I used earlier about coming from actual data in Adaptive, for example, all the way back to that source record. That's really what's important to the customers is having that experience. I think it's a little bit different than other situations which may have calls for replatforming. This is about the commonality of the security model, the data model, and the user experience.
just to be clear, there's no need to rewrite the code
No
for this platform.
That's correct. No.
Thank you.
You only rewrite bad code.
Raimo Lenschow from Barclays. I might try to put my German accent back out. Quick question. When you talk about the architecture, there's another company out there, German, that says, "Oh, we do it in memory database, and so we have the analytics and the transaction in one system. I don't need to have the object-based model that you have." I'm also looking in a kind of CRM or a Salesforce who has kind of down like a different path because they started earlier, and I see ServiceNow differently. The big question I have, like, does it matter in the end to the client and the advantage that you're kind of preaching us today? Will that come through at some point or in five, 10 years' time? As you said, don't look into the kitchen. It's not going to matter.
Can you just help me understand that a little bit better?
Look, our northern European friends with a Germanic accent, I think, gave me credit years ago for when they created a new analytical data store, a column database, right? It's still made of wood. You still have to take the data from here and move it over there, right? If you want to know a lot more about these companies, ask them, right? We all interview each other, and we know a lot more about each other's dirty laundry, right? I can tell you a lot more. The notion of what they're trying to do is absolutely the right one. Now, will they do it eventually? I hope they do. This isn't about being. I hope the world will actually catch up in more ways than one. It's just a matter of time.
I was reading over a couple of weekends ago about another legacy company that started using this notion of objects and how it was fantastic. They could loosely couple orgs. Someone could have a position over here and belong there and report to someone else. It was kind of an eye-opener. I thought, "Hallelujah.
We've been talking about this for 13 years. Now someone sees the light. Write about it. Right? We don't see it as a threat in any shape or form, right? I'd much rather go into conferences with them and tell us, how can we do it better, right? That's not what the threat is. I believe that solving the business problem is the key thing that we all need to solve. How do you extract time, right, so an implementation of the enterprise system does not delay you and doesn't cost you a fortune. That's what we should be working on.
Love all the questions. We could probably go all day. We do have a session at the end for questions, we're just going to take one more, which I think up here at the front, we're going to go to a quick break.
Thanks. Ross MacMillan from RBC. Hey, Tom. I actually had a question just on scalability, because you've gone through, at Workday, a process of making the object-oriented model more scalable as you've gone into a transactional system with financials.
Yes
a high-velocity transactional system. When you did your diligence on Adaptive, I'm just curious, what did you see there that got you very confident on the scalability? Thanks.
It was absolutely exciting.
I would have said in the second meeting, in a few hours.
Yeah
We had our chief technology architect look at it together with the other chief technology architect, it was exciting. It was JVM, the same parallelization, the same technology. We would've solved the problem exactly the same way.
Yeah.
In fact, we are on doing that with Workday. We just ran out of time. We'd matured. We knew how to build it, make it work, make it scale and perform. Those last two components, that was taking us way too long. You take a company, a successful company, it takes 10, 14 years. We thought we were going to build it, what, in 18 months or two years? It's the same. They use exactly the same motion. That's the most exciting component that we have.
I think that was a key part, I think, on both sides in terms of the synergy. Because after those sessions, there was a very high degree of alignment, confidence by the Workday team in terms of the work that we were doing, and I think that was an important consideration. All right?
Okay. Thank you.
Ladies and gentlemen, please welcome Workday Senior Vice President Services, Emily McEvilly.
Good afternoon. At Workday, we really feel like one of the keys to our success has been our partnership with our customers, and as you can tell, this conference, 10,000 attendees, is evidence of that. A little secret that you don't know is that at every Workday internal event, we also really look to bring in the voice of the customer. That's our sales kickoff, our conference with our partner ecosystem and Workday Services employees, and other internal events, company meetings. We always feature customers, typically through a customer panel. It's great because we get to hear their voice. We use that feedback to improve both our execution and our partners. We thought, for the first time, it would be nice to bring you guys a little bit of that magic, so we're going to have a customer panel.
Please join me in welcoming two customers to the stage. The first is Christa Davies, who's a Workday board member and the EVP and CFO of Aon, and Chanda Pepping, who is the VP of Finance Technology at Unum. Thanks. Thank you. Thank you, ladies, so much for joining us at this, the inaugural panel at Analyst Day. I thought we'd just start out with some basics, giving these guys a little bit of background, your personal background, and then background of both your organizations. Chanda, if you'd like to kick it off?
Sure. Hello, everyone. I'm Chanda Pepping. I'm Vice President of Finance Technology at Unum. I've been with the company for 22 years and currently head up our finance initiative plan, which we have about 70 initiatives going on at any given time. Our project management team, as well as our technicians, manage our system implementations for finance, upgrades, and just overall application support. We also support our data automation as well as process improvement. I'm the finance business owner for Workday, and I've had other roles, as a CPA within the company, overall accounting COE, financial services, internal controls, reinsurance, as well as being a stand out in the operations. That's a little bit about me. Let me tell you a little bit about Unum. Who we are, we provide benefits through the employer at the work site.
We're located in the U.S. and in the U.K. as our primary market. We're a Fortune 267 company, which we protect or serve 189,000 businesses as well as 36 million people that we protect. Got $11 billion in revenue, and the metric that I'm most proud of is the benefits that we provide to those policyholders at a time of need or loss through our products. Last year, that was $7 billion. Very, very exciting. As a 170-year-old company, we're constantly looking to innovate and change and deliver on our customer needs.
Great. Thanks.
Sure.
Christa?
Hi, I'm Christa Davies, I'm the CFO at Aon. I've been the CFO at Aon now for almost 11 years. I'm also a very proud Workday board member. Prior to Aon, I was the CFO of the Platfora and Services division at Microsoft, which was the largest division at Microsoft, I was at Microsoft for 10 years. Let me just tell you a little bit about Aon. We're a leading professional services firm focused on risk, retirement, and health, underpinned by data analytics. It's a global firm. We operate in over 100 countries, we're built up through acquisition, almost 500 different acquisitions over a 20-year period of time. We're really innovating and accelerating growth through the investments we're making in data analytics going forward.
Great. Thank you both. I thought, kind of as we talk through the panel, it'd be really interesting for the audience to hear about your journey from Workday. I think we start at the basics, would be great to hear from both of you about what was the business case for change? Why did you initially embark down the path of partnering with the Workday team? I don't know, Christa, you want to start us off?
Sure. We started with HR a couple of years ago, really the impetus for moving to Workday HR was really total cost of ownership. We had several different HR systems in place. It was terribly expensive. It was terribly inefficient. We didn't have multiple versions of the systems. We really had different versions by country. We implement Workday HR in a 12-month period of time, across 100 countries. That was a seamless implementation. For us, I think it was a really successful implementation, gave us much more insight into our people globally, 50,000 employees globally. Enables our HR leaders to really do on their devices, mobile or iPad or PC, a lot of things that really the IT department had to do through reporting and analysis previously.
It enabled people to make much faster decisions and get things done, whether you're an employee or an HR leader across our organization. That's where it started. For finance, we really thought about the Workday finance decision. We went live on Workday finance 01/01/2017 with seven countries. We're now live with over 34 countries and 60% of our global revenue. We'll have 90% of our revenue live on Workday, or over 90% of our revenue live on Workday 01/01/2019. Really, the decision to go live on Workday finance was really based on having Workday HR in place and actually being able to link HR and finance together, because we really run the company based on return on capital.
Our biggest expense is people, being able to have those two things in one system and be able to do the analytics around it and really manage the business actively on a return on capital was a very big driver for us in making that decision.
That's great. Thanks, Chanda, you want to talk a little bit about why you made the decision?
Sure. When we looked across our corporate application, we had approximately 200, which created a lot of risk for us, and it also created a lot of silos as far as the way we operated between HR, finance, procurement, and IT. Collectively, we decided to go out and look at a product in the market to see if we could collaborate in one platform to meet our business needs. We had four key objectives with the RFP that we did with multiple different companies, large competitors out there. The value we were expecting to realize is to reduce our application portfolio, reduce our costs, and provide better insight to data and analytics as well as meet our customer needs. Enters Workday, and we're a full platform customer right out of the gate. We purchased HR and Financials five years ago.
I'm sure we'll get into a little bit of the deployment, and we continue to invest and buy all the products as they're rolled out.
That's great. Really similar stories, where you had some siloed data, and you were looking for a way to bring things together. Before you guys were in the room, we spent quite a bit of time talking about the Power of One, the benefits, kind of clarifying some of what we mean by the Power of One. I think, we would love to hear your opinion, because I would say competitors will come in and say, "Listen, you can create the Power of One by integrating multiple legacy systems," because it's really an integration that makes systems talk, right? I would love, since we've heard a lot of the Workday opinion on what the Power of One means today or will mean for you, I would love to get your guys' opinions on that. I don't know, Chanda, you want to start with that one?
Sure. One, Workday was the only product that truly had one platform that eliminated all the integrations, and those integrations are multiple. When you think about payroll integrating with the ledger, you think about HR data integrating with payroll, when you think about AP integrating with the ledger, all that's eliminated within the one platform. They also give us the insight and the capability to be able to analyze our financial, our HR, our spend data, all through one common tool. In the Power of One, as we did the RFP and looked at the products, we got very savvy in actually the analysis of what was going on in the demo when they linked out to another tool through a URL to be able to ask questions regarding that. Security was a big proponent for us as far as is it truly one security model?
You get that answer, yes, and yes from the competitors, but you have to ask the question in the right way to get the right answer. As far as, yes, it's one, if you use the tool that truly combines everything together, which there again, there's another application that has to do that. Really at the end of the day, they all have different security models. The role- based really piqued our interest and provided a lot of value. That one platform, from the integration and just the holistic utilization of it, I'd say we knew we would get versatility and eliminate the silos in that platform of one, but the versatility of our employees definitely grew exponentially beyond what we had expected initially.
That's great. We had dinner last night, and you were sharing a lot of stories from your demos, and I would say that you could probably have a consultancy. You were so nailed into knowing exactly where people were tracing through the applications and when they were linking out. It sounds like you guys were
Yeah, I will say one unique thing in the demos the first day that I met our sales representative for Workday, it's like, "Oh, hey, you want to download the app on your phone? We'll put you in a test tenant." I didn't get that from anybody else. I was able to actually replicate within their test tenant as they showed the demo, as we went through all our scenarios and that, which was definitely unique. That would have taken quite an extensive amount of time to be able to get an infrastructure set up with one of the competitors, and it was there day one, which was fantastic.
That's great. Christa, do you want to comment a little bit on that?
Yeah. I think for us, having HR and finance in the same platform is really important because as Chanda said, it's not just that they're sort of linked or integrated, it's that they are actually connected in exactly the same platform. I think having HR consistent for us in 100 countries globally and having finance consistent in 100 countries globally by itself is a massive innovation. We've never been able to actually have that kind of insight. To be able to connect them together over time, to be able to actually analyze HR expense deeply across all of our different businesses live. Empowering our finance leaders and our business leaders to be able to do that. We do manage the business on free cash flow. We're actively managing the portfolio. We've bought 500 companies over the last 20 years.
We've divested 300 companies in the last three years. Actually having our business and finance leaders be able to actively manage the portfolio and do that analysis every month or every quarter, as opposed to what we've historically been doing, which is sort of almost an off-line batch process at the end of each year. Which takes months and months to actually pull the data together off different systems and make it apples to apples.
Yeah.
It just takes a really long time to drive that insight, by which time the business has moved on.
Yeah.
To be able to do it live is really exciting for us.
That's great. Plus it kind of manages the risk, right? I know both of you are in the business.
Yeah
Of managing risk, the risk of the applications of not having bailing wire and string kind of tying everything together, right?
Errors, right?
Yeah.
Yes.
Yeah. That's great. Okay, let's move on through your journey and talk a little bit about your deployments. I know that you've both deployed in multiple phases and still actively deploying, but I'd love to hear about your takeaways from your Workday deployments maybe versus some legacy, and lessons learned. If you could do something different about deploying our applications, what would it be?
Sure. I'll just tell you to actually upgrade one of our applications that we had in-house would take a year, and with a massive amount of resources to be able to do that. Because of heavy customization, we got no benefits. It was really just to stay current on the model or the current release that was being supported. Looking at Workday, when we purchased it, we went in a phase 3 approach. We planned on rolling out HR, payroll, and then financials. Immediately as we entered into the HR rollout, because of the cost-benefit analysis on the expense saving side of the house, as well as on the procurement side, we needed process improvement badly. There, we brought that up into phase 1, in nine short months, we delivered HR, procurement, and expenses.
Technically, for a large portion of financials, we've been live since 2014. Again, we did it in less time than it would have taken just to upgrade one of our applications with no value at the end of the day. As far as the deployment, we met our CBA, exceeded it in some areas. It was a very, very successful deployment. Did we run into bumps? Yes. I think you do in any kind of implementation. At the end of the day, Workday was always there, and we solved all our problems, and we moved forward. It's definitely reverberated across our organization as a success as well. Not only from the CBA, but from the functionality and then the implementation itself. From a lessons learned perspective, things that we'd have done different, when we rolled out procurement, we rolled out policy changes.
By doing that, we said, "No pay if you don't have a PO." That created some contention with the tool. Folks thought the tool was causing them to do that versus a mandate by management. We learned to federate that and definitely handle the change management aspect of it better. Prior to Workday, we had 93% of our invoices, all of our spend was through invoices. After Workday, 83% went to PO, which definitely gave us more management and oversight of our spend before it moved through the process, which was pretty phenomenal. I think there's a placement out on the Workday website about the value in procurement and the expenses itself as far as all the benefits that we got, which is pretty impressive.
That's great. Christa, how about you?
In terms of our deployment, they were sort of separate. The HR deployment was 12 months. It actually went seamlessly. We certainly met the business plan in terms of the cost savings. It was quite significant. Well over 30%. I guess the big lessons learned for us on that HR deployment were really about change management because, as I mentioned, we didn't have one HR on-premises system. We really had these different versions in the 100 plus countries in which we operated. We really had, in each of the 100 plus countries, a change management person in the country who was responsible for managing the change across business leaders, HR, and finance leaders. Then one person on the project team was responsible for taking those country requirements and feeding them into the global requirements.
That change management process was really, really important for us on the HR front. We replicated that when we rolled out finance. The finance side, I think the deployment is taking three years. We went live 01/01/2017 with seven countries. We went live on 01/01/2018 with 34 countries, and we'll go live 01/01/2019 with over 90% of our global revenue. Three years is sort of the rollout on finance. I'd say the big lessons learned for us on finance was similar in terms of change management. It was definitely this one person per country thing because that actually really helps us actually drive the change management in the countries because, again, on finance, we had different versions of the platform in each country. It was really lots of change management.
The big insight for us on financials, which made the go live just so much more seamless for my finance organization was we had live data in a Workday production environment from February 2016, well before we went live 01/01/2017. My finance team got to play with live Aon data, multiple years of Aon data, in a production environment for more than 10 months. That meant that the cynics who really didn't like Workday and didn't want to do the change, got to play with it and actually really understood it and got pretty excited about it. There was no sort of surprise on 01/01 of, "Oh, this is how it integrates with the HR system," or, "Oh, this is how the reports work." They'd actually done all that for months.
It was definitely a very seamless go live for us on financials. I was telling Emily this earlier, we almost didn't update our audit committee because it was just so not an issue. There were far more important things to talk about. It was the most seamless ERP go live I've ever seen.
That's great. Chanda, you told me last night at dinner a really interesting comparison that your team made to the Workday Financials go live. I think another rollout that you were doing internally.
Yeah. August 1st this year, we celebrated all our companies being on Workday Financials for a year. I saw a business partner in the hallway and I'm like, "Can you believe it's been a year and it's just been quiet? Huge success." This was a person that definitely the onboarding process took a little bit more than average effort. They said, "Yeah, Workday implementation was a non-event. We'd rolled out Office 365 on August 1st at the company and had a few hiccups." He was like, "Who would've thought Office 365 would've overshadowed an easy Workday implementation?" The comparison was quite surprising and I contribute change management, communication, and the product itself, which was-
Yeah. That's great
great.
We pride ourselves on having very non-eventful go lives. In fact, we had a really successful go live with probably an extremely large retailer, that our competition has put a lot of FUD in the market around. They just went live on Workday a week and a half ago. Their sponsor that drove the program is so comfortable that he's here at Rising, networking and sharing his story with other customers. Thank you for those stories. The other thing that we had talked a little bit about is one of the things, if you reflect, that you wish you would've maybe done a little bit differently is kind of pulling dashboards and analytics into a phase 1 deployment.
I think the years of implementing legacy systems where Petros was kind of showing how you have to really work on the transactional data, and the effort to get the transactional data correct, and that you can never really do dashboards and analytics. In the past, you could never do them in a phase 1, right? Because you'd have to get the transactions, then you'd build your data stores and your analytics. With Workday, it can really change that dynamic and I think, since then you've deployed dashboards and analytics, it would be great to share with the audience here some of the ones that you've deployed and that have really driven some value for your organizations.
For us, our procurement organization has done a phenomenal job of all kinds of spend analysis that just pulls up automatically there, deep drill dive-ins are available to go down to the individual level of any kind of transaction, which is phenomenal. It's different from any tool that we've been provided. I'm obviously a user as well as an implementation owner of the product. I wish we'd have rolled it out on the front end more so on the general ledger side, because it would've drove our transformation more. We definitely had extensive transformation, there was also areas where we did some lifting and shifting, where we had some resources that was heads down on doing other projects. We made that business decision.
Now we're circling back around and showing them all the great things in addition to products like Workday Prism Analytics and building out some cool financial reporting there from a reinsurance perspective now that we've got financial data at the level that we need it within Workday. Our journey is just endless there. Great opportunities ahead, do wish we'd have started there instead of just managing the regular processes that we had through reports versus those dashboards.
That's great.
I mean, we would say the same thing. We focused on getting the transactions right, I think our team would say if we did it again, we wish we'd done the dashboards at the beginning because they've been so valuable.
We have these closed dashboards and it literally goes through every single account in the company, where the account's up to, who's approved it, et cetera. It's really helped us diagnose issues that are driving delays to the close process, issues where we have constant errors or it's just some sort of issue. It's sped up the close process enormously. We've really been able to make it a much more efficient process. This is all run out of our Krakow Finance Center of Excellence. Yeah, we wish we'd roll those out at the beginning, because we're now rolling them out now that we're sort of several years into this, and I think it's made such a difference.
We also have them on expenses, so similar to you, and I think it's helped us manage expense compliance issues much more rigorously. The analytics around it is just seamless. Yeah, I would say across the dashboards, the ones we've done have worked really well, and we just wish we'd done them earlier.
Yeah. Yeah, that's great. Before we move on, I want to move on a little bit to market perceptions and get your feedback from that. Anything else that you would add, just in terms of since you've gone live on Workday, different ways that the business is operating versus pre-Workday deployments?
I'd say our biggest advantage, so for Workday, it's more than just a HR and a financial management system for us, even though we continue to buoy all of the capabilities that they deliver. For us, we've extended that out to our operation. From a growth perspective, it's changed the way we deliver value to our business or our customers at the end of the day. We have a little over 100 large case customers with Workday, we're able to integrate with the product from a billing and other type of automation efforts. It's eased our ability to deliver value external to finance, which is just phenomenal. Cloud Platform is another big example of where we're looking to retire user-developed applications throughout the organization. We just went live with our first use case over in the U.K. with Cloud Platform. Again, kind of endless there.
We're excited about the opportunities as far as what we can build in and integrate and know that it'll work seamlessly within the releases that occur.
Yeah. That's great.
I would say for us, we're really acquisitive. We do a lot of acquisitions. It's really helped us integrate the acquisitions much faster. Bringing the employees on board and integrating them into the payroll system, integrating them into the workforce management system, it's just been much faster to do that and much more seamless. I'd say the same on the financials. Bringing them into the financial system is just much easier to do. I'd say the next big benefit for us is it's a much more secure platform than what we had before on-premises, because we had all these different on-premises instances. There were so many ways in which you could get into our network security-wise. Having it all in one instance in the cloud is just far more secure.
The last thing I'd say is it's helped us make our external audit with EY much more efficient, because we have all the underlying transaction documents in the system. When they're going in and doing their audit, it's a much more efficient audit. They're going into our Krakow center of excellence, and they're doing it across all the record to report transactions with the underlying document there. They're not going and deep diving and doing a different analysis in the system, and a different analysis in the system, and then digging around for paperwork. It's all there. It's had a number of other benefits that we frankly didn't expect.
Mm-hmm. We hear that a lot from customers, actually. That first there's an effort to retrain their auditors to look at Workday differently, right, than they do legacy systems, just because just from an architecture perspective and a data management perspective, it's so much different, right?
Agree.
Okay. Let's move on to some market perceptions. I'm going to start with you, Christa, because this is a very CFO-centric question. There's a general perception that CFOs are not motivated to move to the cloud, right? Typically, a little bit risk adverse. They have a GL that works for them, why rip and replace their GL? Do you have any advice for them, or what would you say to them, I guess?
I guess the first thing I'd say is I'm not sure it's just about the GL. I think it's much broader than that. I think the conversation we've been having is it's finance plus procurement plus expenses plus HR. I think for us, the way we're thinking about is really return on capital and trying to manage the business more actively. Manage it consistently, globally in a way that we've never been able to before because we've never had transparency into the underlying transaction data. For us, it's driving much more insight into our business than we had ever thought possible. I think it's a much broader decision than just a GL decision is sort of where I'd start. The second thing I'd say is I do think the security model is just much more secure than not having it in the cloud.
I think that's actually a very important thing to CFOs as you think about cyber attacks, which is a very big risk today. It's very sensitive financial data. Having that high security model is important.
Mm-hmm. Great. Thank you. Okay, we're going to move on to another one.
Sure.
That a lot of times we will hear a perception that Workday Financial Management is not ready for the Fortune 500. Since you both are Fortune 500 customers, I'm interested to see what made you take the leap, right, and bet on Workday as some of the initial large customers to adopt Financials?
Yeah. From our perspective, 1, a cloud application was one of our critical decision makers. We had just turned to being a cloud-first company. As much as I would love to say that we didn't still have to prove it out, we did. I think Workday set the leader board from that aspect is from an evaluation perspective. Keep in mind, we did our evaluation 6 years ago. We started our journey 5 years ago, January of 2014, and we went all in in Financials and HR. We did a very robust RFP with top competitors. We went through all the capabilities that was required and went through the exact same demos with each of those. At the end of the day, Workday had all the capabilities.
We asked for 3 enhancements to the product that we set out a timeline that they would deliver on, which they committed to. Really when we were looking at the product trust, because there was other asks within, to give you an example, U.K. payroll, which they have now subsequently delivered not too long after we signed. Initially when we were asking about it was like, "No, that's not on the roadmap." They're the only partner or vendor that was actually I heard no from. We actually developed a huge trust in that and looking at their roadmap and how they delivered, the understanding it would come in time. That was a huge value. Again, through requests from a financial perspective, again, we started that deployment and go live in October of 2014.
We put our first company on full financials in November of 2015 and just continued to deploy from there. It's been ready, and we've been very, very pleased.
Great.
I would say from our perspective, I think we did the business case just like you described, Chanda, and I think it was a much better business proposition for us. We saved substantial amounts of money. I think the functionality was much better because we did get this consistency, and I think actually having it in the cloud means every single country, at least for us, didn't get to say, "I'm different, and therefore I get to add on these extra features or do some customization." Of course, they can customize their own reports, which is fabulous, and we get all these custom reports for France versus Germany versus Italy versus Spain, but the underlying system is exactly the same, which means I can use apples to apples. That was a really important, I think, part of the decision process for us.
I would say, there's a bunch of other sort of benefits of being in the cloud. I think the security platform's really important. I think the business case was really, really compelling.
That's great. Let's move on now to life with Workday, I'd like to focus on innovation and really how your organizations take advantage of Workday updating every six months, right? Releasing new features and functions. I think that it's hard sometimes for customers to get into that mode, right? Of being in a SaaS solution, right? You mentioned earlier you came from a legacy application where you're basically forced into stagnancy because it's really hard to apply new features and when you have to look at customizations and rationalize all that. You basically are stagnant until you're forced to do a major upgrade, right? With Workday, you're having to learn a new skill and develop that within your organizations. I'd love to hear what you're doing, and I'll start with you, Christa.
How are you priming your organization to get ready to adopt additional features and functions? How do you feel like that helps you better serve your customers and manage your risk?
Well, I would say it's actually been a partnership between Aon and Workday in actually what we would like in the platform going forward, Workday delivering that. We actually, in the finance platform, outlined 250 features right at the beginning, they've been delivered in each subsequent update. For us, I think it's very much about as our business evolves, we continue to have a partnership model with Workday where they're continuing to deliver new innovation for us. I think unlike on-premises applications where you put it in then you kind of never see the partner again, it's very much an ongoing partnership, which has worked really seamlessly. I think, it's really about the innovation matching where we're going as a business, which has worked really well for us.
Mm-hmm. That's great. Chanda, you guys are, I think Unum's the poster child for innovation because you've adopted, I think, nearly every application that we have.
Yeah.
I'd love to hear how your team is embracing that and how.
Absolutely
Driving that mentality.
Yeah. We have a functional leads group that is very, very active with all the features that come out in every release that Workday provides. I'll tell you, going with a software as a service, having two releases a year added a little bit of anxiety at the beginning as far as timing because it was new to us. How would we feel about it? How would it go? What surprises were we going to encounter? I'm very pleased to say I've been through nine releases since our initial go live, and they've all been seamless, and we've continued to roll out functionality right when it's delivered and it goes to production as well as some we migrate in over time. We pick our path from that perspective, and we communicate it appropriately across our organizations where we need to. It's a seamless event.
The testing is very seamless. One, the alarm is, "Hey, you only have six weeks to do all your testing." I'm proud to say, even though we're not automated, finance can complete all their testing in one day. We have automation on the procurement side, and we have automation within our IT organization for the integrations that we test and run through. We get in a room, and we hammer it out, all the partners together from a financial perspective. That's just amazing. That just makes the adoption rate and the rollout rate continue to increase as those features come through. It's across all the functionality, the Cloud Platform, the Prism, the general ledger, the HR, and so it's proud that we're in one platform and doing it continuously.
We've talked about products, we've talked about innovation, and your stories around your business and how it uses Workday. I'd like to end our session just talking about something that's near and dear to my heart. When I opened, I talked about one of the keys to our enduring success we really believe is our partnership with customers, and you guys are great examples of that. I would love to hear from your standpoint of your viewpoint on the customer experience with Workday and really how you feel about that, so the team is not just hearing from us on that one.
For us, it's very, very easy. Over the last few years, Workday has become integral to our strategic business strategy. When we look at a capability or a need, the first thing we do is say, "Does Workday have that capability?" We still do our assessment, but again, it's a unique partnership with a vendor to be able to continue to roll out functionality and provide it through one platform and one tool. The various ways that you can influence the product as you move forward is very vast, and Workday listens. It's through the product team, it's through brainstorms, it's through design partners, early adopters, which we do them all. We appreciate being at the table to be able to influence the product, but also where Workday is going with their business strategy and the value they're going to continue to provide.
Lease accounting, and I'll give you an example of it. With the regulation changes that were upon us, you got two pieces you have to do. You have to go and collect your information and determine what you have from a contractual perspective and report on it, and then you need a tool that actually is going to handle that process from the beginning all the way through to the financial recognition of it. For us, we had two paths to take. Workday was building something, because we built that trust in them, we thought, "Okay, if Workday's going to build it, we're just going to go out and do our data gathering component of it." We didn't have to worry about the functionality.
Come along in March, they delivered the functionality, and they delivered it within the tool at no cost, just pure value for us. We're wrapping up our testing and getting ready for deployment. It's just unique. That partnership is very, very rare, and we appreciate it.
I think for us, it's been a really good partnership from the beginning, and it's been a great collaboration between the product team, and our either HR or finance and IT teams. We see that continuing today. We're a very complicated company. We, in finance, operate in 100-plus countries, and we have three sets of books in every country. We have a local GAAP or IFRS set of books. We've got a US GAAP set of books, and we've got a tax set of books. Actually providing all that functionality is really hard. Actually getting that all in the product for us has been a journey, and it's been delivered exactly as they said it would, which has been really reassuring.
I think we feel exactly the same way about planning, and we feel the same way about analytics because for us, that's really the value-add for our business leaders and finance leaders and really the reason why we want HR and finance in one platform. We're very excited about the sort of functionalities that comes down the pipe.
Thank you. Well, I want to thank you both for your time and your partnership with Workday. Please join me in thanking these guys. Thank you. We're going to stay on the path that I ended with the Workday customer experience. To speak to you all about customer experience, please join me in welcoming Jim Bozzini.
Thank you. Thanks, Chanda and Christa, and thanks, Emily. You heard from our customers about their perspective of the customer experience. What I want to do is take a few minutes and just talk to you about the strategies that we developed early on to develop the customer experience, which we think is a differentiator for Workday. First, from the very beginning, when Workday was founded, we knew customer satisfaction would be a key tenet. It would be a strategy that we would drive throughout our company life cycle. About 10 years ago, we set an objective of 95% or better in customer satisfaction, and we developed a survey of executive sponsors. That's how we measure at the top level. I announced earlier this morning that we achieved 98% customer stat this year.
We were 98% last year, and we've been on a track record over the 10-year period of being 95% or better. Of course, in the services world, we respect our business objectives of driving revenue. This year, we'll drive in the neighborhood of $420 million in revenue. As we often say on earnings calls that we absolutely prioritize customer satisfaction over maximizing and driving our revenue. It's really all about keeping customers happy so that you hear from customers like Chanda and Christa and all of the other customers that help us to represent Workday, essentially tell our story for us, and drive more software business. When we think about the differentiated customer experience, for me, I think about two different parts. One is proven deployments, and the second is accountability to customer results.
We'll divide this presentation up into those two parts, and we'll start by talking about proven deployments. Some of the key components of Workday deployments, first of all, we think it's so important to get off to a great start. That initial deployment, that ability to get organized and get live in production out of the gate is so important because, of course, on an ongoing basis, the customers are able to capitalize on the features that we continue to put in the system. We do get pretty particular about how we create that deployment experience and our track record, at a high level, about six months to deploy for that initial deployment for medium enterprise customers and about 12 months for large enterprise customers. Of course, for the last couple of years, we've been at 70+% of our customers live on Workday.
In order to maintain high quality, we're diligent about picking only selective partners. We work very closely with those partners to ensure that they are ready to take the role of prime contractor. Before they're able, they will subcontract with us and work side by side with us. At the point that they are ready, we are very careful to ensure that their resources are certified, not only when they're onboarded, but recertified every six months as we do new feature updates. We test them. We want to make sure that it's not just about taking training classes, but in fact, it's passing tests. We have a service called Delivery Assurance that is essentially a peer review process. Workday is involved in every deployment.
Whether a partner is the prime contractor or Workday, we're doing a peer review on the process to make sure that the customer is ready to go live. Of course, we also invest in methodologies and tooling to continue to drive and streamline the process. Just a quick point on deployment tooling. For the last several years, we've sort of had increased our investment in deployment tooling. The idea, of course, reduce hours, increase predictability, improve quality. I would say that the key to the tooling, not just for initial deployments, but also for the ongoing updates and the ability to uptake features. When we think about building deployment tooling and building methodologies, we do think beyond just the initial deployment. We do think about how to uptake functionality over time.
The methodologies and tools are targeted at both the large enterprise and the medium enterprise companies. I want to highlight something that's been very interesting for us recently in the medium enterprise space. We've seen significant momentum recently, and we attribute it in part to the tooling and to an approach, a methodology that we announced last year called Workday Launch. It is a methodology that leverages pre-configurations and a tighter scope control. What we found is that the level of effort on deployments has decreased by 30%, a little bit more in some cases. I think of note, both Workday and our partners have adopted Workday Launch. It's important to note that when we develop tools and methodologies, we make them available to our partners. We essentially open source them.
We want all of our partners to take advantage of all of the best ideas and the best tools so that they can pass those along to the Workday customers. I want to take a minute and talk about the ecosystem. We like to give you an update periodically on where we are growing the ecosystem. Currently, we're in the neighborhood of 9,500 certified consultants, and by the end of the year, we'll be getting pretty close to 10,000. The Workday consultants represent about 13% of the ecosystem, and I've got some of the highlighted partners on this slide, but there are about 30 partners worldwide today that are capable of priming Workday deployments.
Now, some customers choose to be a little more self-sufficient than others, and so one of the things that we introduced a couple of years ago is the ability for customers to take advantage of the same type of training that we provide to our consulting partners. That program is not a certification, but we call it an accreditation, and it's called Workday Pro. After just a couple of years now, there are 1,300 accredited Workday Pros in our customer population. I think that's interesting because it really gives customers more and more of that training that consultants get. It gives them the opportunity to do more on their own with the knowledge that their employees are getting the same level of training. Let's flip over to talk a little bit about accountability for customer results.
I'll say for starters that very important to Workday that we dedicate resources in all phases of the customer life cycle as customers are learning about Workday in through initial deployment, and then of course, in all of the years that they will be in production, looking at more and more of the functionality that we put into updates, as well as new add-on modules that we develop. We track all deployments, all initial deployments, and we track the majority of the subsequent product deployments, and that gives us an idea of where customers are, how we can help them, how we can stay close to them, and the resources that they're using from the ecosystem. Part of our objective is to look for more and more ways of measuring how we're doing during that journey.
Throughout that life cycle, and particularly as they're live, ensuring that they're meeting their business case and staying very close to them through that process. Of course, part of what they're looking for is to up level. We connect with them, learn more about how we're doing through our learning interactions, periodic business reviews, planning sessions, various surveys, including the executive sponsor survey and others. Of course, we work with them to help them prioritize their Workday agenda because we want them to continuously drive value and increase the value that they're getting from their Workday products.
One example of how we're helping customers take advantage of the rapid innovation and the features that we're putting into the product, we've built some new tooling so that they can understand their usage patterns and help them focus on how to create that roadmap to continue to adopt the features that we've put into the product. One of the additional benefits that we get from working with those customers on their feature adoption roadmap in core products is that we get some early visibility to where they may be interested in buying additional Workday products, the SKUs that are available for them to buy as opposed to the features that go into the core products.
We partner with the sales organization that Chano will talk about in a few minutes to highlight those opportunities and make sure that we're doing everything we can to bring the right people to help customers learn about those features that are available to them. I want to comment that the subsequent deployments, so beyond initial deployment, makes up a large body of the implementation work for Workday and for our implementation partners. There are some modules that are just more commonly deployed as subsequent deployments. I'll just wrap it up by telling you that while the field organization, the sales and services teams are on the frontline, the focus on the customer runs deep through all employees.
If you caught a comment that I made in the initial keynote today, every Workday employee is very interested in seeing those customer satisfaction results because the executive sponsor survey is the one that we use to gauge our overall satisfaction with customers, and we incentivize every single employee at Workday on that score. I would say that while all the teams in the field, the partners, everybody does such a great job in serving the customer, that one of the absolute key differentiators for us is that we have developed a customer-centric culture where everybody in the company is focused on serving the customer. I'd say that that's a key difference. 95% or better is the goal, and our track record's been great. With that, I'll turn it over to Chano Fernandez, Co-President of Workday.
This, sir.
Thank you.
Thank you, Jim. Thank you. Pleasure being here. Thank you for making the time to all of you. I couldn't emphasize how relevant is the job that Jim and the services organization does for us in the field being successful, particularly into new customer acquisition. What is happening out there in terms of those customers networking with some prospective customers, but even between them into adoption of other different solutions and suites that we might be offering is just of tremendous value. I'm proud to say that because of the work they do, potentially, I would say that our best sellers are, no doubt, I always say it, our customers. That's really powerful. I want to talk about a couple of primary growth levers that we do have, and that is clearly two very simple motions.
One is acquiring new customers, and the other one is basically upselling into existing customer base. Let's just start with acquiring new customer. When we think on our addressable total market from a customer perspective, we have around 33,000 customers identified that are really suitable and fitable to Workday on a global basis. Currently, we are less than 10% penetrated into that customer base. We see it as a great opportunity and ample opportunity to grow within our base. Over our short history, and if you look at the trend during the last five years, that customers base has grown from 500 to over 2,300 customers today, and we expect that this type of customer growth is going to continue. Net new customer growth is really fueling net new ACV.
In fact, 80% of our net new ACV is driven by basically net new logos or net new customers. We feel that this is important to emphasize because this is very different than many of our peers that are already mining onto the customer base when we still have a few years ahead of us where we're going to be growing, and we believe that growing healthy in terms of net new customer acquisition. As we add also new products, we're also increasing the number of products onto our initial sale to those net new logos, to those net new customers. Indeed, if you look at basically the trend during the last six years, that has doubled from three SKUs or product into an initial sale to around six that we are running basically as our last fiscal on an average.
We also continue to see an increased trend that we definitely like of more customers buying onto the platform, meaning taking Financials and HCM basically at the beginning of the initial sale. If you look at the trend in North America during H1 or the first half of this fiscal year that finished end of Q2, 30% of the customers basically were acquiring HCM and Financials at the beginning. You can see what is coming from a year ago. Clearly, this is one of our differentiators in terms of offerings in the medium enterprise space. I think it's also fair to say and recognize that we are seeing similar trends into the large enterprise space. Indeed, if I think about some of our Fortune 500 customers, they exactly became platform customers. The cloud financial management market in financials continues to mature and move up market.
We're growing significantly faster than the market, and you can see our continuous progress and track record out there. Those 530+ customers today, they represent around 25% of our base of the 2,300 that we commented before. If you look at during the last three quarters, we doubled the Fortune 500 base from four to eight. Indeed, I can say, and you've read in there, that today we are nine Fortune 500 customers. The last one being H&R Block, which also happens to be basically a platform customer who just became a customer earlier this quarter. When we look at the pace of the adoption, and this is what happened in HR from customer 100 to basically customer 500.
When you compare to what's been the Financials trend there, funny enough, it's a very similar curve of adoption, just basically a delay, basically in the timeframe on how customer have been adopting first CRM, moving to the cloud, then HR, and now more financial customers moving on to the cloud. Clearly, we always talk about this when we're talking to our earnings calls and we share with you. We still feel and recognize that the opportunity is significant in the U.S., clearly a significant growth lever of our market is the opportunity to internationally. Hence, we are investing into capturing that one, and we realize that those emerging markets has a tremendous potential for us, and we have a great solution for them. Let me focus now on to the up-sell opportunity.
I think it's important to emphasize that our focus is going to remain on net new customers and net new customer growth. Obviously, as our customer base is increasing, I think it's important that we put efforts as well into nurturing the relationships and the trust we have with those customers and begin to focus into that up-selling opportunity. This year, beginning of February, we made a go-to-market change where we had all our go-to-market focus enhancement, where we put much more focus into dynamic movement into having go-to-market teams focus as well into nurturing and working onto that customer base. What I can tell and what I can share with you is when I look at what has happened during the first half of the year, we really like what we're seeing. We know, again, it's early. It's those couple of quarters.
It's paying off, both on the retentions, renewals, but as well into the addition of the up-selling of additional SKUs. We continue a very good track record in terms of the product attach rate opportunity being a significant growth driver for us, and we believe that we are best in class in the market here. If you look at what's happened in the last year, there's been significant progress in areas like recruitment, but as well learning, planning, pricing analytics, many others. The attach ratio is very significant. I'll give you a minute, too, so you can take the pictures. I will now move on. The up-sell opportunity, as we say, is quite significant. Again, focusing on net new customer logos, but realizing that we had a tremendous asset, which is that customer satisfaction that we enjoy.
We should definitely be aware that satisfied customers who buy more from us, we were doing a good job for them, right? If you consider a typical journey where a customer initially becomes just core HCM, by becoming financial customers, that initial dollar will be $2 or will double, and it will be able to deploy all the additional or all the available SKUs. You saw before the attach ratios, that would be 5x, the initial sale. That's the potential. That's I think a good reason why you understand that as our customer growth base is increasing, it makes sense for us to put more focus in terms of how we're going to be handling that and managing that opportunity from a go-to-market perspective and deploying sales.
To give you an example, and this would be a technology customer, real example, that has not yet become a financials customer, that became a customer of us initially in 2011, that later on moved into solutions like recruiting or like Workday Cloud Platform or pricing, and how that customer has become from a $1.3 million ACV customer to a $3.1 million ACV customer. You clearly could make the math if they become a financial customer or if they acquire another SKUs compared to what's initially the HCM customer. We're really excited about the opportunity again on net new customers and how we're going to keep driving that very hard, and with that less than 10% penetration today that we have, but as well into the upselling opportunity we have. With that, I want to hand over to our next speaker, who's that one?
Robynne, please come on stage.
Thank you, Chano.
There you go.
All right. I'm going to bring it home here for us. What I'm going to talk about is three things, primarily. How we can sustain high levels of enduring growth through our large market opportunity, our multiple growth levers, and our compelling long-term business model and investment framework. I'm going to start with market opportunity, because while Chano touched on this, I think it's really, really important for you to understand how we think about the long-term Workday opportunity. Our current TAM is $80 billion today. It's a huge number, and it's only getting bigger. It's projected to actually be $115 billion in 2022. Our opportunity is massive, and this is giving us a really long runway to continue to grow the company.
While our early success and reputation have been built on the HCM market, it's important to keep in mind that that is only about 20% of the addressable market that we're actually going after. We have just really scratched the surface of our potential in the long run. As all of you know, the cloud adoption is still in its really, really early days, right? We have a long runway ahead of us, and more opportunity ahead of us than we have behind us. Now let's talk about how we're growing within those addressable markets. Jim talked about our customer support goal, customer satisfaction goal of 95% or higher. We have very similarly high bars for ourselves on retention rates.
One of the critical foundations for enduring growth is to keep your existing customers, because if you start losing your existing customers, the first thing you have to do is go out and replace that revenue before you can even grow on top of that. This is really critical for us. Our high customer satisfaction, combined with the fact that our products are mission-critical to our customers, really drives best-in-class retention rates for us, which is a great foundation for us to continue to grow into the future. Much like our customer satisfaction goals, we have a goal of 95% or more gross retention rate, and we consistently beat that, sometimes by a lot.
We've got a great track record on gross retention. We've talked a lot in our earnings calls and elsewhere about our net retention rate goal is 100% or more. We consistently overperform on that as well. We have always been, and will always be, laser-focused on our customer success, and that will help us continue to drive these retention rates, which will be the foundation for our growth going forward. If you look at our leadership position in HCM, right? The markets that I just talked about, our addressable markets, are growing at 13% in HCM. We're growing two and a half times that, which tells you that we are continuing to take share and extend our leadership in HCM, and really have become the de facto gold standard in this area.
If you look at financials, that market is growing at 7%. Our revenue for financials is growing at a staggering seven and a half times the market. Right? We are really, really excited about our opportunity in financials. It's still early days, but we're really encouraged at the market share that we're taking right now, and the signs that the pace of adoption and migrations to the cloud has not only picked up, but has started to move up into the large enterprise. We've seen a tremendous amount of success also in building larger relationships with our customers. When we first started showing you this data a year ago at Rising, we were seeing an acceleration at that time in the number of large contracts versus previous years.
We weren't sure when we presented that data to you, whether that was an anomaly or whether that was a shift that we were seeing. I'm really pleased to say that it looks like that acceleration is here to stay. We continue to see very, very strong growth in our customer relationships, as measured by $3 million in annual ACV or higher, 34% growth over what we showed you last year. I think there's really two things that are driving that, right? First of all is the growing number of products that we have, and Chano touched on this. We're able to sell more out of the gate, the initial sales are getting larger. We're also doing good add-on business, which Chano talked about as well. Our customer relationships are growing over time.
On top of all of that, we're continuing to see the pace of large deals coming into market being sustained from the levels that we saw last year. This is a really, really great result for us. What all this means is that we continue to grow revenue at a very high rate even as the numbers get larger. We've been delivering consistently very, very strong growth, even as we really attack our goal of being one of the largest software companies in the world. When we look at backlog really gives us strong visibility into our future revenue. Now there are dynamics that move it around, things like duration, timing of renewals. We think that this is really a great metric, and you're starting to see our peers, as they've adopted the 606 revenue standard, start to talk about backlog as well.
We've been pleased to deliver very strong growth, even as these numbers are getting really, really large, and we're running into the law of large numbers here. Now you've been asking us to give you a shorter-term metric on backlog that takes out the impact of duration. In fact, some of you asked me that over the break as well. Here you go. This is for you guys. We're not giving a current, what we're giving is 24-month backlog because our contracts are longer than most of our peers. We think that this is the right shorter-term metric. Our contracts are three years or higher, so giving you a two-year view completely eliminates the duration factor. We're really pleased to give these numbers to you guys.
As you can see, the growth on the 24-month backlog is actually two percentage points higher than the total. That takes out the duration impact that we saw last quarter. We think that with this, we're really well positioned to continue to grow in a very robust manner into the foreseeable future. We've talked a lot actually, and Petros had a slide that was a little similar to this graphically, about multiple drivers for growth, right? Multiple S curves. As I mentioned earlier, we're still in the really, really early days of our long-term opportunity. While we've shown great success so far, as you all know, our historical success is largely an HCM story. Given the large markets that we're going after, we have so many growth drivers ahead of us, really far more than we have behind us.
Financial Management, again, it's early days, but as Chano showed, it's tracking just like that HCM curve did at this time, right? That gives us a high degree of confidence in where we're going with the Financials product in this market. Other products, such as analytics and planning, are really in the early days and are just starting to take off, and we're really excited about having Adaptive as part of the family and what that will create for us in terms of a growth driver out of the planning business. Chano touched on international. Our international expansion is really continuing to pay off, and we've got growth overseas outside of the U.S. of over 45%. We're working on growth levers beyond that. We're investing today so that we can continue to drive growth years and years out into the future.
We're investing in a lot of things that we're not even ready to talk about yet, but we're really excited about. Now let's talk about our business model and investment framework and how that connects to our market and our growth strategy. As all of you know, when you look at R&D as a % of revenue, we invest twice as much as our SaaS peers. We do that very, very intentionally and for very, very good reasons. The TAM we're chasing is very, very large. As I just said, we're making investments today to ensure that we have multiple growth levers to continue to deliver enduring growth into the foreseeable future. Here's how we think about our investment strategy, right? Our success in HCM is the foundation from which we can continue to build investments in other areas.
In fact, our HCM non-GAAP operating margins are already over our 25% long-term margin goal. We are already delivering to our long-term margin targets with just the HCM business alone. What that's allowing us to do is to deliver profits today while continuing to invest for the future. We're investing in Financials. As you know, you've heard a lot about Financials today. We're investing in delivering industry-specific features. We're investing in making sure that our product's ready to enter into new markets, right? All of that investment is funded by HCM. We're investing in Prism Analytics, and it's early stages, but we're super excited about where that product's going to go, and the early interest in the marketplace and our customers is extremely high. We'll continue to invest in Adaptive, right?
Tom talked about the roadmap to get us to the power of one with Adaptive. Super, super important where they're going with operational planning, headcount planning, financial planning, sales planning, right? We'll continue to invest in the planning product and that whole suite. We continue to invest in other product areas as well. Petros talked a lot about technology. We continue to invest in technologies that our customers can take advantage of across our product suite. Things like Workday Cloud Platform, machine learning. If you were at the keynote this morning, we talked a lot about machine learning and other things that will benefit all of our customers and all of our products. If you look at the allocation of our development team in terms of headcount and resources, it largely reflects our long-term market opportunity, with 20% being dedicated to HCM.
35% being dedicated to financials and the rest spread across other product areas. You can see there's a method here to our madness, right? We're really putting our investments and our resource allocations to go after those long-term markets that I showed you. Where does operating leverage come from then? You should not expect it to come from R&D. We're not going to take our foot off the investment pedal anytime soon when it comes to investing in our products. You should continue to see R&D run at that high level of revenue into the foreseeable future. We will get operating leverage in other areas of the business, like gross margins. We continue to expect that gross margins will benefit from the continued mix shift to subscription services, and that benefit will be delivered to the bottom line in terms of non-GAAP operating profits.
We also expect to continue to get efficiency gains in sales and marketing, we already have best-in-class customer acquisition ratios in sales. We'll continue to deliver that best-in-class ratio as well. Even though G&A is a smaller number, we do expect that as we scale, we'll continue to get efficiencies in G&A as well. In fact, we're already at unrivaled G&A ratios when you look at us against our peers. All that means we will continue to deliver non-GAAP operating margin improvements through those efficiencies I just talked about. This year, we're well-positioned and on track to deliver an incremental 200 basis points, then we bought Adaptive. As you all know, we've taken our margin guidance down for the year by 300 basis points because of the Adaptive acquisition.
It's really, really important to note that $40 million, or almost half of this margin adjustment, is solely attributable to one-time transaction and integration costs. This acquisition is incredibly strategic as you keep hearing from us, we will continue to invest into Adaptive, we feel super excited about our ability to deliver on our vision to our customers of plan, transaction, analyze all in one system with Adaptive. Our long-term target margins haven't changed, right? These are the same targets that we showed you last year. We do expect that we will start to get incremental margin improvement again next year from this year when you take out those one-time costs, we will continue to deliver incremental improvement over time.
Given where we are with just the HCM business, we're very, very confident that we can deliver on these longer-term targets. Now I want to end by talking a little bit about cash flow. All right? We have very, very strong operating cash flow. We've been pleased with our progress. We were on track this year to deliver $605 million of operating cash flow. We've taken that down with the Adaptive acquisition. Again, $40 million of the $55 million drop is one-time costs. We expect that next year we will again, just like margins, get back to steady improvement in operating cash flow over time. Just want to wrap this all up because we've talked about a lot this afternoon, right? We talked about Adaptive and how excited we are. Adaptive really accelerates our planning opportunity by two to three years.
Our customer base is so excited for it. You heard from Tom about our plan to bring them into the power of one so that it is absolutely the experience that our customers have come to expect from us at Workday. If you were at the keynote this morning, you also heard Tom announce that Workday is now fully live on Adaptive as of yesterday, 10-week deployment. Great proof point that it's ready for companies of our size and our global complexity. On the same day yesterday, we actually brought Adaptive completely live on Workday across our platform suite, HCM, financials, expenses, recruiting, procurement, everything. 10-week deployments, both directions. All right. Really great way for us to showcase both of our products in such fast go-lives. Very excited about Adaptive. Petros talked a lot about innovation, right? Our platform, what makes it different, right? Data.
You heard a lot about data in the keynote this morning and from Petros, how that's going to drive a lot of our future opportunity and going to be something that's very unique in what we can deliver to our customers that nobody else can. You heard a lot about the customer experience, how important our customer relationships are to us, how important retaining them is. You heard from two customers that talked about how our financials and our full platform was ready for Fortune 500-type deployments. All right. This will continue to be something that we're laser-focused on, and we're very, very proud of our 98% customer satisfaction again this year. We talked about driving enduring growth, right? Chano talked about making sure that we're getting new customers, new logos, upselling into our customer base. Right.
Our business model is supporting all of our investments today that will pay off in the future for us to continue to drive high levels of growth, even as our numbers are getting bigger. To wrap it all up, we'll continue to deliver on our long-term vision through plan, execute, analyze, and extend framework, and we couldn't be more confident and more thrilled about where we're going and what we're going to do in the future. Thanks again for joining us today. We'll have a Q&A session now, and I would like to ask the speakers to come up to the stage and join me.
Oh, hi. I guess I'll kick it off. Thanks, everybody. Karl Keirstead to the Deutsche Bank. Maybe for Robynne. Robynne, I was just checking my notes from this event last year. When you were on stage, you addressed a little bit some of the unusual invoicing, billing terms, then billings growth positioning that you're lapping. Could give us an update today, like you're largely through that effort, still fighting?
I think, all that you said, on track. [inaudible] .
Thanks very much. For ISI. Partners, [inaudible] tech, either more into the mid-market off and you guys show up and more. Can you just talk about, then actually for Robynne. Robynne, business gets to be mixed with large it says enterprises impact on sort of your thoughts around, you have a little bit more mid-market in it.
We're very pleased how it came. I think that in terms of the go-to-market from a sales perspective, kind of the Workday Launch, investing into that and simple, more template we implement and the sales team, how to position that. You saw we commented into customers that you're seeing as well where 90%-30% initially getting HCM going. That is not just North America or market methodology. In the U.K., from Germany.
A major market.
Revenue and our billing.
Don't see any big will be new to us overall.
I guess, is there anything out there that change? As we're going through this kind of early days of the cloud cycle, what do you think that day is whenever we hit that sort of bump in the road? Thanks.
I'll take a shot. Start to customers or things going south. We're at deployment or even trans signings. I think there's a lot of them. If something does, one of the things that I've seen through my career, and I think this was true of Workday in 2008 and '09, which was, I wasn't here. I was actually at a perpetual license company at the time. We're not going to see that if they're buying. They saved a ton of money with Workday. That's actually going to be for us, cost reductions.
Nothing to add.
Nothing.
Hey, guys, over here on the aisle. Alex Zukin with Piper Jaffray. Thanks again for all the great info. You guys made a point to describe the HCM market as being kind of 20% or thereabouts of your total TAM today, you're driving 80% still of your new ACV from new logos in that market, and then you're also seeing really strong growth in $3 million deals that's above kind of where the rest of the company growth rate is. I guess the question is, how long do you anticipate that activity to continue? Where are we in kind of that cycle, and how much longer or at what point do you need for that enduring growth? At what point do you need a lot more of that growth to start coming from financials?
Yeah, that's a great question, Alex. If I had a crystal ball. I mean, we're still seeing a ton of opportunities in HCM. Right now, the growth of HCM revenue is slowing because our numbers are getting so big. We are not seeing any shortage of new opportunities in the large enterprise and in the medium enterprise come to market for HCM. It feels like we've got continued pace there of things coming to market, and Chano, you should pipe in on that-
Yeah
in a minute. I don't feel like the opportunities are slowing down yet, right? I do think that as you look at some of the growth levers that are coming, it will be important at some point. It's really hard to tell if that next year or the year after or the year after. It will be important at some point that they start to kick in, which is why we're so encouraged by the data that Chano showed you on the financials curve and how amazingly that maps incredibly well to the HCM curve. It feels like that is starting to become a growth driver. The numbers are just smaller at this point, and then we have so many other things that could kick in. It's really not easy to tell exactly what that timing looks like.
You want to comment on what you're seeing in the pipeline for HCM, Chano?
Yeah, Alex, I think it's a great question. I mean, clearly, we come from a very strong year, last year in terms of tremendous numbers, many logos, particularly Fortune 50, Fortune 500. When you look at kind of the first half of this year, I mean, in Q2, we said 8 Fortune 500 as well as the new logos. When I look at kind of the pipeline in second half, I mean, clearly, I commented on one because it was financials here, right? H&R Block, Workday Financials, and HR. Basically remains kind of pretty strong and kind of similar dynamics. As we're becoming a larger company, more dynamics towards backing of the year, more heavy-weighted to Q4, right? The pipeline seem very strong and kind of similar kind of perspective that we had had before. That is pretty encouraging.
When you look at them from my first slide, which I think is pretty telling, that 33,000 compared to what, 2,300 accounts today, less than 10% penetration. I think that's also pretty significant, right? I guess someone may ask me what that penetration can be. Can that penetration become 10,000 customers, 33%? What I can tell you, we have 33% already in some industries in North America and large enterprise, like financial services or technology. I potentially would answer you quite bullish. Why not, right? If you ask me how long that is going to take, that's a different answer, right? The other thing is, we see kind of more Global 2000s as well now coming as some of those emerging geographies or international markets are becoming more mature.
Thank you. It's Evan Brayson with KeyBanc. Wanted to drill down into the large customers, specifically hesitant to call an acceleration a trend last year. Now you're saying, "Hey, it feels like a trend." What's changed in the last year? What's giving you confidence that this acceleration you saw is sustainable? Is that a comment relative to the pipeline? Just what's changed giving you confidence in the change in trend line? Thanks.
That's a great question because when we showed the data last year and we saw the huge jump in large accounts, we weren't quite sure what was driving that. I really do think it's a combination of, we have seen a lot more large deals come to market with HCM. The pace at which they're coming really accelerated last year, and that's sustaining. We are able to have larger relationships with customers than we could, say, five years ago because we have so many more products to sell. I really do think it's a combination of those things. Now, whether it will continue, is kind of anybody's guess. One of the things that we've said all along, and continues to be true, is that the really large deals are going to be lumpy, right?
They're hard to predict in terms of when they're going to come to market, when they're going to sign. We've seen stuff in our pipeline that maybe slips. The pace of those is really difficult to predict, and we're more focused on making sure that we can continue to have really, really strong win rates, which we do today, particularly in the Fortune 500, the Global 2000. If we can keep winning the vast majority of those as they come to market, then that's a great result for us. They will ebb and flow, it's kind of hard to predict when they'll come. Chanda, you have anything to add?
No.
Hi, this is John DiFucci from Jefferies over here. You're right. The question is for Chano. Robynne just mentioned that curve you put up there, the first 500 customers for HCM and then financials kind of look like they overlay really nicely. I would think the composition might be different. In other words, when HCM, I know you have some early smaller customers, but really early, you were really going after the large enterprise. Whereas financials earlier, you said, "Okay, you know what? They're not ready yet. Let's go after the sort of mid-market." I would assume the billings or revenue curve might look a little bit different. There you go. Beautiful. That still begs the question of after 500, what happened to HCM? Was it still kind of like the slope still coming down because of the law of large numbers that Robynne spoke about?
Was there any kind of inflection up or down? I'm just curious what that looks like after 500 to whatever your number is now, four times that or more.
Well, it's a great question, John DiFucci. To be honest, I don't know after the 500. I don't even know when the world reached within the HCM. Maybe it was when I was not even here or close to like four years ago.
When you came in, it inflected up.
I don't know exactly that's flattening out. Clearly, in financials of being accelerated. Yeah, you are right. We're pretty transparent on saying that when you look at the first 500 HCM, give or take, you have around 40. It would be a good number in terms of Fortune 500 out of those. We've been telling you or sharing with you, that is nine within the financial composition. I think there are very good reasons for that in terms of the solutions for financials are more complex, and we are getting more mature for that cloud core financials. Potentially for some of the things that Christa Davies and Chanda Pepping were commenting now, some of those CFOs realizing some of those benefits, but maybe taking a little bit longer. Still, I believe it's a great comparison. We'll look into what happened after the 500 going forward.
The pace of net new logos, and particularly because the medium enterprise has been accelerating with our go-to-market offering, has been very strong. I would not be surprised if the curve has continued, basically given a similar track record, because clearly, when I look at it in the last three years and I compare quarter-on-quarter, we're getting more logos. I can tell you that, yes, the growth or the health of the new logos growth is very nice. I don't know, Jim Bozzini, do you have any views on that one in terms of you being here much longer than me or Petros Dermetzis?
Not specifically without looking at the numbers. The one thing I guess I would say is that when you're implementing financials, it's comprehensive. It's quite different than maybe some of the early HCM customers where it was a very small sliver of the very large HCM customers, where we were implementing very small slivers of HR functionality in the very early days.
Sounds like a quick job for Prism Analytics.
Yeah.
Get the answer. Good.
Hey, guys. Kash Rangan of BofAmer. Congratulations on the wonderful successes over the last several years of rising, particularly this one. Very impressive. A question for you, Chano. You talked about how you're going to segment the sales force into an install-based sales force, a new customer acquisition sales force. Can you talk about when that is going to be implemented, what are the likely benefits that you expect out of that segmentation? That's clearly a big step for you guys. Also more, looking out longer term as the company really becomes a multi-product company to Robynne's slides on the TAM being really multifaceted. How does the go-to-market model change? Clearly, you could be growing faster. What stops you from hiring at a faster pace given that you're very small relative to your total available market? Thank you.
No, it's a great question, Kash. I would say, what changed on that go-to-market segmentation is, we always had great retention ratios in the renewals. Now we have teams that are more focused into planning those according to milestones, even kind of 12 months earlier. We're very prescriptive what needs to happen 12 months earlier, six months earlier, three months earlier, and we can have a conversation offline if you're interested in all the details. Happy to share. Jointly with that, I think we allocated good talent into manage that customer base. Now that we have basically a suite of products that is much broader and try to accelerate the adoption onto happy customers of the new SKUs, I think the attach ratios are proving that to work.
What we've seen during the first half is even though we always have good retention ratios, and I think we share in Q2 that we have best renewal rates. Comparing $1 initial towards what they are renewing today, not adding, just mix of more or less employees or mix of CPIs or renovation indices or whatsoever, not adding or taking products there. Kind of comparing apples to apples. We like what we're seeing into both, right? Kind of the planning plus the add-ons basically of the SKU. It's early days, right? It's early days. I think it's the right thing to do. Presents a great opportunity as the customer base is increasing.
Thank you. Over here, Brian Schwartz from Oppenheimer. Question for Chano, maybe Tom wants to share some thoughts, too. Just on building upon cloud financials adoption in the market. Can you maybe share, maybe on a more granular level in terms of the deal activity, what are you seeing today as kind of the biggest hurdle to overcome, and how has that changed from, say, two years ago in the deals for larger financial enterprise? Thanks.
I think the biggest change from two years ago is that we have more proof points, and that the solution has matured as well in terms of the two components that are quite critical. One is the industry functionality for the core industries we want to serve, and the other one is basically the scalability and what we can deliver to those customers. I think that is a huge change from two years ago that, again, we don't want to get this wrong again, that give us a little bit more confident onto clearly when you look at the financials pipeline as a percentage of the total has grown significantly faster than HCM.
Of course, when you put it in the whole total of the pipeline as HCM is still significantly big, it's only a few points larger, like two to three to four percentage points larger than it was a year ago, right? That composition is clearly driven by, yes, mid-enterprise market, but clearly as well large enterprise market that are being part of those discussions. With Adaptive, if anything, is even a much bigger change, but I will let Tom to comment on what I believe is providing us a much better opportunity into engaging with those conversations. Tom.
Yeah. If I think about it, Brian, compared to a couple of years ago, I think for us, probably the biggest difference is there's more activity around enterprise. I think that was true before the acquisition by Workday, and it's certainly true today, two months, six days into the acquisition. I think that's probably the biggest change we've seen. The other thing I would comment for the planning space, is a highly competitive market, and we've seen pretty consistently over the last couple of years, improvements in the win rates. I think we're starting to see what may be the beginning of some separation of vendors in that space. I isolate the enterprise change as the biggest difference.
I would just add one thing, Brian, because I talk to a lot of prospects, and I'm involved in a good portion of the financial sales cycles, particularly in the large enterprise. One of the things that I've noticed that's changed over the last two years is the conversations I was having two years ago were with CFOs who were saying, "I'm not sure if I want to put financials in the cloud.
Yeah.
I'm interested in this. I want to learn more, but I'm just not convinced." Right? Those conversations are over now. Now when I talk to CFOs, it's, "We're definitely going to the cloud. We're definitely putting financials there. It's just a matter of who we're going to choose as our strategic supplier, and what our timing's going to be. Is it going to be a year out? Is it two years out? Is it three years out?" That's the biggest difference that I've seen is the whole debate about financials going to the cloud seems to be over.
maybe I'd add that I think CIOs are now proponents, too.
Yeah.
In addition to CFOs, I think we're getting the IT side that has come around, and it's a different mentality now than it was two years ago.
I think for planning, Robynne, I completely agree. I think we saw it in planning just a little bit earlier.
Yeah.
I'd say around the time I started Adaptive, about four years ago, we were just starting to see the transformation. There was still some resistance, and that's completely gone. I expect financials will follow that pattern as well.
Hi. Thanks, guys. Philip Winslow, Wells Fargo. A question on Adaptive. Obviously, planning has been a focus at Workday Rising for a couple of conferences now, but there's a change, obviously, with you guys owning Adaptive here. Two questions, really. When you think about the go-to-market, when I think of the original planning product, it was sort of part of the whole stack, so to speak, with HCM or with HCM and Financials. When I think about how Adaptive is going to market now, it's either integrated with in a stack or standalone. The question is, how do you think about that potentially serving as a landing area for Workday to sell into non-Workday customers using Adaptive planning as a route in?
Similarly, on the opposite side of it, selling an Adaptive into Workday, not necessarily for Finance or HCM, you also have Adaptive Insights for sales, et cetera, and I'm sure there'd be future product there.
I'll start then, Chano. Maybe you can jump in. I think you did a nice job of capturing the various sales motion opportunities. I think the sell with is principally a Workday-led sales motion, and I think we have a stronger offering with Adaptive as the planning solution today. It's early days, but I think we're very encouraged by the reaction we've seen from customers and very encouraged by those opportunities. The sell Adaptive first for customers who may not be ready, I think we'd all stipulate that companies are more likely to make a planning change at a higher cadence or frequency than they would do a financials change. There will be, I would expect, there will be opportunities within those 30,000-plus companies that will be ready to do a change on the planning side before they're ready to consider something on financials.
There will continue to be an Adaptive sales motion, which is opportunities that may not be, at least in the short term, Workday Financials or HCM opportunities. I think it's all those, and the strategy that we've taken is try to keep as much of the Adaptive go-to-market motion, which outside Workday, keep some of that intact and continue to do the same things that we're doing. Leverage really the net new opportunities for Workday, planning as an enhancement of that, and selling into the Workday installed base.
I think you capture it perfectly. It opens a tremendous opportunity. We've been looking just into this last year on sign-up customers that we've been trying to talk to, if it is the right time to engage and move on to the GL. In some cases, they said, "We'll have that discussion, but not now, but we're engaged in a Hyperion potential replacement. Can we have that conversation?" We know being ERP-agnostic at that point and not having Adaptive is kind of, we can't talk about that. When you're ready to replace the GL, we talk. That opens a tremendous opportunity, and we need to make sure that we basically go after that standalone market right now. We believe we have put reasonable and good rules in place and compensations plan in place, but we got to learn to see.
We think we deploy pretty fast on communication, engaging the teams, setting the rules of the games, and people are excited about and ready to go for it. We have to learn what needs to be tweaked for next year.
Yeah. I think this was in a conversation earlier, breakout sessions, that Adaptive for North America, we had seven enterprise sellers. If you compare it to the enterprise sales force from Workday, it's just orders of magnitude different.
Yeah.
Hi, everyone. Oops, sorry. Scott Berg with Needham. Thanks for joining us today. Kind of a two-part, multi-part financials question. I don't know who wants to handle the first. It's on the implementation resources within financials and those time frames. Have they improved materially over the last couple, three years? Are you having any challenges hiring resources? Because there's not a lot of cloud financials implementation people out there to hire. The second part of the question is for Robynne, is as you look at some of these platform deals up front, maybe H&R Block's not the right example, but I'll use the Unum example from earlier if I'm pronouncing the company's name correctly. That was a serial implementation where HR was first for the first couple of years, and then financials followed. How does the invoicing on that contract work?
My guess is they're not paying for financials on a contract like that doesn't even begin its implementation for two years.
So I'll-
Go ahead and start, Robynne.
go ahead and start that one. It's very contract specific, as you would imagine. We do have customers who buy full platform, and they pay us annually in advance for the whole contract amount. That happens quite a bit. In fact, that's generally how those work. There can be specific situations where if a customer says, "I want to buy both, but I'm not going to start my deployment for two years," that we will structure lower payments up front, and then they'll step up as they begin their deployment. We never tie payments to deployment timelines. We time the dates. If they think they're not going to start for two years, we may give them a two-year lower payment. Unlike some of our competitors, we don't say you can pay us on go live, or you can pay us on some other project milestone.
They're always date driven, but there can be some flexible payment terms if they've got you know, a phased deployment. That's generally not the case. Generally, they're paying for it out of the gate. If you think about a platform deployment, there's a lot of things that they have to do in common, and Jim can extend on this, right? Across HCM and Financials to make decisions about both at the same time. Even though you're focused on HCM, you're making decisions about how you're going to deploy Financials through your data modeling.
Particularly in the best cases, there are whole other set of customers that are deploying Financials as a next phase. They're basically, those are the customers that are going live, stabilizing, waiting a year, and taking it as a complete subsequent phase. A couple of different models.
You may want to comment on.
Oh, yeah. Let me comment on the.
resources
financial resources. The short answer to the question is we're very pleased with the financial resources that we've added to the ecosystem. As you would imagine, the partners are intelligent. They're smart about the way that they build their business, they stay in sync with us, keeping an eye on the pipeline and staying ahead of the curve. I think that there occasionally is noise out there that there's a shortage of financial resources. We don't agree with that point of view. In fact, we monitor the supply and demand essentially in the ecosystem all the time. Where you'll hear customers or other partners talking about where they wish getting the first go lives for individuals so that they can be lead consultants in the next one, and that's just a process that has to happen.
We work with the partners as much as we can to subcontract to them, to provide them experienced resources to the extent that we can help them to build their practices. You asked a question about where we're finding resources, because there aren't a whole lot of cloud financial resources out there. It's from, most of the time, from legacy vendors, and they're not cloud financials resources per se. They're financials knowledgeable resources.
Mark Murphy with JP. Look back in time, I've noticed that Oracle's claims from time to time about competitive wins in the HR. In the most part, they've mentioned replacements, not wins, but replacements, and it was on Workday Financials. It just sounded a little odd. I'm curious what you think we'll find. They mentioned Airbnb and Legg Mason, I believe. What do you think we'd find if we investigated that? If you don't want to speak to that, to if you want to, but retention in the financials versus HCM.
Yes.
You can comment. I'm happy to comment.
We're always very transparent about this stuff, right? If you look at the situation at Airbnb, they're a full platform customer. They've been on Workday Financials for quite some time. What they bought from Oracle was Accounting Hub, which is similar to the Workday Accounting Center that we announced at the keynote, that we don't have built quite yet. What Airbnb will be operating on going forward is Oracle's Accounting Hub to take their operational transactions and use Oracle's accounting engine to drive journal entries from that, and they're staying on Workday core financials. Right. That's not a typical case where the way Oracle presented their win there was not entirely accurate or transparent. Airbnb remains to this day a core financials customer of Workday's. With Legg Mason, frankly, we had a situation where their corporate team was very, very happy with Workday.
Their subsidiaries or divisions, there was some noise there. They decided that it was better, or they made the call to switch to a different system that was perceived to be better for the business units. That is a loss for us. Frankly, Jim, pipe up here, it's the first financials unplug that I've ever heard of in my six years at Workday.
I think you may be right. Yeah.
It's very, very rare. When you talk about retention rates overall and in financials as well, generally, when we have customers that don't renew, it's because they went out of business or like Toys"R" Us would be a great example, right? Workday customer going out of business. They get bought by a company who is on another system and wants to put them on their system. The competitive losses of a live customer are very, very rare.
Across HCM and Financials-
Yes
just to be clear.
Yeah.
Mark, it's a great question. I would just chip in or add that. Hopefully, with the announcement of Accounting Hub today, we can have our Accounting Center, as we call it on our case. We can have conversations going forward on the first case. On the second one on Legg Mason, doesn't want to be, it sound excuse from my side, but taking it to the subsidiaries, it was getting to a cost point where honestly, it was very unhealthy business for us on a very, very small deal, right? I want to be very clear about that. Would I have gone to that price? Would I still be our customer? Honestly, I don't know. I think that maybe yes, but I think we're already wasting more time on more on this conversation at the ACV number we were talking about, right?
Mark Marcon from R.W. Baird. I was wondering, Robynne, you were talking about the sources of leverage and increasing the margins over the long term. I'm wondering if you can talk a little bit about, with two months of experience with Adaptive, all the opportunities in Financials, international planning, analytics. Can you talk a little bit about the slope in terms of sales and marketing, in terms of the leverage there, as well as the gross margins, as we think about your product set becoming more diverse and your client acquisition cost being perhaps a little bit different?
Yeah. I don't see the fact that we've got more products really changing our sales efficiency ratios. I think what you'll likely see over time is the curve of decline for both sales and marketing and G&A, and upward for gross margins will flatten a little bit. It'll get harder to get that extra % of efficiency over time, just as we grow, because I think as you look at the data between us and our peers, we're already highly efficient, both in sales and marketing, in G&A, and gross margins. I expect those curves will flatten a bit. I don't see anything that we're doing today, and that includes Adaptive, that will significantly change the slope of what we thought we would do over time.
Really, we're in an anomaly year this year with the acquisition and a huge part of that margin deterioration being one-time cost that will not repeat. We feel very, very comfortable that we can continue the steady pace that we had planned for this year incremental margin improvement year after year until we hit those 20% and 25% targets. We're very, very confident in our ability to get there. Unless we do another big acquisition, you should expect to see improvement every single year.
Hey. Raimo Lenschow from Barclays. If you think about the rollout of an ERP system in the olden days, it was all like the first big wave, and now we're in the second. It was all about you needed to have a certain amount of reference customers in an area, and then just everyone else was kind of totally comfortable. Chano, where are you feeling that you are on that reference for both customer base in the different segments? As a follow-up to Robynne then, or Chano for you and then Robynne, as you reach that point, is there not an argument to kind of go a little bit more looser on sales and marketing spending and throw more people at the problem? Once you're there's a tipping point, and you want to use that tipping point to drive that customer base home.
Just maybe comment on that one. Thank you.
On the HCM, I think on the markets that we are present, we are pretty comfortable on the foundation we have on all those markets in terms of the reference ability, right? If you look at markets, I could go cover many of them. But even if you look at how we enter many of the markets, Korea, we enter with big customers like Samsung, and then Jim and team does a great job, and they've been live with 380,000 employees, basically a couple of years after. And it's when we decide to go formally and officially into that market, right? You look at markets like Germany and Siemens soon to be going live, and Deutsche Bank with customers and many others. I'm talking some of the European ones, and clearly on Spain, you have customers like Santander and many other large customers.
In many of them, France, I could carry on, there's Sanofi and Airbus and many others. U.K. I pick any customer, we have good reference ability and great solution fit and great reference ability in terms of the foundation for HCM. That is not a challenge. Of course, if you ask me on financials, as we are in the earlier stages, and when you go to international markets, by the way, to give you an idea, close between 10% and 15%, but more close to 15% than 10%, are already out of those financial markets that I mentioned. Sorry, financial customers, are very international financial customers. But clearly, as you go on talking to the larger ones, they may want to see more peers into those particular markets that are headquarters into those countries.
We have more work to do, but I would say pretty comfortable on HR as a whole, and solution fitting pretty well. More work to do into the financials part.
I would just add, particularly on financials, that we clearly strive to build those reference customers by partnering with the products organization, by partnering with the ecosystem, and ensuring that we're providing extra care for the early customers because we can't afford to have any customer that's not wildly successful and happy in a market where we don't have a lot of companies, right? It's one of those areas where we make very conscious investments to build references. As Chano points out, it's not so much an issue with the HCM, but in financials, and particularly some of the international markets. That's where we're spending time investing and partnering more closely.
From time to time, you find out things that they are surprising. I would say a market like France, Financials seems to be taking faster or at the same speed as HCM, right? We mentioned Groupe Foncia, and there are others, and there are others that already are signed or just about to sign in Q3, and it's quite surprising even to me looking into that. We have great coverage from the product team, and we are preparing advance now in that in terms of the implementation, so we don't have a challenge either in deploying those projects and keeping. Of course, we need to keep a closer eye into making them successfully, right? It's quite surprising.
Yeah. I'd say on the coverage model too question, right?
Sorry.
When we plan our sales coverage, it's all about projecting how many opportunities we think are gonna come to market, right? If we saw that really accelerating, that might warrant really accelerating hiring in that area. I think right now you feel like you've got the right coverage in terms of, we're seeing all the opportunities we should see. We're engaging in all the opportunities.
I think we're comfortable with the coverage model we have for covering that opportunity. Yeah.
Thanks. We have time for about two more questions.
Thanks. Derrick Wood at Cowen, back in the back. Chano, on your product attach slide, a couple of things stood out. The recruiting, I think last year was number 3. It jumped up to number 1. Learning also had a big uptick. Any color on what drove the strength there? On Workday Prism Analytics, I think it's a 2% attach. Obviously you've been refactoring some of the code from Platfora. How do you feel today in terms of the ability to drive inflection there, and what would give you the confidence? Thanks.
Yeah, no, great question. I think recruiting and learning, I would say, has a lot to do with those jumps. Has a lot to do with the new go-to-market model in terms of having more people focusing on the customer base and seeing that opportunity, kind of matching interest with basically the offering we do have, right? In terms of Workday Prism Analytics, take that 2% as we are ahead of the targets we were planning for Workday Prism Analytics because it's been basically a couple of really quarters in the market, maybe three quarters. We've not been selling Workday Prism Analytics for that much for that long. The deals there are, in terms of average ACV, significantly larger.
Even we have minimum deals value that are significant, that are certain size, more like $100K plus or, kind of deal size in terms of average contract value per year. We're pretty pleased with how that is going, and there is tremendous interest. We're expecting that one. You should be as, if I would predict, there will be a nice jump for next year.
Thanks. Ted Lin. I mean, now that we're roughly, is obviously much more based, how are you thinking about building it yourself versus offloading it to partners? Thanks.
The industry build out is something we've been working on for a while. For example, we've got student for higher ed. We've got inventory supply chain for healthcare, right? It's something that we've been working on for quite some time, and we continue to build out for those specific industries that we're going after. There are ones that we're not currently going after that we could choose to do at some point, like supply chain manufacturing, right? Who knows? That's a key investment area. I don't know that we've seen necessarily industry-specific features being built in Workday Cloud Platform yet.
Not yet.
I think we could, definitely.
It's just a matter of time. As I mentioned before, as soon as we have one platform that serves the development community as well as the customer community, you will see a larger uptake of customers using it to extend the system.
To complement with, this morning we announced Workday Accounting Center. That is tremendously important for financial services, other industries as well, but insurance, financials. PSA has had a tremendous improvement. Even I had customers lately saying, "[inaudible], we're at great progress with PSA in the last two years," and we've seen a significant uptake on professional services. It's building up. Kudos to Petros and the product organization on their bringing their strengthening the offering. That's giving us more opportunity into those core industries we are still trying to serve.
Okay. It's always dangerous to be the last guy between a meeting and liquor. In case, Richard Davis at Canaccord. Last question is, you announced the opening of Workday Cloud Platform, your platform last year. We're kind of a year into that. What's a reasonable, as outsiders, what should our milestones be as to measure the success of that? Then, broadly speaking at least, how should we think of the kind of revenue and profit contribution of the, of that effort over the next few years? Thanks.
I can tell you about the opening. It's under control right now. We have specific customers that work very closely to us. When you have something like a platform, it brings a lot of variety in your direction. That's why it's more being conservative in a way to be able to control what those questions are. Even after, we're going through a year right now understanding what those questions are, to know what we have to improve. I'm saying we're sitting here next year, and we should be ready to be generally available. You've got to get support ready, you've got to get community ready, you've got to get your documentation ready. Those are the components that we have to work out beyond just, "Here's a bunch of tools, run with them.
On the monetization side, we're still discussing internally-
Yeah
How, what we're gonna do on that front. Our early adopters are paying us very small fixed fees just to cover our costs to support them, and it's negligible. And, you know, how far do we move from how we price today to, you know, a usage-based model or maybe just a tiered model based on usage? We're watching these first use cases to really see what's the right metric for us to price off of. Longer term, to the extent we have partners building things and then selling into our customer base, we're gonna have to figure that one out, too. It's really early.
I think one of the big benefits we're gonna get from it is I'm hoping that it actually increases our win rates on HCM and financials as well because it becomes a more compelling use case for our customers, and that's gonna be difficult to measure, too. I think there are lots of ways that we could monetize it, and it's, you know, it's still too early for us to tell. We haven't built any revenue in any of our numbers for it because we just don't know. I certainly think we all believe that it'll be a significant contributor over time in one way or another and probably across multiple fronts.
From a technical perspective, we are actually instrumenting it to be able to work with metering.
You know, you don't know right now. It's too early.
Awesome. Thank you so much. On behalf of the management team, thank you so much for joining us today.
Thank you.