Hi, everyone, welcome to Financial Analyst Day, welcome to Chicago. I hope you'd have a good day so far here at our Workday Rising event, that you enjoyed the keynote. We have a packed agenda today, we're going to go ahead and jump in. Aneel's going to start us off with a few opening remarks, then we're actually going to spend a lot of time today on product, which I know is really top of mind for all of you. We'll talk a little bit about go-to-market strategy and how we're doing on that front. I'm going to end it with a financial review.
We're going to allow five to 10 minutes after each of the sessions for Q&A, you can ask specific questions to the presenters in their area, we'll hold a broader Q&A session at the very end of all the presentations. If you just take a minute to read our safe harbor statement. Much of the information we talk about today is forward-looking, actuals could vary significantly. With that, please welcome to the stage Aneel Bhusri.
Well, thank you all for being here. I hope you found today's keynote and interactions with our customer to be valuable to you. I'm just going to spend a few minutes, I'm really going to talk about where I left off today at the keynote. These are really what I hope you take away in the way that we're building Workday. At the core of what we're doing, I think hopefully you see this with our customers, we are all about taking care of our customers. We build great products, we hire great people, that combination allows us to have very happy customers. This event is where that really comes together in a really nice way. We're not perfect.
I'm sure you're going to find some customers that have issues in certain areas, I think in general, what they'll tell you is we really care about them that we're doing the right things, the product is really a strong product, no matter what products you're using. The thing that we're beginning to see now, after having been at it for 12 years, is we're beginning to get a network effect of customers where our customers are truly becoming our best sales advocates. That level of customer satisfaction when it was five out of the Fortune 500, their voice wasn't loud enough to really have an impact. When it's 150 out of the Fortune 500, their voice has a massive impact in the marketplace.
As long as we continue down that path, we have to pay attention to competition, in some ways, competition distracts you from what your core job is, which is taking care of customers. Driven by that customer orientation, we continue to make lots of investments in the product, and you'll see more today. We had an hour and a half this morning to go through all the different products. Just not enough time. One of my takeaways from this morning's session is our product line is now broad enough that maybe a one-and-a-half-hour keynote is not the right format because we had so much more that we had to cut just to keep it within a reasonable timeframe. The fact that we have that issue is just because we are continuing to invest heavily in many product areas.
Number three, I think people that I've known for a while that are in this room know that I've always had a great amount of respect for Apple and how they build products. In many ways, when you look at the way that we bring planning, execution/HR finance, then analytics with reporting and analytics and Prism together in one system, it's never been done before in that way. I was just talking with Richard Davis, our competitors have gotten there through cobbled-together systems, they're going to be building up an enormous amount of technical debt that will either be paid by them or paid by the customer, there's no way to avoid that technical debt.
We are driving towards a system like Apple, where the iPhone just works with iTunes, the content is seamless across Apple TV and all their devices, that's why iPad sales then the laptop sales took off because you're just buying into that ecosystem. We believe we're going to see a very similar phenomenon. We start out with HR. We're seeing increasing traction in financials. Prism and Planning, they work with HR, let's be honest, they're mostly financially driven applications. Once we get in the door and we can start selling this message of planning, execution, and analysis together, we believe you're going to see a lot of cross-selling from our customer base, that will be illustrated in the sessions later today and in Robyn's presentation. The last piece, opening up the cloud platform.
Honestly, I don't have any idea how to tell you how we're going to monetize that over the short term. Over the long term, I have a fairly strong level of confidence that we'll get to a billion-dollar business there. I just don't know when and exactly how, because we're an honest, transparent company. We're learning. What I do know is that there's a ton of demand for this platform offering. We've had it from our customers almost since day one. We've had it from partners. I just met with two of our biggest Systems integration partners, not only do they want to be early users on extending Workday for their customers, they want to bring some of their IP that might be locked up in some legacy systems onto the Workday platform and bring those into the cloud.
Maybe it's a utility system for customers, or it's a retail system for merchandise management, these systems integrators want to bring some of their intellectual property onto the Workday platform, that opens up industries, it opens up a whole bunch of new markets. We're still in the early days, again, the thing that I can say with confidence is that there's a ton of interest in the cloud platform. Very importantly, in the way we're building it, and I hope this was clear from the presentation this morning, we're not locking people into any particular technology. You can build it in Java, you can build it in Ruby on Rails. Whatever application platform you want to build it in or technology you want to build it in, it's your choice.
What we are doing is getting you to leverage our set of APIs and services, whether it's the visual presentation services or the integration services, or a security service where you inherit the security model, dramatically reducing the time to market for an application, but not necessarily locking them in. I think as a result, ISVs will be very excited to build on top of the Workday platform. The other benefit, which we did not talk about in the session this morning, it takes a lot of pressure off of our development organization. That's at least our expectation. We always want our development organization working on the highest value-added features.
In the way that we had been building products over the last 10 years with a focus on customer satisfaction, if there was a feature that an important customer needed, we didn't have a choice, we just had to build it into the platform. Today, there's going to be things you'll see in the system that maybe only a couple of customers use, but they're important to us, and the way that we could build into the product was by building them specific capabilities. Going forward with the cloud platform, all the banks, we have many of the banks as customers. They all do compensation differently. It's amazing how differently all the places you work do compensation. As a result, it's really hard to get a compensation model for banks to work within one system.
Now you can get a custom app built as an extension, does the custom comp calculation, feeds Workday. The customer's really happy. They get exactly what they want. From our perspective, it takes us off the path of having to try to build every possible permutation of compensation that's out there, which frankly is not super valuable in terms of payback for Workday in terms of investment dollars. That's really where I wanted to start today, and I'll be around for Q&A at the end. It's an exciting time for Workday. I really believe the combination of bringing together planning, executing, and analysis, and then adding the cloud platform, we are transitioning into a platform company. That's really what we had hoped to do from day one. You don't get to be a platform company. Your customers choose you to be a platform company.
Everything we're doing is driven by customers. In a way, they're encouraging and pushing us to be a broader platform company, I think it opens up many opportunities for us down the road. With that, turn it back to Robyn.
Thanks, Aneel. I'd like to now welcome to the stage Barbry McGann.
Thank you, Robyn. All right. Well, I'm Barbry McGann, I am SVP of Product Management for our entire application portfolio. That's our human capital management products, our financial products, our student products, and our planning analytics. The agenda I have planned for you today, I'm going to be covering HCM, is to first start with our market opportunity, I'll share with you our success in the large enterprise. I'll update you and talk about our strong global presence that we have today, fill you in on the momentum and growth we're seeing in the mid-market, close with our vision and the future and how we're investing in our products. Before we take a look at our HCM market opportunity, I thought it would be important to take a step back and look at Workday's total addressable market.
If we take a look at our entire application portfolio, estimated to be around $74 billion, this is based on IDC's worldwide application market spend for the year 2017. Now, we believe we are still in very early stages of penetrating this large and growing market opportunity. For the rest of the afternoon, we are going to go through our strategy and our go-to-market plans for each one of our investment areas. I'm going to start with HCM. We have a significant addressable market in HCM. Around $14 billion is the current market, we continue to see aggressive growth and movement towards the cloud. We believe that we have significant market opportunity and growth ahead, that is through gaining and expanding our leadership position.
We've had great success in helping customers modernize their HR systems and providing them with a strategic system to recruit, hire, engage, and retain their employees. As an innovator and a disruptor, we have been rapidly, as you can see, gaining market share from legacy providers. We see this for 2 reasons. Many HR organizations today are finding it difficult and expensive to maintain their old HR legacy systems. Secondly, they are challenged with integrations. An average enterprise has over 50 integrations to different systems and service providers. They're really looking for the power of one. Further evidence of our success is captured by industry analysts, who consistently rank us as a leader. From Gartner's Magic Quadrant to Forrester's Wave, analysts, customers, and partners see us as an innovator and a leader. I'd like to talk about the large enterprise.
Today we have over 1,800 customers, but it's not just the number of customers I'd like to say, it's the size. We have the giants in the industry, or what I like to say, the Amazons. With Walmart deploying 1% of the entire U.S. workforce and Amazon, the largest e-tailer and online public cloud provider. We added in this first half of the year also Shell and Citigroup to this list. We have set the standard for the large enterprise. In addition to the Fortune 50, we have 30% of the Fortune 500 as customers, and over 75% of them are live. We are the only cloud-proven solution to get these customers at the size, scale, and complexity live and meet performance service level agreements. These are companies managing hundreds of thousands of employees in Workday, their entire global workforce.
Just to give you an example of the size and scale we're talking about, here's a day in the life of Bank of America. 9 million transactions in one day, 120,000 employees entering time in one day, running over 400,000 reports in one day. Guess what? 95% of those transactions finished in 2 seconds or less. We're raising the bar this year. We're not stopping here. We have even larger customers going live and deploying today, from Walmart to Amazon into a large express shipping company. We're very excited about that. We're going to be reaching new peaks at 400,000 employees. We're not stopping there. We're forging a new frontier where we'll be able to manage not only hundreds of thousands of employees, but millions of employees.
We have a strong global presence with our HCM product line, where over 20% of our customers are now outside the U.S., and 20% of our revenue is also outside of the U.S. From the beginning, we built our applications to be designed for globalization and localization. We have strong foundation frameworks so that our solution can be adapted very easily for different languages and regions, and that we can configure country-specific configurations on top of that. We've delivered over 30 translations, and we allow our customers to do country-specific localizations on top of that as well. It's proven to be very successful. We've got 26 million workers around the globe in every possible country. There's only 195 countries and over 240 regions, and we have 749 multinational large enterprise customers today.
Just to give you an idea of the depth and breadth of our localizations, we have 93 country-specific configurations in HCM. That includes over 3,000 localized fields. We have 400 global and local business processes, 170 localized features, and over 347 connectors. Most of those payroll connectors, but we also have Unistaff for our Russia integration for data security and privacy. We have, for absence, 35 countries in which we have 214 absence plans and 72 time tracking plans, all pre-configured, move-in ready. This is just to give you an example of some of our multinational customers that are managing their entire global workforce with Workday. From Hewlett-Packard in Palo Alto, California, who was able in 15 months to eliminate 86 systems with Workday HCM, to Fast Retailing in Japan, to Qantas in Australia, to Lafarge in Paris, France.
I want to talk a little bit about the medium enterprise, this is the segment of customers that are 3,500 employees and below. We have seen incredible growth in our customer base. If we look over the last four years, we've got compounded average growth rate of over 45%. We are seeing the same demand in the mid-market for a global HR system of record. The need to operate in multiple countries with diverse regulatory and data access and privacy requirements becoming common. These are all the drivers we see, new customers, platform sales, add-on attachments, and renewals that are really driving this growth in the mid-market. We have doubled down our investment also from a product and a technology side into the mid-market. We talked to you last year about our implementation tools that allow us to automate the deployment process.
We've also been delivering pre-configured content, and we've grown that considerably 70%. We deliver 75 pre-built connectors and over 3,000 reports and 24 dashboards so that our customers can be move-in ready in the mid-market as well. As we look at the rest of fiscal year 2018 and beyond, we're going to maintain our strategy and our plan, a relentless focus on continuous customer innovation. Just as we have from the beginning, we continue to deliver customer-centric, customer-driven innovation in every release. For HCM, we released just in Release 29, 437 new features, and we accomplished 332 brainstorms. We introduced three new products: Financial Performance Management that Betsy will talk about later, Prism Analytics that Pete's going to also talk about, and Data as a Service, our first offering benchmark that I will talk about today.
Coming soon in 2018, which Dan and Jon will talk about, is the Workday Cloud Platform. Our strategy and vision is threefold. First is to advance our core business applications to derive new levels of operational excellence and efficiency. We'll be doing this by leveraging new technologies such as Workday bots that you heard Joe on the video talk about to automate, streamline, and even eliminate administrative tasks. Second is to advance our service to offer more intelligent experiences and relevant experiences for our customers to make smarter workforce decisions. We'll be leveraging new technologies such as advanced analytics, data science methods, and machine learning to surface both recommendations and predictions within our software. Not only make moments that matter, but moments that count. Third, we're opening up our platform to create more personalized and differentiated digital experiences for our customers.
We started this with learning, recruiting, and students, but that was just the beginning. You heard how I talked about the people experience earlier this morning. I wanted to share with you just a few highlights of some of the product innovations that were coming in Release 29 and beyond, and I wanted to start with recruiting. We're focusing our love and attention not just on the candidate, but also on the recruiter. We've invested in three key areas where the recruiter spends most of their time. One, in sourcing candidates by leveraging campaigns to target, nurture, engage candidates through the recruiting pipeline. Two, in reviewing candidates, providing automated ways where they can screen candidates more efficiently and effectively with knockout questions. In interviewing candidates by streamlining the scheduling process with Office 365 and including interview behavioral analysis and feedback into the interviewing process.
In learning, we are focused on transforming the way that employees learn at work by providing a modern, engaging, and personalized experience. New in Workday 29, we introduced interactive learning. This is really going from more of a lean back and watch approach to learning to a lean forward and interactive approach to learning, much more engaging. We're also using machine learning to provide personalized learning recommendations to help employees grow new skills, advance their capabilities, and really prepare them for their current job and for their next one and beyond. In addition to this, we're also focused on the learning administrator, providing them with the key capabilities for course management, compliance, and also managing all the content that goes along with learning management.
In workforce planning, you heard today we are the only cloud planning solution unified with HR, finance, and analytics, we've built planning natively into our platform so that both planners and business managers can collaborate together. You heard how excited I am, this is one of my favorite key features, that now HR can strategically partner with finance, recruiters, and hiring managers to create talent acquisition plans, and they can plan down to position level so that they can determine the exact and essential hires to help grow and fuel their business growth. In Workday Data-as-a-Service, we just launched and announced our benchmarking. Benchmarking will help deliver key metrics so that not only can you compare your performance to plan, you can prepare your performance to your peers.
Adoption has been incredible so far in which we have over 100 customers signed up and a million workers that we're doing benchmarking across. We've seen adoption across all of our industries, and the benchmarks are designed to be available in our dashboards, our scorecards, our reports, and even can be included in our business processes. Now in Workday 29, we released a lot of benchmarks, but we'll continue to deploy more and more benchmarks in a continuous process. We really focused in on workforce compensation, age, headcount, diversity, and tenure. We also have been very focused on providing a connected and continuous talent growth through machine learning. Our vision is to increase productivity, make it easier for our customers to streamline and automate tasks, and create operational efficiencies. It's also to personalize and provide relevant experiences to help our customers make smarter decisions.
Today, we support all kinds of machine learning and talent acquisition. We've enhanced our search capabilities to help the recruiter more effectively find candidates using natural language understanding and processing. In onboarding, we use through talent development, we're using learning recommendations to help prepare the employee from day one, as well as to advance them through the employee life cycle. We have the retention risk analysis in the assessment period and the retention period, so that we can look at all of the factors that may influence a person's decision to leave the company. We have over 100 factors that we are looking at and that we can correlate. We also have Workday bots to automate inquiries and help look up information for employees, such as worker addresses, worker contact information, and also to automatically provide feedback.
In the future, we'll also be using optical character recognition for resumes, those neural networks, and using all of the great capabilities we do for learning recommendations to bring candidate recommendations and help candidates better find jobs on our career sites. We've created a skills graph, that's coming in Workday 30, that will use Workday's knowledge about the worker to help them better find job opportunities and to get learning recommendations. Last but not least, we introduced today the people experience, really a next-generation portal, one that's personalized, unified, and journey-driven. One that knows who the employee is, that Julia Bryant is a new sales manager that has just been promoted, and provides a manager journey for her. One that knows that her next step in her journey is to develop her team.
One that brings together information from different systems to help provide these journeys, turning transactions into journeys. You can see here the information isn't just coming from Workday, it's also coming from other systems. One that helps her become better at her job, coaches her, and ensures that she's able to get there. We've got the Workday Talk, the Workday Assistant, that is able to provide Julia with recommendations on how she can effectively lead and develop her team. All this is coming in 30 and 31. Now I'd like to just close with some key takeaways I hope you get from this session. One, that we're the undisputed leader in the HCM cloud suite. Two, we have a proven global solution.
We've got strong momentum in the medium enterprise, we have a relentless focus on continuous customer-driven innovation, that there's plenty of room and runway for growth in Workday HCM. Now I'll open up for questions.
Anyone have any questions?
Everyone's too tired? I think there's a question over here. Mike?
Hi. Mark Marcon, R.W. Baird. Wondering if you can talk a little bit more about the momentum that you're seeing in the medium enterprise. What is driving that beyond just the implementation and the pre-built solutions? Is it a greater level of recognition as well, or all of the above? What's the cadence in terms of market share gains there?
I think that the driver, and for the growth that we're seeing, the momentum in the medium enterprise, is the need that they're recognizing that they also need a global system of record. That's really what's creating the demand, and then coming to us for that. I think that we're also able, with our implementation tooling and being able to deliver the prepackaged configurations, accelerate their time to market, and also lower the deployment cost is also contributing to that momentum.
Hi. It's John DiFucci from Jefferies. Barbara, you mentioned the Workday Data-as-a-Service. You said you had 100, I think, customers on it right now. Can you give us a little more, like what kind of traction are you seeing? I think that's relatively new, the benchmarking. Seems like if I'm a customer, and I think there's 100 there, I'm not quite sure how much that's going to benefit me, especially if I'm a big customer. Until that becomes really big, as far as the number of customers, just kind of curious as to where this is going.
We just released benchmarking in Workday 29, want to make sure that that's clear. It's really recent. We have over a million employees included in that benchmark. 100 customers, but a million already workers that we're doing the benchmarking on. We're going to see, I think, dramatic sign-up of that going forward. I think we're just starting to take off, and again, it's just been released.
Hi. Right here. Justin Ferbey with William Blair. I guess, a question on this next leg, the Amazons, the Walmarts, the Targets. As you get into that tranche of customer, what does it do with the customer conversations within the prospective customers? Are they excited about having the idea that Walmart drives your roadmap? What does that look like? Are you using that in your go to market, the fact that they're in the process of implementing? Does it sort of tax your development cadence? Because now they probably have much broader ambitions and things that are maybe more centric to their organization. Can you just sort of talk about that?
Sure. I think one of the unique advantages of being the power of one and being on one code line is all of the scale that we're able to achieve with the Walmarts and the Amazons benefit all of our customers. They look at that as a benefit. That they see, okay, if they can scale to handle Walmart, they can scale to handle FedEx, they can scale to handle the Amazons, I get all the benefits of that scale as well.
Hey, Alex Zukin with Piper Jaffray. I wanted to ask a quick question about platform as a service, and how do you expect that to impact or influence sales cycles for you guys when you talk to customers about how much more that can now be done?
Well, I definitely think I should let Dan and John talk about They're going to be up here next. I definitely think it helps allow our customers to extend our applications, and that's going to be a key benefit for, I think, many of our customers and many of our prospects. Any other questions? Okay, that's it. I've been told.
Thank you.
Please welcome Vice President Financials Product, Barbara Larson.
Thanks. All right. Good afternoon, everyone. Good afternoon. I am going to spend a few minutes talking about Workday Financial Management, our portfolio. I'm going to spend just a few minutes talking about the size of the market, the addressable market opportunity. I think more interesting is how that spend is moving to the cloud. I'll talk about what we see in terms of what's driving adoption, what's fueling adoption for financials out there in the market. I'll wrap it up with a little bit of insight into the business, and how we're doing from a momentum perspective. Barb already covered this. I think it's no surprise, right? That spend on the financials arena is quite large. I think what's more interesting is to talk about how that spend is going to move to the cloud.
For that, I'm going to refer to Gartner's recent Magic Quadrant research report, if you haven't read it. They are essentially predicting that today there's about $1 billion in spend on cloud financials. That's today. They are predicting that that is going to grow at about 24% year-over-year. Pretty aggressive growth rate going forward. It is primarily being led by mid-market organizations. It's primarily being led by service-centric organizations, which is great for Workday. They are also predicting by the year 2020 that about 50% of large enterprise organizations will have moved their financials to the cloud. I think the key point here is it's a large market opportunity. We're very early at the front end of that opportunity, but the predictions are that it's going to move very quickly.
What is going to drive the adoption, and what moves the cloud financials market? I'm going to start with technology, because I think when technology innovates, it always breeds new opportunity. That's what's happened, I think, with applications being delivered in the cloud. In particular with financials, if you think back 30 years ago, right, the mainframe. They had a bunch of siloed applications, and you had a GL that was essentially optimized for financial reporting. If you move forward right to the 2nd wave, client server, all of a sudden you saw an integrated suite of applications with an emphasis on integrated, and your GL was still optimized for financial reporting, but you had all these bolt-on applications that you integrated too. Today in the cloud, right, there's a couple different options.
One is you can take this on-premise technology, and you can port it to the cloud, or you can refactor it to the cloud. I think this is a place where Workday really differentiates. We took a different approach, right? We took advantage of modern technology. We built from the ground up, and we were able to deliver a unified suite of capabilities, of financial capabilities that is optimized architecturally and technology-wise for the cloud and for cloud delivery. What's going to drive this pace of adoption? I believe it's three things. Number 1, it's cloud viability. It's cloud-first IT strategies. I think that's pretty much assumed now. I mean, that wasn't the case, say, five years ago. I never ever get a question about the cloud and financials in the cloud.
I think it is really just assumed that financials is moving to the cloud, and it's just a matter of when for each organization. The other thing that drives it is the increasing maturity of cloud offerings, right? You need to get to a point of maturity that you can replace the incumbent systems. Finally, it's an organization's catalyst for change. I'll talk a little bit about the bottom two. Let me start here, because when we're talking about the maturity of this space, and we're talking about the maturity of cloud-based applications, I think this is the best proof point out there today. Gartner very recently released their first ever Magic Quadrant for cloud-based financial management suites.
As a result, this really credentializes the market, and it credentializes Workday and the fact that there are products out there that are now mature enough to replace incumbent systems. We were very excited to be recognized as a leader in this research. They did an intensive one-year evaluation of us, and this is the end result. You can have the cloud, you can have great financials offerings in the cloud. What is going to encourage an organization to adopt it? I would propose that there has to be some sort of catalyst for change, right? Generally, it manifests itself in business pain or cost. These are the catalysts that we see from our customers. Finance transformation. You have a finance organization that wants to modernize. They want to be a strategic partner to the business.
They want better access to data. They want data to drive decisions. In order to do that, they need modern systems and modern processes. They need those systems to evolve as they evolve. The cloud today is a viable option for that. Operational efficiency, we see this all the time. I'm on aging systems. I'm not getting a lot of value out of it. I'm facing a costly upgrade. I have multiple instances of my financial system out there, but I want to consolidate. I want a global view of my operations. Finally, rapid growth and change. Organizations that are growing, M&A, new products, new lines of business, new geographies. You need a system that grows with you. The cloud brings that kind of agility. Workday brings that kind of agility, that that system can keep pace with the pace of your business.
Finance and their systems are not left behind. I wanted to just give a few examples just to bring this to life. The first one is Unum. Unum is a Fortune 500 company. A couple of years ago, they were really grappling with the fact that they had multiple disparate systems across their enterprise. They had a mainframe GL, they had PeopleSoft for HR, they had Concur for expenses, and they had a homegrown procurement solution. They had heavy customization, a lot of manual workarounds, which is very common we see in finance organizations, and difficult, if not impossible, to upgrade. They went on a search for a new system that would support their business, their modern business, and they ultimately selected Workday. Interestingly enough, it started with procurement and then expanded to full platform.
They are live today globally in the U.K., Ireland, and the U.S. on full platform, including financials, procurement, and expenses. The next one I want to talk about is Panera. Panera is a really interesting customer in that they also had an aging system. They were on an aging Oracle financial system. They're also a company that's innovating. They're growing. More stores, different lines of service. They went on a search for a modern financial system that would support their business needs, and ultimately selected Workday and the Workday platform, including financials. Interestingly enough, one year ago at Rising, they had just selected Workday and were excited about it, and they recently went live in production on financials at the end of July. Finally, I want to talk about Aon. Aon is on the Forbes Global 2000 list.
They are a large global organization, and they have grown through acquisition. A lot of change in that organization. They recently actually also went through a major divestiture. They had an aging PeopleSoft system. They went on a search. They initially selected Workday for human capital management. They had such a fantastic experience. I think it was one of the best deployments in the organization. They decided to look at financials, and they vetted us very carefully over a long period of time. Ultimately decided to go with financials. They're a people-centric business. They are now live today. They're going live in 3 phases. Live today in 6 countries. In January, they're going to be going live in an additional 20 countries. Ultimately, they'll be live in over 60 countries. A major global deployment.
Just a few examples of why organizations have decided to make the change and move to Workday and move to financials in the cloud. Let me give you a little bit of insight into the business. We are growing at a significant rate. From a number-of-customers perspective, we're really growing at about 70% year-over-year. It has primarily been led, similar to the Gartner research, led by the medium enterprise. Our passionate focus on customer success and innovation is getting us to a place where we can methodically move upmarket to larger and larger organizations. Today we have over 370 core financials customers. Nearly 60% of them are live in production. That is my most favorite number because we want our customers to deploy. We want them to be live, happy, and referenceable.
What you can see here is quite the list of some strong referenceable brands. What does that look like from a size perspective? This gives you a little bit of flavor on this. As I mentioned, if you went back three, four, or five years ago, we were bringing on board primarily medium size, mid-market size organizations. They have literally led the charge in terms of adoption to the cloud, and about 87% of our customers today are under $1 billion in revenue. What's more interesting is increasingly, customers are coming on board that have more than $1 billion in revenue. 11% have $1 billion-$5 billion in revenue and 2% now over $5 billion in revenue. What is also interesting about this is most of these customers are actually live in production.
Netflix is live, Cushman & Wakefield is live, J.B. Hunt is live, Unum is live, Aon is live on their phase 1. We just closed 21st Century Fox and CNA in Q2, they're actually now in deployment. How do we get into an account? What are the entry points into an organization? What you're seeing up here are really our traditional entry points. It really depends on the organization, it depends on their pain, it depends on their priority. We might lead with financials because that is the primary pain point for the organization. We land in an account with financials, they have a great experience, they expand to HCM. We may land an account with HCM, right? That's their primary pain point. That's what they want to deploy first.
They have a great experience like Aon, they expand to financials. They may just decide to go full platform out of the gate. We really see all of these, you can see some of the proof points up here. We now have 2 additional entry points, it's fairly early on, they're significant. Let's start with Workday Planning. Workday Planning, because of its unique differentiation, right? It's unified in our architecture. It's unified with your core system of record or your core systems of record. It's unified with your reporting and analytics platform. This is really an opportunity. You don't need core financials to deploy Planning. It might start with a conversation with HCM, talking about workforce planning. Workforce planning and your workforce plan is one of the primary inputs into your financial plan.
Often this is an entry point to a broader discussion with finance and with FP&A. The other entry point is financial performance management. This goes beyond Planning. Let's say an organization has multiple instances, multiple GLs out there, they're not really ready to replace their GL, maybe there's no reason to replace their GL. They can now come to Workday as a global consolidation platform, if you will. SPM is all about using Workday for financial consolidation, financial reporting, management reporting, and budgeting and planning. What we do is we take the accounting information, we take the journal entries from those source systems that you see on the left-hand side, we ingest them into the Workday platform. Once they're in there, they can take advantage of all of those Workday financials capabilities.
Just to bring that to life a little bit is Accuride. Accuride is a company that did an evaluation literally about November of last year. They went live in production in August of this year, that gives you a flavor for speed of deployment. They are a mid-size manufacturing company, they're global, they have Plex as their cloud ERP system. Plex operates at a plant level. It manages the operations and the financials at a plant level. What they didn't have is a consolidating financial system across all of their different plants. Midway, they are in acquisition mode. They acquired a company called KIC, they're planning to acquire more companies in the future. They had no intention to replace Plex, they are looking for a financial consolidation, financial reporting, management reporting, budgeting and planning platform.
They selected Workday for Financial Performance Management, and they are now live in production today. Let me briefly cover our product strategy. This is our footprint. I don't think I'm going to spend too much time on this, but we can always come back to it. It is really a broad and deep footprint that we continue to invest in. What I do want to talk about are our investment themes. We really have three primary investment themes. The first is industry, really core and industry. I'll talk about this in a second, but our target industries heavily influence our product strategy. Global is a key theme. We are architected from the ground up global at the core, and it is our objective to support a global multinational organization, regardless of where they're headquartered.
Finally, Planning, which I talked about, and analytics, which Pete will talk about in a second. On the industry front, we're very targeted. Industry is probably the most important lens for financials. You think about it's the products and services that an organization sells, offers, and it's different industry by industry. Professional services, you have billable projects. In software, you have subscriptions. In higher ed, right, it's courses and tuition. It is different. There are investments that we need to make industry by industry to support our efforts in the financials arena. Just some examples here, Project billing for the professional services industry, materials management, supply chain for healthcare.
It's procurement and inventory for all those goods and materials that support hospital operations, or an example like grants management, endowment accounting, commitment accounting, are really critical in the higher education vertical. All of this is there to support our efforts to be successful in each of these industries with financials. Global is also, as I mentioned, a huge investment area for us. We are global at the core, and I just wanted to give you a flavor for our traction here. Today, we are live in production, with customers in eight countries from a headquarters perspective. If you went back a couple of years ago, we were primarily focused on North America. We still are primarily focused on North America, but I'm sure Chano will talk about how we're expanding to Europe and to Asia-Pacific.
You're seeing that manifest itself in our customer base and our live customers. In addition to that, we're live. We have customers live in production in over 45 countries from a supporting operations perspective. It might be a subsidiary, a local operation, but they are using financials in some capacity in those countries. Key takeaways for you today. The first takeaway is this is a large and rapidly expanding market. I think we all know that. I think the Gartner Magic Quadrant has established that Workday is that early market leader. There are key adoption catalysts in every organization, key pain points, and we want to be able to meet those pain points with the right entry point. We are methodically moving up market, by investing in innovation, by ensuring the success and referenceability of our customers.
We continue to invest to drive those global opportunities, those industry-specific opportunities. We believe this market is going to rapidly accelerate, that we're well-positioned to gain share as this market accelerates over the next five years. With that's what I wanted to share with you. I think we're going to open it up for questions. There's no questions for financials, right?
Hi there, it's Adam Holt from MoffettNathanson.
Hi, Adam.
How are you? Some of the field work that we've done suggests that the cloud financials market has started to accelerate from a demand perspective. Has that been your experience, and why do you think that is? Why do you think we've finally turned a corner? Then just secondly, is there any functionality that you think you need to bring to the product portfolio to get more logos in the upper tier of the $5+ billion in revenue?
Yeah.
Is that just a question of time and customer references? Thanks.
Let me try and answer your first question, then I'll answer your second question. The first question, I believe it's the increasing maturity of cloud-based offerings out there. This is a 100% replacement market. You need to get to a point of maturity that you can start to replace those incumbent systems. I talked about, there's comfort with the cloud, which is there. There's increasing maturity of product alternatives, which is now there, as exemplified by the Gartner MQ. It's an element of where an organization is and what kind of catalyst for change do they have that compels them to make a change with their financial system. I think to answer your second question, we're embarking on the key things that help us move up market, if you will. The first one being planning.
Planning, budgeting, and forecasting was a key ask from our customer base. We delivered that a little over a year ago. We have actually over 170 planning customers so far to date. The other one is analytics. If you look at what Workday's doing with reporting analytics, we're really evolving as a reporting analytics platform. Pete will talk more about this, but our customers have been asking us to now bring in non-Workday data into the Workday cloud in support of their reporting and analytics efforts. I think both of those things really help add to HCM in financials and to support a large enterprise. Yeah.
Hi.
Hi.
Keith Bachman from Bank of Montreal. I also wanted to ask about adoption trends in financials. In one of the feedback we get is it's such a binary event, it makes customers reluctant to push forward with a complete swap out of their financial systems. My question is, how do you make it less binary? You mentioned one thing is perhaps it's a geo situation-
where you're going along geographic lines.
When you first introduced planning and budgeting, we thought that may be another way to make it less binary or at least get your foot in the door. If you could talk to, it's only been out a year, but these product modules, have they been, in fact, adopted by customers that are not already Workday, underneath it? In other words, has this really
Yeah
been a way for you to open the door?
Workday Planning, for example?
Budgeting. Are those a way for you to-
to increase your penetration in financials and make it less binary?
To answer your question, first, we don't offer Workday Planning independent as a standalone offering. You either need to be an HCM customer or a financial customer. We have seen an incredible interest. We have over 170 customers already who are HCM customers. They see the value in planning from a workforce or a headcount planning perspective. They see the value in the unified system, and that helps open the door to a conversation with FP&A and with finance, right? Planning and budgeting is so strategic to an organization. If you can bring a better way to do that, there's going to be interest. Yeah.
Hi. Phil Winslow, Wells Fargo. Here in the middle.
Oh.
No worries. Actually, just had a follow-on to the last two questions, this idea of just building a beachhead. One of the things you mentioned in there, and it's something we've heard today around the conference, was the idea of the third-party data getting pulled into the financial systems.
I wonder if you could just talk about that and how sort of the idea of not just necessarily going all-in Workday, but needing to fit inside of a wider ecosystem.
How has that resonated with customers? How do you sort of see that playing out?
The third-party data and-
Right. Yes
supportive reporting analytics? I'm going to defer that to Pete, I think. Is he going to be up here. He's going to talk directly to that, if that's all right.
Thank you. Mark Murphy with JPMorgan. In the Gartner Magic Quadrant, it's interesting, on the horizontal axis, your completeness of vision is almost identical with where Oracle's is.
It looks very much neck and neck.
What is Gartner reflecting back to you in terms of what you would need to do to actually close that gap and move ahead of Oracle in terms of new features? Is it the scalability of the core engine? Is it vertical as well?
I'm trying to think. There's the X-axis and Y-axis, but where we're really close, like virtually neck and neck, Chris is in the room, and he might be able to answer this better than me, but what they've told us is, it has to do with the Oracle has a broader presence globally. That's primarily the reason for that little differential.
I think that's the other axis.
Yeah.
Actually, I think the completeness of vision is on the product side.
Yeah. That's what I'm speaking to. They view Oracle as being more global, more localized, more language translations, I think that is the reason for the incremental differential.
We have time for just one more question, and we'll have time at the rug to do Q&A as well.
Oh.
Thank you. I guess just a probably quick follow-up on the question that was asked before, just around customers for planning, the 170.
Can you help us understand sort of how many are using that for just Workforce today? How many are starting to see the value in financial planning?
There's lots of financial planning products out there. There's sort of some that come in at the bottom of the organization-
kind of replace Excel. There's some that come in at the top.
Yeah.
Could you just help us understand maybe of the 170, what they're using it for, and then what the applications are on the financial side?
Sure. The 170 is, it's incredible growth, right? It's a product that's only been out a year. It sort of took off, I think, faster than anybody expected. The early customers are in deployment, so they're just starting to go live. I think the vast percentage, not all of them, but the vast percentage are looking to use planning for both workforce and financial planning. There is a subset of them that are only looking to use it for workforce planning right now.
Thank you, Betsy.
Sure. Thank you.
Please welcome Chief Technology Architect, Jon Ruggiero, and Senior Vice President of Platform Technology, Dan Beck.
Jon and I are inseparable at this conference, we're going to tag team this one as well. Hi there. My name's Dan Beck. I just want to dive in and talk about our journey of extensibility and how the Workday Cloud Platform fits into that. Then I'm going to turn to Jon to talk about some of the core components, dive into technology, then wrap and talk at a deeper level about some of the customer use case. Of course, we'll save time for your questions. The way we think about the cloud platform is essentially for 12 years, for the life of the company, we've been on a journey of extensibility. So each of these blue rectangles you see on the box over time are the kind of configurations we've put into our customers' hands.
Yet this journey of extensibility to date has had one destination, which is the world's most configurable enterprise app. Where we're going with the Workday Cloud Platform is you can now build your own application, your own application extension. It's a new destination. The key point, and one of the first questions I get all the time about this is, will it be update safe? We have two updates a year. Will the kind of configurations, the capability you can now build with an application extension, be update safe? Our categoric answer to this is, yes, it's got to be update safe. The last thing we want to do is put so much powerful technology in people's hands that they get off of our innovation cycle. The reason we have confidence in that is that we've been doing this for years.
The number you see on your left is the number of, behind me, I guess, the number of delivered artifacts from Workday. For example, 500+ delivered business process definitions. The number you see adjacent to that is the number of those artifacts that are in production today that our customers have created. We've created 500-plus business processes. Our customers in turn have taken that and made around 300,000 in production today. Those 300,000 business processes, those million-plus reports, hundreds of thousands of integrations, all of those were update safe. In around less than a 4-hour window, 100% of our customers on September 9th went from Workday 28 to Workday 29, all these configurations update safe. For the technically inclined in the audience, we have versions on these RESTful APIs.
We can talk about this in a more technical detail, but the way we do this for the cloud platform will be against versions of the APIs we put forward. I talked about this this morning. I understand around over half the audience didn't necessarily attend the keynote, apologies for those that did for the slight repeat. We have core principles of the cloud platform that I want to walk through with you. The first principle is, as you gather from the key word on the slide, is it's one of openness. We're categorically opening up the Workday Cloud. The first is open platform. When we talk about the kind of things that customers can do with our platform, we fully expect we're offering high-level business services, the kind of things you would expect from Workday.
Perhaps you want low-level storage or low-level compute or reference someone else's machine learning libraries or someone else's natural language processing. You're able to do that. In fact, we're putting that into our reference applications out of the box. We had a hackathon Jon's going to talk about momentarily. Of 35 teams, something like 10 of 35 in the hackathon we had in July referenced third-party cloud applications in the hack they built. They're calling out to Google Cloud Platform for optical character recognition, Amazon Web Services for Lambda or Lex. We see that as just a fine proposition. Open APIs. Standards-based design time and runtime APIs, with no tool chain dependencies. Put differently, if you're used to Node.js, if you're used to .NET, your technical talent can build on the cloud platform using the tools that they know and understand. Open development site.
Jon will talk about this momentarily. Open data. We have no licensing fees on the data. All the data in the cloud is our customer's data. I know some of our competitors have a different approach to that with direct or indirect licensing fees. The power of the community. Today, because of the power of one, all of our customers are on the same version. They can share these configurations with each other. You can share a custom report with existing customers. Certainly the idea is that as people build out these extensions, these applications, they can choose to share that with the community. We think it'll be very vibrant for the community, certainly our customer community, but also our ecosystem partners.
Let me turn it over to Jon to talk about the core elements of the service, and then we'll dive into some customer use cases.
Thanks, Dan. All right. If you saw the keynote this morning, you heard me talk about our goal with the Workday Cloud Platform, which is really to provide developers with all the tools that they need to design, build, and manage business applications on the Workday Cloud. What does that really mean? If we dive into the core services, we expect to provide developers with the tooling that they need to manage the complete application life cycle. To go from a development environment where they can design and develop their initial application into testing, into different implementation environments, eventually into deployment into production in an update safe, upgrade safe manner. We're extending their data modeling capabilities. Today we have what we call extension custom objects, which allows you to take a delivered Workday business object and extend it.
With the new capabilities, we're going to be providing standalone custom objects so they can create a complete application data model, essentially. That's essential if you're going to create a custom application that you have that capability. We've enhanced our integration platform. This morning I mentioned it's a single API endpoint. What does that mean? api.workday.com. Imagine if you're a third-party developer, you want to build your application that just works generically against Workday with any of our customers, regardless of where they're deployed in the world and their tenant information. We've created a single endpoint that they can program against, and then through the authentication flow, we handle all of the routing complexity for them. That's pretty important. We've added webhooks support.
If you're orchestrating events across different clouds, you need to be able to make calls to those clouds when the events happen. Imagine a compensation process or a hire event or something like that takes place in Workday. You need to know about that in your third-party application. That's what webhooks provides you to be able to do. I mentioned this morning that all of these applications are secured using the Workday configurable security model. Our customers have invested heavily in their organization structure and their security structure. This allows them to secure their own applications that they build on the platform in the same framework that they're already familiar with. Moving up to the technology services, we're opening up technology services so that customers can create applications that behave like Workday applications. Presentation services, I call this a cornerstone of the platform.
This is all about building user interface, and it allows developers to build complex applications that are served directly in the Workday user experience. That's important if they're building a custom application, they want it to look and feel like Workday because that's what their users are used to. They also, with presentation services, they can orchestrate calls to third-party applications and surface that data and those transactions directly in Workday. If you saw the keynote today, we talked about the use case with Unum, where they've built their application, essentially, they've embedded it directly in Workday. A user, they're filling out their benefits information, they can't tell the difference if that data is actually hitting APIs against the Workday cloud or against Unum's systems. It allows you to create these composite applications in a single user experience that users are familiar with.
It's very powerful. With workflow, we have our business process framework that all of our customers are very familiar with, now we're opening that up to customers to create their own workflows as well. It's not just configuring our workflows, but their custom application can now be driven by workflows. They can use our conversation services APIs to drive those workflows with bots and with natural language through Workday Talk and our Workday bot platform. You've heard us talk a lot about our investment in machine learning. We're opening up some of our machine learning algorithms and our statistical models, including time series forecasting, recommendations, and anomaly detection. We're doing this in a way that is very friendly to developers, so they don't have to know a lot about the actual underlying machine learning models and how all of that works.
For example, with time series forecasting, it's as simple as giving a set of data points to the API, that API endpoint will respond with a prediction of where they believe the next set of data points will fall. Very simple for a developer to consume. This is what we're talking about when we talk about we're trying to provide higher-level business services for our developers. Finally, moving up to our application services. We're investing heavily in our APIs across our entire suite of applications so that developers can create applications that integrate with Workday transactions and Workday data.
We announced today Workday Query Language that allows developers to query the entire Workday data model with an intuitive syntax, all secured based on the appropriate security model. They only have access to the data sources and fields that they should have, but the syntax is something that they should be very familiar with. All of this comes together. We built these services to work together. We call it a platform for business, that application developers can focus on building business applications and not worry about provisioning low-level infrastructure services. This is the way that we've invested in our technology platform for 12 years, really giving our application developers higher leverage so that they can focus on business logic. Now we're extending that same capability out to our customers and all third-party developers. Talk about Workday Designer really quickly.
This is how you configure presentation service applications in a browser-based environment with a drag and drop interface. The way we're thinking about the tools that we're going to provide to developers and to our customers, we expect to have essentially a coding environment. Think of an IDE. We've been providing that with Workday Studio since 2018, and we're going to be enhancing the capabilities there so that they have access to some of these new services that I've been describing. We're also going to have low-code tools as well, which we also have had for a number of years. Many of the frameworks, like our reporting framework, are all done in the browser. Imagine Workday Designer over time will continue to be our low-code development environment where customer end users can configure these frameworks that I've been talking about.
Our new developer site Dan mentioned is cloud.workday.com. Right now it's closed to all of our design partners and our developer program that we've been running, but over time, we'll be opening that up so that any developer can have access to that. The idea here is that we want to educate developers and get them quickly up and running on the cloud platform so they can learn about all the available services. They can try out our APIs directly, and we have a number of tools available for them to be able to do that out there on the site. We've got getting started guides. We've got a number of reference applications that Dan mentioned so that they can gain experience with all of these services working together. They can see working applications. They can use that code if they want.
They can use those examples, and they can iterate from there. We've created a developer forum out on cloud.workday.com, and that's our new developer community, enabling developers to collaborate with each other, just like we have our customer community and our partner community where our customers and partners collaborate today. Then finally, all those tools, as they gain experience, we have developer console tools so that they can manage all of their development resources, so their development environments, their applications, their migrations, trying out the APIs through our API Explorer. All of those tools will be available to them through the developer site. Dan mentioned a hackathon. We soft launched this at Workday Altitude in July. Every year at that event, we have a hackathon event prior to the event. We had somewhere around 30 teams. All of our partners participated in this event.
This was really our test run to prove out number 1, our developer site and the APIs that we had released. Because we hadn't given them any information prior to the event, so they literally went from nothing to 24 hours learning the APIs and building applications. We were blown away by what they built. That really gave us the confidence to move forward. Coming out of that event, we launched a developer program. We've been working very closely with all of those partners. We have an early adopter program with our customers that we're working very closely with. Dan's going to share some examples of what developers are building.
For the last essentially eight plus weeks since Altitude, we've been working very closely with those developers, taking them through step-by-step the different services that we have out there, getting great feedback from them on the tooling, on the APIs, and everything that we're providing. We're really impressed with what folks have been able to build in a short period of time. Back to you.
Thanks, Jon. What do we expect people to build? Just high level, there's a bit of a continuum here, the orange box, we expect people to build application extensions. There's something in Workday, and they want to make it a little more bespoke to their needs, like that financial services banking example Aneel just described for advanced compensation. The green box is pretty exciting. The green box lives into the vision of a composite application, where you're calling to multiple different cloud services to put together a complete user experience. I think that's a good example you saw in the video today in the keynote from our partner Unum, there are many other examples of this. The blue box, think of this as part of the cloud platform, we have more of a platform mindset, opening up Workday.
If what you want to do is consume Workday from a third-party application, you can do so more readily, taking advantage of our bots, taking advantage of our communication protocols and the webhooks that Jon just described. I think of the teams of the hackathon, I think a full 12 of them built applications that had bots in Slack that then would interact elegantly with Workday to push employee feedback, to ask questions of the Workday system, but then to consume that and have a full experience in that third-party application, in this case, Slack. That idea, sometimes we saw use cases that spanned all three of these. It just gives you a feel for the kind of capabilities we expect people to be building. Just to dive into a little more detail, we have six active design partners.
We've been working in earnest with them to build out their use cases. I talked through four of these this morning in the keynote. I just want to go a little bit deeper on two of the four and then add two more, just to show you the breadth of what customers are currently building with the cloud platform. I talked about this on the main stage. This application is a large, I guess they'd call themselves sort of a digital media company, and they have two distinct applications today where they store additional information about job families, and then they map all that on the globe to show their employees possible career moves, where they could go around the globe. It's about 48,000 employees operating in over 100 countries. They take advantage from the services that Jon just walked you through.
They take advantage of visual presentation services, both the prior page I just showed you to see those job families, let the user navigate through that, and then to have a map widget where we then plot data from Workday directly on the map, lets you select those pins. Those are the location of these objects. They're going to ask for more hooks so they can then take action from that. They ask to see the opportunity graph from here. Pretty innovative use case. They store that additional data about the job families in custom objects. Just taking advantage of a couple of those web services and taking a host of our application RESTful APIs. Next example is the global airline I talked about, this badging use case.
You see the use of AWS for some data storage and S3, and then a credit card payment gateway. They, again, use visual presentation services to build the flow that I walked you through this morning. A pretty compelling use case. I think the prior one, if I Oh, I can't go back. That's great. No need to go back. That's the broadest breadth of use from that. Thank you. You guys are fast. From this customer is taking advantage of the most platform services that we've seen so far. The next use case is the employee portal case that Barbry walked you through. This idea of an employee experience, a portal replacement. In their case, they're calling out to knowledge base repository, HR ticketing system, they have a time tracking use case as well. Pretty cool, something that's meaningfully feeding into our people experience strategy.
Lastly Oh, I guess I killed the last one. There was a last one that was around different performance feedback. I just want to give you a sense of the services being used by these use cases today. This is our final slide before we open up to your questions, and I'll answer, I think it was Justin's question earlier first. Essentially, across the three categories of services that Jon just put forward, we are offering a roadmap with more RESTful services, more APIs across each of those. The first one I want to draw your attention to is the application layer, which is we're having a radical increase in the number of RESTful APIs available for third parties to build and extend the application.
Think of it as you need RESTful APIs to do the kind of application creation you want to do, we're making a heavyweight investment across our application teams. Thank you, Barbry, Lynn Christensen, and team to build these out. Across technology, across core, Jon mentioned standalone custom objects. That's a big one at the persistence layer. We can not just extend existing objects like worker to have more attributes, but to have your own dedicated object. One key one, workflow is kind of nebulous. We say phase one, phase two. The key requirement there is to have custom business processes. Don't just let me extend current Workday business processes, but let me have my own custom business process to build my application. You put it all together. Now you can create a page. You can have a custom business process.
You can store and persist that data with a standalone object. It's a proliferation of use cases that enables. With that, we're going to open it up to your questions. Just to take the first one that was posed earlier that got deferred to this session. Absolutely. I mean, a lot of prospects are coming our way and asking simple questions, such as, "Will the Workday Cloud Platform help me with this use case?" We have a team that's fielding those questions, and we're taking an honest look at our roadmap and answering that with a yes or no.
The kind of prospects I've been speaking to, very large companies mainly, they're really keen just to know that we're opening up the platform because they know they have a set of bespoke needs, things that are unique to their company that they'll be able to build out themselves, which certainly helps them as they think about Workday as a more strategic solution for them. Please.
Hi, Michael Nemeroff, Credit Suisse. Other than the obvious retention benefits for the customers, are there any ways to monetize your efforts around the Cloud Platform with customers on a go-forward basis explicitly?
Yeah, we think so. You heard Aneel earlier articulate that we're in a learning mode. Certainly, as there's more robust use of the cloud platform, we have ideas about how we want to monetize that. Early days, we're really focused on getting these first set of design partners, then a set of fast followers into production. From that, we'll learn exactly what they're using, how robust it is. Certainly, we have ideas about monetization, but it's probably too soon to speculate.
Thanks. Kirk Materne. To your left.
Oh.
Kirk Materne with Evercore.
I like that.
When you think about the functionality gaps that exist, let's just say from an industry perspective, I guess two questions. One, how are you all thinking about handing some of those off to partners that might have more domain expertise in those areas versus doing it yourself? I guess, how are you thinking about that? Secondly, other platform-as-a-service companies have incented or funded partners to go out and do some of this for them. I guess, how are you guys thinking about that in terms of trying to maybe try to build your own momentum in terms of making some investments in smaller application developers? Thanks.
Yeah. I think it's an insightful question. I had a chance to speak with a number of our service partners and software partners earlier today. They're gung ho. They have a depth of industry expertise, certainly industry and sub-industry. As soon as we talk about an industry, there's sort of N number of sub-industries that are appropriate, where they have a real depth of knowledge and a depth of global reach, right? It's like, what's appropriate for banking in EMEA today, right? Absolutely, we see that as a good thing. We want to unlock that energy and focus it on the cloud platform. I think that's going to be a net positive for us, and they're keen to build and show their intellectual property so they can differentiate from their competition.
As far as incenting them today, I think our current thinking is that we just need to enable them. They're keen. They're existing partners. We have existing relationships. In some cases, they've been asking for some time for new capabilities that we could unlock for them. I don't know that we Workday need to specifically incent them. Rather, I think we need to enable them. For example, earlier today, they were saying, "When are you going to have a certification program for cloud platform developers so I can differentiate my firm with your certification program?" "When can I deploy my IP on the cloud platform?" That's the kind of questions we're getting.
Hey. Richard Davis, Canaccord. Just I want to be clear. If I'm a developer, am I using standard languages or am I using your language, and is the key reason beyond working with the Workday ecosystem, is it just you're going to have super easy-to-use APIs and things like that? Thanks.
The answer is, it depends on the type of application that you're building. If you're building an application or if there's an existing application that's running on a third-party cloud, on AWS as an example, you can build that with any of the tools that are available on AWS. If you want to surface that within Workday, you're going to be using our presentation services tools that I was describing to essentially make calls to that API, surface that content within Workday. It's a combination of the tools that we provide and the tools that are available at that third-party cloud, if that makes sense. It's not a proprietary language. All standards-based.
Very different than, say, what PeopleSoft did with PeopleTools and PeopleCode. We're not pushing a proprietary language. When we talk about our APIs, they're RESTful APIs, standards-based. You can get to them with the kind of tool set you choose. A lot of our developers are using Node.js at the hackathon, so on and so forth.
We have time for one more question.
I guess I get the last one.
Lucky you, Steve.
Thanks, guys. Hey, Dan.
Hi.
Thanks, guys. Steve Koenig with Wedbush. You guys used the word, or maybe the ecosystem uses the word platform in two different ways. Traditionally to describe multi-module sales that include financials and HR, and now you've got cloud platform that's coming. My question is, will cloud platform help you in platform sales efforts? In particular, into driving into specific industry functionality or whether it's the difficulty of the integration efforts around bringing in large volumes of financials data. Is there any benefits to cloud platform in terms of really driving an inflection in your platform sales, if you will?
Yeah. It's a good question, Steve. We talk about now trying to get people to say full suite. We've been trying to say that for years. Now with the cloud platform, we're really going to get better at that, meaning a customer that purchases both human capital management and financial management is a full suite customer. Don't forget payroll time and absence. Yeah, absolutely. Just coming back to your other question, as we have either extended by a partner or just the thought that they can do it themselves, the idea that a customer can bring that more bespoke thing that from a roadmap perspective, either Workday isn't going to do in the near term might never do because it's so unique to their company. I think it will absolutely catalyze full suite sales.
Thank you, John. Dan.
Thanks, guys.
Please welcome Vice President, Workday Analytics, Pete Schlampp.
Good afternoon, everybody. Good to be here. Let's talk about analytics. Quick overview of what we're going to go through. I wanted to first spend about five, 10 minutes just giving you an overview of Workday Analytics, where we've been, where we've come, a current state of things. I wanted to talk about Prism Analytics, which is the new service which we rolled out today, talk a little bit about where we're going in the future with analytics. Hopefully, we'll get through this in enough time to leave time for some questions at the end. Starting with the opportunity. Analytics is truly a huge opportunity. It's a $20 billion market. There are many different components within that market. There's things like data discovery, which I talked about today. There's things about reporting. There's ETL. There's data warehousing. There's these types of things.
It's a very big market, it's something that we are excited to get into. From a history standpoint, Workday focused, at the beginning of the company, on really focusing on solving these core administrative systems of the business, managing the people and the workforce of the business. Really focused on a set of users who were back office administrators. We realized the software at the time was broken, we built a completely new stack of software. We said we fixed it and we built it in a modern way, by doing that, we really started getting other types of users to come into the system. Those users, people who were workers and business users, wanted more than simply managing the financials of the business or the people of the business. They wanted to do more strategic things.
They wanted to do things like be able to manage talent, procurement, learning, those types of things. We brought these new users in, they were doing these types of activities within Workday. Those types of users, business users, what do they want to do? They really want to drive performance of their business. The next step for us was to get into business management solutions, things like planning and analytics, so that they could drive their business further. You've seen us in Workday 27 with the introduction of planning, now in Workday 29 with the introduction of Workday Prism Analytics, take this next step in our evolution and where we're going. The users here are business users. We're focusing really truly on a set of business users that are trying to, again, drive performance of their business.
Again, back from the early days, to give you an example of how this has evolved. From the early days, doing this type of reporting, like an income statement, is built into the core of the system. We do millions of reports like this every single day. This is, again, what you'd expect out of the back office administrative systems. The next thing that we built as those different types of users came in and they wanted to understand, "Hey, what's going on in my team? How's my hiring going?" We built dashboards so they could go in and at their fingertips, at a glance, be able to understand how their team is doing, how their business is doing. One level higher than that, the executives want to have at a glance understanding of the health of certain KPIs within their business.
We built a scorecarding framework, this is a way for any executive to go in and say, "Hey, sure, it's red. It's green. Here's the trend. Am I doing well or not?" What I've just shown you in the last two slides, dashboards and scorecards, the one before that, reports, might not realize it, but is a fantastic distribution system for information. One of the best distribution systems that's out there because it's all within one application, it's all accessible through the web client, through the Workday tablet app, or through the Workday mobile application. As we start to get those users into the system, they start to ask these questions. "What's the financial health of my business? How do we identify the next teams and future leaders?
How can we plan for and respond to the future?" These are the types of questions that we now need to be able to help our business users answer. What gives us the belief that we can answer this for our customers? Starting with the fact that we are the system of record for our customers. We are the place where if there's a change in the organization, it happens in Workday. If there is a decision to purchase something, that happens in Workday. We are the system of action. We are the place that they go to take those actions. If you're going to make an organizational change, you do it in Workday. If you're going to decide to have a $20 million capital purchase, you approve that in Workday. More and more, we are becoming the system of engagement.
The system where businesses reach out to their employees and engage with them, whether it is making their payroll selections or making their benefit selections for the year, whether it's through those scorecards and reports that I showed you before. We believe that we can be our customer's system of insight, really ultimately helping them drive better business decisions. At the end of the day, that's our goal, is to allow them to drive better business decisions with the power of one. It might have snuck up on you, we've built a pretty amazing stack of technology, services, and applications that are part of this analytics offering. Starting at the foundation, we now have the ability to pull data in from external sources to synchronize with other sources as data integration. Data preparation, that's the process of getting data ready for analysis.
Data governance, that's security. Data as a service. You heard me talk this morning about benchmarking and the ability for us to provide data to our customers, for them to make decisions about their business, how are they doing versus others in the industry. At this layer, also machine learning. Part of this foundation are some technologies like Hadoop and Spark, which you may be familiar with. Those technologies are very scalable, distributed processing systems that also come with machine learning capabilities built in. We have the ability just out of the box to do this without having to do a forklift upgrade of our infrastructure. The next layer is a set of services which we have seamlessly woven together. It's not just one service, and a lot of people have asked me, why is it not just one service?
It's because the users at this layer have different skills, different technical abilities, and different use cases. The way that we've woven those together with this concept of the power of one is truly unique. We just did a demo of this 20 minutes ago, I think the audience was pretty excited about it. The ability to do reporting and dashboarding and scorecards and data discovery, which is the ability to explore your data, build reports on the fly, worksheets, which is more around ad hoc analysis and being able to do what-if modeling and those types of things, and benchmarks all seamlessly put together for the right tool for the right user at the right time. Then our set of applications, where our customers get value from us, where they make those decisions for their business. Let's talk about Prism.
Why did we do Prism? A bit of a story is, I was at a company by the name of Platfora, which was an acquisition of Workday's that we closed last year, last summer. Earlier in 2016, we started a conversation at Platfora with the folks at Workday, and they said, "Hey, we have customers, and we have all this fantastic data inside of Workday, all of the information in the system of record about the people and the financials of the business. A lot of our customers want to augment that data to be able to do analysis to do decision-making.
Unfortunately, it's outside of Workday." What a lot of them were tending to do was pull data out of Workday, pull data out of these other systems, put it in a departmental data warehouse, do ETL on it, do data modeling, do all that stuff, and then run business intelligence software on top of it. That was a really complex process that they had to go through to bridge this gap. It was separating the process of action and analysis, and that wasn't good, and they were making suboptimal business decisions. To finish the story, we continued along the path, and Workday acquired Platfora, and that was last summer. We've spent the last year putting together Workday Prism Analytics to solve this problem.
How do we bridge this gap of the most important data in the business sitting inside Workday and data outside of Workday, and how do we bring these two things together? We announced this morning the limited general availability of Workday Prism Analytics. Few key capabilities here. Data integration, so that's pulling in data from any external source via SFTP, via browser upload, raw data in its natural state, being able to map any of the existing Workday data sources as well. Data preparation. That's the process of getting the data ready. For analysis, things like cleansing and blending data sets together, joins, unions, those types of things. Being able to set up agile pipelines of data and doing all of that processing on that framework, that big data infrastructure we talked about before.
Data governance, which is a very key capability of being able to secure the data using the Workday security model. Getting all that data exposed through our existing reports and dashboards through a very high-performance new analytics engine, and then data discovery in the future, which is planned for Workday 30. You saw us do a demo of that this morning in the keynote. This is really unlocking for the business users the ability to do ad hoc analysis and reporting by simply dragging and dropping the fields into drop zones and getting instant access to these visualizations. Of course, once that's done, you've got that fantastic distribution model that I talked to you about before of just being able to click that orange button, Share, and send it out to anybody in the company without extra licensing costs. Quick history.
I kind of talked about this a second ago, we acquired Platfora back in the summer. In case, I do get this question quite a bit, we branched the Platfora code. This is not Platfora anymore, Workday Prism Analytics is not skinned Platfora. It's not like that. Branched code Platfora customers are gracefully being sunsetted. We've now reached what we're calling limited general availability for Prism. Just as a side note, the team, the Platfora team, over 95% of that team is still with Workday, really jazzed and energized to take us on this next journey of Workday analytics. Data discovery is a key future deliverable for us as we go along this journey. Back in January, we started a design partner group, to help us build Prism. We selected 23 customers from existing Workday customers across 13 different industries.
Had some fantastic conversations with them. Understood the challenges that they were having and understood the use cases that they were trying to achieve with Prism. Of those, we selected 6 early adopters, which includes Workday. We are first and best using our technology. Some of those customers are the first users that are using Platfora in production today. Just to give you a sense of what the use cases look like. Starting at the left, and really the use cases span, and I should also mention, one of the things that's different about us and our strategy here is to focus on workforce or people and financial use cases, as opposed to just general broad business intelligence use cases. They span this spectrum from people history, where our customers have previous human capital management systems that they are currently paying for.
They're sitting in the closet, and they have all this data that's sitting around, and they want to be able to bring that data into Workday, finally retire that system, and be able to do things like trending of workers over 10-plus years, for instance, or verification or compliance type of reporting. The extended workforce. Many of our customers are already managing their contingent labor within Workday, but sometimes they don't, or sometimes they don't consider it contingent labor. They consider it maybe somebody that's part of the gig economy or something like that. They want to be able to look at all of their workers as one, however they want to classify those workers. They'll bring in all of that data into Workday as well. The HCM ecosystem.
If they have a learning management system outside of Workday, if they are doing surveys of their workers, which commonly happens when they're onboarding a worker or off-boarding a worker and they want to bring in that survey information or employee engagement information. They want to bring that in and analyze that together. I'll skip over to the right-hand side and come back. Profitability analysis on the financials and being able to bring in very fine, granular information for profitability cases.
For instance, if you were a software as a service company, for instance, and you wanted to bring in server utilization from your data center, down to the per customer level, and you wanted to understand profitability down to the per customer level, you'd be able to bring that data into Prism and drive profitability analysis with Prism down to the level of the customer, being able to analyze revenue and cost drivers. Then in the middle of this big sweet spot of operational insights. That's bringing in any operational data from outside in the business. This afternoon, I was just speaking to a customer that wanted to bring in data from an energy production system, and they wanted to be able to analyze when are parts failing and how much is that going to cost me.
They wanted to tie that together with profitability information from Workday financials. I gave another example previously about a provider of food, a food provider, and they wanted to actually measure productivity of employees by the pounds of food that they were creating, which is an interesting metric. Those are the types of things by being able to bring in operational data into the system, you'd be able to do. Three big areas that we differentiate ourself on. First is security. This is really, really important for our customers. This may be the most important. Because we are the system of record, because we know we are the matter of fact moment of truth of is somebody employed, are they not employed, what organization are they in or not, we are the best system to be able to secure your data.
Because if somebody moves between organizations, the second that they move between organizations, we can change their access to data instantly. You don't have to manage that across multiple different systems. For our customers, when they're managing the personal information of their workforce and when they're managing the financial data for their company, having security, solid and locked to the individual worker is really incredibly important to them. Distribution, second piece. I mentioned the distribution mechanism that we have with reports and dashboards. The problems that our customers have told us about are allowing analysts to do their analysis, drop things into a PDF, send it out via email, and who knows who gets it. If you open that thing up, is it the latest version or is it a version that was created a month ago?
Inside Workday, we can distribute that just through the Workday application. Every time you open it up, you've got the latest version of the information. Then finally, the experience. That's our ability to weave together all of these capabilities, from data integration to data discovery, to dashboards, to benchmarking, and do it in one system and have it truly be one system, one unified system, not multiple systems that are kind of tied together with wire and duct tape. The impact of experience is that we can put the right data in front of decision-makers as they're making business decisions. I think that this is a huge differentiator. I think the fact that if we can help our customers make better business decisions because the right data is in front of them at the right time, that's going to help us drive this business.
I'll just talk a little bit about futures, and where we're strategically going in a couple different areas, and then we can open it up for questions. Starting with Power of One. This is something that we are focused on quite a bit, and it is pulling together our applications, being Prism and Planning and absolutely HCM and Financials in a way that nobody else can. I was having a conversation with an analyst from Gartner a couple weeks ago, and she noted that multiple attempts have been made at this scale to pull together planning and analytics, and none of them have actually succeeded because most of the time the companies have been pulled in different directions.
We are just starting this process, and I think we have a really great first step where you can now take data from Prism and you can bring it into a worksheet, which is part of our planning process, and you can use external data now to drive plans using external data. Neat example you saw this morning in the demo, moon boot price went up 1,000%. Oops. That's external data that you'd be able to use. Of course, in reality, you can use much bigger data than that in Prism to help drive your planning process. Beyond that, allowing us to put analytics, not just between analytics and planning, but being able to put the right data in front of decision-makers as they are making decisions.
As part of our business process framework, as somebody's about to click, "Yes, I approve this purchase requisition," what information can we give you about that right there in place? Really driving the Power of One. The next piece is thinking of analytics as thinking of the application capabilities of analytics. Every industry that we support has a set of specific use cases where they have a set of specific data that they need to bring in and analyze. We have the opportunity to put together use case and industry-focused applications using this framework that we've created. Along with each one of those, we would have a semantic data model, so you'd be able to essentially plug your data in and have a known data model for that industry and for that use case.
We would have a set of pre-delivered applications or dashboards that were available. We would also be able to leverage things like machine learning and AI that are specifically built for each one of those applications. Finally, augmented analysis using machine learning and artificial intelligence. Within the area of analytics, and speaking of it really from a tool perspective, the efficiency of analysts over the coming decade is going to be boosted incredibly by machine learning and artificial intelligence. Today, it requires a pretty smart analyst to know what questions to ask. If you want to say, "Tell me about revenue for the past year, and break it down by quarter," an analyst has to ask that question.
If there was a spike in revenue in Q2, we have the data behind the scenes to be able to suggest to that analyst, "Here are the top 10 drivers for the spike in revenue in Q2, and we're going to order them by which ones are most statistically significant." Being able to give answers to users without them having to answer the question. There's a few other areas here, like natural language generation, helping analysts tell stories about the data without them having to write it themselves.
Natural language processing, which you saw Joe Korngiebel in the video this morning, where instead of having to understand how to use a tool like data discovery, just being able to ask in natural language, "What was revenue for the last year in this team, in this company?" Those are the three key areas that we're focused on in the future. With that, I think we have time for questions. Mike? Yeah. You can shout it out. I'll repeat it.
This is-
Let me edge in.
Sure. Just as a repeat, the question is, how are we going to enter this market? Who are we going to talk to first versus previous attempts at this? I think one of the great things about Workday is that we know who wants this right now. There's an analytics team in HR organizations. There's an FP&A team inside the finance teams. They have analysts. We had our HCM advisory council a couple of months back, 20 companies, large enterprises, and these were large enterprises, and I asked just for a survey, "How many of you have an analytics team?" All 20 of them raised their hand. "How many of you are using business intelligence software disconnected from the system of record to do this?" Every single one of them raised their hand. Obviously, the same thing in the FP&A side.
We are focusing on those folks first, meeting their needs, making sure that they're successful. As you go further in those organizations, there are business users, other business users that are going to be using this, and those teams want to offload a lot of the job that they're currently doing to those folks across the organization, and those are the second folks. When I say second, we're focusing on them on day one, but their primary user are the folks in the HR analytics team and the FP&A team.
Any other questions for Pete?
Can you describe a little bit about how much of this is going to be built into the core as opposed to what the incremental discrete revenue generation opportunity is?
Yeah. I'll start by saying that Workday Prism Analytics is a standalone SKU for us. It is something that you buy separate from HCM and Workday Financial Management, but you would not buy it without buying HCM and Workday Financial Management. That's the way that we're packaging this. I think, maybe is there a second part of that question? No.
Just if you could describe the pricing in part.
Yeah. It's priced in the same way the rest of our SKUs are, which is on a per-employee basis.
Great. Thanks, Pete.
Ladies and gentlemen, next we'll hear from Executive Vice President, Global Field Operations, Chano Fernandez, and Senior Vice President, Services, Emily McEvilly.
Hello, good afternoon. We're going to cover the go-to-market side, the sales part. See if this is working. We're going to be going around these three topics or themes. I'll try to make it a little bit fast, but hopefully I'm sure you'll follow up properly. I mean, the good news for us is that I'm not biased to a particular product. We can sell it all. Right? Unlike to my colleagues, I think the opportunity is just immense ahead of us, and that we were trying to get the best out of. Here's a different view of the opportunity. I think, a couple of takeaways on this slide for me. The first one is that our current customers wider space SKU has become bigger than our current SKU as of today.
The second one is, if you do a simple math, we only penetrated around 5.5% of the total addressable customer base that we define as our target market. Again, this is on our own analysis and data and good knowledge on the bottoms ups per customers per markets. Quite excited on the opportunity we had ahead of us. In terms of the sales deployment and go-to-market model. Basically, I would say it's a message of continuity, if anything, of what you have seen and doing us before. First one will be double down around industries, and the industries more prominent to us are those that are usually acquiring a platform, finance and HR, usually together, and those are mainly healthcare and education and government as a whole.
Clearly on regions, we have done significant investment in increasing the coverage that we have for the regions we are presence on. Then we're done significant investments as well in terms of the sales leaderships and strengthening of the teams. Recently, people like Gonzalo Benedit sitting on the back of the audience, joining for EMEA and APAC, basically leading that region. I'm sure he's going to do a much better job than I was doing it when I was managing that region. Last but not least, I will say, especially as go-to-market. I think we said before, we believe that there is a different dynamics between large enterprise and majors and medium enterprise, hence, we plan to tackle, we're tackling this market differently.
As we are saying, medium enterprise is a great and huge opportunity for us, it's more about faster time to value, is more decreasing the cost of implementations, is more really low risks, is more prescriptive on the packages we're providing today. Many fixed time, fixed basically approach, that's how we're tackling that market, that's where we're being successful. Of course, that carries a lot of investment on our side on simplifying the tooling, simplifying data migrations, basically movement of data between tenants and so on and so forth. Quite excited on the medium enterprise journey. I would say that huge investments around customer sat or important investments around customer reference ability, that is key.
As Aneel was saying, we're seeing now the networking effect that that is producing, that is helping us a lot and our best potentially sales and sales tooling in the market. Clearly, we're going to continue doing that. I believe we need to be scaling and continue what we've been doing. That I'm not saying it's easy, it's basically what we plan to do. I think the good news is that pleased to see that majority of the solution cover a really broad set of industries. We have had tremendous success lately in industries like healthcare, as I mentioned before, like retail, others like financial services and manufacturing too, becoming quite significant. Rapid adoption of SKUs, as we were mentioning. This is basically a comparison between last year and this year. A couple of points there.
A couple of SKUs or a few of them recruiting payroll and time tracking, more on attach rates of 55%-60%. Then some of the SKUs, as we've been mentioning, more like learning and planning, that is basically for one year in the market right now with the rapid adoption on those. We're pretty pleased how customers are perceiving the value and basically taking adoption on the new product launches that we are doing. Definitely, this is a key driver for our growth and for our model going forward. I'm not going to spend much time on this. I think Barbara was commenting the progress we've been seeing lately on the Fortune 500, that is more to be less of, be honest, to the proven, to the scalability, and to the low risk of basically taking the Workday path.
The good news is that we've been saying we penetrated 30%+ of the Fortune 500, creating that networking effect. I think the good news is that we reckon that 50%+ of the Fortune 500 have not yet gone to market, are still sitting on legacy systems, we expect there are some points that are going to be coming to the market, definitely we will be happy, as you can imagine, to have conversations with those as we have had with the other 30%. It's not only the Fortune 500, it's also the Fortune 50. It's been a good track record there and a good growth ratio again, based on the solidity of the product set that we're bringing. In terms of the international expansion and the international coverage, I would say that right now we cover 90%+ of the addressable cloud market.
We're clearly more about double down where we are today than going into new geographies or new places because we have still tremendous opportunity of doing so. International is definitely, as we've been saying, obviously, coming from a smaller base, but growing faster overall than basically the U.S. market. I'm just seeing if anything, it's great to see that that growth has accelerated. If you compare the compounded annual growth rate during the last years, and you compare that to basically this H1 or first half of the year compared to the first half of last year, that is jumping from a 57%-59%. The growth drivers, I think you can read them. Clearly the international market is gaining that momentum. It's gaining as well their own referencability of the customers that we're doing there.
As I said before, we're doing, I think, the investments on attracting the right sales leadership. When people ask me, "How are you managing to do that?" Because we all have problems on basically talent being a rare and a scarce component in the market. I think Workday appeals to innovation, appeals to a great culture and a great customer satisfaction and referencability, and appeals as the company of the future. That is where I think great sales or great go-to-market talent wants to come and join the journey in Workday. Some of the international logos, some lately like Siemens or others joining the family, that makes us very pleased on particularly where it could be more difficult market to penetrate, and we're having some good successes, both in EMEA and in APAC. Why are we winning?
I don't think it has changed on where are we winning to what potentially we've been sharing with you before. Clearly, proving and scalability is a big theme on why we are winning, because that is taking us a low risk and has a competitive TCO. I think the way we're engaging with our customers as well and the experience they have owning the solution, and I would say, the service we provide into that in terms of the availability of the solution and the performance of the solution goes a long way as well. As I said before, I think, referencability is a key thing of what we are winning. You would be surprised and amazed when some of these large customers are making a decision, they ended up talking to 20-40 of our customers, right?
We usually are good on providing them many more references that they're able to get from other legacy players that might be saying they have too many, but we provide them 10+, then they ended up taking formally with many others. I think that is, as Aneel mentioned as well, our best sales teams are our customers today, so we're very pleased to count with their support. With that, I'm going to ask then to join me on stage, Emily McEvilly, then we'll take Q&As at the end of the session.
Sorry, I didn't follow you up. I was afraid I was going to fall off the perch. Okay. Hello, everyone. My name is Emily McEvilly, and I run our services organization here at Workday. I've had all my colleagues talk about the great things that we're bringing to market with the products, go-to-market, and I'm going to round it all out talking about the customer experience that we provide because we do think that is a differentiator for us. Along the way, I'm going to talk about our partner ecosystem because we get a lot of questions about how we work with our partners and how, in turn, they work with our customers. There's going to be four key items that I talk about in terms of our differentiated customer experience. Foundationally, it's all about our focus and our passion around customer satisfaction and customer success.
We have a goal at Workday of achieving 95% or greater customer satisfaction, and we incentivize every single employee to meet that goal. It's not just a services thing, it's not just a product thing, it's across the entire company. Each and every employee is incentivized to meet that goal. You will hear a lot of organizations lately saying, "We're focused on customer satisfaction. We're focused on customer success." In my opinion, if you don't ingrain it in your core values, if it's not something that you talk about on a daily basis, if it's not something you incent your employees on, then it's just words on paper. It's not going to be part of their natural response in working with customers. Right?
At Workday, we're really fortunate that we have a leadership team that set a set of core values, Customers is one of them. We work with our employees to make sure that when they're in a decision-making process, that they're going to optimize based on what's best for the customer as opposed to based on what's always best for Workday. It's part of their natural response. That's a really important point about that. The other thing is that we test ourselves on a regular basis. We go out, and we survey our customers at different points in their life cycle. This particular metric that Aneel shared this morning, the 98% that we just achieved, was from our executive survey. Every year, we survey an executive at each and every one of our customers. We don't cherry-pick, we don't pick with our favorites.
It goes to every single customer. They all have a vote, and this is the results that we achieve. We're really proud of these results, obviously. We've gotten over 97% for more than seven years, but we know we can do better. The really wonderful thing about our relationship with our customers is that they're very transparent, and they provide us a lot of great feedback. Through the survey process and through interactions in the field, they give us feedback. We take that feedback, we look for themes, and we create initiatives to drive improvements across, again, all of our organizations, products, services, support, and sales. The second thing that's important to know about our customer experience is our proven track record. You've heard this multiple times, but nearly three-quarters of our customers are live on their Workday service.
This number represents being live on a core system of record. It's HCM or financials or both. The number's not polluted with point solutions like they're only live on expenses, and we put a tick in the box for financials. Or they're only live on performance management, and that counts as a go-live for HCM. No, this is live on the core system of record. As you heard multiple times, they're all live on the same version. About 80% of our deployments are done by our partner ecosystem. I thought it's really important for you to understand how we work with that ecosystem. There's four key components to our, what I would call our deployment philosophy. The first is around how we select partners.
We have a group of partners that we select based on their track record and the offerings that they can provide to our customers. Then we will work with them to target them to specific geographies or specific market segments and help and make their investments in Workday in those particular areas. The other thing that's really important is around certification. In order to maintain our very high-quality standards, we have invested in a robust certification process. You will hear certification from a lot of different vendors out there. Here's a few things that are very different about the Workday process. Number one. We certify every single one of their resources at a more granular level than you've probably typically seen. They get certified on our methodology, on products, on the technology.
They have to get recertified every six months with each feature release. We track every single one of the consultants in the Workday ecosystem, and if they don't pass a certification, we turn off their access to our customer's tenant. The other thing that's interesting is that if you're a customer and you're about to hire one of our systems integrators to come deploy your solution, you can look up their individual consultants on your customer portal to see what certifications they have before they show up on site. It's a very robust, and again, transparent process and program that we have with our customers. The third item is around the collaboration that we have with our partners. Our Workday Services organization has a collaborative relationship with our partners. It's not competitive. We're not out every day in the field battling for services dollars.
It's not like that at all. In fact, we invest tens of millions of dollars into our partner ecosystem. We create methods, tools, tips and tricks out of the Workday Services organization, and we share that with our partners to help drive consistency and high quality for our customers. The final component is around Delivery Assurance. Delivery Assurance is a service that Workday offers where we have a footprint on every single customer deployment, regardless of who's deploying. We do a series of checks, quality checks at the project level, at the configuration level, at the integration level, and we set up gates that the project has to proceed through before they go live. Again, helping our customers and our partners drive optimized solutions to meet the customer's business needs. I'm going to talk a little bit more about the ecosystem.
It's made up of large SIs and what I would call purpose-built smaller integrators that typically work in the medium enterprise. Listed here on the slide are just our titanium and platinum sponsors for Workday Rising. Across our partner ecosystem, we have about 6,800 certified consultants today, and that is across 36 partners globally. This is just another important detail. We have some competitors out there that have the similar number of certified consultants, but they're across 400 partners. Imagine trying to put all the things in place that I just talked about around our deployment philosophy, trying to do that for 400 partners. How do you get their attention? How do you drive consistency? With Workday, we have an ecosystem of 36 partners. In North America, it's around 26. Across those partners, they have around 20,000 certifications, so that's roughly three certifications per consultant.
In terms of how they're growing their practices, most of the large SIs are growing more than 20% year-over-year. However, there's one of them up there, a very visible global SI, who had a large base, and off of that, they've grown around 40% compounded year-over-year. The other thing that these SIs have to do is that with Workday, they have to think differently. Our deployments are more efficient than legacy deployments. In the legacy world, you would climb this implementation mountain. You'd try to stuff as much scope in as possible. Most of the time, your resources would get tired. You'd have to defer scope. Projects would run on. With Workday, because our deployments are more efficient, they'll be going live faster, and we're delivering new features and functions every six months.
These partners, when they build these trusted relationships with the customers, can take new features and functions, turn them on, and create more of an annuity stream with our customers, as opposed to the mountain that they're climbing. One question that I get asked quite a bit is, how many deals are the partners sourcing? I think we'd all admit there's a lot of great information out about the market, who's coming to market, the addressable market, what products they have. It's pretty rare that they will source an opportunity for us. They do influence quite a bit. We think on average, they influence around 60% of the deals that we have in the pipeline, and that's much greater, actually, in large enterprise. I would also add that they credentialize Workday even when they're not in the running for the services business, right?
When the auditors are running the selection process. One thing I'll comment on quickly, we talked about it on the last earnings call, and Shawna mentioned it, is that as we are focusing our go-to-market efforts around large enterprise and medium enterprise, we released a new packaged offering purpose-built for the medium enterprise called Workday Launch. It consists of pre-configured, pre-packaged solutions that both Workday and our partners are delivering for a fixed price for about a four to six-month implementation timeframe. Not only does it have key application functionality within it when they go live, it includes both the reports and the dashboards or the analytics, excuse me, that you saw earlier. Again, driving additional value for these medium enterprise customers as soon as they go live. The other important point about the Workday customer experience is our accountability to our customers.
Of course, you all know with the SaaS solution, we're in charge of their infrastructure, their updates, the technology components. It goes beyond that for us, right? As you can see, as I'm describing with how we work with our partners, the really important thing is, yes, we have a partner ecosystem, but Workday never steps away. We never step back from our responsibilities of making sure our customers are successful, ensuring that they're going live, and then continuing on in that journey with our customers once they're live. Engaging with them on a regular basis, helping them adopt new features and functions. I will say the one thing that we see is when customers are coming out of this legacy mindset, where they implement and they rest for years.
Getting them into this new groove of thinking about adding additional features and functions on a regular basis, it takes some work, right? It's a new muscle that they need to learn to flex. One thing that we're doing is based on customer feedback, is driving more things into the application to help them with their ownership experience. What I'm showing here is an adoption planning application within Workday, where it shows the usage metrics. It shows you what features and functions you've deployed, what users are using them. It shows you what's new within Workday. It surfaces that, and then it allows you to create an adoption plan within the application. We've released this, and it's very popular around our customers to help them plan this journey, and Workday walks side by side with them in that as well.
The final thing that I will close on is around culture. Several of the speakers have talked about this. I think we're really fortunate here at Workday, our founders set about some core values. As I taught customers is one of them. It's something that the management team pays a lot of attention to, and especially as we're growing so rapidly, to ensure all of our employees are living the core values and pulling them into their actions on a regular basis. I will say, I was involved in several of the sales cycles for a lot of the notable logos up there. In those conversations, the customer said, "Listen, we love your technology and your products.
You're winning the evaluation based on that." The tipping point for them was our culture and the people that they met from Workday in the sales process. They said, "Listen, we don't want another vendor relationship. We want a partner because we know this is going to be a journey." To them, that was the deciding factor. Key takeaways for Chano and I. Number one, most of these are yours, Chano, but I'll read them for you.
Thanks for calling me.
Yeah, you're welcome. Number one, strong sales leadership focused on capturing long-term growth. Two, new product innovation that is enabling us to upsell opportunities and drive growth within our customer base. Our proven success within the large enterprise space, our investments in international expansion, and what I just covered, we feel like we really have the best proven low-risk deployment methodology. It's measured by our track record in both not only go lives, but also our strong track record in customer satisfaction. All right. Mike, we have time for Q&A.
We're done?
Yeah.
Yep.
Thank you. Mark Murphy with JPMorgan. Chano, I'm curious, how much more runway do you see in the second half and beyond for the linearity improvements that I believe you have influenced pretty heavily among the sales teams? Also, this wave of the larger Fortune 500 type logo wins that you've had from Amazon to Walmart to British Petroleum and Citigroup and all that. Also, just at a deeper level, what do you think have been the dynamics that have been driving those two effects that I think have surprised all of us on the positive side quite a bit this year?
Thanks for your question. My expectation is potentially we will be able to continue the trend on linearity that we're seeing during the first half of the year what is spending on the rest of the year. That's my expectation. In terms of what has been driving or what has changed, I think that what is really helping is that momentum that Aneel talked about that networking into very many customers successfully in the Fortune 500, and that creating a really network effect that is supporting basically us being able to do a better job overall.
The rest is, I guess, we're trying to be more tighter up in terms of sales execution, trying to be pretty looking forward in terms of how we manage, particularly the quality and the quantity on the pipeline and how we wrap up processes around that, and basically working hard towards more monthly closures than any other thing. That's how we're trying to do.
Hi. Whoa, excuse me. Question for Emily. Scott Berg with Needham. The question is on the implementations for your financials product. We've heard a lot of good things on some of the mid-market deals and what those deployment cycles look like.
Our upmarket, we're hearing that those deals are taking much longer than expected to implement and have had some different challenges during those processes. How do you improve that going forward to make that be a much more palatable experience?
I would say in general, large enterprise deployments, whether they're HCM or financials, when you're in the large enterprise, there's typically more complications regardless, right? Just usually a more complex landscape from a legacy system perspective. More constituents involved that you have to have to buy off on decisions. I wouldn't limit that to financials. I would just say, in general, it's different in large enterprise than medium enterprise. In terms of how we're improving the deployment experience overall, you heard Barbry talk about the fact that one thing that we're really trying to do is build more baseline configurations into the application. Almost like a cookbook, so to speak, where you could pull out different recipes depending on your particular needs as a customer. That's one thing that we're doing to give more pre-configurations across all of our customers.
The other thing is to look at just some additional application tooling. Again, we provide tooling out to our partners, and we feel like the more of that tooling that we can bake into the application, into the core application, the better that's going to help to drive efficiencies during the implementation and also consistencies across all of our partners. You will see in the coming releases, additional tooling on the roadmap.
Hi, how you doing? Brent Bracelin with KeyBanc Capital Markets. Chano, for you here, clearly, the making investments on the international side. What's less clear to me is where you're going to make the biggest changes on the specialized sales motion. In the next year, could you provide a little more color, what you're doing, what you're changing there, relative to maybe a different buyer for HR, financials, analytics? What are the big changes that you're planning to make around mid-market, relative to go-to-market in the mid-market as well?
Yeah. No, great question. I think it's going to be basically planning on continuity and double down on what we're doing because it seems to be working. We just needs to be scaling it up. If anything that we're looking into is how we do fine-tune more the go-to-market towards that wider space customer base opportunity that you saw before, and now we're having a broader portfolio. That potentially is the only kind of thing that we're looking into more if we're going into next year. How can we do a better job around that one, right? In terms of industry and what we're doing is going to be double down on what we're doing today.
Looks like we have no more questions. Thank you, Chano and Emily. Appreciate it.
Thank you.
Ladies and gentlemen, please welcome back Robynne Sisco.
All right. We're in the home stretch here. Financial update. If you've heard this over the last several hours, multiple times, we have a huge opportunity in front of us. Growth continues to be one of our top priorities. We are pursuing that growth through investments in both international expansion as well as our products. We've had great success since our IPO, which was almost exactly five years ago, here in a couple of days. We continue to expand on that success, ending this year with revenue expected to be over $2 billion. As you heard from Chano that our success is global, right? We've got big expansion overseas. Those investments are starting to pay off really well. We've got over $100 million last quarter outside of the U.S. in revenue. That number is growing at a very, very rapid pace.
We're very, very pleased with the business that we're growing outside of the U.S., we're going to continue to invest in that area. You've been hearing a lot about success in the upper end of the large enterprise segment from a lot of the folks that were up here earlier today. What I'm showing you here are the cumulative number of Workday customers with contracts with annual contract value over $3 million. Some new data here for you. This is really being helped out by the networking effect that you've heard us talk about. There are two ways that we actually add to this base of customer. One is to go after those super large customers and get net new customers with large contract values.
The other way that we add to this base is to expand our existing relationships with customers by doing add-on sales, right? Expanding that relationship and expanding the contract value that we have with those. We've been successful in both of those areas. Here's the incremental change in the four-quarter periods that you see. The interesting thing about this is that you saw we were pretty steady in earlier times, earlier periods, of adding 18, 19 into this large customer count over time. The past four quarters, we really saw that accelerate. We've been talking about this during our earnings calls when we talk about our new logos.
The effect that this has had was to drive a lot of the acceleration in subscription revenue that we've seen over the past four quarters, as we've been able to get that number back over 40%. As you also know, we were early adopters with the new ASC 606, and with that came some new disclosures that we've been providing to you over the last couple of quarters. One of those disclosures is subscription revenue backlog. What we're giving here is some better visibility to you into the history of that number that we had not previously provided. This will help you to measure the growth rates in this metric, as well as to see some seasonality to it. The biggest drivers for the growth in this metric are net new customers and the contract values there.
Renewals, when a customer renews, the contract that is renewed in that period goes into this number.
The other factor here is duration of those contracts. One of the things that I said at the last earnings call was that duration had not notably changed. Duration has not been a factor over these periods presented, but could be at some point in the future if that duration significantly changes. As you can see, for Q2, our year-over-year growth and subscription revenue backlog was 44%. That compares to 43% in Q1. I actually personally think that this is a very good metric for you and us to really see how we're doing as a business. I think it's highly relevant, and you can tell by the growth rates here that actually ties pretty well to our subscription revenue growth as well.
I do expect that we'll continue to see seasonality in this number, I want to just point your attention to Q4 to Q1. We expect that that will be continued in the future to be fairly flat to low growth just due to the history of our seasonality and the business between Q4 and Q1. We have a very efficient business model that we've been running for the last 12 years, we're really starting to see the effects of it at scale. Our customer base, our ability to get them live and referenceable, the fact that they're happy, is really driving our growth and driving our path to profitability and to improving that profitability. We've been able to sustain this cycle over the last 12 years, and it continues to really prove out the long-term business model that we put in place.
Having said that, growth is still a top priority for us over operating profitability expansion. What you're looking at here is our investment in our products and development teams as a percent of revenue. We continue to invest heavily in our products. You heard a lot today about where those investments are being made. We have a huge opportunity, this is what's going to help us fuel our growth. While we're not focused on the short-term efficiencies in our development area, we actually are seeing them in other areas of the business already. We continue to expect that we'll be able to expand our gross margins. We've had a pretty good track record so far. We are driving that through a couple of different drivers.
First of all, as our high-margin subscription revenue becomes a larger percent of our total revenue base, that's been driving that number up. Additionally, we've been getting operating leverage from the scale of our data center and customer operations. Lastly, technological advances in the marketplace have made running these data center operations actually less expensive when it comes to the cost of servers and memory and other such things. When we IPO'd 5 years ago, we set a long-term gross margin target of 75%, as you can see, we are bumping up against that already. We believe that in the near term, in the intermediate term, which is approximately 5 years, we can actually take these margins up to 77%, we're setting a new long-term gross margin target for ourselves of 80-plus %.
We believe based on the efficiencies through scale that we've been seeing so far, that this is highly achievable. One of the things that strong gross margin expansion drives is strong non-GAAP operating margin, and we've had great results in this area as well. These operating margins aren't only driven by our gross margin expansion, but also by our sustained revenue growth, and other operational efficiencies that we're continuing to see outside of development. In our sales and marketing organization, even though we're investing heavily internationally, as Chano was talking about earlier, we continue to see efficiencies in that cost line item, and these are really being driven by our high levels of customer retention, our growing base of renewals, and we're getting operating efficiencies even though we're continuing to invest. We're also seeing operating efficiencies in the G&A line as well.
Five years ago, at our IPO, we had set a long-term non-GAAP operating margin target of 20%. One of the things you've heard Aneel and I talk about recently is the fact that our HCM business is actually already operating at over 20% margins. That's fully loaded non-GAAP operating margins for HCM, already over 20%. That gives us confidence that we can not only hit this number across the company, but actually take it higher. We can now consider 20% to be our intermediate term operating target, and we've got high confidence level that we can get there. We've now adjusted our long-term operating margin target to 25-plus %. I want to finish off by talking about cash.
We've been talking for the last several years, and more recently over the last couple quarters, about the fact that we have been more flexible with our customers in terms of cash payment upfront. You see the effects of that here, particularly this year, where we've had less focus on getting multiple year payments from our customers out of the gate. We believe that the right long-term perspective for Workday success is to make sure that we're maximizing the long-term relationship with our customer and not focused on short-terms billings and invoicing. That's what we've been doing. You can see we're in transition this year and the last couple of years, this headwind will absolutely turn into a tailwind, all other things being equal, we expect to see noticeable improvement in our operating cash flow margins starting next year.
We have, over the last several years, been able to fund all of our capital expenditures, including our new development center that we're building at our headquarters, as well as strategic M&A through our operating cash flow, allowing us to maintain a strong cash balance of over $2 billion for the last several years. Given the convertible note offering that we did last month, we believe we'll end this year with over $3 billion in the bank. $600 million of this is earmarked to pay off our convertible notes that we issued in 2013, which come due over the next several years, that still leaves us plenty of cash and plenty of flexibility for strategic investments as well as opportunistic M&A. We think we're in a really very great place to continue to invest in the business for growth. Takeaways for the whole afternoon.
We have a massive global opportunity. I know we've talked about that a lot today, we really are going after something huge, we don't want to take our foot off the pedal. We're continuing to invest to pursue that opportunity. We are already a market leader with continuous best-in-class products and a highly referenceable, successful customer base. You're starting to see that with our traction, particularly in the highest end of the large enterprise. We have a robust partnership ecosystem that Emily talked about here just a minute ago. We've got high growth, recurring revenue at scale with strong profitability, which will expand over time. With that, please welcome back up to the stage Chano Fernandez and Aneel. Is Aneel back here? For Q&A. There he is.
Well done, Robyn.
Hi, I'll start. Karl Keirstead, Deutsche Bank. Thank you for today. Maybe this question is for Robyn. Robyn, you mentioned just a second ago that you expect a material improvement in operating cash flow margins. I think you referred to fiscal 2019. Maybe a couple questions there. When you say material, do you think it can exceed that sort of 22% level that it was prior to this dip? Is that what you mean?
Yeah.
Secondly, why is that happening? Is that happening because Workday expects to alter your billing terms somehow? Is it because you're sort of anniversarying shifts that have already occurred, and they get in the rear view mirror? Thank you.
Yeah, that's exactly it. A few years ago, we made the decision to be more flexible about the cash that we took from customers in year one for some certain strategic deals. We talked about earlier this year as well that we were not pursuing getting multiple years from customers up front. We believe that that's the right long-term decision for us. We've been a little bit in a transition period for the last three years, what we expect to see starting next year is that the lower cash payments that we were getting in years one and sometimes in years two mean that the payments in the back half of the contract are actually significantly higher.
Now that we are starting to bridge that transition and we'll get the tailwind effect from those contracts, where we get more in the back half, and we're starting to see the back half coming to fruition starting next year. This is a swing from a headwind to a tailwind that we've actually been talking about for a few years. I do expect, all other things being equal, that we will see that operating cash margin go over what it's been historically.
Thanks.
Hi. Saket Samana with Stephens. It seemed like the theme today was that financials is moving much more quickly in the mid-market. I'm curious, when you think about the large enterprise and the cadence that it is moving at, how many of those deals does Workday get to look in? Even if we eliminate how fast the market itself is moving, are you involved in the deals that customers that are looking in the large enterprise to move to financials in the cloud, how often are you involved, and is that number increasing? How's your win rate evolving there?
Do you want me to go?
Yeah.
Well, I would say within our target markets, I think we see a very high percentage of them. The more focused we are in a given industry like healthcare or Education and Government or technology or financial services, I think we see a pretty decent percentage. Obviously, if they're in the manufacturing space, we're not seeing those opportunities since we don't have the supply chain and manufacturing products. The market is beginning to tip. It's taken longer than we had anticipated, but it is beginning to tip, and we're seeing it in the pipeline, and I hope that that pipeline translates into business. I think the good news is, there's now a lot of proof points within our base of Fortune 500 customers that are live, and that's what we didn't have a couple of years ago.
We had a few Fortune 500 customers that weren't live, now we've got a bunch that are live, and people are looking at those proof points.
Yeah. I think the different entry points or the strengthening on the entry points with planning and FP&A is also a game changer, because though there are quite significant advantages or moving just the GL, and of different types from simplicity. So use to TCO basis. Clearly, what gets companies more excited are the use cases of planning and FPM combined to the movement of the GL as a whole.
Hey, guys. Alex Zukin with Piper Jaffray over here. Robyn, you gave a lot of great, I think, new targets around margins, both gross operating, and we talked about cash flow. You started the presentation with a theme of the investments are for growth. I wanted to ask about maybe how do you think about your intermediate and long-term growth targets, particularly as you're seeing kind of almost a new inflection in HR deals in the enterprise. You're seeing financials start to pick up, and really evolve. Then you've got, between platform and Prism, and planning a tremendous amount of vectors to both increasingly monetize your existing customers and continue to push stronger. Just any comments you have around that would be helpful.
We have a lot of levers that can help us continue with the growth trajectory that we've been on. Exactly when those kick in, I think is what we're going to have to see how that unfolds. With Prism, with planning, with the platform, we're very confident that we're going to continue to have strong growth into the future. You saw in the chart I put it in before about our R&D spend. We are heavily investing in R&D. We don't have any near-term plans to change that at all. The expansion that we expect in our margins is really driven through efficiencies in other areas and sustained revenue growth. We're just very optimistic that we're going to get to those targets over time, even as we continue to invest as we are today.
Hi. It's John DiFucci from Jefferies. I think the question's for Chano and Aneel. There's a lot of talk today about the synergies between HCM and financials, and that financials are going to come. It sounds like it's in the pipeline, and Gartner says it's going to come, too. Both those, it's still not here yet. I guess given the complexity or at least my understanding, the increased complexity of financials and a lot of times the unique deployments that come along with that, I'm just curious how we should think of platform. Should we think of platform as perhaps a sort of catalyst for financials? Larger organizations can say, "Okay, Workday's got the financials, but I have all this other unique stuff I have to do. You know what? Now I can do it." That makes sense to me.
I guess the question is, are you hearing that from customers now?
Yep.
Are you selling it that way?
We're definitely not selling it that way yet around platform. I would say to your question on financials, five, six years ago, it was really NetSuite and SMB phenomenon. In the last five years, it's turned into a medium enterprise drifting into large enterprise. It's very similar to the CRM path, very similar to the HCM path. I wish it would've gone faster for sure. I actually think the levers for financials going forward are not just a platform. I'll come back to that. If you really look at planning and you look at Prism, that's when it starts singing for the office of the CFO. They're just not looking to get a better way of doing accounting. They want to be that business partner. The unified planning where you can plan and execute, which we show in the demo today, that's the first of its kind.
That is getting us into a very different conversation than we could have before that. Chano allude to the FPM piece as a wedge in. I think the Prism piece as well. As much as we'd like to say Prism is across all product lines, there's no question the deeper use cases are going to be around financials. If you make the leap into our financial products, now you get these huge added benefits of planning and Prism, which frankly, three or four years ago, we didn't have. On the platform as a service piece, I think that takes some of the pressure off of every feature and function you might need to replace a legacy system. I do think that that will be a powerful selling tool, but it's too early so far.
Customers are asking us about it, we have yet to really start selling it that way. I mean, we're just officially launching it today, it would've been a little premature beforehand. From the pre-launch, we definitely get a sense that customers would like to use it to extend in areas that we're not planning on building.
Thank you.
If I may add, I know maybe you were not on the keynote this morning, I think for me to take away of the keynote is we really were showing how the platform business makes sense, Finance and HR end-to-end processes, and what we were saying at the keynote, the plan executes and analyze, right? When you think about that from the key differentiation, which is just that one single core system of records and how that goes seamlessly, and you have the same UI and the same security and the same integration and the same model. The single version of the truth, what would you get around basically just simple things like compliance and visibility is just huge, right? There is no other player having that solution as such in the market. Really still that is what that solutions provide.
We're pretty excited what it is to come and how customers are understanding that. Sometimes in larger enterprise, it's just that. How do they see that these are big projects, and sometimes they're just taking one first and then the second one instead of taking them together at the same time. Other industries are taking them more together jointly, right? Definitely, we are with more the joint value approach proposition.
I'm particularly excited about the early use cases of Prism Analytics that Pete showed today. It was our hope that we had our big data offering several years ago. It just didn't have the level of technology that Pete and his team brought or the knowledge of the applications that we now have built into it. The kinds of solutions where you're tying financial data to patient data, financial data to point-of-sales data, and doing it rapidly and quickly, that is the holy grail for these business analysts trying to first get the data together and then come up with analysis. We've made it so much easier than they've ever had before, and I think that's going to be revolutionary in the way that people work.
Yeah. Hi. Kirk Materne with Evercore. This sort of follows on that point just made, Aneel, which is when you look at financials these days and you think about industry, it seems like financials are going to be adopted more by industry versus HCM. Maybe Chano has something to add to on this, but are you guys going to have more of a solution-based approach to financials by industry when we think out over the next two to three years? Meaning, are you going to sell financials differently in the financial services than you are into services companies? I'm just trying to get a sense on when we think about the cadence of adoption.
Yeah
in the big enterprise, should we expect to see sort of it fall industry by industry? Is that sort of one way of thinking about it?
Well, I'll tackle the product, and I'll defer to Chano on the sales side. On the product, there's no question there's more industry capability required on the finance side than on the HR side. Where we've made those investments very early on, like Education and Government, we're running away with that market. We're running away with higher education because we're really the only cloud platform that has that industry-specific capabilities. We've done the same for professional services and technology with the big investment in PSA and what you heard today around recurring revenue business models and all kind of revenue recognition. Then I'd say the other place is in the procurement side for healthcare. As we make those, and I'd throw in average daily balance for financial services, but the first three are really big investments, where we're doing really well in healthcare.
Now, they might not be Fortune 500 names because they're not public companies, but they're massive organizations that pay us as much as a Fortune 500 company do. Absolutely, that's the path on the product side. With Prism, we can also bring into that the templated solutions around things like patient profitability or customer profitability in retail, where we could marry it with whatever operational data they have, too. I think that will be part of the solutions going forward.
Yeah. I think Betsy was showing, of course, kind of the progress we've been doing in the solution on the different industries, and yes, it's going to be heavily industry investments. I think we've been tackling the ones that are buying more on that platform model, and also that they have a massive opportunity ahead of us. Aneel is mentioning them, healthcare and Ed and Gov. Those deals are massive. They're quite significant when they get into the inventory on HR and finance in one. On the other side on a student, HCM and finance. They're quite big.
These are 80,000-person hospital systems using financials. That's a Fortune 250 kind of company, and for them, that investment in the procurement side was critical to them choosing Workday.
In those, you add payroll as well.
Yeah.
Get 20 on one side or the other.
Yep
It becomes quite interesting.
Hey, Aneel. It's Adam from MoffettNathanson. Lots of really exciting new stuff out today. I keep going back to the idea that based on what I'm hearing about the HCM business, that the HR and the HCM business alone could be a much, much bigger business, two, three times what it is today. Is there any reason to believe that that assumption isn't right, that trajectory couldn't be just much, much larger than it is today? I have a follow-up on the back.
There's no question it could be two to three times, four or five times larger. I just can't tell you over what timeframe, right? That's the presentation rate of new deals. Right now, it looks very good. That's just so hard to predict, and if I gave you a prediction, first, Chano would shoot me because we don't know. Secondly, I wouldn't want to mislead. In terms of the size of the opportunity, I think we have a very reasonable shot at getting to 50% of the Fortune 500. How does that translate into the rest of the market around the globe? I think that's really how we think about it, and Fortune 500 is still going through that transition. We go to some markets like Southeast Asia, Japan. Japan could explode.
We were with one of our great business partners today, and they were talking about the excitement around several of the Workday implementations, Sony, Nissan and Hitachi. These are companies that have deployed Workday around the globe, but not yet in Japan, and all these Japanese-based multinationals are waiting to see how these guys do. If they go well, and Nissan's in the lead to go first, I think we're going to see a wave of business out of Japan. Right now, our Japanese business is minuscule. I think that phenomenon exists all over the globe. As we open up markets, that helps drive that scale of opportunity, too.
I'm not looking for a quota increase, definitely. The opportunity is, I think, time plays in our favor. If we are able, and I am confident we are, basically to keep doing what we're doing at scale, as I'm saying, which is keep that customer reference ability. I think as we're becoming more on a strategic platform to companies, the CIO, besides the business, is becoming more of a decision-maker. Honestly, when the CIO is getting involved in cycles and understanding more of the architecture and what that allows, and now, of course, enhanced with Prism and Workday platform, it's just become a much better value proposition overall, and they see much better benefits of going with Workday. Yeah, I'm pretty excited with the opportunity ahead in HCM, is your question.
Great. Just my follow-up on backlog for Robyn. Very helpful disclosure. Looking at the billings plus the change in backlog quarter to quarter, it looks like that bookings number might have actually grown slower than billings in Q1, faster than billings in Q2. Is that right? How should we be thinking about that relationship? Even bigger than that, what should we, as the analyst community, be thinking about are the most important metrics to focus on then for the longer-term growth rate on the top line?
Yeah. As you know, we stopped guiding billings at the beginning of this year, I personally believe that it's not a leading indicator of our business. Any particular contract can have billings in off cycles or can start lower and get higher, it's just really not a good indicator. I actually haven't done the math that you're talking about in terms of how the backlog relates to the billings, because we just don't pay attention to that internally. I think that the main thing to take away from the backlog metric is, I think it's a pretty good indicator of the growth of our business, but it will continue to have seasonality to it. If you look back at what I showed, the differential between Q4 and Q1 was negligible. We've got such big Q4s in terms of net new customer wins.
Q1s are seasonal low, the bookings are really just offsetting the revenue that's coming out of that number and being recognized. I think seasonality is going to be really important to pay attention to. I do think the metric is very helpful in terms of measuring how we're doing. I would encourage you to not look at it in relation to billings, there really is no correlation at all between our backlog number and just the timing of billings on any individual contract.
Hi, Robyn. Keith Bachman from Bank of Montreal. I wanted to ask you, as you put your lens on the pipeline that you envision, particularly in financials, as financials presumably grows as a % of mix, doesn't that suggest that the average deal size could increase meaningfully over the next few years? As you look at the total, again, mix between HCM and financials, wouldn't that put some upward tension on the average deal size?
Yeah, I think it definitely could. There's a couple ways this will happen. First, in the medium enterprise, as we've seen, we often sell the full suite at once. Those deals will include financials and HCM and potentially a lot of our other SKUs. Those become relatively larger deals. I expect that we'll continue to see a lot of platform buys in the medium enterprise. I think when it comes to the large enterprise, we'll continue to see customers primarily buying first HCM and then going to financials or even the other way around. These are more complicated deployments, and so they're generally not going to tackle them both at the same time. One of the reasons I wanted to show you the new metric with customers with ACV over-
Right
$3 million was to show that those aren't all net new customers. We're adding to that population as we actually upsell financials and other SKUs into our existing customers. Just because we don't sell it all at once doesn't mean there's not a huge opportunity there. If a customer first buys just core HCM, we can actually quadruple or even more the size of that annual contract value with that customer over time as they attach new products. Chano gave some great updates on the attach rates, and so we're having huge success there with the attach rates. From a net new deal size, I expect that we will see larger deals as we sell more things upfront to the customer because we have more products to sell.
I think growing that existing base and the value of contracts with that existing base is just as important for us to expand those relationships and make sure that these customers becomes more sticky. The more SKUs they have, the stickier they are, and the more we'll have great retention rates like we do today into the future.
Hi, Walter Pritchard from Citi. Just on the platform side, I think we come away with a really good idea of what the platform is, and customers have been asking for it. From a monetization perspective, you've sort of thrown out a few things that maybe help us understand how you're not going to charge for it. Could you help us understand, you have peers that don't charge at all for the platform, say Intuit. You have peers that heavily charge for the platform. Are you going to charge for it or not? Is there a per user model? Is it a per customer? Any sort of detail you could give us, help us understand what that opportunity looks like financially.
We're going to try out a few different models as we go through this initial release phase.
There'll definitely be a significant component tied to usage. I think tying it to users or anything else like that's a really tricky one. Some systems just don't need that many users. Other systems have lots of users. Tying it to some level of usage will probably be the way we drive it. I would expect that we charge upfront for development support for people that are building more substantial applications.
Thanks. Justin Ferbey with William Blair. Maybe two-part question. This quarter last year, I know you guys went through some volatility with enterprise deal signings. I guess I'm just wondering, as you're now 40% bigger than that, do you feel like there's more visibility? Things have obviously bounced back nicely the last few quarters, do you feel like there's more visibility, it's more predictable? Is the scenario that happened last Q3 equally as likely or potential this quarter or any other quarter, for that matter?
I'll let Chano answer that. I feel better.
There are less crazy things going on in the world.
There's less-
That's for sure.
Well, I don't know if that's the case. I think we've continued to mature as a field organization and bringing on people like Gonzalo Benedit to run Europe, putting in a star executive in Japan. I just feel like we have more places to drive revenue rather than just being dependent on one particular engine, and that diversification feels pretty good. The focus between medium enterprise and large enterprise, that's new this year, and that also, to me, takes out some volatility. We can manage those business separately. I give Chano and others like Phil a lot of credit for breaking down the problem into smaller, manageable parts and running those parts, and together it adds up to me to be more predictable. You never know. There are always these external events that we're not in control of. As long as those don't happen, I feel pretty good.
Well, I think scale and the different levers that we're talking here is helping us out to become more predictable, right? Definitely I'm not going to be disclosing here what Q3 is going to be, right? We are in October. I certainly plan to go to the party dinners tonight with the partners and tomorrow party as well. You know. I'm not changing those plans.
Got it. Thank you.
Thanks.
Hi, in the middle. Phil Winslow, Wells Fargo. Just had a follow-up on Walter's question on the platform side. Aneel, earlier you said that the initial platform use would obviously come from your customers and SIs, not necessarily ISVs. How do you sort of just imagine this evolving over time? Obviously you've opened up the platform more and more over time
Yep
from custom validations, custom fields, personalizations to now what we heard this morning and in these comments. Maybe help us walk through sort of the thought process of where you've been and kind of how you see this going.
Well, it's very important to us to be very focused on customer success. We've just opened up this platform. We're going to start by walking and seeing the kinds of extensions that customers and partners want to build. That might be an HR extension or a financial extension or maybe, as an example, a unique compensation extension. The more we get comfortable as people use our APIs and as the API level grow, the breadth of APIs grow, we'll get more comfortable in bigger and bigger apps, and the bigger and bigger scale means that we can start thinking about ISVs. I would think the ISV opportunity is at least a year away. When we do get to that ISV opportunity, I think with customers, we're going to let them drive where they want to take the application, and fill in places where they want to build applications.
When it comes to ISVs, I think we're going to take a very curated approach. We're not going to look for random applications getting built in our platform and have a low probability of success. We're going to pick our places. Well, we might actually go as far as recruit partners and invest in partners to build out those solutions. Supply chain manufacturing is a natural one. The platform's not ready to do that now, but it could be down the road. You could think about a claims processing system. You could think about a patient system. There are lots of things, but we have to make sure the platform is first ready to build those applications so that it doesn't crash and burn early on. The best way to do that is to first get it working with our customers and our partners.
I know, Jon Ruggiero, you want to add anything or Dan Beck, you want to add anything? You don't have to.
No, no, I think that's right. We want to get to the point of the early design partner customer success. It sounds kind of wonky. Then a set of fast followers, but certainly there's a lot of interest from our existing 80 software partners and then the 26 services partners. Yeah, we're going to walk before we run and earn the right to get into those adjacent applications.
I think one of the very exciting areas that's intermediate term, not short term, are the systems integration partners that have a lot of intellectual property stuck in legacy technology, and they really want to bring that into a modern cloud platform. These are the Accentures and IBMs and Deloittes of the world. In many cases, those technologies are specific to a particular industry. I think for us, that's a great opportunity to partner with them and dramatically deepen the relationship and also open up industries in the joint efforts.
Thank you. Over here, it's Brian Schwartz with Oppenheimer. Question for, I think it's directed to Chano and then Aneel. You've talked a lot how you've been seeing a positive customer reference network effect speeding up the deal velocity. My question is more internally, just thinking about how you're scaling your own hiring. I'm just wondering if the positive customer network effect that you're seeing in that market, if that's leading at all to making it easier for you as the business to get the top
sales and engineering talent that we know every software company
Yeah
is striving to find.
I'm going to let Chano talk about the sales talent. I would say, in general, the focus on having a great culture built around core values and coupled with the success, has definitely improved our ability to hire over the last 12 to 18 months. I think we've also reached a stage where we've become, and I don't mean this in an arrogant way at all, but we've become an established player, and you're able to attract a broader group of folks where pre-IPO, we're the sexy pre-IPO company. Post-IPO, we're sort of in somewhere in between, right? Well, who knows where they're going to be? Now we're a $2 billion company growing at a nice clip, and people can see a long-term career with Workday, and they see the values and they see that customer orientation.
The big investment we made over the last 12 months is in manager training. Frankly, I think it caught us a little bit by surprise. We were looking at numbers and realized that half the company was new in the last two years, and half the managers were new, and we were having pockets of problems where managers might come from a different company and manage the way they did at those companies, and that wasn't acceptable. We were seeing employee ratings of their happiness at Workday go down.
We decided we were going to make big investments over the course of the last 12 months, we've taken all 1,200 people managers, first starting out with the senior folks, but then to every manager in the company, take them offsite for three days and teach them how to manage in the Workday way, manage around objectives, manage with teams, but most importantly, manage with empathy and in the way that works at Workday. I feel like that, in some ways, has recreated some of the momentum, too. Maybe you want to talk about the sales side.
Yeah, no. I think it's not different, right? The senior sales talent, it has become easier, particularly in international markets, that when I joined three years ago. When I talk to senior people like Gonzalo at the back of the audience, they're looking for an experience where a company that cares about employees, that there is a good culture. Of course, there is driving innovation, that you have growth opportunity, right? That is seen as forward-looking thinking company, and that you can have Of course, it's hard work, but have fun and good team and collaboration. Those are scarce resources, and they have differing opportunities. Of course, there's got to be opportunity for you to do well.
There is growth, and then you go and sink in the market, and you see some customers that make the move from legacy systems into here, and you hear about good stories in terms of the customer intimacy with Workday, and on how forward-looking thinking is the solution, and so on and so forth. It is quite of a compelling story. For me, because I have lived since I joined, it's becoming now four years ago, and Europe was in a different stage than it is today. I can tell you that potentially, the people we could attract in Europe or in APAC three years ago, we couldn't attract the people that we are attracting today. We just didn't have that same value proposition in being so attractive, I would say. People were seeing more as a riskier option, where today it's, "Wow, it's a good place to go.
People shouldn't confuse having a nice person culture with not being competitive. I think people also join Workday because we're winning, and we are fiercely competitive. We just choose to do it in a different way than some of our competitors.
Hi, Scott Berg with Needham. This is probably a question for Aneel, but I wanted to see if you can update us on your M&A kind of thoughts and strategy. I ask the question because many of us were in San Francisco two and a half years ago when you and Stan were on stage pretty adamant about never buying a front-end application company because of the security and data model challenges. As Financials takes off and grows more, that's kind of the one platform that customers want more integrated applications. You're obviously doing it with Prism and Planning, et cetera. Does that philosophy change at all going forward?
You know what? We might tweak it a little bit, I still think if you saw from the keynote today, I still think our real competitive advantage is when we make acquisitions to do it, to make the platform better. We wanted to create a cool learning experience. We didn't buy a learning company. Instead, we bought the video technology and then built learning on our tools, and now every application in the family of products can leverage that learning capability. We didn't have the rich data analysis capability to look at all the data in the way that what Platfora, which is now Prism Analytics, did. So we bought that technology. I still think it's tougher for us to think about a front-end app with a different user experience and different security model.
The only reason why I say I would tweak it a little bit is I do think with our new platform-as-a-service offering, it'd be easier for us to absorb that and very quickly replace the front end, very quickly drive our security model around it. Maybe not very quickly, but in a measurable amount of time, and harmonize the data model. What you'd have be different would be the underlying technology that the app was built in. I think over time, we're going to have to just be comfortable with that because we're going to see it within the cloud platform partners. They're going to be building in technologies other than the Workday XpressO language. I don't know if that answers the question, but I would say slightly more open to that, but we'd have to wrap it around with our cloud platform technologies.
Hi, Fred Havemeyer from Macquarie. We've had a number of conversations today with your customers who signed back in 2013, 2014, about how they're coming up for renewal and they're going into negotiations. Wanted to ask as a follow-up on those conversations, how you're viewing the competitive environment around your renewal base, given that a number of the legacy vendors out there who really didn't have a cloud strategy before are now much more competitive, both on features and on pricing, and even with one circling cars around the conference today.
I really don't understand that car strategy. I just think it just tells you that they're worried about us. I think as long as we're doing a good job, the idea of ripping and replacing a cloud system after having gone through the process to implement it just doesn't really make much sense, and that probably is the same for us trying to replace one of their systems. The only time you get that option, it's not really a price option, it's that the platform's just not working. We really haven't seen any of their tactics work. I would say that we're learning through the renewal process, because I get called into these, they're really good customer relationships where we're trying to make sure we get treated fairly, and they're trying to make sure that they don't get treated unfairly.
We're working on finding that happy medium in the middle. We continue to invest in our products. We have CPI protection. In some cases, you might have a customer who's downsized significantly. In other cases, you've got a customer that's grown significantly, and the original contract doesn't work. That creates friction that we're learning how to work through to just move forward, but it hasn't really changed the renewal rates at all.
I would say that many of the attach improvements that you are seeing there on the slides that I showed before are coming out of the compelling events of where we are having those discussions around those renewals. Happy to see some of those uptaking in terms of the increase of the attach rates. That hopefully means that they're seeing the value of using our solution and they're looking to get into more value from us that still makes a competitive business case for them.
Great. We have time for one more question.
Hi, Shanker from Bank of America. Cash couldn't make it because of an emergency. I have a question on the midmarket. You talked about the opportunity in the upper end, you can get 50% penetration of the Fortune 500. Given that your midmarket customers, you're also growing at 44% CAGR, is that a goal that you have where it's a large market in terms of customers? Is that a goal that you have that you could potentially reach in the next two years that you would talk about?
What's the goal there?
In terms of penetration, in terms of the number of customers in the middle market.
It's hard. There are so many different solutions, and the midmarket's defined so differently. It's hard to think about a 50% target level. The Fortune 500 is a very measurable set of accounts. I think what we're more focused on is growing that business at an aggressive clip. Taking that medium enterprise strategy that's really beginning to work well in the U.S. and taking it to other places around the globe where you go to countries like Germany or France or even the U.K., much of the marketplace is medium enterprise. They don't have a ton of Fortune 500 accounts. Historically, our implementation costs were just too high for many of those accounts.
Now with Workday Launch that Emily was talking about and other offerings, we can bring the implementation costs to then be competitive on the software side and hopefully have a bigger chunk of that market. We don't have necessarily a goal, market share goal for medium enterprise.
No, I think we're trying to grow in that market healthy, on a healthy way, right?
Yeah.
What do I mean by a healthy way? That customer profile, that is kind of fulfilling that look in that transformation as well, and a competitive solution, but taking more the broader fit or footprint of our solutions, as Robynne was describing before. That's usually a good customer fit for us. There might be other customers in that midmarket that maybe at this particular point in time are just looking for a very good enough and very cheap solution, and we just might not be a fit. I think more than, it's just not about number of customers or market share, it's having a growth, healthy, profitable business going forward on customers that we can feel that can partner with and basically grow that footprint going forward.
Well, I would end with that strategy that we talked about today, the plan, execute, analyze strategy. I personally think it's absolutely the right strategy for large enterprises. They have enough resources to still do best of breed and piece it together. It's not going to work nearly as well. When you get to the medium enterprise, our story there is super compelling. If you can get planning, HR, finance, and Prism in the same kind of system a Fortune 500 company does, but it all works out of the box together, that's huge for that market. They don't want to just buy HR suites and financial suites. They want to buy the full platform suite because they don't have the resources to stitch it together. They want everything to work out of the box.
As we broaden that platform, I think we become even more competitive in that marketplace, and I think that will be the dominant way people will buy in the medium enterprise for the next 5 to 10 years.
Aneel, Robynne. I'll turn it to you guys for any final thoughts.
Thank you for coming.
I never fight you.