Hi, everyone, and welcome to Financial Analyst Day, and welcome to Chicago. I hope you'd have a good day so far here at our Rising event. And that you enjoyed the keynote. We have a packed agenda today. So we're going to go ahead and jump in.
Anil is going to start us off with a few opening remarks. And then we're actually going to spend a lot of time today on product, which is I know I know is really top of mind, for all of you. Then we'll talk a little bit about the go to market strategy and how we're doing on that front. And then I'm going to end it with a financial review. We're going to allow 5 to 10 minutes after each of the sessions for Q And A so you can ask specific questions to the presenters in their area, and then we'll hold a broader Q and A session at the very end of all the presentations.
So Just take a minute to read our safe harbor statement. Much of the information we talk about today is forward looking and actuals could vary significantly. And with that, please
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 and 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 the way that we're building Workday. So At the core of what we're doing, and 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, and that combination allows us to have for very happy customers. And this event is where that comes 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, but I think what they'll tell you is we really care about them and that we're doing we're doing the right things.
And the product is is really a strong product no matter what products you're using. The 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 5 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 has a massive impact in the marketplace. And as long as we continue down that path, we have to pay attention to customers, but in some ways I mean, sorry, competition, But 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 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 it's broad enough that maybe a 1 point our keynote is not the right format because we had so much more that we had to cut just to keep it within a reasonable time frame. But that the fact that we have that issue is just because we are continuing to invest heavily in many product areas. On number 3, I think people that that I've known for a while that are in this room know that I've always had a great, respect, amount of respect for Apple and how they build products. And in many ways, when you look at the way that we bring planning executionHR Finance and then analytics with reporting analytics and prism together in one system.
It's never been done before. In that way, I'm just talking with Richard Davis. And our competitors have gotten there through cobble together systems And 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, but there's no way to avoid that technical debt. We are driving towards a system like Apple where the Iphone just works with iTunes and the content is seamless across Apple TV and all their devices. And that's why, iPad sales and And then the the laptop sales took off because you're just buying into that ecosystem.
And 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 And planning they work with HR, but 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 from her base. And that will be illustrated in the sessions later today and in Robin'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 over the short term.
Over the long term, I have a fairly strong level of confidence that we'll get to a $1,000,000,000 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 1.
We've had it from partners. I just met with 2 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. So whether maybe it's a utility system for customers or it's a retail system for merchandise management. But these systems integrators want to bring some of their intellectual property onto the Workday platform And that opens up industries.
It opens up a whole bunch of new markets. We're still in the early days, but again, the thing that I can say with confidence is that there's
a ton of
interest in the cloud platform. And 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 and Rails. Whatever application platform you want to build it in, technology want to build in and it's your choice.
What we are 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 security model, dramatically reducing the time to market for an application, but not necessarily locking them in. And 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 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 in the way that we could build into the 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 through 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 is 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 and in terms of investment dollars. So that's really that's really where I wanted to start today, and I'll be around for Q And A at the end. But 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.
There's that's really what we had hoped to do from day 1. 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. So, so in a way, they're encouraging and pushing us to be a broader platform company.
And I think it opens up many opportunities for us down the road. So with that, turn back to Robin.
Thanks, Anil. So I'd like to
now welcome to the Sage, Barbie McGahn.
Thank you, Robin. Alright. Well, I'm barring McGahn, and I am SVP of Product Management for our entire Application Port Folio, such as our human capital management products, our financial products, our student products and our planning and analytics. And so the agenda I have planned for you today, I'm going to be covering HCM, is to first start with our market opportunity, and then I'll share with you our success in the large enterprise And then I'll update you and talk about our strong global presence that we have today and then fill you in on the momentum and growth we're seeing in the mid market. And close with our vision and the future and how we're investing in our products.
So before we take a look at our eight market opportunity. I thought it would be important to take a step back and look at Workday's total addressable market. So if we take a look at our entire application portfolio, estimated to be around 74,000,000,000 And this is based on IDC's worldwide market spend, 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, And 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. But I'm going to start with HCM.
So we have a significant addressable market in HCM. Around 14,000,000,000 is the current market And we continue to see aggressive growth and movement towards the cloud. We believe that we have significant market opportunity and growth ahead And that is through gaining and expanding our leadership position. Now we've had great success and 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.
And we see this for 2 reasons. Many HR organizations today are finding it difficult and expensive to maintain their old HR legacy systems, And then secondly, they are challenged with integrations. They have over 50 and average enterprise has over 50 integrations to different systems and service providers. So they're really looking for the power of 1. 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.
Now I'd like to talk about the large enterprise. So today, we have over 1800 customers. But it's not just the number of customers, I'd like to say. It's the size. And we have the giants in the industry, or would I like to say the Amazon's with Walmart deploying 1% of entire U.
S. Workforce and Amazon, the largest e tailer and online public and also 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. So in addition to the Fortune 50, we have 30 percent 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 100 of 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 America. 9,000,000 transactions in one day, 120,000 employees entering time in one day. Running 400 over 400,000 reports in one day, and guess what, 95% of those transactions finished in 2 seconds or less.
Now we're raising the bar this year. We're not stopping here. We have even larger customers going live in DuPont today from Walmart to Amazon into a large express shipping company, So we're very excited about that. We're going to be reaching new peaks at 400,000 employees, but we're not stopping there. We're forging a new frontier we'll be able to manage not only 100 of thousands of employees, but millions of employees.
We have a strong global presence with our ATM product line, where over 20% of our customers are now outside the U. S. And over 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. And it's proven to be very successful. We've got 26,000,000 workers around the globe. In every possible country, there's only 195 countries, and over 2 forty regions, and we have 749 Multinational Large Enterprise customers today.
So 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 3000 localized fields. We have 400 global and local business processes, 170 localized features And over 3.47 connectors, most of those payroll connectors, but we also have UNIS staff, for our Russia integration for data security and privacy. And we have, for instance, 35 countries in which we have 214 absence plans and 72 time tracking plans, all preconfigured, move and ready. And 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.
Now I want to talk a little bit about the medium enterprise, and this is the segment of customers that are 3500 employees and below. We have seen incredible growth in our customer base. If we look over the last 4 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.
And 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 allows to automate the deployment process. But we've also been delivering pre configured content, and we've grown that considerably 70%. We deliver 75 prebuilt connectors and over 3000 reports and 24 dashboards so that our customers can be move in ready in the mid market as well. Now 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.
So 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 Brain storms. We introduced 3 new products, financial performance management that Betsy will talk about later, prism analytics that Pete's going to also talk about. And then data as a service, our first offering benchmark that I will talk about today, And then coming soon in 2008, which Dan and John will talk about is the Workday Cloud Platform. Now our strategy and vision is threefold.
First is to advance our core business applications to drive new levels of operational excellence and efficiency. And we'll be doing this by leveraging new technologies such as Workday Botsts that you heard Joe on the video talk about to automate Streamline and even eliminate administrative tasks. 2nd is to advance our service to offer more intelligent experiences and relevant experiences for our customers to make smarter workforce decisions. And 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. So not only make moments that matter, but moments that count.
And 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. Now 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 3 key areas where the recruiter spends most of their time. 1, in sourcing candidates by leveraging campaigns to target, nurture, engage candidates through the recruiting pipeline. And 2, in reviewing candidates, providing automated ways where they can screen candidates more efficiently and effectively with knockout questions and and 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 and 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. And we've built planning natively into our platform so that both planners and business managers can collaborate together. And 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 data driven service, we just launched and announced our benchmarking. Benchmarking will help deliver key metrics so that not only can you prepare 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 Workday29, we released a lot of benchmarks, but we'll continue to deploy more and more benchmarks in a continuous process.
We're really focused in on workforce compensation, age, headcount, diversity and tenure. We also have been very focused on providing a continued and connected and continuous talent growth through machine learning. Our vision is to increase productivity, make it easier for our customers to streamline and automate task 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. Then in onboarding, we use through talent development, we're using learning recommendations to help prepare the employee from day 1, as well as to advance them through the employee life cycle. We have the retention risk analysis in the assessment period and 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 create 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, and that's coming in Workday 30, and that will use Workday's knowledge about the worker to help them better find job opportunities and to get learning recommendations. And 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. And one that helps her become better at her job coaches her and ensures that she's able to get there. So we've got the workday talk, the workday assistant, is able to provide Julia with recommendations on how she can effectively lead and develop her team. And all this is coming in 3031.
And now I'd like to just kind of close with some key takeaways I hope you get from this session. 1, that we're the undisputed leader in the ACM cloud suite 2, we have a proven global solution. We've got strong momentum in the medium enterprise, and we have a relentless focus on customer, continuous customer driven innovation and that there's plenty of room and runway for growth in Workday HCM. And now I'll open up for questions. Everyone's too tired.
I think there's a question over here, Mike.
Hi, Mark, Mark on RW 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 this the implementation and the pre built solutions, is it a greater level of recognition as well or all of the above? And what's the cadence in terms of market share gains there?
So 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. And so 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 costs is also contributing to that momentum.
Hi. It's John DiFucci from Jefferies. Barbara, you mentioned the data as a service. You said you had 100, I think, customers on it right now. Just could you give us a little more like What kind of traction are you seeing?
I think that's relatively new, the benchmarking, but it 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 I'm a big customer. And so until that becomes really big as far as the number of customers, just kind of curious as to where this is going?
No. We just released benchmarking and worked at 29. So just, so we want to make sure that that clear. So it's really recent. And we have over 1,000,000 employees included in that benchmark.
So 100 customers, but 1,000,000 already workers that we're doing the benchmarking on. And we're going to see, I think, dramatic sign up of that going forward think we're just starting to take off. And again, it's just been released.
Justin Furby with William Blair. Just I guess the question on this next leg that the Amazon, the Walmars, 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? Or What does that look like? Are you using that in your go to market the fact that they're in the process of implementing?
And does it sort of tax your, your development cadence? Because now they probably have much broader ambitions and things that are maybe more centric to their organizations. So can you just sort of talk about that?
Sure. I think one of the unique advantages of being the Power 1 and being on 1 code line is all of the scale that we are able to achieve with the Walmarts and the Amazons benefit all of our customers. So that 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 Amazon's, I get all the benefits of that scale as well.
Hey, Alex, you can 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 can now be done?
I definitely think I should let Dan and John talk about they're going to be up here next, but 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.
Please welcome, vice president Financials Products, Betsy Bland.
All
right. Good afternoon, everyone. Good afternoon. So I am going to spend a few minutes talking about Workday Financial Management, our portfolio, I'm just 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, then 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.
And then I'll wrap it up with a little bit of insight into the business. And how we're doing, from a momentum perspective. So, Barbara 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.
And so for that, I'm going to refer to Gartner's recent Magic Quadrant Research Report. It if you haven't read it. But they are essentially predicting that today, there's about $1,000,000,000 in spend on cloud financials. That's today, but they are predicting that that is going to grow at about 24% year over year. So 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. And they are also predicting by the year 2020 that about 50% of large enterprise organizations will have moved their financials to the cloud. So 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, very quickly. So what is going to drive the adoption, and what moves the cloud financials market? And I'm going to start with technology because I think when technology innovates, it always breathes new opportunity.
And that's what's happened, I think, with applications being delivered in cloud, but 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 second 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. 1 is you can take that on premise technology and you can port it to the cloud.
Or you can refactor it to the cloud. But 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.
So what's going to drive this pace of adoption? And I believe it's 3 things. Number 1, it's cloud viability. It's cloud first IT strategies. And I think that's pretty much, assumed now.
Mean, that wasn't the case, say, 5 years ago, but I never ever get a question about the cloud and financials in the cloud. I think it is really just assume 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 an increasing security of cloud offerings, right? You need to get to a point of maturity that you can replace the incumbent systems. And then finally, it's an organization's catalyst for change.
And I'll talk a little bit about the bottom too. So 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. So Gartner very recently released their first ever Magic Quadrant for cloud based Financial Management Suites. And 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 as a leader in this research, they did an intensive 1 year evaluation of us, and, this is the end result. So you can have the cloud you had to have great financials offerings in the cloud.
But what is going to encourage an organization to adopt it. And I would propose that there has to be some sort of catalyst for change. Right? And generally, it manifests itself in business pain or cost. And so these are the catalysts that we see from our customers, finance transformation, you have a finance organization that wants to modernize right?
They want to be a strategic partner to the business. They want better access to data. They want data to drive decisions And in order to do that, they need modern systems and modern processes, and they need those systems to evolve as they evolve. And the cloud today is a viable option for that. Operational efficiency, we see this all the time.
Right? 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. And finally, rapid growth and change, right, organizations that are growing M And A, new products, new lines of business, new geographies, you need a system that grows with you, and 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. And so finance and their systems are not left behind. So 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, And a couple 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. And they had heavy customization, a lot of manual workarounds, which is very sort of common we see in finance organizations and difficult, if not possible to upgrade. So they want went on a search for a new system that would support their business, their modern business and they ultimately selected Workday.
Interesting enough, it started with procurement and then expanded to full platform. And so they are live today globally in the U. K, Ireland and the U. S. On full platform including Financial's procurement and expense The next one I want to talk about is Panera.
So Panera is a really interesting customer in that they also had an aging system. They were on an aging Oracle Financial System. But they're also a company that's innovating. They're growing more stores, different lines of service, And so 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 financial.
And interestingly enough, 1 year ago, at Rising, they had just selected Workday, and we're excited about it. And they recently went live in production on financials at the end of July. And then finally, I want to talk about AAON. So AAON is on the Forbes Global 2000 list, they are a large global organization, and they have grown through acquisition. So a lot of change in that organization, they recently actually also went through a major divestiture.
They had an aging PeopleSoft system. They wanted us 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. And so they decided to look at financials, and they vetted us very, very carefully over a long period of time ultimately decided to go with financials.
They're a people centric business. And they are now live today. They're going going live in 3 phases. Live today in 6 countries. In January, they're going to be going live in an additional 20 countries And then ultimately, there'll be live in over 60 countries.
So a major global deployment So just a few examples to make the change and move to Workday and move to financials in the cloud. So let me give you a little bit of insight into the business. So 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, and our passionate focus passionate focus on customer success and innovation is getting us to a place where we can methodically move up market to larger and larger organizations.
So today, we have 370 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. So what you can see here is quite the list of some strong referenceable brands. So what does that look like from a size perspective? And so this gives you a little bit of flavor on this.
And as I mentioned, if you went back 3, 4, 5 years ago, we were bringing on board, primarily medium size, mid market size organizations. And so they have literally led the charge in terms of adoption to the cloud, and about 87% of our customers today are under $1,000,000,000 in revenue. But what's more interesting is increasingly, customers are coming on board that have more than $1,000,000,000 in revenue. So 11% have $1,000,000,000 to $5,000,000,000 in revenue and 2% now over $5,000,000,000 in revenue. And what is also interesting about this is most of these customers are actually live in production.
So if you look at that top tier, Netflix is live, Cushman and Wakefield is live, JB Hunt is live. Unum is live. AAON is live on their phase 1. And then, of course, we just closed 21st Century Talk in CNA in Q2. So they're actually now in deployment.
So how do we get into an account? What are the entry points into an organization? And what you're seeing up here are really our traditional entry points. And it really depends on the organization. It depends on their pain.
It depends on their priority. So we might lead with financials. Because that's 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 AAON and they expand to financials, or they may just decide to go full platform out of the gate. So we really see all of these, and you can see some of the proof points up here.
We now have 2 additional entry points. And it's fairly early on, but they're significant. So let's start with Workday Planning. So 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. And so this is really you don't need core financials to deploy planning. And it might start with a conversation with HCM talking about workforce planning. But workforce planning and your workforce plan is one of the primary inputs into your financial plan. And so often, this is an entry point to a broader discussion with finance and with FP And A.
The other entry point is financial performance management. So this goes beyond planning. So let's say an organization has multiple instances, multiple GLs out there, they're not really ready to replace their GL or maybe there's no reason to replace their GL, they can now come to Workday as a global consolidation platform, if you will. So FPM is all about using Workday for financial consolidation, financial reporting, management reporting, and budgeting and planning. And 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, and we ingest them into the Workday platform.
And once they're in there, they can take advantage of all of those Workday Financials capabilities. So just to bring that to life a little bit is Accuride. Accurite is a company that did an evaluation, literally about November of last year, They went live in production in August of this year, so that gives you a flavor for speed of deployment. They are a midsized manufacturing company, and they're global. And they have, plex as their cloud ERP system.
So plex operates at a plant level it manages the operations and the financials at a plant level, but what they didn't have is a consolidating financial system across all of their different plants And then Midway, they are in acquisition mode. So they acquired a company called KIC, and they're planning to acquire more companies in the future. And so they have no intention to replace PLEX, but they are looking for a financial consolidation, financial reporting, management reporting, budgeting planning platform form. And so they selected Workday for Financial Performance Management, and they are now live in production today. So let me briefly cover our product strategy.
And this is our footprint. I don't think I'm gonna spend too much time on this, but we can always come back to it, but it is really a broad and deep footprint that we continue to invest in What I do want to talk about are investment themes. So we really have 3 primary investment themes. The first is industry, really core and industry. And I'll talk about this in a second, but our target industry is heavily influenced our product strategy.
Global is a key theme. So we are architected from the ground up global core and is our objective to support a global multinational organization regardless of where they're headquartered. And then finally, planning, which I talked about in analytics, which Pete will talk about in a second. So on the industry front, we're very targeted. So industry is probably the most important lens for financials.
You think about it, it's the products and services that an organization sells offers, and it's a different industry by industry. Professional services, you have billable projects, in software, you have subscriptions in higher ed right? It's, courses and tuition. That we need to make industry by industry to support our efforts in the financials arena. So just some examples here, projects, project billing for the professional services industry, materials management supply chain for health care, right?
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. So 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, 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 8 countries from a headquarters perspective.
So if you went back a couple of years ago, right, 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. And 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 40 five countries from a supporting operations perspective. So it might be subsidiary, a local operation that they are using financials in some capacity in those countries. So key takeaways for you today. The first takeaway is this is a large and rapidly expanding market. I think we all know that.
And 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 to drive those global opportunities, those industry specific opportunities. And we believe, Market is going to rapidly accelerate that we're well positioned to gain share as this market accelerates over the next 5 years. So with that, that's what I wanted to share with you.
I thought, I think we're going to open it up for questions. There's no questions for financials, Ryan.
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. Is that has that been your experience? And why do you think that is? Why do you think we've finally turned the corner?
And 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 $5,000,000,000 plus in revenue? Or is that just a question time and customer references? Thanks.
So 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, right? Because this is 100% replacement market, right? And so you need to get to a point of maturity that you can start to replace those incumbent systems. So 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.
And then it's an element of where an organization is and what kind of catalyst or change do they have that compel them to make a change with their financial system? And 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. So planning, budgeting and forecasting was a key ask from our customer base. We've delivered that a little over a year ago.
We have actually over 170 planning customers so far to date. And the other one is analytics. So if you look at what Workday is doing with reporting the 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.
So I think both of those things really help, add to HCM and financials and to support a large enterprise.
Keith Bachman from Bank of Montreal. I also wanted to ask about adoption trends and financials. And 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. So my question is how do you make it less binary?
And so 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 a way another way to make it less binary or at least get your foot in a door But 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 work day underneath it? In other words, has this really been a way for you to open the door?
Or Workday planning for example?
In budgeting. Are those a way for you to to increase your penetration and financials and make it less binary?
So 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. But 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 and A and with finance, right?
Because you know, planning and budgeting is so strategic to an organization. So if you can bring a better way to do that, there's going to be interest.
Hi, Phil Winslow Wells Fargo here in the middle. 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 is something that we've heard today around the conference was the idea of the Part A data getting pulled into financial systems. And, wonder if you could just talk about that and how sort of the idea of not just necessarily going all in Workday, but being to fit inside of a wider ecosystem.
How is that resonate with customers? How do you sort of see that playing?
The 3rd party data and supportive reporting analytic? I'm going to defer that to Pete, I think. Is he going to be he's going to be up here. He's going to talk, directly to that, if that's all right.
Thank you, Mark Murphy with JP Morgan. In the Gartner Magic Quadrant, it's interesting on the Horizontal Axis Your completeness of vision is almost, identical with where Oracle's is. I mean, 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, are they looking is
it the scalability of the core engine? Is it vertical?
On the and I'm trying to think there's the X axis and Y axis, but where we're really close, like virtually neck and neck, And Chris is in the room, and he might be able to answer this better than me, but I what they've told us is, it has to do with the Oracle has a broader presence globally. And so that's primarily primarily the reason for that, that little differential.
So I think that's the other emphasis. I think the complete decision is on the product side.
Yeah. And that's what I'm speaking to. So they view Oracle as being more global, more localized more language translations. And so I think that is the reason for the incremental differential.
And we have time for just one more question. And what time at the end, to do Q And A as well.
Thank you. I guess, just a probably quick follow-up on the question I 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. And there's lots of financial planning products out there. There's sort of some that come in at bottom of the organization kind of replace Excel, there's some that come in at the top.
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?
So, the $170,000,000 is I mean, 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. But I think the vast percentage, not all of them, but the vast percentage are looking to use planning for both workforce and financial planning.
And 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 Architects, John Rogiro and Senior Vice President Platform Technology, Dan Beck.
John and
I are inseparable at this conference we're going to we're going to tag team this 1 as well. Hi there. My name is Dan Beck. I just want to dive in and talk about our journey of extensibility and how the Workday cloud platform fits into that. And I could turn to John to talk about some of the core components, dive in the technology, and then wrap and talk a deeper level about some of the customer use case.
And of course, we'll save time for your questions. But 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. And so each of these blue rectangle you see on the box over time are the kind of configurations we put into our customer's hands. And yet, this journey of extensibility to date has had one destination, which is the world's most configurable enterprise app. And where we're going to work cloud Workday cloud platform is you can now build your own application your own application extension.
And so it's a new a new destination. But the key point and one of the first questions I get all the time about this is, will it be update safe? We have 2 updates a year. Will it configurations, the capability you can now build an application application extension, be update safe. And so our category answer to this is, yes, it's got to be update safe.
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 4 years. So 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 plus delivered business process definitions. Number you see adjacent to that is the number of those artifacts that are in production today 300,000 in production today.
Those 300,000 business processes, those 1,000,000 plus reports, 100 of 1000 of integrations, All of those were updates safe in around less than a 4 hour window, 100% of our customers on September 9th went from Workday 28 to Workday 29th, 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 reason, detail, but the way we do this for the cloud platform will be against versions of the APIs we put forward. So I talked about this this morning. I understand around over half the audience didn't necessarily attend the keynotes.
Apologies for those that did for the slight repeat, but 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 keyword on the slide, is it's one of openness. So we're categorically opening up the Workday cloud. The first is open platform. So 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.
But perhaps you want low level storage or low level compute or reference someone else's machine learning libraries. For 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.
John's going to talk about momentarily. Of 35 teams, something like 10 of 35 in the hackathon we had in July, referenced 3rd party cloud applications in the Hackday bill. Calling out to Google Cloud Platform for Optical Character Recognition, Amazon Web Services for Lambda or Lex. See, that isn't just a fine proposition. Open APIs, standard space, design time and runtime APIs, with no tool chain dependencies.
So put differently. If you're used to node JS, if you're used to dotnet, your technical talent can build on the cloud platform using the tools that they know and understand. Open development site So John will talk about this momentarily, open data. So we have no licensing fees on the data. All the data in the cloud is our customer's data.
So I know some of our competitors have a different approach to that with director indirect licensing fees. And then the power of the community. So today, because of the Power 1, 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.
And so, certainly, the idea is that as people build out these extensions, these applications, they can choose to share that with the community things will be very vibrant for the community, certainly our customer community, but also our ecosystem partners. Turn over to John to talk about the core elements of the service, and then we'll dive into some customer use cases.
All right. So 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 applications, business applications on the Workday cloud. And so that 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 lifecycle. So 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. So 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. So that's essential, for 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. So what does that mean? So 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's information. And so 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. So that's pretty important. And we've added webhook support. So if you're orchestrating events across different clouds, you need to be able to make calls to those clouds when the events happen.
So imagine a compensation process or a higher event or something like that takes place in Workday. You need to know about that in your 3rd party application That's what webhooks provides you to be able to do. And then I mentioned this morning that all of these applications are secured using the Workday configurable security model. So our customers have invested heavily in their organization structure and their security structure And so 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. And this is all about building user interface and it allows developers to build complex applications that are served directly in the workday user experience. So 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. But they also, with presentation services, they can orchestrate calls to 3rd party applications and surface those 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 their application essentially they've embedded it directly in Workday. So 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. So it allows you to create kind of these composite applications in a single user experience that users are familiar with.
It's very powerful. With workflow, we have all of our customers are very familiar with. And now we're opening that up to customers to create their own workflows as well. So it's not just configuring our workflows, but their custom application can now be driven by workflows. And then 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.
And then 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. And 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 that works. For example, with time series forecasting, it's as simple as giving a set of data points to the API. And then 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. And then 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. And 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. So 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.
So all of this comes together. We built these services to work together. We call it a platform for business, so 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 And now we're extending that same capability out to our customers and all third party developers. Talk about Workday Designer really quickly. So 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 a essentially a coding environment. So think of an IDE. We've been providing that with Workday Studio since 2008. 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. But we're also going to have low code tools as well, which reads also have had for a number of years.
Many of the frameworks like our reporting framework are all done in the browser. So 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 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. So 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 oncloud.orgday.com, and that's our new developer community, enabling developers to collaborate with each other just like we have our customer community that and our partner community where our customers and partners collaborate today. And 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. So we soft launch this at altitude in July.
And every year at that event, we have a hackathon event prior to to the event. So we had around somewhere around 30 teams all of our partners participated in this event. And this was really our test run to prove out our 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. And we were blown away by what they they built.
Netreally gave us the confidence to move forward coming out of that event, we launched a developer program. So 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 Dan's going to share some examples of what developers are building. But for the last, essentially 8 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, everything that we're providing. And we're really impressed with what folks have been able to build in a short period of time.
Back to you.
Thanks, Sean. So what do we expect people to build? Just high level, there's a bit of a continuum here, but the orange box, we expect people to build application extensions. So there's something in Workday, and they want to make it a little more bespoke to their needs, like that Financial Services, Banking example, and you'll just describe 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, and there are many other examples of this. And then the blue box think of this as part of the cloud platform, we have more of a platform mindset. Opening up Workday.
So if what you want to do is consume Workday from a third party application, you can do some more readily, take advantage of our bots, advantage of our communication protocols and the webhooks that John just described. I think a full of the teams in the Hackathon, I think a full 12 of them built applications and 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. So that idea sometimes we saw use cases expand all three of these, but just give you a feel for the kind of capabilities we expect people to be building. Just to dive into a little more detail, we have 6 active design partners, been working in earnest with them to build out their use cases, I talked through 4 of these this morning in the keynote.
I just want to go a little bit deeper on 2 of the 4 and then add 2 more just to show you the breadth of what customers are currently building with the cloud platform. So, I talked about this on the main stage. This is an application. This is a large, kind of guess, they'd call themselves sort of a digital media company. And they have 2 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. And so they take advantage from the services that John 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. Then they're going to ask for more hooks so they can then take action from that. They asked to see the opportunity graph from here, pretty innovative use case.
And then they store that additional data about the job families in custom objects. Taking advantage of a couple of those web servers and taking a host of our application restful APIs. Next example is the Global Airline I talked about, this badging use case, So they have a number of integration points where they call out the different background check services. 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 this the flow that I walked you through this morning, a pretty compelling use case.
I think the prior one, if I can't go back to no need to go back. That's the broadest breadth of use from that. Thank you. You guys are fast from, 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 Barbara walked you through.
This idea of an employee experience and portal replacement In their case, they're calling out to knowledge based repository, HR ticketing system, and then they have a time tracking use case as well. Pretty cool. And some is meaningfully feeding into our our people experience strategy. And then lastly oh, I guess I killed the last one. There was a last one that was around different performance feedback.
But I just want to give you a sense of the services being used by these use cases today. Just this is our final slide before we open up your questions, and I'll answer, and I think it was Justin's question earlier first, but essentially, across the three categories of services that John just put forward, we are offering a roadmap with there's more APIs across each of those. The first one I draw and 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. And so we're making a heavy weight investment across our application teams Thank you, Barbara, Lynn Christensen and team to build these out.
Next, across technology, across core, John mentioned standalone custom objects. That's a big one at the persistence layer. So we can not just extend existing objects like Worker to have more attributes, but to have your own dedicated object. And then one key one workflow is kind of nebulous. We say phase 1, phase 2.
The key 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 processes 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 proliferation of use cases that that enables.
So with that, we're going to open it up to your questions. Just to take the first one that was posed earlier that got defer to this session. Yeah, 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? And we have a team that's feeling 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 are unique to their company that they'll be able to build out themselves, which certainly helps helps them as they think about Workday as a more strategic solution for
them. Yes, please.
Hi, Michael Nimmeroff, 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?
Yes, we think so. I mean, you heard Aneel earlier articulate that we're we're in a learning mode. But certainly as there's more robust use of the cloud platform. We have ideas about how we want to monetize that. But early days, we're really focused on getting these 1st set of design partners, then a set of fast followers.
Into production. And so from that, we'll learn exactly what they're using, how robust it is. But certainly, we have ideas about monetization, but it's probably too soon to speculate.
Thanks. Kirk Materne with to your left. Oh. Kirk Materne is 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. 1, 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? And I guess, how are you thinking about that? And then secondly, your 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 developer years?
Thanks.
Yes. I think it's a 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. I mean, they have a depth of industry expertise, certainly industry and sub industry.
I mean, 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? So it's like, what's appropriate for banking in EMEA today, right? And so absolutely, we see that as a good thing. We want to unlock that that energy and focus it on the cloud platform. So I think that's going to be a net positive for us, and they're keen to build and show their intellectual properties 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 can unlock for them.
And so I don't know that we work in need to specifically incent them rather. I think we need to enable them. So 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 your certification program. When can I deploy my IP on the cloud platform?
So that that's the kind of questions we're getting.
Hey, Richard Davis, Camp Gordon. So just I want to be clear. So 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 like super easy to use APIs and things like that? Thanks.
Yes. So the answer is it depends on the type of application that you are building. But if you're building an application that or if there's an existing application that's running on a third party cloud on AWS as an example, and you can build that with any of the tools that are available on AWS. If you want to surface that within Workday, then 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.
Does that make sense? It's not a proprietary language, all standard space.
So very different than say what PeopleSoft did, what people tools and people code, and we're not pushing a proprietary language. So when we talk about our APIs, you could the restful APIs, standards based, you can get to them with the kind of toolset you choose. So 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 that last one. Thanks guys. Steve Canning with Wedbush. You guys use the word or maybe the ecosystem uses the word platform in two different ways. I mean, traditionally to describe multi module sales include financials and HR.
And now you've got cloud platform that's coming. My question is, how does will cloud platform help you in platform sales efforts in particular into driving into specific industry functionality or whether it's kind of the difficulty of the integration efforts around bringing in large volumes of financials data. I mean, is there any benefits to cloud platform in terms of really driving an inflection in your platform sales, if you will?
Yes. It's a good question, Steve. We 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 as a full suite customer. Don't forget payroll time and absence. Yeah, but absolutely, I mean, absolutely. I mean, 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.
Please welcome. Vice President Workday analytics, Pete Schlamm.
Good afternoon, everybody. Good to be here. Let's talk about analytics. A quick overview of what we're going to go through. Want to first spend about 5, 10 minutes just giving you an overview of Workday analytics, where we've been, where we've come kind of a state, kind of current state of things.
Then I wanted to talk about Prism Analytics, which is the new, service, which we rolled out today, and then 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. So starting with the opportunity. So analytics is truly a huge opportunity. It's a $20,000,000,000 market It's 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 or state of warehousing, these types of things. But it's a very big market and 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, but we realized the software at the time was broken. And so we built a completely new stack of software.
We said we fixed it. We built it in a modern way. And by doing that, we really started getting other types of users to come into the system. And 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.
And so we brought these new users in and they're doing these types of activities within Workday, And of course, those types of users, business users, what do they want to do? They really want to drive performance of their business. And so the next step for us was to get into business management solutions, things like planning and analytics. So that they could drive planning and now in Workday 29 with the introduction of Workday Prism Analytics take this next step in our evolution and where we're going. And 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. So 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 a at their fingertips at a glance, be able to understand how their team is doing, how their business is doing. And then one level higher than that, the executives want to have at a glance understanding of the health of certain KPIs within their business. So we built a scorecarding framework. And 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, and 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 and it's all accessible through web the web client through the Workday tablet app or through the Workday mobile application. So 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? So these are the types of questions that we now need to be able to help And what gives us the belief that we can answer this for our customers? Well, 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 $20,000,000 capital purchase, you approve that in Workday. And 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. And so we believe that we can At the end of the So it might have snuck up on you, but we've built a pretty amazing stack of technology services and applications that are part 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. So 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, versus others in the industry? And at this layer, also machine learning, So part of this foundation is, are some technologies like Hadoop, and Spark, which you may be familiar with. But those technologies are very, very scalable, distributed distributed processing systems that also come with machine learning capabilities built in. And so 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.
And it's not just one service, and a lot of people have asked me, why is it not just one service, is because the users at this layer have different skills, different technical abilities and different use cases. And so the way that we've woven those together with this concept of the power of 1 is truly unique. We just did a demo of this 20 minutes ago, and I think the audience was pretty excited about it. But 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, and then our set of applications where our customers get value from us, where they make those decisions for their business.
So we
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 Platforma, which was an acquisition of Workdays that we closed last last year, last summer. And earlier in 2016, we started a conversation at Platforma with the folks at WorkPay, 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,
but a lot of
our customers want to augment that data to be able to do analysis do decision making, but unfortunately, it's outside of Workday. And so what a lot of them were tending to do was pull data out of Workday pool 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 put, and then run business intelligence software on top of it. And that was a really, 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 sub optimal business decisions. And so to finish the story, we continued along the path and, Workday acquired Platforma and that was last summer.
And we've spent the last year putting together Workday Prism Analytics to solve this problem. How do we bridge this gap of most important data in the business sitting inside Workday and data outside of Workday and how do we bring these two things together. So, 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, So, things that are that's a process of getting the data ready. So, for analysis, things like cleansing and blending data sets together, joins, unions, those types of things and being able to set up pipelines, 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 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 plan for Workday 30. You saw us do a demo of that this morning in the keynote, And 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. And 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. So, quick history, I kind of talked about this for a second a second ago, but We acquired Platform back in the summer.
In case I do get this question quite a bit, we branched the Platforma code. This is not Platform anymore anymore. And Workday Prism Analytics is not skinned Platforma. It's not like that. And so branch code platform customers are gracefully being sunsetted and we've now reached what we're calling limited general availability for PRISM.
Just as a side note, the team for our team, over 95% of that team is still with Workday, really jazz and energized to take us on this next journey of Workday analytics. And 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. And 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, trying to achieve with PRISM. And of those we selected 6 early adopters, which includes Workday.
We are 1st and best using our technology. And those some of those customers are the first users that are using Platform in production today. So 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. But 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 closet and they have all this data sitting around. 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. And they want to be able to look at all of their workers as 1, whether you can however, they want to classify those workers.
And so they'll bring in all of that data into Workday as well. The HCM ecosystem. So if they have a learning management system outside of Workday, if they have if they are doing surveys of their workers, which commonly happens when they're onboarding a worker or off boarding a worker, 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 about about for profitability cases.
So for instance, if you wanted to 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 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. And then in the middle of this big sweet spot of operational insights, and that's bringing in any operational data from outside in the business. This afternoon, I was just speaking to a customer that 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?
And they wanted to tie that together with profitability information from Workday Financials. I gave another example previously about a provider of of food a food provider, and they wanted to actually measure productivity of employees by the pounds of food that they were creating. Just an interesting metric. But those are the types of things by being able to bring in operational data into the system, you'd be able to do. So three big areas that we, we differentiate our cell phone.
First is security. And 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 we can change their access to data instantly. You don't have to manage that across multiple different systems. And 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, really incredibly important to them. Distribution, second piece, So 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 Or if you open that thing up, is it the latest version or is it a version that was created a month ago?
But 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. And then finally, the experience, And 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. And 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. So, I'll just talk a little bit about futures and where we're strategically going in a couple of different areas And then, and then we can open it up for questions. So starting with Power of 1, 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 from Gartner a couple of 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 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 to drive plans using external data.
So neat example you saw this morning, the demo, moon boot price went up. 1000% oops. That's external data that you'd be able to use. And 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.
So as part of our business process framework, as somebody is about to click, yes, I approved this purchase requisition, information can we give you about that right there in place? So really driving the power of 1. The next piece is thinking of analytics as thinking of the application capabilities of analytics. And so 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 And we have using this framework that we've created. Semantic data model.
So we would know 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 And then finally, augmented analysis, using machine learning and artificial intelligence, And 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 show me what revenue is, tell me about revenue, revenue for the past year and break it down by quarter.
An analyst has to ask that question But 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. So being able to give answers to users without, without them having to answer the question And 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 Korn Gable in the video this morning, where instead of able instead of having to understand how to use a tool like data discovery, just being able to ask a natural language, what was revenue for the last year in this team? In this company. So those are the 3 key areas that we're focused on in the future. And with that, I think we have time You can shout it out.
I'll repeat it. Sure. Just as a repeat, the question is, how are we going to how are we going to enter this market? Who are we going to talk to first versus kind of previous attempts at this. I think one of the great things about Workday is that we know who wants this right now.
There is there's an analytics team in HR organizations. There's an FP and A team inside the finance teams. They have analysts. We had a we had our HCM Advisory Council a couple 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 twenty of them raise 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, and obviously the same thing on the in the FP and A side. So 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 end 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 2nd folks. And when I say second, we're focusing on them on day 1, but they're primary user are the folks in HR analytics team and the FP and 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?
Yes. So I'll start by saying that Prism is a standalone SKU for us. So it is something that you buy separate from HCM and financials, but you would not buy it without buying HCM and financials. So that's that's the way that we're packaging this. And so, I think maybe is there a second part of that question?
No. Yeah. And so it is 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 McEvelli.
Hello. Good afternoon. So we're going to cover the go to market side, the sales part. Basically, the since it's working. As many of them are going to be going around these 3 topics or themes, I'll try to make it a little bit fast, but hopefully, you, you know, I'm sure you'll follow-up properly.
I mean, the good news for us is that I know bias to a particular product, we can sell it all, right? So unlike to my colleagues, so I think the opportunities, yes, immense ahead of us, and that's what we're trying to get the best out of. So here's a here's a different view of the opportunity. I think, you know, a couple of days away from this slide for me. The first one is that, where 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'd only penetrated around 5.5 percent of the total addressable customer base that's redefining us that we're target market. And again, this is on our own analysis and data and good knowledge on the bottoms apps per customers per markets. So, you know, what excited on the opportunity we had ahead of us. So in terms of the sales deployment and go to market model, basically, I would say, is a message of continuity, if anything, or what you have seeing and doing us before. First one would be, you know, double down around industries and the industries more prominent to us are those that are usually acquiring platform, finance and HR, usually together, and those are mainly health care and education and government as a whole.
Clearly, on regions, I mean, we have done significant investment in increasing the coverage that we have for the regions. We are presence on. And then we're done significant investments as well in terms of the sales leaderships and strengthening of the teams, recently, people like Gonzalo entity joining for sitting on the back of the audience, joining for 4 AME and APA, basically leading that region, I'm sure he's going to do a much better job that I was doing it when it was managing that region. And last but not least, I would say a specialized go to market. I think we said before, We believe that there is a different dynamics between large enterprise and mayors and medium enterprise.
And hence, we plan to tackle and we're tackling these markets differently, right? And as we are saying, medium enterprise is a great and huge opportunity for us, but it's more about faster time to value is more decreasing the cost of implementations. It's more really low risk. It's more prescriptive on the packages we're providing today. Many fiscal, fixed time, fixed basically approach.
And that's how we're tackling that market, and that's where we're being successful. And of course, that carries a lot of investment on our side on simplifying the tooling, simplifying data migrations, basically moving our data between tenants and so on and so forth. So quite excited on the, on the medium enterprise journey. And I would say that huge investments around customer or important investments around customer referenceability that is key. And as Sandeep was saying, we're seeing now the networking effect that that is producing, that is helping us a lot and our best potentially sales tooling in the market.
And clearly, we're going to continue doing that. So I believe we need to be scaling and continue what we'll be doing I'm not saying ECC, but it's basically what we plan to do. I think the good news is that, you know, at least to see that majority of the solution Kroger had really broad set of industries. You know, we had, tremendous, basically, success lately in industries like, Healthcare, as I mentioned before, like retail, but also like Financial Services and Manufacturing, too, becoming quite significant. Rapid adoption of SKUs, as we were mentioning, right?
You know, this is basically a comparison between last year and this year. So a couple of points there, right? A couple of SKUs or a few of them recruiting payroll and time tracking, more on attach rates of 55% to 60%. And then some of the SKUs, as we've been mentioning more like learning and planning, that is basically for 1 year in the market. Right now with the rapid adoption on those, right?
So we're pretty pleased how customers are perceiving the value and basically taking adoption on the new product launches that we are that we are doing. And definitely, this is, you know, a key driver for our growth and for our model going forward. Going to spend much time on this. I think, you know, Barbara was commenting the progress we've been seeing lately on the Fortune 500. And that is more to be, let's not be honest, right, to the proven, to the scalability and to the low risk of basically taking the work they path.
But the good news is that we've been saying we've penetrated 30% plus of the Fortune 500 creating that networking effect. I think the good news is that, we reckon that 50% plus of the Fortune 500 have not yet gone to market. Are still sitting on legacy systems, And we expect there are some points that are going to be coming to the market. And definitely, we will be happy, as you can imagine, to have conversations with those as we have had with you, the 30%. And it's not only the Fortune 500, it's also the Fortune 50, right?
So it's being a good track record there and a good growth ratio, again, based on the, on the solidity of the product set that we're bringing. So in terms of the, in international expansion and the international coverage. I would say that right now, we cover 90% plus of the addressable cloud market. So we're clearly more about double down what 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. Right? So 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, you know, that is jumping from a 57% or 59%, right?
I'm, I'm, you know, the growth drivers, I think you can read them, right? But clearly, the international market is gaining that momentum is gaining as well their own referenceability 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. And when people ask me, how are you managing to do that? Because we all have programs on, you know, basically, talent being, a rare and a scarce component in the market. I think workdays appeals to innovation, appeals to a great culture and a great satisfaction and referenceability and appeals as the company of the future, right?
And that is where I think great sales or great go to market talent wants to come and enjoy the journey. In Workday. Some of the international logos, some lately like Siemens or other joinings of the family that makes very pleased on, particularly where it could be more difficult market to penetrate. And we're having some good successes, both in EMA and in APA. And 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 unscalability is a big theme on what we are winning because that is taking us a lot of risks and as a competitive TCO. I think the way we're engaging with our customers as well and the experience they have owning this solution, and I would say, the service we provide into that in terms of the availability solution and the performance of the solution goes a goes a long way as well. And as I said before, I think, referenceability is a key thing. It was we're winning.
You would be surprised and amazed when some of these large customers are making a decision, they ended up talking to 20 to 40 of our customers, right? We usually are good in 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 in 10, 10 plus. Then they ended up taking formally with many others. So I think that is, as Anil mentioned, as well, our best sales teams are our customer days. So we're very pleased to come with their support.
With that, I'm going to ask to join me on stage, Emily McKeveli, and then we'll take Q and A's at the end of the day. Say you.
Sorry. I didn't follow you up. I was afraid I was gonna fall off the perch. Okay. Hello, everyone.
My name is Emily McEvley, and, I run our services organization here at Workday. And I've had all my colleagues talk about the great things that are we're bringing to market with the products, go to market, and I'm going to round out 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. So 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.
And 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 to service this thing, it's not just a product thing, it's across the entire company, each and every employee is incentivized to meet that goal. And so you will hear a lot of organizations lately saying, we're focused on customer satisfaction. We're focused on customer success. And in my opinion, if you don't engrain it in your core values, if it's not something that you talk about on daily basis, if it's not something that you incent your employees on, then it's just words on paper.
And it's not going to be part of their natural response in working with customers, right? So at Workday, we're really fortunate that we have a leadership team that set a set of core values, customers is one of them, and we work with our employees to make sure that when they're in a decision making process, they're going to optimize based on what's best for the customer as opposed to based on what's always best for Workday. So 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 Anil shared this morning, the 98% that we just achieved was from our executive survey. So 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 result that we achieve. And we're really proud of these results obviously, we've gotten over 97% for more than 7 years, but
we know
we can do better. And 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. So 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. So 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 numbers not polluted with point solutions, like they're only live on expenses, and
we put a tick in
the box for financials. So 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. And as you've heard multiple times, they're all live on the same version. About 80% of our deployments are done by our partner ecosystem.
So I thought it's really important for you to understand how we work with that ecosystem. And there's 4 key components to our, what I would call, our deployment philosophy. The first is around how we select partners. So we have a group of partners, that we select based on their track record and the offerings that they can provide to our customers. And 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. So in order to maintain our very high quality standards, we have invested in a robust certification process And so you will hear certification from a lot of different vendors out there, but here's a few things that are very different about the workday process. Number 1, we certify every single one of their resources at a more granular level than you've probably typically seen. So they get certified on our methodology on products on the technology. They have to get recertified every 6 months with each feature released.
We track every single one of the consultants in the Workday ecosystem. And if they don't pass the 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 1 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.
So 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 1000000 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. And then 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. And we do a series of checks, quality checks at the project level, at the configuration level, the integration level, and we set up dates that the project has to proceed through before they go live. So again, helping our customers and our partners drive optimized solutions to meet the customer's business needs.
And talk a little bit more about the ecosystem. So 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 rising. Across our partner ecosystem, we have about 6800 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. So 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 how do you get their attention? How do you drive consistency?
But with Workday, we have an ecosystem of 36 partners. In North America, it's around 20 Across those partners, they have around 20,000 certifications. So that's roughly 3 certifications per consultant. And 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 deployment. So in the legacy world, you would climb this implementation mountain. You try to stop as much scope and 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 6 months. And so 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?
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, but they do influence quite a bit. We say 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. And I would also add that they credentialize Workday, even when they're not in the running for the services business, right? So that when are the auditors are running the selection process, One thing I'll comment on quickly.
We talked about it on the last earnings call, and Sean 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 for the medium purpose built for the medium enterprise called Workday Launch. It consists of pre configured prepackaged solutions that Both Workday and our partners are delivering for a fixed price for about a 4 to 6 month, implementation timeframe. And 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. So 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.
And of course, you all know with the SaaS solution, we're in charge of their infrastructure, their updates, the technology components, but it goes beyond that for us, right? So she 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 away. We never step back from our responsibilities of making sure our customers successful, ensuring that they're going live and then continuing actions. And I will say the one thing that we see is when customers are coming out of this legacy mindset, right, 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.
And so, one thing that we're doing is based on customer feedback is driving more things into the application to help them with their ownership application within Workday where it shows the usage metrics. So it shows you what features and functions, you've deployed what users are using them, it shows you what's new within Workday. And so it surfaces that, and then it allows you to create an adoption plan within the application So 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. So the final thing that I will close on is around culture, is, and and several of the speakers have talked about this, but I think we're really fortunate here at Workday. Our founders set about some core values as I talk customers is one of them, but it's something that the management team pays a lot of attention to, 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.
And I will say I was involved in, several of the sales cycles for a lot of the notable logos up there. And in those conversations, the customer said, listen, we love your technology in your product. And you're winning the evaluation based on that, but the tipping point for them was our culture and the people that they met from Workday in the sales process and they said, listen, we want we don't want to want another vendor relationship. We want to partner because we know this is going to be a journey And to them, that was the deciding factor. So key takeaways for Chano and I.
Number 1, most of these are yours Chano. And, but I'll read them for you.
Thanks for coding, Dan.
Yeah. You're welcome. So number 1, strong sales leadership focused on capturing long term growth, 2, new product innovation that is enabling us to upsell opportunities and drive growth within our customer base. Our proven success with 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. And, it's measured by our track record in both not only go live, but are also, our strong track record in customer satisfaction.
All
right. Mike, we have time for Q And A.
Thank you, Mark Murphy with JP Morgan. So, 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 And 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. And also just at a deeper level, what do you think has been the 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.
My expectation is, potentially, we will be able to be kind of continuing the trend on linearity that we're seeing during the first half of the year on what is pending 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 Anil talked about about that networking in very many customers successfully in the Fortune 500 and that creating a really network effect that is supporting basically us being able to to do a better job overall. The rest is, is, I guess, pretty good trying to be more tighter up in terms of self 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.
But That's how we're trying to do.
Hi. Excuse me. Question for Emily, Scott Berg with Needham. The question is on the implementations for your financial product. We've heard a lot of good things on some of the mid market deals and what those deployment cycles look like.
But our a market we're hearing that those deals taking a 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. And so I wouldn't limit that financials, I would just say, in general, it's different in large enterprise than medium enterprise. And, in terms of how we're improving the deployment experience overall. You heard Barbara talk about the fact that one thing that we're really trying to do is build more baseline configurations into the application.
So almost like a cookbook, so to speak, where you could pull out different recipes depending on your particular needs as a customer. So that's one thing that we're doing to give more to give more pre configurations across all of our customers. And 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 that's going to help to drive efficiencies during the implementation and also consistencies across all of our partners. So you will see in the, coming releases, additional tooling, on the roadmap.
How are 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. So 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? And then 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?
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 need to be scaling it up If anything that we are looking into is how we do fine tune more the go to market towards that wider space customer base opportunity that sue before, and now we're having a broader portfolio. That's 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 doubled down on what we're doing today.
Looks like we
have no more questions. Thank you, Chano and Emily. I appreciate it.
Thank you.
Ladies and gentlemen, please welcome back Robin Sisco.
All right. We're in the home stretch here. So 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, and we are We are pursuing that We've had great success since our IPO, which was almost exactly 5 years ago, here in a couple of days, And we continue to expand on that success, ending this year with revenue expected to be over $2,000,000,000.
And 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 $100,000,000 last quarter outside of the U. S. In revenue, And that number is growing at a very, very rapid pace.
So we're very, very pleased with the business that we're growing outside of the U. S, and 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. So what I'm showing you here are the cumulative number of workday customers with contracts, with annual contract value over $3,000,000. So some new data here for you.
This is really being helped out by the networking effect that you've heard us talk about. And there are two ways that we actually add to the space of customer. 1, is to go after those super large customers and get net new customers with large contract values. But the other way that we add to this base is to expand our expanding the contract value that we have with those. We've been successful in both of those areas.
Now here's the incremental change in the 4 quarter periods that you see. And the interesting thing about this is that you saw we were pretty steady in earlier times earlier periods of adding 'eighteen, 'nineteen into this large customer count over time. And the past four quarters we really saw that accelerate. And we've been talking about this during our earnings calls when we talk about our new logos and the effect that this has had was to drive a lot of the acceleration in subscription revenue that we've seen over the past 4 quarters as we've been able to get that number back over 40%. As you also know, we were early adopters with the new revenue standard 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. Now what we're giving here is some better visibility to you into the 3 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.
Now the biggest drivers for the growth in this metric are net new customers and the contract values there. Renewals. So when a customer renews, the contract that is renewed in that period goes into this number. And the other factor here is duration of those contracts. Now one of the things that I said at the last earnings call was that duration had not notably changed in duration has not been a factor over these periods presented, but could be at some point in the future if that duration significantly changes.
So as you can see, for Q2, our year over year growth subscription revenue backlog was 44%. That compares to 43% in Q1. Now 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. And so 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, and we're really starting to see the effects of it at scale. So 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 of profitability and to improving that profitability. We've been able to sustain the 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. So 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, and this is what's going to help us fuel our growth. So while we're business already.
So we continue to expect that we'll be able to expand our gross margins So we've had a pretty good track record so far. We are, driving that through a couple of different drivers. So 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 And 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 ed 5 years ago, we set a long term gross margin target of 75%. And as you can see, we are bumping up against that already. So we believe that in the near term and the intermediate term, which is approximately 5 years, we can actually take these margins up to 77% and we're setting a new long term gross margin target for ourselves of 80% And we believe based on the efficiencies through scale that we've been seeing so far that this is highly achievable. Now one of the things that strong gross margin expansion drives is strong non GAAP operating margin, and we've had great results in the area as well. Now these operating margins aren't only driven by our gross and then other operational efficiencies that we're continuing to see outside of development.
So in our sales and marketing organizations, even though we're investing heavily Internationally, as China 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 and A line as well. So 5 years ago, at our IPO, we had set a long term non GAAP operating margin target of 20%. Now one of the things you've heard, Anil, and I talk about recently is the fact that our HCM business is actually already operating at over 20% margins. And that's fully loaded non GAAP operating margins for HCM already over 20%.
Now that gives us confidence that we can not only hit this number across the company, but actually take it higher. So we can now consider 20% to be our intermediate term operating target. And we've got high confidence level that we can get there. And we've now adjusted our long term operating margin target to 25 plus percent. Now I want to finish off by talking about cash, So we've been talking for the last several years, and more recently, over the last couple of quarters, about the fact that we have been more flexible with our customers in terms of cash payment upfront.
And 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 term billings and invoicing. So 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 and all other things being equal. We expect to see noticeable improvement and 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 and A through our operating cash flow allowing us to maintain a strong cash balance of over $2,000,000,000 for the last several years. Given the convertible note offering that we did last month, we believe will end this year with over $3,000,000,000 in the bank. Now $600,000,000 of this is earmarked to pay off our convertible notes that we issued in 2013, which come due over the next several years, but that still leaves us plenty of cash and plenty of flexibility So we think we're in a really very great place to continue to invest in the business for growth. So takeaways for the whole afternoon. We have a massive global opportunity.
I know we've talked about that a lot today, but we really are going after something huge, and 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 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.
So with that, Please welcome back up to the stage, Chano Fernandez and Anil, who's anil back here. For Q And A.
Hi. I'll start Carl Carris to Deutsch Bank. Thank you for today. Maybe this question is for Robin. Robin, you mentioned just a second ago that you expect a material improvement in operating cash flow margins, I think you referred to fiscal 'nineteen.
So maybe a couple of 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? And then secondly, Why is that happening? Is that happening because, Workday expects to alter your billing terms somehow or is it because you're sort of anniversarying ships that have already occurred and they get in the rearview mirror?
Thank you.
Yes, that's exactly it. So we, a few years ago, we made the decision to be, more flexible about the cash that we took from customers in year 1 for some certain strategic deals. We talked about earlier this year as well that we were not pursuing getting multiple years from customers upfront 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 3 years. And so what we expect to see starting next year is that the lower cash payments that we were getting in years 1 and sometimes in years 2 means that the payments in the back half of the contract are actually significantly higher.
And 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. So this is a swing from a headwind to a tailwind that we've actually been talking about for a few years. And I do expect, all other things being equal that we will see that operating cash margin go over what it's been historically.
Hi, Samad Saman with Stephens. So 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 work they get to look in? So even if we eliminate how fast the market itself is moving, but are you involved in the deals that customers that are looking in the large enterprise move to financials in the cloud how often are you involved? And is that number increasing?
And how's your win rate evolving there?
Well, I would say within our target markets, I think we see a very high percentage of them. The more focus we are in a given industry, like health care 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 opportunity since we don't have the supply chain and manufacturing products. The market is beginning to tip. It's, it's taken longer than we had 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 not a lot of proof points within our base of Fortune 500 customers that are live. And that that's what we didn't have a couple of years ago. We had a few Fortune 500 customers that weren't live. And now we've got a bunch that are live and people are looking at those proof points.
Yes. I think the different entry points or the strengthening on the entry points with planning on FP and A is also a game changer. Because though there are quite significant advantages or moving just the GL and of different types from simplicity is used to TCO basis. Clearly, what gets companies more excited are the use cases of planning on FBM combined to the moving of the GL as a whole.
Hey, guys. Alex Zukin with Piper Jaffray over here in the Okay. I want to Robin, you gave a lot of great, I think, new, new targets around margins, both gross operating and we talked about cash flow. But you started the presentation with a theme of the investments are for growth. And so I wanted to ask about maybe what how do you think about your intermediate and long term growth targets, particularly as you're seeing kind of an almost a new inflection in HR deals in the enterprise, you're seeing financial start to pick up and really evolve.
And then you've got between platform and PRISM and planning a tremendous amount of vectors to both increasingly monetize their existing customers and continue to push stronger. So just any comments you have around that would be helpful.
Yes. So 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. But 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 and D spend, we are heavily, heavily investing in R&D And we don't have any near term plans to change that at all.
And so the expansion that we expect in our margins is really driven through efficiencies in other areas. And sustained revenue growth. And so 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 DiSucci from Jefferies. I think the question is for Chano and Anil. There's a lot of talk today about the synergies between HCM Financials and that financials are going to come. It sounds like it's in the pipeline.
In Gartner says it's going to come too. And both those it's still not here yet. So 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 because those deployments can people get larger, larger organizations can say, okay, workdays got the financials, but I have all this other unique stuff I have to do. But you know what?
Now I can do it. And if that makes sense to me, but But I guess the question is, are you hearing that from customers now? Are you selling it that way?
We're definitely not selling it that way yet around platform. But I would say to your question on financials, 5, 6 years ago, it was really NetSuite and SMB phenomenon. And in the last 5 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 have gone faster for sure.
I actually think the levers for financials going forward are not just a platform. I'll come back to that, but 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.
I'm trying to allude to the FPM piece as a wedge in then 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. And so if you make the leap into our financial products, now you get these huge added benefits of planning and prison, which frankly 3 or 4 years ago, we didn't have. 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. So I do think that that will be a powerful selling tool.
But it's too early so far. Customers are asking us about it, but we have yet to really start selling it that way. I mean, we're just officially launching it today. So it'd be It would have been a little premature beforehand. But 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, but I think for me to take away of the keynote is we really were showing how the platform business makes sense, financing HR, end to end processes and what we were saying at the keynote, the plan executes and analyze, right? And when you think about that, from the key differentiation, which is just that core 1 single core system of records and how that goes seamless, and you have the same UI and the same security and the same integration and the same model and the single version of the truth and what would you get around basically just simple things like compliance and visibility is just huge, right? I mean, there is no other player having that solution as such in the market. So really still that is what that solution provides.
So we're pretty excited what it is to come and how customers are understanding that. Sometimes in larger enterprise, it's just that is how the do they see that there is 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? But definitely, we are with more the joint value approach proposition.
I'm particularly excited about the early 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. So the kinds of applicate the kinds of solutions where you're tying financial data 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.
Hi. Kirk Materne with Evercore. This sort of follows on that point just made, Anil, 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. And maybe China has something to add to on this, but are you guys going to have more a more of a solution based approach to financials by industry when we think out over the next 2 to 3 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 in the big enterprise, should we expect to see sort of 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 China 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. And where we've made those investments 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 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.
And then I'd say the other places in the procurement side, for health care. So as we make those and I throw an average daily balance for financial service but the first three are really big investments where we're doing really well in health care. Now they might not be Fortune 500 names, because they're not public companies, but there are massive organizations that pay us as much as a Fortune 500 company do. So absolutely, that's the path on the product side. And with PRISM, We can also bring into that the templated solutions around things like patient profitability or customer profitability in retail where we can marry it with whatever operational data they have too.
I think that will be part of the solutions going forward.
Yes. I think Betsy was showing base 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. I mean, as I was mentioning, healthcare and E and G, those deals are massive.
They're quite significant when they get into the inventory and HRM financing one on the other side. I don't it's doing HRM finance. They're quite big.
And these are 80,000 person hospital systems using financials. I mean, that's a Fortune 250 kind of company. And for them, that investment in the procurement side was critical
to them choosing workday. And then in those, you add payroll as well, you know, get one on one side or the other, and then becomes quite interesting.
Hey, Neil. It's Adam from MoffettNathanson. Lots of really exciting new stuff out today. But I keep going back to the idea that based on what I'm hearing about the HCM business at the HR and the HCM alone could be a much, much bigger business, 2, 3 times what it is today. Is there any reason to believe that that assumption isn't right that that trajectory couldn't be just much, much larger than it is today.
And then I have a follow-up on the backlog.
There's no question could be 2 to 3 times 4 or 5 times larger. I just can't tell you over one time frame, right? I mean, that's the presentation rate of new deals. Right now, it looks very good. But that's just so hard to predict.
And if I gave you a prediction, first China would shoot me because we don't know, And secondly, I wouldn't want to mislead. But in terms of the size of the opportunity, I think we have a very reasonable shot at getting to 50% of the Fortune 500. And how does that translate into the rest of the market around the globe? I think that's that's really how we think about it. And Fortune 500 is is still going through that transition.
So we go to some markets like Southeast Asia, Japan, Japan could explode while we were with one of our great business partners today, and they were talking about the excitement around several of the workday implementation, Sony, Nissan, and Hitachi. These are companies that have deployed Workday around the globe, but not yet in Japan. And all these multinational all these Japanese based multinationals are waiting to see how these guys do. And if they go well and Nissan's in the lead 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 all over the globe. And so as we open up markets, that helps drive that scale of opportunity too.
I'm not looking for a quota increase, definitely. But the opportunity is, I think time placing 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 referenceability. I think as becoming more on a strategic platform to companies. The CIO, besides the business, is becoming more of the tissue maker.
And honestly, when the CIO is getting important cycles and sending more the architecture and what that allows. And now, of course, enhanced with pricing and where the cloud platform is just become a much better value proposition overall, and they see much better benefits of going weak quarter. So yes, I'm pretty excited with the opportunity ahead. In HCM, it is your question.
Great. And just my follow-up on backlog for Robin, very helpful disclosure. Just doing some quick back of the envelope on your total bookings number. So looking at the billings plus the change in backlog quarter to quarter, it looks like that, that bookings number might have actually grown slower than billings in Q1 and then faster than billings in Q2. Is that right?
And how should we be thinking about that relationship or even bigger than that? Like what should we analysts community be thinking about are the most important metrics to focus on then for the longer term growth rate on the top line?
Yes. So as you know, we stopped guiding billings at the beginning of this year. And 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 and it's just really not a good indicator. So 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, right? If you look back at what I showed the differential between Q4 and Q1 was negligible, right, because we've got such big Q4s in terms of net new customer wins. And then Q1s are seasonal low. And so the the bookings are really just offsetting the revenue that's coming out of that number and being recognized. So I think seasonality is going to be really important to pay attention to.
But 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 because there really is no correlation at all between our backlog number and just timing of billings on any individual contracts?
Hi, Robin. Keith Bachman from Bank of Trill. 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 percent of mix, wouldn't doesn't that suggest that the average deal size could increase increase meaningfully over the next few years? As you look at the toll, again, mix between HCM and financials, wouldn't that put some upward tension on the average deal side?
Yes. I think, I think it definitely could. And there's a couple of ways this will happen. 1st, in the medium enterprises, we've seen, we often sell the full suite at once, right? And so those deals will include financials and HCM and potentially a lot of our other SKUs.
And so those become relatively larger deals. And 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 $3,000,000 was to show that those aren't all net new customers, right? Those are we're adding to that population as we actually upsell financials and other SKUs into our existing customers.
So just because we don't sell it all at once, doesn't mean there's not a huge opportunity And 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. And Chano gave some great updates in the attach rates. And so we're having huge success there with the attach rates. And so for 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. And then 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, right, the more SKUs they have the year they are, and the more we'll have great retention rate 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. But from a monetization perspective, you've sort of thrown out a few things that kind of maybe help us understand what it's how you're not going to charge for it, but could you help us understand mean, you have peers that don't charge at all for the platform, say, into it. You have peers that heavily charge for the platform. Is it are you gonna charge for it or not?
And then is there a kind of user model? Is it a per customer? Any sort of detail you can give us around 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. It'll be there'll definitely be a significant component tied to usage. I think tying it to users or anything else like that, 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.
And I would expect that we charge upfront development support for people that are building more substantial applications
Thanks. And Justin Furby with William Blair, maybe 2 part questions. This quarter last year, I know you guys went through some volatility with enterprise deal signings and 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, but do you feel like there's more visibility, it's more predictable or is the scenario that happened last Q3 equally as likely or potential, this quarter or any other quarter for that matter?
I'll let Shano answer that. I feel better.
There are less crazy things going on in the world.
There's less well, I don't know if that's that's the case. I think we've continued to mature as a as a field organization. And bringing on people like Gonzalo than it did to run to run Europe, putting in a star executive in Japan. I just feel like we have more, 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. So I give I give Chano and others like fill 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.
But you never know there's there are always these external events that we are we're not in control of as long as those don't happen, I feel pretty good.
Well, I think a scale and the different levers that we're talking here is helping us out to become more predictable, right? Definitely going to be disclosing here what Q3 is going to be, right? But we are in October and certainly plan to go to the party dinners tonight with the partners and tomorrow party as well. So
I'm
not changing those plans.
Hi, in
the middle, Phil Winslow Wells Fargo. Just had a follow-up on Walter's question on the platform side. Neil, earlier you said that the initial platform use would obviously come from customers and SIs, not necessarily ISVs. How do you sort of just imagine this evolving over time? Because obviously you've opened platform more and more, which I mean, custom validations, custom fields, personalizations to now what we heard this morning and then these comments.
So maybe help us walk through sort of the thought is 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. And so 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 unique as an example, unique compensation extension. The more we get comfortable as people use our APIs and as the API level grow, the breath 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, think with customers, we're going to let them drive where they want to take the application and fill in fill in places where they want to build applications. When it comes to ISPs, 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 place as 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. Platform is 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 have to make sure the platform is first ready to build those applications so that it doesn't crash and burn early on. And best way to do that is to 1st get it working with our customers and our partners. I know John 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, we want to get to the point of the early design partner customer success. This sounds kind of wonky. And 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. So Yeah.
We're going to walk before we run, 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 stuck in legacy technology they really want to bring that into a modern cloud platform. These are the Accentures and IBMs and Deloitte's of the world. In many cases, those technologies are specific to a particular industry. And 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, in the joint efforts.
Thank you. Over here, it's a Brian Schwartz with Oppenheimer question for I think it's directed to, channel and in Neo. You've talked a lot how you've been seeing a positive customer Customer reference network effects speeding up the deal velocity. My question is more internally, just thinking about how you're scaling, your own hiring. And 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 is striving to find.
I'm going to let Sean 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 where the sexy pre IPO company post IPO were sort of in in, in, somewhere in between, right? Well, who knows where they're going to be? Now we're a $2,000,000,000 company growing at a nice clip and people 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 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 2 years and half the managers were new. And we were having pockets of problems where managers were 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. So we decided we were going to make big investments. And over this course of the last 12 months, we've taken all twelve hundred people managers first starting out with the senior folks, but then to every manager in the company, take them off-site for 3 days and teach them how to manage in the workday way. Manage around, objectives, manage around, manage with teams, but most importantly, manage with empathy and in the way that works at work day. And that's I feel like that in some ways has recreated some of the momentum too.
Maybe you want to talk about the sales
side? No. I think it's not different, right? The senior so silent. I mean, it has become easier, particularly in international markets that when I joined 3 years ago, I mean, when I talked to senior people like once out of the back of the audience, they're looking for an experience where a company that cares about employees, that there is a that there is a good culture thing, of course, that is driving innovation that you have growth opportunity, right?
And that is seeing us forward looking thinking company and that you can have some course, it's hard work, but have fun and good team and collaboration, because those are scarce resources, and they have different opportunities. So of course, there's going to be opportunity for you to make to do well, but there is there is growth And then you go on sync 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's quite a compelling story. For me, because I have lived since I joined.
It's becoming now 4 years ago, and Europe was in a different stage that is today. I can tell you that potentially the people we could attract in Europe or in APA 3 years ago, we couldn't attract the people that we're attracting today. We just didn't have that same value proposition being so attractive, I would say, and people were seeing more as a riskier option where today is, wow, it's a good place to go.
And 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 Anil. I wanted to see if you can update us on your M and A kind of thoughts and strategy. And I asked the question because many of us were in Sanford Cisco 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. But 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, etcetera. But does that philosophy change at all going forward?
You know, we might tweak it a little bit, but 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 we wanted to create a cool learning experience. We didn't buy a learning company and said 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 Platform, which is now Prism Analytics did.
So we bought that technology I still think it's a tougher it's tougher for us to think about a different 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. And 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 other than the work to espresso 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 Happemeyer from Macquarie. So we've had a number of conversations today with your customers who signed back in 2013, 2014 about how they're coming for renewal and they're going into negotiations. So wanted to ask as a follow-up on those conversations, how you're viewing the competitive environment around your renewal base given that 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, even with one circling cars around the conference today?
I don't even 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 cloud system after having gone through the process to implement it. It just doesn't really make much sense. And that probably is the same for us trying to replace one of their systems.
The The only time you get that option, it's not really a price option. It's just that the platform's just not working. So we really haven't seen any of their tactics work. I would say that we're learning 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.
They're trying to make sure that they don't get treated unfairly. And we're working on finding that, that happy medium in the middle. 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. And 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. No.
I would say that many of the touch improvements that you are seeing there on these slides that I showed before are coming out of the compelling events of what we're having those discussions around those renewals. I'm happy to 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 get into more value from us, that still makes a competitive business case for them.
Great. We have time for one more question.
Hi, Shankar from Bank of America. Cash couldn't make it because of her emergency. I have a question on the middle mid market. You talked about the opportunity in the upper end. You can get 50% penetration of the Fortune 500.
Given that your mid market customers, you're also growing at 45% 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 2 years that you could talk about?
What's the point? I'm going
to tell
you the penetration in terms of number of customers a better market?
No, it's hard. There are so many different solutions in the mid markets defined so differently. It's hard to think about a 50% target level. The Fortune 500s are very measurable set of accounts. I think what we're more focused on is growing that business at an aggressive clip.
And, and not to and 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 in 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. And historically, our implementation costs were just too high for many of those accounts. And now with Workday launch that Emily was talking about and other offerings, we can bring the implementation costs then be competitive on the software side and hopefully have a bigger chunk of that market. But we don't have we don't have necessarily a goal market share goal for being No,
I think we're trying to grow in that market healthy, on a healthy way, right? What do I mean by a healthy way at that customer profile? That is kind of, fulfilling that looking that transformation as well on our competitive solution, but taking more the broader, the broader feet or footprint of our solutions as Robin was described before, right? That's usually a good customer fit for us, right? There might be other customers in that mid market that may be 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, right? So I think more than, it's just not about a number of customers and cashier is having a growth, healthy, profitable business going forward on customers that we can feel that can partner with and basically grow the footprint going forward. Yes.
Well, I would just add 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, that's our story there is super compelling.
If you can get planning HR, finance and PRISM and the same kind of system, a Fortune 500 company does but all works out of the box together. That's huge for that market. They want to buy they don't want to just buy HR suites and financial suites. They want to buy the full platform suite because that's don't have the resources to stitch it together. They want everything to work out of the box.
So as we broaden that platform, I think we come become even more 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.
Neil Robin? I'll turn it to you guys for any final thoughts.
Thank you for coming.
I can't reply to you.
Let's go outside and have a
rubbing anything you want to comment for.
No. The Just
go have a glass
of wine. Cocktails. Thank you. Thanks for coming.