Welcome to Workday's 2021 Financial Analyst Day. Thank you for joining us. It's been quite a while since we've gotten together as a group like this, and it's so great to see so many of you joining us today. Workday has made a lot of important progress since our last Analyst Day in 2019. As we look forward, we set our sights on a lofty new ambition, Becoming a $10,000,000,000 revenue business.
Over the course of the next couple of hours, we'll share how we plan on achieving that goal. First, you'll hear an update from our co CEOs, Anil Bushri and Chano Fernandez, on our market opportunity and the trends that we see that will drive future growth. Next, you'll get an update on the innovation front and learn how we're uniquely positioned to lead the from Shyam Chakraborty, our EVP of Technology and Pete Shlamp, our EVP of Product. We'll then have time to take questions focused on the innovation front, followed by a short break. Then You'll hear an update from Doug Robinson, our EVP of Global Sales, on how we're broadening our go to market strategy to capitalize on all of our innovation.
And finally, you'll hear from our President and CFO, Robin Sisco, who will update you on our compelling business model and then we'll bring everyone back together virtually for a final round of Q and A. We're excited to take your questions. During the course of today's presentation, Please submit them via email to irworkday.com. We'll do our best to get to as many as we can. And please note that we'll have 2 separate Q and A sections, 1 at the halfway point, which is focused on innovation.
So please make sure and submit questions ahead of that. And then a final round of Q and A with the broader executive team at the end of today's event. Before we kick it off, Please be mindful that some of the matters we'll be discussing today include forward looking statements regarding our strategies, operations or financial items that are based on the information we have as of today and our current beliefs with respect to the future of our business. These statements are subject to risks, uncertainties and assumptions, and our actual results and financial condition may differ materially from those indicated in the forward looking statements. Further information on risks that could affect our results is included in our most recent filings with the SEC, which are available on our Investor Relations webpage.
With that, it's my pleasure to turn it over to our Co Founder, Co CEO and Chairman, Anil Butchari. Over to you, Anil.
Thanks, Justin. Nice jacket, by the way. So let me just start by welcoming everyone, Welcome to all the attendees out there and thank you for taking the time to spend with us over the next few hours To hear about our plans for growth and beyond at Workday. So as you know, Dave and I started the company 16 years ago. We really wanted to revolutionize the world of enterprise software, in particular the areas that we do well, HR and Finance.
And I think, humbly speaking, we made great progress. Most people would view us as the global HR leader, And we're making great progress and have a lot of momentum in the world of financials. Lots went into this. There's a lot You're going to hear more about this from a great group of speakers. But I wanted to mention our core values as well.
Everything we do is driven by those core values. It's not just lip service. We prioritize our employees, we prioritize our customers,
We like
to have fun. We like to innovate. We do business with integrity. At the end of the day, important to you and to all of us, we like to make a profit. And profitability is not necessarily a core value, but it does pay for all the rest and allows us to be An ongoing concern that can be timeless in the future.
With that as a backdrop, I wanted to spend a few minutes just sharing some thoughts on the business and where we're at. Next slide. So the first thing, which would be the first time we've committed to this, is that we're committing to a 20% sustained growth rate for revenues on the subscription side. We did below 20% during COVID. We found our way back to growth again in Q1 and Q2.
And as we look at our pipelines, we look at the competitive landscape, We look at the market opportunity, we are confident that we can sustain this 20% switching revenue growth rate From where we are today to our $10,000,000,000 in revenue goal over the next few years. Next slide. And where do we get that confidence? It starts with our strength in HCM. Approximately 50% of the Fortune 500 use Workday as their core HCM platform.
And as you know, you don't have more than one system of record. So for these companies, we are their core system of record for HR and that enables us to sell all the add on applications as well. And it's a great opportunity for us to expand that, not just for the Fortune 500, but also into the medium enterprise. And really when you look at these statistics around our penetration HCM, it's across every industry. There's not really any industry bias.
We've had a great run across really every sector of the economy and government as well. Next slide. And what that's equated to is $3,200,000,000 subscription revenue business over the last 12 months. But I would also say we're not done. There's still a lot of room for growth, both within the medium enterprise.
There's still A number of Fortune 500 companies have not made a decision. And then most importantly, globally, where cloud Rates are still pretty low. We have a great opportunity to continue to drive this number to a much, much bigger number over time. So really excited about where we are with HR. Next slide.
Now this might be more Of a surprise, when you look at our footprint in financials and you look at the strength across the multiple product lines we have, Remember, we go back several years ago and we're really just selling core fence, but with the addition of Adaptive Planning, which has been just a phenomenal Acquisition and now great partnership as it's we've been to the Workday platform. Our own procurement products Plus the acquisition of Scout, we've gained momentum across the financials marketplace across a pretty broad product footprint. And today for the first time, we're going to be sharing the numbers with you. Next slide. It's now over $1,000,000,000 And so as you think about pillars for Workday and for other cloud companies, Getting an individual pillar to over $1,000,000,000 is a monumental achievement, at least for my part.
It means that you really have Demonstrated real impact and market momentum in that given sector. And equally importantly, we're still going, 33% subscription revenue growth rate. So This continues to be a growth engine of the company. There's a ton of opportunity in front of us across the Fortune 500, across medium enterprise, across the globe And really across this broad product line. So we're really beginning to see the world look to do their digital transformation Their digital transformation For finance as they have for HR going forward and as we maybe don't exit not exiting the pandemic, but at least Exiting the impact on business of the pandemic.
Next slide.
And you know, it's not shelfware. What we're proudest of and what we've always been proudest of is that we sell the software to A lot of amazing companies, we get them into production really quickly. And so as fast as we're growing, we're proud of the fact that 70% of our customers Live on their solutions, whether it's HR, finance is roughly the same. It's a testament to the cloud and The power of getting companies up and running quickly, getting them to get value out of the software and then adding capabilities, adding new modules going But you got to get them live in the 1st place and this has always been a key tenant and a key strength of Workday. Next slide.
As I turn it over to Chano to talk about how we're going to continue to grow from a go to market perspective, I want to leave you with these market trends that really drive how we think about our product line and what problems we're trying to solve for our customers. The first time is real time business, first one real time business. When you think about the pandemic and you think about The combination of planning and execution and analysis, 1 2 year cycles were now changed to 1 or 2 month sales cycles. Plans were to turn out the window on a pretty regular basis. You got to this concept of real time business where the conditions are changing so rapidly.
You need your systems to respond to that change and to be nimble and agile to deal with whatever that environment is. Maybe it's a retailer who's going from mostly in store to now e commerce and curbside pickup. All these things drive the need for changing applications and agile applications. That's really what we plan for, what we built And we saw it thrive during the pandemic. A change in workforce, we've seen this over the last 5 years, both in terms of a workforce that is More diverse and frankly more driven by contingent workers and that need To drive a new workforce is important to almost every customer we have.
Our ability to support their need of a changing workforce is really paramount to what we build. Very competitive markets right now. We see the job markets and we need to make sure that our customers have the tools to compete for this Diverse talent across the board, across the globe and target pockets of talent that may not have been Targeted or even appreciated in the past. That's all really tied to what's been happening on the HR side. What you're seeing now is a real focus on finance digital transformation.
Companies realizing that the legacy systems were not able to support them During the pandemic, they were not able to support remote work, not able to support the agile business changes that they were making. And As a result, they're turning to the cloud and turning to companies like Workday to look at a finance digital transformation. And one of the powers of the cloud is The ability to collect data across a large number of companies, leveraging machine learning, not in terms of one company's data, but across a broad swath Companies and helping companies make better decisions, not replacing employees, but actually truly helping companies make better decisions. And that is built into the fabric and part of our strategy as well. So these are really the trends driving Workday's Product strategy and go to market strategy and how we support our customers and so far so good.
With that, I'm going to turn it over to my Co CEO and friend Chano Fernandez to talk about how we're taking these products and our messages on the go to market front.
Hi, everyone. I hope you're all well. And thank you, Anil, and welcome to all of you. As Anil mentioned, we have been on an incredible, and I would say, fun journey these past 16 years. But I am truly convinced that we're just getting Our strategy is really around driving the next phase of growth.
Can I have the first slide, please? Thank you. In the office of the CHRO, we are laser focused on maintaining our leadership position by complementing our winning the core strategy That has worked really well today, while doubling down on expanding wallet share with existing customers. So how are we going to do this? We aim to focus heavily on winning new accounts while strengthening the breadth of our offerings.
This should enable us to lead the market and at the same time address our customers' increased concern on winning the competition for talent And enhance our overall solutions offering proposition for existing customers. But let me be clear, we want to dominate this market, And we feel we are very well positioned to just do that. If I may have the next slide, please. In the office of the CFO, our strategy is to increase market share and be the dominant cloud FINS vendor in services based Industries. While increasing the number of different landing points outside of the core, many of you have been seeing us doing it So more lately with solutions like planning or Guarpe strategy sourcing.
The whole purpose is to meet our customers where they Truly are in their journeys. So to get there, we will remain focused on offering industry best in class products And solutions to support our strategic partners to build on our platforms to be much more competitive against Some of the large ERP legacy vendors, both, I would say, within our core industries and outside the core Services based industries. Clearly, outside the core, we aim to do that through our enterprise finance approach. Additionally, we will double down to build stronger relationships with CIOs to further penetrate the office of the CFO Given the important role in technology buying decisions CIOs are playing these days. May I have the next slide, please?
Obviously, international is becoming every day a more significant growth lever for us, and it is paramount For our leadership positioning, not only as a global HR, but clearly as well as global fringe player. From a geographic standpoint, North America will remain an important part of our growth engine going forward, But we are doubling down across key geographic regions like the U. K, France, Germany and Tremia, among others, you'll hear Doug later on talking about Deng in more detail because we see outsized growth opportunities In international markets, these targeted go to market investments that we're going to be doing I'm going to bear significant global product investments that we have already been doing during these past few years, But we keep as well doing to aim innovating for global capabilities as well as working closer with an expanding ecosystem, not only in North America, but globally, that certainly will play a key role for us to help us expand internationally. I am pleased to share with you that I've been talking and meeting a number of international customers lately. And overall, I would say that they are very happy with Workday, and we keep partnering really well with our customers through Our customer success teams.
Next slide, please. Obviously, you've been hearing us Talking on our earnings calls around the strength of our medium enterprise business and the success we've been achieving. Medium enterprise represents a large total addressable market opportunity for Workday, and we have a strong fit for our platform Deals across both the office of the CHRO and the office of the CEO CFO, sorry, within our medium enterprises space. And it has been critical to our success within ME customers, our ability to deliver simplified packaging, Lower cost of deployment and embedded services. This is certainly a quick time to value formula That we are expanding successfully in our international markets as well.
Next slide, please. We certainly have very ambitious growth targets, and meeting them will require successful execution across several key initiatives. This include increased focus on verticals, both internally but also collaborating with And you'll hear more about that from Pete later on. An evolving go to market approach, which includes Driving cross sell, customer base growth and increased partnerships. And again, Doug will comment more detail on this area.
Continued investing in building out our platform, machine learning, openings, scalability, Sayan will be covering Good morning, Jeff. This topic, transforming our U. S. And leveraging public cloud to offer customers increased choice And also to help us open in some of the international markets. Next slide, please.
So as you can see, there is a lot of exciting work and opportunity ahead for Workday, and we're fully energized to build on the momentum we are seeing across the business and within the market. And we are incredibly confident in our path Towards the $10,000,000,000 With that, I'd like to hand it over to Sajan Wardig, Executive Vice President for Technology, We will be sharing much more about our technology and innovation roadmap. Sajan, over to you.
Thanks, Jono. And thank you all for joining me today as we take a look at the evolution of the Workday platform, past, present and future. We meet at a really interesting time, Pacing another inflection point in the cloud, driving both increased adoption, but presenting new challenges. It's the advent of state level security threats, the challenges of remote work, the reality of hybrid work and the blurring concept of employment. Where and what an enterprise even is, these are all trends that were already underway, but these have all been accelerated by the past 18 months.
We see that the companies that have moved to the cloud have adapted and even thrived in the face of these challenges. As a result, there's broad recognition that cloud is the way forward and cloud strategy is now on every CIO's agenda. But we also believe we're turning the page on the 1st generation of cloud and ushering in the next generation. The 1st generation of the cloud was just about getting to the cloud. Back then, the question being asked was, does the cloud even make sense?
And there was this clear separation between on premise software and cloud software. There was a lot of skepticism. So we had to prove to customers that the cloud was reliable. Critical work would be there when you need it to be, that it was scalable, Scale with your business and be flexible to demand, that it was ambient, accessible across devices, whether mobile or desktop, In whatever modalities and whatever location you needed, that it was performance and cost effective, and of course, that it was secure, That your data and your business would be safe. Nowadays, those factors are just table stakes.
We take them for granted. And even if they're done exceptionally well and we do do them exceptionally well, because Workday stands apart, we are reliable. We have a best in class availability SLA of 99.7 and an actual measured performance well over 99.9. We serve over 55,000,000 active users with over 365,000,000,000 transactions and we're growing at a rate of 40% year over year. Performant, where 96% of all transactions regardless of size return in less than one second across the platform.
Our UX is responsive, omni channel and accessible with a native mobile user experience And the ability to access Workday where you are, such as in natural workspaces like Teams or Slack. And we're secure. All Workday apps are governed under a configurable security model and a cloud service experience defined by privacy and security by design. So Workday is dramatically different in terms of our service delivery, but this stems from how we're different in our fundamental architecture. Because you see not all clouds are equal, we didn't just port an existing on premise ERP to the cloud.
We started with an entirely different design and reimagined enterprise applications for the capabilities and challenges of the cloud. The investments that we've made from this very beginning and continue to make today build on the unique foundation and have not only carried us through this 1st generation of cloud, But are going to carry us into the future and help our customers meet the challenges that lie ahead. From day 1, we've always had a single coherent architecture built around a common object model, Incorporating HR and finance data, your people and your money is underpinned by a single configurable role based security model That works with your organizational structure to derive correct business processes. This also means that we do acquisitions differently With deep integration leveraging this key architecture, as we acquire new technologies, we do the heavy lifting on behalf of our customers to connect the acquired portfolio back into the people and financial data in a common object and security model. And this approach allows us To use that same security and business process framework across all these products, we can rapidly build solutions which comes out of the Adaptive acquisition, our accounting center, which was born out of the Platforma acquisition.
It also allows us to provide customers with critical text around data and transactions in Workday. This results in faster and better decision making and allows a tempo of business to speed up And respond to change better. So despite working at adding capabilities over time and operating at a far different scale than before, This through line of our original Power of 1 architecture remains, even if not one original line of code remains. We still provide a single code line with all customers running the exact same version of software. Customers configure our software for their specific needs, they do not customize it.
And this leads to a reduced cost of ownership For Workday and our customers, and it gives us the ability to rapidly respond in the face of challenges such as emergent security vulnerabilities. We genuinely believe that all of our customers are better off when everything is interoperable in this consistent and coherent way. But we're now in the next generation of cloud evolution and that brings a new set of challenges and opportunities. For example, How do you best leverage public cloud? How do you take advantage of ML innovation?
How do you create applications that couldn't be made just a few years ago To solve problems that don't neatly fall into traditional categories, the companies that will be successful facing those challenges sorry, The companies that will be successful will be those that deal well with those challenges. It's not enough to be cloud native anymore. You need to have a platform that leverages all the innovation the industry offers across public cloud, across partners to increase value for your customers. There will be those who can harness these capabilities and those who won't and that will create winners and losers. So this next generation is about Leveraging innovation for the customers' benefit.
And a great example I'll share with you is the evolution of Workday's own data centers. In the past, we built, ran and optimized our own data centers using all of our own tooling. Everything was cutting edge for its time. But we're committed to constantly reviewing and reinventing ourselves. We focus our energy on things that we do really well on our unique expertise And then we partner with others to take advantage of what they do well.
And this line is always moving as the industry innovates. In the years since our founding, we've seen the public cloud mature by leaps and bounds alongside of next generation open source tooling like containers and Kubernetes. This has led in turn to our expanded partnerships that you've heard about with Amazon, Microsoft and Google. Today, Workday is committed to a multi cloud strategy so that we can leverage this additional innovation coming from our partners and the industry at large, Including operating infrastructure at global scale, we're providing modern machine learning services. Amazon, Microsoft and Google will spend close to $40,000,000,000 this year on innovating their platforms.
We want to harness that investment and put it to work for our customers. For example, we want to make ML broadly available and useful so customers don't Have to build an ML or AI practice of their own. Many of Workday's customers have fantastic ML and AI practices, but a lot of them don't, And they still need to get that benefit. The point is that a true next generation cloud has to be a platform that can absorb all the innovation Coming from across the technology industry, combine it with our own expertise and turn around and provide that as a strategic advantage to our customers. That's what customers want and need from us.
You see, Workday has become a core building block of the enterprise And the security, openness and extensibility of the Workday platform allows our enterprise customers to gain value farther and So let's talk about extending outside of Workday. In 2008, Workday began offering an integration platform as a service, enabling our customers and partners To tie their external systems to Workday without requiring additional investments in middleware. And now with Workday Extend, We can enable customers and partners to build their own applications that utilize the Workday platform for use cases that Workday is not solving directly. Workday Extend has all the capabilities that you would expect from a development platform or system of extension, but it removes the complexity that bedevils most application development. Not having to recreate all the data structures, the workflow, the business process framework, the security Provides a faster time to value from the customer's perspective and it helps them create applications that are robust and that don't become brittle over time.
Today, we have more than 250 live applications in production on eXtend and more are coming live every day. The latest addition to our app development platform is Work and Orchestrate. It allows customers to invent new people and finance processes Using a visual drag and drop tool we call Orchestration Builder. This low code tool brings a deep power of security and logic, Data manipulation and API connection into Workday Extend apps. This is the tool that fuses Workday platform elements And external applications and data in a way that business users can leverage quickly and safely.
It's also ushering in a significant wave of innovation across our partner and customer ecosystem. It's through extensible building blocks like adaptive planning, Prism Analytics, Workday Extend, Orchestrate and the Workday Integration Cloud The customers and partners get access to much of the same power that our own developers do. And the stats here represent the strong momentum we're seeing in this area, Having doubled the number of developers in the past year alone. So let's look ahead, because the next generation of cloud Requires an intelligent platform. For example, and unlike our competitors, we've built machine learning into the fabric of the platform itself, time its constructs directly into our object model.
Machine learning infused features that we deliver to our customers flow out naturally for this investment. We can do this because not only do we have one of the most interesting massive enterprise data sets in the world, but we also have the data management capabilities Needed to harness all this data while still meeting regulatory, security and ethical requirements. Machine learning and deep analytics requires data and our platform operates on and learns from this data. We talked about 55,000,000 active workers, 365,000,000,000 transactions. These are across thousands of production tenants.
We already have over 75,000,000,000 financial journal lines And growing on the platform. We're also approaching over 1,000 customers with 2,200,000,000 skills in our skills cloud. And it's not just the volume of data, it's the velocity and the variety of data. We have all 3. That's the essence of great machine learning And it empowers all of our future data infused applications.
So we're able to convert that data into meaningful insights and recommendations that radically So we're going to deep dive for a second to ground this discussion with an example. Workday Skills Cloud has been fundamental to the ongoing success of our HCM portfolio. In the HCM world, skills can show up in projects, What skills do I need? Scheduling, do I have the right skills at the right time? Recruiting, what do I need to get from the outside from a skills basis?
And of course, developing your own talent, learning and career growth. It's a common currency for people operating across the platform, Whether that's contingent workers, part time workers, full time, new hires, college grads, in any location, skills is a fundamental construct At the depth of the platform. And there are natural extensions to using skills to traverse from HR to finance use cases. Because of the power of 1, this is as natural as anything else we do with the platform. And keep in mind, more use cases And greater adoption leads to more usage and better accuracy with better outcomes.
This is the virtuous cycle of ML And the benefits of deep embedding into a single coherent data and transaction platform. But look, intelligence isn't just customer facing. Machine learning is used by the platform as a means to understand the ebb and flow of our customers' businesses And respond immediately. ML allows us to optimize our intelligent platform. For example, the next generation platform has to adapt dynamically to Changes in workload ensure the right work is being done in the right way by the right engine to recognize and dynamically respond to ongoing security threats, To optimize capacity, to dynamically scale within our recruiting and talent software services, for example, last fall, Workday managed the hiring process of more than 50,000 employees in a single day for a single customer.
Globally, We also supported the hiring of 6,000,000 total employees in a single month. Our customers can accomplish such feats because Workday has an intelligent platform That elastically scales with our business. As we look ahead to the future of work, We stand apart for our ability to understand the changing nature of employment in the enterprise. This is unique expertise we have. Thousands of enterprises and tens of millions of workers rely on Workday every day.
We know when payroll starts, When reports are due, what it takes with a month at quarter end is hitting, so we can make sure our service is there for them and even how a company has been on into changing pressures from the pandemic and supply chain needs. And we bake that understanding into the services we provide. Last year, the world changed. Business had to respond and Orkay helped them to do that. We see that the very definition of what an enterprise is, is changing under these pressures.
It's more permeable. It's less clearly defined and with uncertain boundaries. I mean, honestly, sometimes those boundaries are individual homes, My home office, relationships to employees, to partners and vendors are changing. Value chains are more fluid and deeply integrated. This offers incredible opportunities, but it opens up customers to a whole new spectrum of threats and challenges.
Our intelligent platform adapts to account for the degree of change and the boring lines of what were traditional enterprise Employment is changing. These categories we've been talking about remote, full time, contingent, part time and even former are becoming indistinguishable. Kind of gone are the days With a concrete view of binary employment, whether you're employed or not employed, a future employee, a past employee. These are not different people. It's the same person in different roles.
And we are able to adapt Workday to handle these new sorts of Fuzzy employment models and stay tuned for more on this in upcoming releases. In the face of changes in the enterprise and the And the boxes that we've traditionally put applications into are falling apart. We've had strictly defined categories of applications that customers' needs straddle those boundaries. If you really think about it, most workloads are composite work They involve some amount of planning, some analytics and transactions. What do I want to do?
How and when should I do it? And then doing it since decisions made are transactions. So wouldn't it be great if you could move the workloads to the right engine that's optimized for the problem in front of you and not have to think about It's difficult, if not impossible for other vendor architectures to bring these workloads and their data together in a single coherent application and do it seamlessly. We're able to change all that because our architecture is set up for that. We see the market moving towards a demand for applications that provide a mix and match with the right data and the right workload to solve a particular business problem, no matter what category it's supposed to be in.
So we intend to focus on customer needs and not categories. For some examples, workforce planning, is it an HCM application? Is it a planning application? Our accounting center, is it a financials application? Is it an analytics application?
That's the vision for where our architecture allows us to go. We can arbitrarily define applications without having to start with asking, Is this an HCM application? What is it? It just shouldn't matter. We should solve the customer problem.
And Pete is going to talk a whole lot more about what we're calling these data infused apps and what the future looks like for that. We've got great examples of applications we're already selling today But don't fall into those category bins. And we're the only vendor with a flexible strong architectural core that's going to be able to help customers handle Whatever the world chooses to throw at us next. So now I'm going to pass it on to Pete, so he can share more.
Thanks, Cheyenne. Hi, everyone. It's great to be back here with you. So let's start where Shyanne left off. He described the next generation application platform that we've developed here at Workday.
Specifically, our deep investments in unifying data and unleashing it in powerful ways that are fueling our leadership and our ability to deliver delivering real value. And that's important because over the past 18 months, our customers' needs have changed. They're telling us that challenges are coming at them faster and more frequently than they ever have before and they need to move faster themselves. They need to continuously recalibrate and they can't spend time jumping between systems. Now a thin workflow veneer over the top of multiple enterprise systems won't help.
The next generation of cloud is reimagining how we get our work done. Most companies Have now moved into continuous recalibration mode. With the time between plan, execute and analyze cycles shorter than ever And course correcting on the fly becoming the new normal. Now, Workday is developing applications that can embed the 3 types of workloads, planning, Transacting and analyzing into a single app. Traditional ERPs can't do this because behind the scenes, the data is fragmented and That creates different versions of the truth.
The traditional vendors never took the time to integrate their components after acquisitions and that's the result. And middleware workflow systems don't solve this because to run applications, you need to access all of the data at the detailed level of the transactions. This is sustainable differentiation for Workday and frankly, this is what our customers are asking us for. So we see a big demand for this type of application going forward. Workday Accounting Center is the first of this new breed of application.
So why is it unique? It essentially serves as a bridge between Workday and other systems. Accounting Center ingests data from other operational And then harmonizes it for accounting. So take an insurance company customer for example. We can adjust the data from a legacy billing or claim system even if it's 30 years old and running COBOL And turn that into accounting.
Then it surfaces insights to allow analysts to drill from summary down to transaction And then back, all in one spot secured within Workday's platform. And there are many more applications like this to come, Like managing employee experience with analytics, planning and action in a single application or our future quote to cash and spend management workflows. So applications like Accounting Center are opening up new ways for us to differentiate Workday for the office of the CFO and truly offer the solution for the next generation of finance. Today, CFOs are balancing not only shareholder concerns like driving Purpose such as environmental, social and governance issues. In the past 18 months, CFO saw the benefits of the cloud as they shifted their to remote operations and they were ready to invest.
As Aneel pointed out earlier, this is the moment for finance transformation and Workday is ready. We're not just selling to the CFO and the controller though. We've broadened our product portfolio and who we reach within the office of the CFO. And these are some of the key constituents. As we look to enable finance to unlock the power of their people, their process and data, we're investing In 4 areas of product to drive traction and here they are meeting customers where they are with solutions that add value immediately to any business, expanding industry leadership by investing in solutions that solve important problems for our key industries, driving financial automation with machine learning and finally, growing our offerings globally.
So let's begin with our strategy around meeting customers where they are. So finance needs a flexible way to accelerate their digital transformation And our approach to provide a constellation of finance offerings is enabling Workday to better serve them and to gain momentum. A great example is planning. So throughout the pandemic, one of the biggest shifts was from annual to continuous planning. Good news for our Adaptive Planning business.
Planning is Workday's centerpiece to enable continuous recalibration, And it doesn't require a full finance transformation. Bookings were up 50% year over year in Q2 and customers are getting value In just a few months after engaging with us, as leaders sought to manage through all the change, we saw a 30x Increase in scenario planning by our customers and that usage continues to be significantly above pre pandemic levels. Spend Management is also a great place to start a finance transformation. And with the addition of Scout, which we now call Workday Strategic Sourcing, We have the ability to sell standalone sourcing to companies of all sizes. We're seeing continued momentum with now over 12 customers, that's nearly double the customers that we had in 2019.
Customers are live and running and they're running their first sourcing event in about a month And they're achieving 3 times their savings goals with strategic sourcing. Now both Adaptive and Scout were acquisitions for us. At this point, the key workflows across both planning and sourcing are now integrated into Workday, and we're continuing to optimize the user experience. And due to our belief in the power of data infused applications and the power of the platform that Shyanne described, we will continue to integrate us. Another way that we're helping meet our customers where they are is through our enterprise finance solution.
There's a variety of ways that Workday Financial Management can be deployed. A core finance transformation is The path that most of our customers have taken in service based industries and it involves replacing the core financial system and moving it to the cloud. But we know that that prospect might be daunting for some CFOs. As of this year, we're now able to help them leave their existing operational ERP E Systems in place while moving their corporate finance functions to the cloud with a corporate finance layer, which in turn Expands our financials addressable market beyond our traditional services oriented industries and it also creates an even larger opportunity for us. And lastly, we also enable large organizations to create new entities on demand, helpful when they need to spin off a line of business or make an acquisition.
The point here is, in whatever way a CFO comes to us with a challenge, we're ready to meet them where they are with a number of different solutions. When it comes to finance, it gets specialized by industry very quickly. So our strategy has been to build product solutions that drive additional value For specific industries, now these are industries where Workday can and should lead. If we do it right, many of these solutions opening up our ability to serve financial services, especially in insurance and banking. We're also Starting to see success with other key industries with Accounting Center like in technology and retail because of the flexibility of the solution.
And in the professional and business services industry, we offer professional services automation. We see this as an industry where we can be the front, the middle and the back office solution for operations. And you probably recently saw that we announced our intent to acquire Zimit, which is going to significantly expand our leadership in PBS with the configure price quoting system or CPQ. Since there's been a few questions on Zimit since the announcement, let's spend a minute talking about how this enhances Workday's offering. Simply put, Zimit is the perfect bridge between a CRM solution like Salesforce And Workday's professional services automation solution.
Once a customer gets added to a CRM, a quote for services can be easily made in XIMMITT And it all directly integrates into Workday PSA. Zimmit is a perfect fit for us because they focus on services CPQ As opposed to product CPQ, it will also be valuable to any customer with service based sales, including subscriptions in the future. So turning to the retail and hospitality industry. Scheduling, which you're going to see in just a few minutes, is helping manage frontline operations in an organization. We're beginning to offer this solution in retail and hospitality, but we could see it applying to other areas in the future like health care And maybe even in manufacturing down the line.
And in Healthcare, in our supply our supply chain management and inventory management capabilities Are supporting our competitive differentiation in that industry. So as we're talking about industry investments, let's do a quick Pause on student. We've made a strong investment in this space and we are now a leader in higher education cloud sales and adoption Across HCM Financial Management and now Workday Student. According to the Tambollini Group, Of the institutions who have adopted a cloud based student solution, 73% have selected Workday. We tripled the number of live customers in spring 'twenty one this year with 18 go lives.
And this brings our total number of customers live to 26. We expect to have over 40 customers live by spring 'twenty 3 as we focus on the success of our early customers. This is just the beginning for the Higher Ed Student Information System market. We're in a really good leadership position here. Momentum is building And it's influencing broader platform deals across Workday, especially in state and local government.
Now student is the 1st vertical that we've invested deeply to become the core operational system, and we'll continue to consider this as an option in other verticals going forward. Another facet of our strategy is investing in machine learning and automation to create that next generation of finance. This is a huge area of interest for our customers and an important factor in how they decide which finance solution to purchase. Now our approach is to look at business processes end to end and find areas where we can eliminate manual work and intelligently automate using machine learning. Here's a couple of recent examples in finance.
So Journal Insights reviews journal entries It alerts accounting teams when it detects an anomaly. Customer payment matching reconciles the right customer invoice when a
payment comes in without the right information.
Spend category recommendations for Spend category recommendations for data entry on requisitions and invoices uses data to automatically recommend spend categories And that simple action can reduce downstream errors and increase accuracy. All of these innovations are available right now And there's more coming. Because of how Workday is architected, we can spin up new ML use cases quickly. We're taking weeks instead of months or years, A clear differentiation for Workday. Now our final strategic focus for the office of the CFO is global growth.
Workday built financial management from the start to be global, starting with foundational capabilities like multi entity, multicurrency, Multi GAAP amongst others. Now on top of that, Workday now delivers 54 country specific configurations To accelerate deployment with specific values, templates and reports and beyond that, we've made financials easily configurable to enable operations anywhere. We have customers operating in over 120 countries. We continue to add new global capabilities like So to sum this up, With the breadth of offerings that we have for the office of the CFO, we have more ways to serve a greater base of customers across industries. We're differentiating our offerings by helping finance put their data to work, driving innovation by industry and Driving greater automation.
Now let's turn over to the office of the CHRO. The past couple of years have put HR leaders in the spotlight in every organization. They're supporting employees Through the pandemic, ensuring a hybrid workforce thrives and making progress on diversity and inclusion, to name a few. It's the perfect storm of disruption when it comes to the workplace. And our vision is to create the future of work By building solutions that enable everyone to have a remarkable experience, be productive and realize their full potential.
While the CHRO is our primary buyer, other functional leads inside HR also play key roles in buying and partnership decisions. And we've expanded our offerings to uniquely serve the needs across HR. To continue our market leadership, we focus on adding new SKUs to grow our business and help CHROs deliver the future of work. Our strategic focus areas are enabling skills based people strategies and leading the skills movement, Driving employee experience with holistic data a holistic data driven approach, enabling workforce agility to drive efficiency and operational excellence, And we're growing our footprint globally. So underpinning Workday's technology differentiation is our unified platform and the heart of it is skills.
Skills are the common data thread that ties the entire Workday platform together that fuels intelligence that matches, Infurs suggests and verify skills for every worker. We've infused this capability in key HCM Workday applications to drive differentiation. So two great examples, our Talent Marketplace and the Career Hub, which are together part of our talent optimization That provides personalized guidance and recommendations to support career growth for employees. Customer growth for talent optimization has been incredible this year at 85%, and that's at the end of Q2, and we still have 2 quarters to go. Recruiting and learning are also leveraging skills.
In recruiting, candidate skills match is a new ML driven feature that we released this fall that finds the most qualified application that matches a job's skill profile, Saving recruiters hours of sorting through resumes and it's intentionally built and reviewed to minimize bias and provide equal opportunities to all applicants. Workday Learning is a personalized contextual platform that arms businesses with the ability to understand the skills that they need now And for the future, to ensure the workforce is ready to take on the most important new challenges. We see these as areas of white space and growth for our And skills go beyond the office of the CHRO to our solutions for the office of the CFO as well. So you can imagine if you're a professional services organization, you'd want to be able to quote a services engagement with certain skills. Now we can draw on that data.
So why is Workday leading in this space? We were a first mover investing in skills based technology 10 years ago and Creating a Skills Cloud 3 years ago. We now have nearly 1,000 customers live on the Skills Cloud. This kind of customer scale means that we grew our skills coverage from 25,000,000 skills just a few years ago to now 2,200,000,000 skills on workers. The more it's used, the better it gets, and we have skills at scale.
Now from a customer perspective, understanding your skills contributes to your ability to be agile, and it also can support employee experience and engagement, Which is another core focus of our strategy. As you know, employee experience has quickly risen to the top of leaders' priority list. Leaders need to be in touch with their employees, but in some ways technology has moved them further apart in this hybrid workplace. Our investment in Pecan is intended to change that. Pecan's intelligent listening technology uses ML to ask the right question to employees at the right time and creates deeply domain specific analytics to help leaders and managers hear and connect with the voice of the employee.
Beyond that, it anonymously creates conversations between employees and managers, deepening the insights and ensuring that employees feel that they've been heard. And the privacy that PKON provides is a core element of differentiation. Some vendors talk about using experience management, Which is another way of saying surveys. Pecan is creating engagement between employees and managers about the topics that they care most about at the moment. And when we integrate the sentiment data that Pecan provides into the Intelligent Data Core, it contributes significantly to what Workday can do to drive exceptional employee experiences.
Workday is unique in the market in that we offer a data driven experience very different That will be relevant and engaging and embedded into the flow of their work. In many respects, everything that we've discussed so far Our next topic, which is workforce agility, but we're also thinking about the new markets and growth in this space as well. The hourly workforce and frontline worker market is huge and it's yet fairly untapped as companies haven't yet invested And HR experiences for hourly workers as much as they have for salaried employees. Scheduling is a key enabler of our frontline worker strategy with a worker first orientation. It's an AI driven scheduling solution that matches labor demands with worker Preferences to generate optimized shift schedules for both workers and for the business, all built on a beautiful UI that's We have 6 early adopter customers Today, 2 of them are live, lifetime with 20,000 employees and Giant Tiger, and it's going to be officially launching next month.
It will be GA in FY 'twenty three. Now earlier I talked about technologies that can help drive success within industries and this is certainly an example of that. We're initially targeting retail and hospitality with this technology, but can see this being useful in other industries like healthcare or maybe even manufacturing. So this brings us to our final focus area. As you know, continuing to expand our global footprint is a key focus for We're actively investing in experiences to improve the globalization and localization of our products.
The translation coverage in our key markets has increased significantly in FY 'twenty two and will further in FY 'twenty three. As you might have seen, we recently announced the development of Workday payroll for Australia and Workday payroll for Germany, Giving us 6 native Workday payrolls. And together with our partners, we now reach 120 countries around the world. This is important Because there's a greater than 60% attach rate for payroll to Human Capital Management and our ability to sell HCM in countries with native payrolls greatly increases. So we've covered a lot of ground today.
And as you can see, across the office Of the CHRO and the CFO, we've been on a tear since the last time you saw us in 2019. We've delivered 50% more innovation In the last 3 years and the 3 prior years before that, we're releasing innovations that not only put us in a unique position in the market to differentiate, But our innovation is specifically designed to provide greater ROI for our business. Today, I told you about There are new payroll countries and gave you a glimpse at scheduling, but there's so much more to come. You can expect more than 10 New directly monetizable SKUs over the course of the next 2 years across the portfolio of the CHRO and the CFO. Over 20 new solutions that increase our competitive positioning and upsells of existing SKUs.
And as always, thousands of enhancements that add value to our existing customers. And with 97% satisfaction rating from our customers, Retention follows, and that's durable performance over the long term. So with that, I want to hand it back over to Justin for the innovation focused Q and A.
Thanks, Pete. We received a number of questions over the last hour, and we're going to take the next 15 minutes to get to as many of those as we can. This first one is actually for Cheyenne, and it comes from DJ Heinz at Canaccord. It relates to Extend. How does Workday Extend contribute to the financial model?
I assume there's a strong retention story for customers that have built apps. Are you directly monetizing the platform today? And is there a play to have ISVs build on Xtend? And how do you see that evolving over time?
Yes, thanks. We view extend as a critical strategic element in our overall technology strategy. And yes, we do directly monetize it. But I want to really reinforce that it is strategically critical. It is and as you said, it is a good sign in terms of customer retention and how they leverage the platform.
In the near term, we are focused on partners and customers and their ability to use extend effectively and focusing our development efforts on that. Over time, we do expect to open it up to a broader ecosystem, including ISVs to build differentiated solutions on the platform. But it's definitely a crawl, walk, run, because we're going to be this be in this for the long haul.
Excellent. I'm going to stay with you, Cheyenne. We've got I'm going to combine a couple of questions. We've got from Anurag Rana at Bloomberg Stefan Slowinski at Exane, it's about the public cloud. Can you give a sense for the percentage of Workday applications currently hosted by hyperscale cloud providers and where you see that going longer term?
And will you leverage hyperscalers more when you think about international versus where we are from in the Americas.
Yes. So super complicated answer to that straightforward question. There's 3 kinds of ways that we leverage the hyperscalers today. The first and actually the largest volume one is internal Workday workloads and you can see that expand over time. These are workloads that often are very elastic in usage and are ideally suited For the kinds of environment the hyperscalers have where we can build up and tear down resources as we need for, let's say, massive testing.
And that's a big use we have today in the hyperscales, we'll continue to use. We also have some Workday applications that are already honed In public cloud, even if the customer data is in our private cloud data centers and so you can see how these hybrid applications span across Public and private cloud and finally, actual primary customer tenants and where those are located, which is really the heart of the question that was being asked. And we've been using public cloud primarily for geographic reasons historically to put customer data In the region and in the regulatory domain they would like to be in and we will continue to use that. If you think about The capital outlay to build a new private data center, it always makes more financial sense for us to leverage hyperscalers to enter new markets From a geographic standpoint, but over time, as our capabilities have developed that and that price curve changes, We're able to move more and more to public cloud.
Great. Thanks, Cheyenne. We're going to go to Pete now. This is a question from Brett Phil Jefferies. And the question is, can you walk us through how Accounting Center interacts with the core GL?
Where does Accounting Center sit in the overall Workday platform? And can it be adopted across different verticals?
Hi, Brent. Thanks for the question. So Accounting Center is now part of the core Workday platform. Actually, it leverages technology that we we acquired from the Platform acquisition is now part of Prism. And the way that we have designed Accounting Center, we've designed it so that Practitioners in the Office of Finance can actually operate it themselves without having to have IT come along and do the work for So basically they set up data ingestion from external operational systems and then the finance practitioners are able to Create accounting rules inside of Workday Financials inside the same interface that they're used to using for regular accounting that handles When the data comes in from the operational systems, we then run those rules on that data and then generate accounting from that, The core debits and credits.
And of course, this is a very, very complex system with very high volume capabilities to be able to handle the types of operational systems that we have. So what we also have in there is we have the ability to do air handling. So if something goes wrong during the process, it gives them full visibility in what's going on, gives them a chance to back out those changes, Make sure that they are comfortable with everything. So it's really a big platform that we've built. It's all within the Workday overall platform and we can see leveraging it for multiple industries beyond financial services as we
Thanks, Pete. I've got one that maybe both of
you can weigh in on here.
This is from Scott Berg at Needham. I'll start with you, Cheyenne. Can you provide some tangible examples of how the quicker time to value configurations are helping win in medium enterprise and how you're applying those learnings to get international customers to value faster as well.
Yes, I'll start, but I really think that Pete can weigh in with even more detail. Fundamentally, the smaller customer We're moving down from the very large Fortune 500 class customer needs to get a return on value faster And often is able to take advantage of the experiences we've already had and then built into Our deployment methodology and software, so they can get up and running quickly in a configuration that works really, really well for their kind of business. And Pete, why don't you elaborate from there?
Sure. I said this a few minutes ago in The previous remarks, but one of the things that makes Workday different is that we allow customers configure, not customize our software. So the implication of that is that we have Previously built configurations that we can quickly apply for customers in various scenarios. One scenario would be in the midsized enterprise where Many companies are they appear similar. They don't have that much general customization within their business.
So we can take one of those configurations and simply apply it Using the tools that we provide through our services organization as well as our partner services organizations to simply say, This is a fast way to get up and going. Another one that I mentioned earlier is country based configurations and we Provide 54 out of the box country based configurations, that's certain values within countries, templates, So if you're doing business in a certain country, you can simply say, okay, I want to take this configuration, apply it quickly, and then they can make Quick adjustments based upon their own needs within the country. And by the way, that's just as I mentioned before, that's just a subset of all the countries that we support business in, we have customers that are doing business in over 120 countries today.
Great. Thanks, guys. The next one is from Brad Sills and it's for Pete. Brad's with Bank of America. How far along is Workday in terms And then the verticals for Fins and what are some of the examples of vertical functionality and talk about the roadmap from here?
Yes, great question. I spent a few minutes on that earlier. And so I'm going to assume that that was you asked the question before that. But Really our strategy here is to pick certain solutions for all of our key verticals that we play in, mostly in the service based industries. And these Certain solutions are going to differentiate us for hard problems within those industries.
And so for instance, we talked about Accounting Center and Financial Services. We talked about professional services automation within the professional business services world. Within healthcare, we provide inventory and supply And so the goal is to have some key capabilities within those industries that are Part of Workday and differentiated. We then have an entire solution map along with our ISV partners that we can go and say, well, you need that capability, here's our partner that So that's been our strategy. We've really over the past Few years that's really started to play well for us, where these new key capabilities have come online and it's helping us have better win rates in verticals.
Great. I'm going to stay on the vertical theme and stay with you Pete and just talk about how Workday thinks about Our own development within verticalization and what we leave to partners.
Yes, great question. So We are although we have we are now a large development organization between Cheyenne and my teams, we know that we Don't have the capability to build everything all at once. And so we absolutely need to and want to work with our partners To fill in those pieces within the solution maps. Now, we definitely go through a lot of thinking in terms of where we want to spend our And I mentioned a little bit of that in just the previous comment, which is we want to pick the things that are differentiated, Hard to do, really take advantage of the core Workday platform. For instance, as we were talking about before, we were talking about We're talking about skills.
So we want to make sure that skills are part of professional services automation. That makes sense for us to invest in that part of The Professional Business Services Industry. So we obviously think about using our resources very strategically in that way.
Great, thanks. I'm going to go now to back to Cheyenne. This is from Kirk Materne at Evercore. In terms of machine learning, Are you able to use all the anonymized data on your platform in order to train your own algorithms or do customers have to opt in? And any sense on what percentage of customers are leveraging ML capabilities today?
So our customers do opt in. They opt in to contribute data to our machine learning platform and they do so explicitly and very much a focus On the value they're getting back for the data they're contributing in terms of use cases that they're leveraging. We do take that data, we do anonymize that data And then we use it to train our algorithms. Those finished models, those highly trained models can then be pushed back. We use a technique called Federated Learning for those of you who are familiar with it.
And then we'll push this trained model That has been trained in the centralized ML platform back out to the edge, back out to the customer's own location, which is often in their own regulatory geography. And it finishes training, let's say we get 80% of the way there with the centralized model and the last 20 really customizes the algorithm for the customers' own specific needs and capabilities in their environment using their own data and in that case, Their own data doesn't traverse back out to the MLP platform. And so it kind of gives us the best Both worlds, we are able to centrally train models, but we're also able to make sure that customer data stays where it needs to be And the customer gets the capabilities from a machine learning standpoint. We've seen very, very high uptake by customers Of the machine learning capabilities, many of these are as we walk through some of the use cases, both myself and Pete, Many of those are focused on particular products or SKUs that we offer. So we have candidate Recommendations in recruiting where we have journal line anomaly detection and financials and so usage of the machine learning depends On the specific customer environment and what capabilities are leveraging.
But the way to think about it is, In the future, the expectation is really all of the interactions are going to be mediated to some degree by machine learning in the same way that nowadays, Whether we realize it or not, most of our interactions through our mobile phone or even our car are mediated by machine learning And that includes the user interface of Workday, which is a learning interface and as I mentioned in my section, the platform itself.
Great. Thanks, Ryan. I'm going to go back to Pete. This is from Michael Turits at KeyBanc. The question is, in areas like procurement, planning and CPQ, Thank you.
How do you benchmark your capabilities versus best of breed the point solution vendors in each of these different areas?
Well, so we certainly want to have great coverage over the key functionality that our customers Need within their business. And so we start by saying, how do we build a great product that covers the functionality that our customers have? Now Actually using benchmarks, I'm not sure if we actually have any internal benchmarks. We do think about our own product market We have high goals for our own product market fit and what that means is to me within the product world that means higher product market fit means That we win competitively more often and we hold ourselves to that. And so I'm really happy about Where we're going with product market fit by industry within those few different capabilities that you were just talking about, one of them Is CPQ and that's a new product that we're going to be if as the Zimit acquisition Concludes we'll be adding to our portfolio and that's a great new product with is very unique.
So in terms of a benchmark, There aren't any other that we know of CPQ for services solutions out there. So that would be creating a new benchmark in that case.
Okay, great. I'm going to stay with Pete actually. This is from Mark Marcon of RW Baird. And it's about the new workforce sign release. Can you further discuss the capabilities within this workforce planning system relative to prior capabilities with Workday?
And how you think it compares to solutions versus other competitors in the market?
Sure. So Workforce Planning is based upon the Adaptive Planning platform. The Adaptive Planning platform itself is incredibly powerful, Has access to all of the data inside Workday, not just limited based upon a use case that is Strictly about workforce planning. So one of the things that makes Workday's workforce planning unique is the ability to have access to all of The people data within Workday, but also to bring in any other dimensions that you have across your business, which might help drive your Workforce planning plans. So that might be sales in certain regions and you're going to bring that in from Workday Financials and that could be a driver that drives Your workforce plans differently in some case.
So workforce planning is Has been evolving. I think in the last release, we've improved the user experience of some of the workflows Within workforce planning, so for instance between workforce planning and over to our core HCM modules, we worked on making those workflows easier for So those are some of the key things that we've been focusing on there.
Thanks, Keith. I might have Cheyenne start and maybe Pete add on for the next one. This is from Mark Murphy of JPMorgan Chase. Given the growth in RPA for automating repetitive back office finance tasks. Do you see an opportunity to offer your own RPA bot technology or would you prefer to build ML automations directly into the apps as you've done with Journal Insights.
Yes, I mean, I think that It really is the latter. I mean, we really look at the problem that RPA is solving, which is Repetitive
tasks that
often involve data movement around as an indictment of kind of Or even a design failure with respect to how that particular task flow was built and understanding how the user is Operating and better optimizing it. And obviously ML is uniquely well suited to processing that and identifying how Address frustrations with that. And so as mentioned in the question with Journal Insights is a great example of how do you, A, Assist with that automation and B, how do you actually not even get to that By understanding the purpose and the goal and reducing some of the noise and frustration that the customer is going through simply by making the task easier to use. That said, we're not going to cover every single use case And every possible use case from an RPA standpoint, because often these involve multiple systems that are outside of Workday's direct control. And so we partnered heavily with Automation Anywhere and UiPath who are leaders in the RPA space to help bridge Those contacts and provide an end to end solution for automation.
Great. Thanks, Cheyenne. We're going to take one final Question and this one's for Pete. Can you talk about payments and where Workday sits today? And do you see a potential to go deeper here longer term?
Yes, great question. So as you all know, Workday sees a lot of transactions on our platform, Both in volume and amounts of payments that are going across our platform on
a regular
basis. They tend to center towards on the supplier side as well as towards employees. And this is an area that we've been studying for quite a long time. We are pretty interested in it and we see an opportunity for us here in the long term. But for right now in the short term, our priorities are focused on other things, but it's certainly something that we're going to keep our eye on.
Okay, great. Thank you both and thanks everyone for the questions. That was a great discussion. We're going to step aside for a quick 10 minute And when we come back, we'll have our EVP of Global Sales, Doug Robinson, with his presentation. I think you're going
to like it here.
Why is everyone Saw
anything at me? Look, as CFO, it's my job to be ready for whatever's next. That's why I have my finance seat randomly hurl things at me.
It's also why we use Workday. It gives us insights, so
we quickly pivot our strategy, people, planning, you name it.
Sorry, sir. I will aim straight at you next time.
I see
that you do. Would you like some coffee or?
Workday,
Welcome back from the break. I trust everyone returned and is settled in and ready for Act 2, it occurred to me as I prepared for this that I actually haven't met many of the analysts in the community. In the last 8 months I've been enrolled, so I thought I maybe take a minute introduce myself, my name is Doug Robinson. I lead Global Sales here at Workday. I've met over the last 8 months, as I said, many of you through earnings callbacks, but the rest of you, I've been with the company 11 years prior to leading global sales.
I ran our North American sales organization. So we're gathered for the next 20, 25 minutes for us to talk about how we in sales are organizing and investing to capitalize on all that great innovation that you heard So as we move forward, we thought maybe a good place to start is since you got to know us as a public company since we entered public markets to today what's transpired and to really give you a sense of not just a walk down memory lane, but rather I think it will prove instructive for you as we talk about where we're going next, where we're taking the organization and how we're capitalizing, as I said, on all that great innovation. So certainly from a customer When we came out in 2012, 300 or so customers to today and all that great growth, organic growth around 3,800 Core customers, core system of record customers. But the other big shift, of course, is the acquisitions, the strategic acquisitions that have given us over 9,000 total customers, Very different organization than 9 years ago. Secondly is this focus on really both new logo and this notion of back to the base.
This Back to the base motion is something we talked a lot about throughout certainly last fiscal year, but I would say it gives us a much More balanced picture in terms of revenue and performance and the sources of revenue that we're driving for our growth. Rewind 9 years ago in HCM that was certainly the Landing point for Workday, but as you heard from Pete and Cheyenne, we have multiple landing points within the organization now. And so this cuts across both our Key personas are key buyers of office of CHRO, office of CFO. So not just HCM or not just core financials, But increasingly these land motions around things like enterprise finance, planning, procurement and even peaking.
From a U.
S. Focus, we moved to certainly a global sales coverage model and you'll hear some additional sort of disclosures when Robin presents around Where we see our revenue when we're a larger organization and where we think that will go from a percentage basis. And then this notion of going from horizontal go to Which certainly HCM HR is to much more industry specialization. And so you cannot talk financials without an understanding of Industry specialization and that goes beyond what Pete talked about and where he really got into product capabilities for specific markets. You have to have sales teams, presales, enterprise architects.
You have to have people that show up and understand the language of industry, and that's an investment that we've made in a big shift over And the last one I'll hit on here is this notion of SKU selling onward to solution selling. And that's talked about a lot in our industry and enterprise software. But for me, it's particularly prescient with Workday. And sometimes I think underappreciated the power of Workday's platform. I think Cheyenne and Pete both did a great job of highlighting this ability
Dan, there are
certainly examples of that. All right. So let's dive in. I'm going to talk to you about looking forward 3 growth pillars that we're really focused on as an organization. And it starts with first a great foundation.
So as you know, as we've mentioned, 3,800 customers, 5,700 just in the planning, adaptive planning module or solution set alone. And what's really unique about this is it's not just a large customer base, It's a really relevant customer base. Over 50% of the Fortune 500, 24% of the Global 2000 Makes us relevant in many industries and in many geographies around the globe. So all of this then is against the backdrop of 97 And you heard Aneel kick off with our focus on our core values and a fantastic customer experience is the baseline And so in our experience, if you take great care of customers, you have an opportunity when you own the core to own it all. So here's the headline as it relates to this back to the base motion or expanding within our add on sales and customer base.
We have a $10,000,000,000 market opportunity and this really comes to us in multiple ways or maybe better said multiple ways for us to get there. First, core Fins back to HCM. Secondly, you heard about planning Pecan and sourcing back into our HCM and back to our Fins customers. And then our new offerings, the new innovation that comes out from Pete's organization. This includes Journeys, this includes Help, this includes People Analytics.
All told, it's an 8x opportunity of just HCM alone. So again, the headline is $10,000,000,000 That's the market opportunity for us. We recognized that and we took advantage of that and we doubled down on it. In the last two years, we've increased our Sales capacity increased our customer base sellers 70% in the customer base. So let's talk about where we were 2 years ago.
When we last got together at the Financial Analyst Day 2 years ago, we were 80% land and 20% expand, clearly a net new driven organization. Fast forward to today, sixty-forty, 60% land and 40% expand motion. And so
what I would share with you
is that while both are growing and both are growing from at a healthy clip, we expect net new to continue to be So where are those opportunities to get to that $10,000,000,000 In ACV within just our customer base. What we've represented here and I believe we also showed this 2 years ago when we were all together is a look at The product attach rates back into our core system of record. So of course, we've got recruiting, time tracking and payroll Are the mainstays and have been you can see in the parenthetical or the parenthesis the year that that application was released into general availability, Really high attach rates. This $10,000,000,000 opportunity comes from here. It's this orange tranche where you see between 20% 45% market share, but a fantastic opportunity for that increased sales capacity, that 70% increase to our customer base to go back into and serve clients these particular solutions.
From this group, I'd call out Planning and Prism. I think Pete mentioned the 50% plus growth rate in Planning. I think those 2 in my expectation move up into that blue over time as we continue to meet with the analyst community. And finally, perhaps the most exciting for me and for my organization is this light blue group of applications. And I'll just call this out is all of these, if you look at the parentheses are in 'nineteen, 'twenty, 'twenty one, they're new innovations.
New innovations for us to go back to that customer base that has a 97% customer set and then serve those customers, all of them below 10% attach rate. And perhaps I'll just call out a couple of them. Certainly, we've made mention of Pecan today. And I would say, really looking back at At Scout RFP for strategic sourcing or adaptive planning for planning, Pecan, all of those served a strategic need for us, But rarely do you get the timing so right. And I think our organization did that with Pecan.
Pecan has applicability that cuts across every geography, Every market segment we look at and every industry. Secondly, I call it extend. There was some mention of that I heard in the Q and A with Pete and Cheyenne some additional questions around And I would say from where I sit representing our organization out in the field, after years of investment, this has really become a compelling Add on opportunity for our customer base teams. And then finally, I mentioned Workday Health, again, another brand new innovation that just came into the pipeline and just came into GA That really meets a unique market opportunity with as we see it limited competitors. But also keep in mind what Pete shared earlier Is that when we get together here next year, the light blue, some of them move into orange, some of the orange move into dark blue, and there's a whole new set of applications that Feed that innovation engine underneath and have less than 10% market share.
That is why I've got a very fired up sales organization that is Ready to go engage with customers. All of that said, the number one opportunity for us beyond all of these add on or solutions is going back into core HGM customer and representing our core financials applications. That is, make no mistake, the largest opportunity. And also as we discussed, the increased ability to land in new areas like planning, sourcing and pecan employee engagement, I should say, becomes a really core HGM and CorFIN's opportunity as well. So let's wrap this section.
And what I would leave you with is really sort of three areas of significant investment. First is sales capacity. I mentioned the 70% growth in this sales organization over the last 2 years. That continues, in fact, that's going on right now That we will continue to increase and this is globally our customer base sales motion and sales capacity in the back half of this year, all in anticipation of FY '23 targets and FY 'twenty four targets. Secondly, I would call out our accelerating account based marketing efforts Really, where we target and this is not true perhaps for all customers, all 9,000, but certainly in our core customers and Particularly with our strategic customers, really targeting our customer base in a customized one to 1 and more strategic way.
So what that means is showing up with Really understanding the customers' goals, objectives and strategies, mapping in our technology enablers and how we'll achieve it and then driving enterprise level agreements. This is particularly a motion that we've invested in this year. We'll continue to do next year to drive enterprise agreements in the strategics. And then finally, I'd close out with investing in customer success. You can't have 97% customer set and not continue to invest.
So we'll always look It's
critical to
what we do. We always look for ways to invest back into those customer success roles and continue to refine how particularly sales and our customer with that, I'm going to transition to our 2nd pillar of growth and that is around broadening our office of the CFO Opportunity. This is a key buying center for us. And as discussed, our product has certainly product footprint has certainly broadened over the last 2 years. And that's, As you can see represented in the far left in core financials, but in the middle column, all of the applications in green Really increases our opportunity.
When you add it up, it's 3 times the opportunity of Corfins. And not only is it important in terms of revenue or wallet It also drives our differentiation. Things like Planning Extend and Prism coupled or paired with core financials is really what is driving our competitive win rates, Not to mention industry. So you see on the far right there, we left those out of the initial compare of the greater than 3x opportunity. When you add in, For example, supply chain for healthcare, PSA for professional and business services, student for our higher education customers In Accounting Center, we see that as real market opportunity and really drives the revenue size and the average selling price in the ACV of our core financials deals.
I would call out Accounting Center. You see we represented it both in the middle column and in the far right, and that really is to capture. Although Accounting Center was purpose built for our FSI industry, we're seeing great capabilities of Accounting Center to apply across industries. Anywhere somebody's got an on premise system, a legacy system and that system creates any kind of operational ERP or sub ledger data, Accounting centers applicable in all of those accounts. That goes well beyond FSI.
So as we see it, Gartner sees it. I want to share just a few quotes that really captures how we're seeing the market play out. And I'll hit each of these, certainly won't read the quotes to you. But first and foremost, The importance of whoever a customer chooses to go into the cloud with from an FP and A perspective, I. E.
Workday Adaptive Planning, That partner is critical to the decision made on core financials move to the cloud. Secondly, there's a whole tranche or group of Opportunities and digital transformation projects in calendar 'twenty four calendar 'twenty five that Gartner is hearing from clients and seeing those pulled forward into And then finally, the last quote is really around inquiry levels. Inquiry levels are up. And so what they see, we see too. Our As we see it now, certainly in FY 'twenty one, our last fiscal year, CorFIN's opportunities in digital transformation projects Dropped off.
But what we're seeing now is that our both in terms of our pipeline growth rate has surpassed where we were pre pandemic And then in terms of total pipeline tied to Just Core Financials is well past where we were pre pandemic levels. So the time is now And as we see it, the finance transformations are beginning to accelerate. Okay. I mentioned the importance of the industry applications as it relates to core financials. And I thought I'd just call out a couple of the areas that we're particularly focused and share some of the data in terms of attach rates that might illustrate for you What's working in the market for Workday?
First up, healthcare. So 60% of our deals are full platform. So new customers come to market, 60%, 6 out of 10 by not just HCM, but core financials and also full platform healthcare supply chain management. Professional and Business Services, 40% of all deals, net new deals are attaching financials so far this fiscal year in the first half. And that actually holds true with PSA as well.
It's about the same attach rate, right around 40% within Professional Business Services. And then next up, our secret weapon, Accounting Center in Financial Services, it's driving our competitive win rates. We win 3 out of 4 deals in this space When we get accounting center as part of the footprint and as part of the solution. And then finally, I'll call out education and government. About 60% of customers Okay.
Another key investment area us to accelerate our motion back into finance is around our partner ecosystem. So we've got 14,000 certified consultants. And in the last 2 years since we've met at the last Financial Analyst Day, we've had a 50% increase in certified consultants. That includes both core financials, But also planning consultants over the last 2 years. Secondly, I'll mention it again, as Extend opportunity.
There was a question from one of the analysts that I think Was spot on, which is the role of Extend as it relates to financials wins, and we're seeing that. So we've got 2,000 certified consultants, Certified developers, I should say, and we've got up to 2 50 apps now in our app gallery, but that's just the beginning. This is an area I'm really going to drive our organization, particularly in the field next year. And then finally, this really couples this with Xtend, but really going to jointly develop solutions with our partners. So examples of this, Deloitte has a cash management application that leverages Prism and Extend.
They developed it and extended our capabilities further and helped us win a financials deal And allows Deloitte to then help the customer take Workday's product even further. We're exploring other solutions with PwC, KPMG and a number of other partners around IFRS 17 and a number of other areas that we think will also really accelerate our financials performance. Okay. One important evolution in our go to market motion over the last few years has really been around this land motion, Finding new paths into the office of the CFO when customers are not ready to rip and replace their entire ERP, operational ERP platform. And so not every customer is ready.
And so what we've seen particularly around Workday Adaptive Planning and around strategic sourcing is an ability to land first There, establish a relationship, serve a customer and then over time move into platform. So there's proof in the data. When we land first with planning, our competitive win rates go up nearly 20 percentage points on core HR and finance platform deals. That's landing first with adaptive planning and then driving into full platform. The other thing I'd call out is enterprise finance.
So this is again another opportunity where we can create a finance footprint, a digital finance layer that meets a customer where they're at, when they're not perhaps ready to rip out all of their Back office applications. So let's wrap up this session with looking ahead, we're making some really significant investments in our sales motions back to the office of the CFO. So watch for 3 primary angles for us. I mentioned this sort of a recurring theme here, but increased sales capacity and focus. We, as I mentioned, will have a dedicated land first only distribution channel and selling motion for planning and strategic sourcing.
Secondly is brand investments. It's targeted at the CFO audience and not just CFOs, but really bringing industry focused messages to CFO to drive awareness Back into Workday Financials. And then finally, a focused partner investments, extending our base extending our solutions And our deployment capacity, you continue to meet the demands in the market. Okay. So to bring it home in our 3rd and final growth priority It is to highlight the significant runways we still have left in office of the CHRO.
This is still the largest percentage of our new business Bookings, although we're still the market leader, there's a lot left to do. Similar to finance, HR solutions have broadened considerably over the last 2 years and our add on solutions now represent 3x the core HCM opportunity. From a bookings perspective alone, booking standpoint, more than 60% of new HCM business came from outside of core HCM in the last 12 months. So leading analysts like IDC and others agree that we're the market leader in But we still have so much runway left. So we'll do 2 sort of cuts at this.
Certainly, we'll do by large and medium enterprise, Not unfamiliar to the analyst community here. We've got 25% market share in the Global 2000. From a medium enterprise perspective, it still continues to be a rocket ship for us. But in spite of all that, we still have less than 10% Market share across our key markets. So for us, the runway is still large and it's still vibrant.
But then another cut at it is geographically. And so as many of you know, 50% of our addressable market is the U. S. Market And 75% of our revenue also comes from the U. S.
Market. So we've definitely had success there, but we're still less 15% penetrated into HCM when you cut across both medium enterprise and large enterprise. So U. S. Represents half that market.
We're still less than 15% market share. Continued investments will go into the U. S. Market in the net new motions. International, however, is a fantastic opportunity for Workday, and there's literally a world of opportunity for us.
So this represents, Obviously, the other 50% of our TAM, but closer to 25% of our revenue as of today. And so as the market Continues adoption of cloud, you can expect our revenue mix and business to shift and see an increasing percentage from international markets over time. But here we are 16 years in and we have less than 5% market share, the opportunity is huge for us. Our core product Has made the investments though. We're now available in over 180 countries and the opportunity is there for us for the taking right now.
But international is not one market. It's nuanced. But we have a playbook and we know it works. So I'll start with the U. K.
And really give that As an example of how we're going after each of the international market opportunities for Workday. So we opened this office in 2012. We developed local That's key to the playbook and particularly around Global System Integrators. Then you have to build local capabilities. You have to invest Product if you're going to go into local markets and that includes things like native payroll in the UK.
Then you hire fantastic people With Workday's value system and then you go win big anchor accounts. So you can see in the UK, we've got AstraZeneca, Rolls Royce, Lloyds Banking, some really great Namesakes and some great customers. And what we find when we enter new markets, you go win the biggest, baddest accounts in those markets. That has an impact not just on their peer group, but rather medium enterprise accounts take notice on who's moving to Workday. Government Accounts take notice on what large commercial companies are doing.
Higher education takes notice. So fast forward to today, that's the playbook that we use. 30% of the FTSE 100 are customers now. We've got a vibrant over 600 customers in our customer base. And you can expect next year even further investments in our dedicated customer base team and particularly medium enterprise going into FY 'twenty three.
Okay. France is much like U. K. It's another key market for us and it's definitely a focused investment area for us. We've definitely established dedicated sales go to market And in the local market and similar to the UK, we've built native French solutions including payroll.
And so the anchor accounts in France, certainly Airbus and Renault are fantastic customers, and we see a lot of market a lot of opportunity in this market and we'll continue to invest. Next up, talk about playing in a competitor's backyard. So Germany is a huge market and we've got some lighthouse accounts There are Siemens, certainly ABB and a recent one that I'm a fan of, Heidelberg Cement is literally right in Waldorf's Backyard and a long time SAP customer that moved to Workday for core HCM. So just like UK and France, big announcement that we made earlier this year, probably One of our larger product related announcements is that we're coming to payroll, German payroll announcement came earlier this year. Okay.
Moving over to APJ, Australia is sort of similar to Germany in that it's a market that we've been in for some time, But this is one where we're continuing to make product investments. So we announced also at the same time that the German payroll announcement announced Going into Australia payroll. And just as in Germany, we expect that to drive a lot of sales and revenue for the company over the medium term. In particular, we think it's really going to help us in certainly an attach motion or back to the base with our large enterprise customers in Australia. But we think it's really key to winning net new customers in government and medium enterprise in the Australian market.
Okay. I'll close out on Japan. It's too large of a market to ignore. It's significant. And for Workday, I would say largely untapped for cloud HCM, I think It's been a market that's moved relatively slow to the cloud for HCM.
But however, it's huge. There's over 200 of the Global 2,000 sit in this market. And this migration, while it's taken some time, we are starting to see signs that the market is starting to move. So in anticipation of that, we're doubling our sales presence in FY 'twenty three. Again, like the other hiring things and sales The comments I've had before, that effort is happening now.
We're not waiting for FY 'twenty three to start. We're going to start the year with people in seats And selling. And again, we're establishing local partnerships. We've had a partnership with IBM and Hitachi. We're going deeper in those partnerships and setting up true resell arrangements With both organizations, they've been fantastic partners so far and a big part of our success to date.
So it's certainly an exciting longer term opportunity for us.
And I
would call out, This is another market where we believe extend is going to be really important to our competitive win rates. It's a market where IT has a lot of power And the large Japanese corporate companies, IT tends to customize. There's lots of history of PeopleTools and PeopleSoft accounts With the customization, Extend can now take those configurations much further than we have historically, and we think it's going to be a really important part of our success in Japan. Opening up new paths to office of CHRO, similar to the CFO, we want to just call it just 2 here really quickly. First is around Pecan.
And this is, as I mentioned before, is perfectly timed acquisition and as an employee engagement system is ready for Primetime and Ready For All customers. And as I mentioned before, it cuts across all geographies, all of our market sizes and all of our industries. And so what you'll see from us going forward is a dedicated sales force just like we're doing in the land products around planning and around strategic sourcing going forward. Next up, I'll mention the federal market opportunity. So this cuts across actually office of CFO and office of CHRO.
We decided to capture it here. So in total, it's a $2,000,000,000 market opportunity for us. And as we called out, at least I did in some of the earnings callbacks Last quarter with several of you is that we did receive FedRAMP Ready status back in mid August. And so what we are now expecting is ATO, our authority to operate in spring of 'twenty two is what we're targeting. And for us, The message I would deliver to you is we're not waiting on the market.
The ready status certainly helped build pipeline. We've invested already in some really strong partnerships with Accenture's federal practice and Deloitte's federal practice. That's really jump started our pipeline. And we've already actually hired up Our sales organization and our sales supporting functions around sales for our federal business for FY 'twenty three. So It's an incredible medium and longer term opportunity, but what I would share with you is I don't think we have to wait 3 years from now to see the federal business be really impactful to the growth of the business in the office of CHRO.
Wrapping this up, pattern recognition should tell you, I'm going to I'm going to tell you we're increasing our sales capacity. So we certainly have an opportunity in office of CHRO to grow here. I would tell you international is certainly where the preponderance of growth is. In fact, in Q2, Although it represents 25% of revenue today internationally, that's where 45% of every hire my organization made Was in international. So we're over investing.
That's where we have a great opportunity to really grow and expand the sales force. And that's what the investments we're making. Similar to planning and sourcing, we've got dedicated Pecan account executives next year. We really saw this happen as Pecan was a European based company And had an established sales force, but that Pecan First motion is strong and it's really strong in Europe and we're going to do the same thing in APJ and the same thing in North America. We took our cues from what Beacon had done before where they acquired them.
And then finally, the Fed team is hired up, as I mentioned, and ready to go. Secondly, I'd mention increasing our global brand awareness. And so there's investments going on and where you will see that the most Is in the countries that I highlighted, certainly Germany, UK, France, Australia and Japan, along of course, with the United States. Those are the markets where the global brand investments will continue. And then opening up the federal market is a great opportunity for us.
So these are all critical Growth drivers for us that we're looking to capitalize on. All right. So it's been a bit of a whirlwind tour that I'll bring us home here with a couple of takeaways for you, 3 to be exact. So number 1, we're going deeper in the customer base. We've got this $10,000,000,000 opportunity just within our existing customer base.
The formula is simple. Take great care of them and then go deliver great innovation and good things will happen on this journey to the 10,000,000,000 And the customer base. Winning in finance. So certainly the broadening the broadened portfolio that Pete talked about has definitely driven our Our Fins relevancy, it's driven our competitive win rates. And then the deeper industry investments, particularly in service based industries is really driving our differentiation And ultimately the core Fins growth for Workday.
And then finally, it's our aspiration to be the dominant force in Human Capital Management. And I would tell you that while international is certainly the key growth opportunity for us, We have plenty of work left to do here in the U. S. Market. So with that, we'll leave it there.
I thank you for your time And attention during the last 25 minutes or so, I think I ran a little over. But I leave you with this, the time is now and Workday's global Sales organization is ready to capitalize on this next wave of Workday growth. So with that, I'll turn it over to our company President and
Thank you, Doug. You've heard about our growth ambitions and the exciting opportunity in front of us. Now I want to share with you the power of our financial model and the changes we Our business as we pursue our $10,000,000,000 revenue target. Let's start by taking a high level view of our growth drivers and the market opportunity in front of us. 2 years ago, we discussed our $88,000,000,000 TAM, but from where we stand today, our opportunity is even bigger.
In fact, our addressable market is now over $100,000,000,000 up 20% in the past 2 years, driven by our relentless innovation As we've added solutions in spend management and employee experience, delivered on our platform vision and expanded on our industry strategy with Accounting Center. As Pete and Shyanne mentioned, we are done. We continue to work on new innovations that will even further expand our long term opportunity. There are different ways we think about this addressable market and one of those is net new opportunities versus expanding our existing customer As Doug mentioned, we continue to drive the majority of our business from landing new accounts. And With an addressable universe of around 35,000 customers, we're only 11% penetrated.
We continue to invest behind this motion given the significant At the same time, we're driving an increasing mix of our new business from our customer base team. And this opportunity has seen significant growth over the last few years. As Doug mentioned, our opportunity is $10,000,000,000 which is 2 times our current revenue run rate. And as he shared, we're still early in capturing this opportunity Coming into the fold from our continued land motion. Another way we look at our opportunity is across our key product families, HCM and Fin Splice and we have driven significant growth across both.
HCM has generated $3,200,000,000 of subscription revenue over the last 12 months with healthy growth which is currently accelerating. Our expanded financials product is now a $1,000,000,000 business, roughly double where it was just a couple of years ago and growing at over 30%. When you look at our opportunity in HCM, even with our strong growth over the years, we're still less than 10% penetrated. We believe we can continue to expand our addressable market through new innovations and we'll continue to invest behind that across several dimensions which you can see here. For Fins Plus, the opportunity is even bigger.
And we're really starting to open this market up with our broad portfolio And increasing maturity, scalability and referenceability of our key solutions such as corefins, planning, Spend Management and Analytics. Here too, we're investing significantly behind the opportunity. And finally, let's look at it from a geographic standpoint because this opportunity is truly global. In the U. S, which represents half of our addressable market and 75% of our revenue today, we still see very healthy high teens growth.
And in international markets, we see even faster growth, In the U. S, we are still less than 10% penetrated and see lots of exciting opportunities across industries, across solutions And across our customer base. And as you've heard today, we have big ambitions internationally and are seeing really positive signs here, Which we're investing behind in a very significant way. I want to transition now to talk about customer retention, a really critical driver of our model and something that becomes even more important as we continue to scale. As we have long shared, our gross retention has consistently been over 95%, even during the most challenging parts of the pandemic.
What I'd like to share with you today is that it's actually a fair amount higher than that. In fact, our gross retention rate has averaged 98% over the last 5 years, which speaks to the strategic nature of our solutions and our relentless customer focus, which we believe is best in class. Further, when we look at the sources of that 2% churn, the largest driver is customer specific events that have nothing to do with customer satisfaction, Such as bankruptcies and M and A. Solid gross retention provides a healthy foundation for us to expand our footprint within our customer base. Over the last 3 years, we have more than doubled our number of customers with annual revenue under contract of $3,000,000 And while some of this growth comes from the landing of new large customer contracts, a more significant driver Customers expanding their relationships with us over time.
Our sales into our customer base has become an increasing percentage of our new business bookings and we're We expect as that momentum continues that with our growing product portfolio That we can further drive net retention even higher over time. I'll close by taking a look at how we see our business evolving Over the next several years as we scale to $10,000,000,000 in revenue. We fundamentally believe That we have the innovation, the go to market execution and the market opportunity to sustain 20% or higher subscription revenue growth on our path to $10,000,000 That goal is our North Star as a company. The entire organization is aligned around it and all of our investments are focused on it. To reach this goal, our growth must be multidimensional.
From a solutions perspective, we believe that our HCM business has the opportunity to sustain high teens growth on our path to 10,000,000,000 And we've never felt better about our opportunity in this space. At the same time, we see meaningful tailwind across our broad financial portfolio and we believe that even as we scale, we can sustain Fins Plus growth in the 30% range for This growth will continue to drive our mix shift with FENS plus expected to make up approximately 30% of our revenue at the $10,000,000,000 mark. From a geographic standpoint, we believe we could sustain High teens growth in the U. S. While accelerating our international growth rate into the 30% range.
As our geographical revenue split moves towards the geographical split of our TAM, we believe international revenue will be approximately 30% A testament to the power and scalability of our SaaS business model. And certainly the impact of COVID has accelerated our margin progression as we pulled back on hiring and saw certain costs like travel and in person events come out of our expense base. Without COVID, we would have expected a more normalized pace of margin expansion, closer to 150 to 200 basis points per year, What you see here reflected in light blue. Given the rapidly improving demand environment and significant opportunity ahead of us, We're making meaningful and purposeful investments as we head into FY 'twenty three. And while we are deep in our planning cycle for FY 'twenty three, Based on what we see today, we would expect operating margins next year of around 18%, which reflects continued hiring, Targeted non headcount investments and the rolling out of our new performance based cash bonus program, which, as we mentioned on the last earnings Call will have an impact on margins every quarter and every year going forward, assuming we hit our performance goals.
Essentially, these investments put us back Investing for growth will remain our focus and we'll continuously evaluate gross margin trade offs. If we find areas of additional investment next year or beyond That said, we do expect to resume margin expansion after next year, which puts us On a path of reaching approximately 25% margins at $10,000,000,000 in revenue. And finally, I want to touch on How we see our business evolving as we approach the $10,000,000,000 mark. Keep in mind that these numbers are directional in nature and meant to illustrate as we continue to adjust and invest for top line growth. From a gross margin standpoint, we expect to continue to make important data center and customer Investments in FY2023 and beyond.
We also expect a continued benefit from mix shift As subscription revenue growth continues to outpace services revenue growth. As a result, we expect gross margin to slowly improve by a couple of percentage points. Within R and D, we've never felt better about our innovation engine and plan to continue to invest More dollars incrementally every year to fuel our growth. Through the benefits of scale and continued efficiencies, however, We see meaningful opportunities to drive leverage. In sales and marketing, given our plans to aggressively invest in growth And in the global market opportunity we see ahead, we expect to increase investments as a percent of revenue over the coming years.
Within G and A, we already run a highly efficient best in class operation and we expect to maintain strong efficiencies here as well. And finally, from an operating cash flow standpoint, the business is highly cash generative as we've shown, and we would expect operating cash flow margins To be in the mid-thirty percent at $10,000,000,000 With that, I'll leave you with a few key takeaways from today's sessions before we wrap up with some Q and A. You've heard about our growth ambitions on the path to $10,000,000,000 in revenue and the key factors that will get us there. First, our underlying architecture, our unique approach to innovation and our incredible 55,000,000 plus user community are meaningful evolve our go to market strategy to capture the global and expansive opportunity we have across our product suite. And third, The fundamentals of our business have never been stronger and we're confident in our future growth and margin story.
We've never felt better about our opportunity and the strategy and team we have in place. And finally, I'll leave you with our fundamental belief that we have a lot of runway beyond 10,000,000,000 We truly have a unique opportunity and we're excited about the journey ahead. With that, we'll take a quick 10 minute break as the executive team joins me back on camera to answer your questions.
Thanks and welcome back. We have the whole team together and we have a number of questions to get through. So let's get going. The first question is for Aneel and it's from Kirk Materne at Evercore. Anil, it's very clear that the product portfolio is much broader today versus 2 years ago, which helps support your $10,000,000,000 revenue guide.
But there continues to be a view by some in the public market that more broad based adoption of core Fins is awaiting for Godot issue. So what confidence that the growth in core Fin's pipeline is sustainable, not just some snapback from a COVID slowdown and the market is at a tipping point?
Well, it's a great question, Kirk. So a couple of things. We now have demonstrated traction. We've got over 1100 core fence customers, Over 3,000 planning customers and 1250 on the procurement side. So the data just says that the market is moving in that direction.
But I would say that COVID in particular created an environment where people really had to deal with their legacy applications And see what they had. And the legacy applications didn't stand up to the test of agility, didn't stand up to the test of remote work. And I think it was a sea change in attitude that it's time to move to the cloud. And the other piece I would say is Cloud applications like Workday, whether it's HR or payroll or finance, they take off when they hit parity with the legacy systems. And our business for HR payroll took off when we hit that parity mark and the rest is history.
And I think we're now past with applications like accounting center, we're past parity on finance. So it's a much better architecture with Equivalent or better functionality, and so I just think it's the time is now.
Great. Thanks, Neil. I'm going to stay with you. This one's from Mark Murphy, JP Morgan Chase piggybacks off that question. In terms of the 20% guidance today, what provides confidence in that framework on the path to 10,000,000,000?
Are you seeing win rates improving exiting the pandemic? Do you see a mix shift happening in the business or is it something else?
I'd say a couple of things. Win rates have remained high. They really haven't changed that much over the last few years. I know the analysts are always asking us about the changing win rates, but they've been consistently high for the last actually since we went public, since we started Really talking about win rates. I think it's more the expansion of our product line And the increasing focus on the finance applications as key drivers to move So between finance moving to the cloud, the expanding product line.
And then the last one I'd say, which is Still a big opportunity for us is international. We're just still touching the tip of the iceberg on international. Chano can talk more about that. And maybe, Chano, you want to talk about international.
Yes. Thank you, Anil. Mark, I think as Doug has provided a very good overview on international, I think our best proof of how much belief we have in international is the sort of investments we are doing. That's all about Our sales headcount, 40% of that went towards international in Q2. I can tell you that is along the same lines, but we're planning going forward at least during H2 Thank you for being ready for next year.
If you look at the increase that we've done around branding investments, clearly international And especially those key focused markets, U. K, Germany, France and Australia and a bit of Japan has taken a big share of that one. Last but not least, we've been talking about the increase in number of certified consultants. And international, again, has been a significant part of those investments in those consultants. So I would say, the international also pipeline Across the different regions is representing the opportunity that we have out there.
And if there is a part of the world where wind rallies, As we've been maturing have improved a bit, that is as well as some of the international markets. And clearly, as some of those newer markets are reaching Closer levels of maturity and parity with the U. S. Markets, right, on some of the most developed Western countries, we are Getting closer to the parity and on some of this, we more newer markets, we have a way to go. But the pipeline Good signals.
And clearly, the teams joining with our partners are getting better on how we're winning those deals against the legacy competitors.
Great. Thanks, Chano and Anil. Let me speak with you, Chano. This one's from Mark Marcon at RW Baird. At the recent Gartner CFO Conference, Workday was cited as a FINS leader within services domestically.
How far along are the various services verticals like Terence Banking Professional Services. How far along are they in terms of adopting and digitizing Fins? And how do you think about that opportunity within those verticals going forward?
Yes. It's a great question. I think Pete gave a good flavor on it, right? Clearly, we are not that far along in terms of the penetration that we do have today. But obviously, we are far along enough in terms of the referenceability of some of the customers we do have in all of those Financials and service based industry, but particularly in finance and insurance, right?
And I would say that is not just domestically. Obviously, it's more clear and relevant in the U. S, but we have a number, especially mid enterprise sized customers as well internationally On those key services based industries that have moved their finances with Workday and have moved into the cloud as finances progress, right? Obviously, we're doing investments as well with our partners, Doug mentioned potentially things like IFRS to complement the solution In some of our international markets, particularly for insurance, we've been talking through this call how much Game changer, accounting center is, right? I mean, 2 ways, right?
Doug even mentioned when we have accounting center as part of the solution part of the deals, we win 3 out of 4 opportunities. That is mainly becoming more and more standard accounting center as part of that A bit of materials in our financial services industries, but it's obviously sent to other based services industries as well. So Yes. I think we summarize by saying the foundation, the referenceability of the customers and the proof points are there. We are specializing more and more our teams and our go to market.
Our solutions are much more mature, and they cover a significant number of global Countries as well in terms of the localization, so as Pete highlighted. So that is also becoming very relevant for both international customers that are global companies as well You know companies within some of the international markets themselves.
Great. Thanks, John. I'm going to go Back to Aneel for a second. This one's from Raimo Lenschow at Barclays. How do you see the long term evolution of the corporate finance layer on top of legacy ERP?
Is this an entry way into an account like a Trojan horse to start replacing the ERPs or do you think that you'll always just stay on top?
It's a great question, Raimo. I've been talked out of going into The ERP manufacturing marketplace by many of our team members, and at some point, I think I'm going to win that argument. But we don't have to go into the ERP space from a manufacturing perspective to do really well. People want the modern functionality On the finance side, even if they're going to leave their existing manufacturing applications in place, but there will be a time Where there will be a need and an opportunity for in the cloud natively built manufacturing applications. I still don't think it's The top priority for us right now.
But what we're seeing is with those companies in retail and manufacturing, They still want the benefits of Workday even if we're not running the supply chain or running their manufacturing apps. And that's why I'm Very optimistic about our that enterprise finance layer.
Okay, great. Thanks, Anil. I'm going to stay with you And maybe bring Robin in as well. This is from Karl Keirstead with UBS. The growth targets set out today, the 30% for Fins Plus and high teen We're actually not that far off what you grew over the last 12 months and in fact contemplate a slight acceleration despite greater scale and which is quite bullish.
What are the 1 or 2 most significant assumptions when you think about those growth objectives?
Healthy market, number 1. There's no question we need a healthy market to deliver on those numbers. Number 2, continued high win rates against our main competitors. And frankly, the main competitors really haven't changed. They haven't changed in our entire existence as a company.
And I'd say the last piece is the acceleration of digital transformation. I really think That coming out of the pandemic, there was a lot of people sitting on the sidelines and they're just not sitting on the sidelines They know they need to change. They know they need to build their business around flexible, agile Applications, which really is only available in the cloud and ones that they can if we're in this world or we get World of having to do remote work, where it works from that dimension or hybrid work, whatever model it is, we're ready to support them. And so I just think the market is coming our way. And I remember in 'eight, 'nine, there was a lot of questions about whether That would be a difficult time for Workday given the economic uncertainties.
That also was an It's worth people to really think about their underlying cost structure in Cloud 1. And so these moments in time That are disruptive and are challenging economically. They tend to favor the better When you come out of those times and I'm convinced that we're the better solution. And so we're going to benefit from this Difficult environment going forward. And I'd say lastly, it's not just the health of the markets.
We have huge markets. Robin talked about it. We have huge markets. And as we expand our product footprint, the markets only get bigger. So it's all about building the right products and continue to expand Our sales execution footprint, but the markets are there.
We're not constrained at all by market opportunity.
Great. Thanks, Anil. I'm going to go back to Chaddo here. This is from Michael Turrin at Wells Fargo. The attach rates that you showed today of less than 10% for lots of The new products and some of the acquisitions you've made really stood out.
Does that change your approach to the expand motion with existing customers? What are some of the changes you're making to take advantage of that? And could that help drive an increase in net retention rates over time?
Yes, it's a great question. I guess the approach that it changes mainly the excitement that I mean with the opportunity we see on that new innovation and clearly the innovation that is going to be coming forward, right? Again, I think 70% increased sales capacity over the last couple of years. I don't know exactly the time frame that we've been on our Expanded kind of customer base. And clearly, that is taking advantage of all that innovation that is coming through.
We are thinking as well as we are evolving our go to market, the land stand alone motions that we can have with clearly some of the new innovations that The key competencies will all work the expertise searching where we still have a ton of opportunity to penetrate the account. So it certainly does. We're taking that opportunity of that $10,000,000,000 plus opportunity that we do have with our new SKUs and our customer base. But on top of that, clearly, it's the land motion on some of the new logos and how we can play with some of these newer solutions that we can position On a standalone basis. So yes, we thought about it.
We think about it continuously in our go to market, and we are certainly double down on Sanofi Investments to Capitalize on those smaller win ratios that we do have there attach ratios, sorry, that we do have there And bringing those light blue to either orange or hopefully dark blue over the long term, right? And we are convinced we can or we are Confident we can because some of those are truly best in class solutions and products. And though it's a small attach ratios Today, the feedback from the customers is positive, and we're clearly bringing those customers successfully live from those solutions and bringing value.
Great. Thanks, John.
Justin, can I add a little bit?
Yes.
So I know there's a focus on the 20% growth rate, 20% plus growth rate, and I hope it's higher than 20% by the way, getting to 10,000,000,000 but I think it's important to recognize that 10,000,000,000 is not the end game. The end game is something much higher. When I look at the scale of companies that Workday needs to be at, It's the sales forces and Adobe's of the world. I have a tremendous amount of aberration for those 2 companies and their 2 CEOs. And so we'll get to 10,000,000,000 in the timeframe that we've talked about, you can figure out by the math.
But then we're on to a bigger number, probably $20,000,000,000 in order to continue to be a great place to work and a great provider to our customers. And so While the focus right now is on the $10,000,000,000 that's not where we're stopping. We're thinking about how we get to a much bigger company and get into The likes of the Salesforces and Adobe's, which really have broken out into the, I think, The 2 biggest and most important cloud companies in the world right now from an applications perspective.
Thanks, Adeel. We're going to go now to Robin. This is a question from Mark Murdler at Bernstein. And the question is, is the 20% Subscription growth framework you provided today, is that organic or are you expecting acquisitions as part of that?
So we have confidence that we can drive 20% Plus organic growth on the path to $10,000,000,000 Having said that, we continue to look at M and A. We have a high bar with M and A when it comes to culture, when it comes to technology, it's got to be strategic to our customer base. But when we find those targets like another Pecan or another Scout, we certainly will Execute on that and we would expect that to drive top line growth even higher.
Great. Thanks, Robin. We're going to go we'll stay with you actually. This is another question from Michael Turrin at Wells Fargo. On the margin framework at $10,000,000,000 the 27% of revenue in sales and marketing, that's above current levels.
How should we think about peak levels there as you invest
And a lot of the investment that we're going to be making will be going into the sales organization. Doug talked a lot about Those investments that he's making as well as marketing, particularly outside of the U. S. And targeted on Fins and the And so what you should expect to see between now and the $10,000,000,000 mark is that we're investing in sales and marketing at a higher rate Our revenue is actually growing. And so it will take us some time to build those investments on top of each other, but you should expect to see a steady increase And sales and marketing spend as a percent of revenue as we go over the next few years.
Thanks, Robin. We're going to go now to Chano and to Doug. This is a question from Brent Bracelin at Piper. Question is, given less than 10% penetration in the medium enterprise today, what investments are you making specifically to further accelerate the share gains in that market? And do you expect that to be led by Fins or HCM?
Yes, maybe start commenting and pass over to Doug. In the medium enterprise, more and more of what we're seeing, it is being driven by platform plays, clearly aging our things together, Right. That's what we see as well represented in our markets. Clearly, that representation of platform is just increasing on a positive way As the depth of our solutions and as well the way we implement those is becoming more at all to those markets and to those verticals within medium enterprise. But So, Doug, would you like to comment anything?
I agree on the sort of the
balance of the mix, Chano, between Financials and HCM, I think the other key element of this is deployment capacity and continuing to invest in Innovation around time to value and that's always a key driver in the medium enterprise and that's particularly true Internationally. And so we've got these Launch Express, we've got all this new innovation that we're trying to drive time out of time and effort out of deployments. I think that was talked about earlier, but I think that's a key part of driving the medium enterprise growth and tap to that 10%. And then Also all of the brand investments internationally. There's many markets where the awareness of Workday could be much stronger and we've seen this year.
As you know, Chano, We've had a lot of investments in that area and it's paying dividends. But I think that branding internationally is a key part of that investment.
Okay, great. I'm going to go back to Anil, at least to start this one. This is from Mark Murphy at JPMorgan. You disclosed today that Workday has more procurement customers than core Fin's customers. Can you update us on your How broad the ambitions are in the procurement market?
And did your growth in that category, was it resilient over the last few quarters or did it dip like some of the competitors?
So my first question is how many questions does Mark get to ask? So It's a great question, Mark. So a couple of thoughts. Number 1, we have some procurement customers that are SCOUT customers, but not yet Workday procurement customers, that is a big part of the difference between the customer counts. The application, In particular, the Scout applications did really well during the pandemic because companies were very focused on trying to Get their arms around their costs and their suppliers.
And so we didn't see the we saw a slowdown across the pipeline around everything, Nothing specific to procurement, but as we come out of this market, it's very strong. And the procurement apps over time, I think can be A standalone pillar, we're not there yet. I hope in 2 to 3 years we are there. There are great standalone companies like Coupa that we compete with And I think they're formidable competitors, but there are a whole host of companies that want to buy finance Core Finance and procurement together that don't want to do a best of breed combination there, and we're really well suited now For those set of customers, and then there are those that want best of breed and maybe we're partnered up with coupon those opportunities. There's a couple of areas that we need to fill in the gaps, but I'm very confident we'll over the next couple of years.
And I do hope it's an independent pillar within a couple of years.
Great. Thanks, Aneel. The next one is for Ray McDonough from Ray McDonough, Oppenheimer. And I'll start with Aneel and we can maybe Bring to Pete and Cheyenne. In terms of extend, it's early, but how has that changed the conversations that you're having with customers?
Have you been increasingly engaging with CIOs? Does that help pull in other areas of the business? And should we expect new offerings at Target the Office of the CIO over time. Anil, do you want to start with that one? We might have lost Anil.
So maybe I'll ask Pete, if you want to start with that question and Cheyenne, if you want to add on to that as well or Chano.
Sure. I definitely want to hear from Cheyenne on this one as well. Extend has been very successful for us over the past several quarters as we've been talking about it for a while and that's because To create this type of technology foundation, it's an investment. And we believe that we've gotten to this point now where we have, I believe over 250 different applications that are running on extend. We have customers Adding it in as net new customers as opposed to just add on business as well.
It's becoming a very important tool for our customers. Most recently, for instance, with use cases like vaccine management here where our customers can Really create any type of solutions they want on top of extend and tie it directly to their people inside Workday. Yes. The thing that I would add on to that is that extend is not just about an opportunity for more revenue. It certainly is a very good opportunity for more revenue, but it also gives us an ability To not build certain things with our own development teams that customers could build themselves.
So it provides an opportunity for us to focus on the things that we can differentiate And then allows our customers to go and build on top of that. And Cheyenne, do you have any other thoughts on this one?
Yes, sure. I guess I'll start by saying the CIO has always been Of the decision to select Workday, it's always been a critical element in their IT and business strategy. And certainly, Extend gives us a new and interesting way to engage with the CIO and the technical arms of the company. And when we think about why that is, is to step back for a second and think about what's in Workday, right? Not only do we understand all of your employees, we understand your organization Sure.
And we understand the changes to your employees and your organization structure and around that is built a security model. And if you think about from a CIO's point of view, the richness of the human capital data and then of course, The richness of the financial data and all the different ways you can combine that in interesting ways to solve problems that are well outside of Workday. Lots of last mile problems that you have where part of the essential knowledge is understanding the who and what they're allowed To do from an access standpoint, the auditing ability that comes along with all of that and being able to Quickly and safely package solutions for the enterprise without adding yet another system of record or yet another integration, which
Can I just add to that? I missed, I got disconnected for a second. I would just say that One of the real powers of Extend is that PeopleTools were really powerful in the PeopleSoft world. And there are a lot of finance companies or financial Application users that are still PeopleSoft customers and they got attached to heavy customizations. We don't want to go down that world of heavy But extend at least lets us close the gap through smart configurations and it opens up that market in a way it was not
Great. Thanks, Anil. And thanks, Pete, Chayenne. This one's for Chano. It's from Derek Wood And the question is, have you seen many deals where you landed with Planning or Fins Plus and then over time cross sold core financials?
And how do you see the pipeline of those opportunities shaking out over the next couple of years?
Yes. That's a great question. We've seen deals that where we landed with planning and really they evolved to core financials later on And that we would be expecting to see more during the next couple of years or 3 years. And why should I say so? It's because, of course, we're doubling down some of the specialization around our landing capacity in the new logos Planning as well, seeing as some of the other motions as part of these sales investments that we're doing.
Clearly, as we're doing so, we should be expecting to get more Planning First Meet those customers is that is what they're ready to do now and definitely based on those relationships and based on the Great core finances application we have, especially for service based industries. I should be expecting as many of those customers Moving forward to core financial later on.
Great. Thanks, Jono. We're going to go now to I'll maybe I'll let Pete and then if Anil wants to weigh in here This is from Siti Panagari at Mizuho. You talked about aggressively hiring both sales and R and Can you talk about the hiring environment and how effectively Workday is able to attract talent?
Sure. Yes. So obviously, everybody knows that this is a very tight labor market across the economy. And Within the tech industry, it's probably tighter. There's a lot of people that are thinking these days about moving on to other to other jobs and that actually gives us a lot of supply of people that are interested in as well.
Workday is maintaining a great ability to be an attractive company to work for during this time. We are as we open New acquisitions, we're able to close them pretty quickly. We are on our way to our hiring goals for the year as we talked about in Last earnings call. And I think that the reason why is because Workday is a company that focuses on culture and Employees as part of that culture. Employees in these days, they want to work for a place that has a purpose, that cares about their employees.
And that's not something that you can change all of a sudden. It's something that we've been investing in from the beginning and Prospects know that. So when they come in, they talk to us, they're really interested in working for Workday.
I'd defer the part in sales to Doug Orteano.
Would you like to take on that one?
Yes. My audio is cutting out, so sorry about that. I think is it you want me to field the last question as it relates to hiring environment, Is that right?
Yes, the hiring environment around sales capacity.
Yes. So in a word or in two words, it's hard. It's a competitive market. We don't certainly can't hide from that. I think I could hear Pete.
And I think he's right. The same things that hold true with This is a destination company with a culture that makes it a destination that people want to work for. We actually see that at sales too. But we also are looking at investments around making sure we're always competitive in terms of compensation for sales. So it's a tough market, But we're adding and we're growing and I believe we'll hit the targets that we've laid out for the second half, but it make no mistake,
Great. Thanks, everyone. I'm going to go to Robin. Now, this is from Kirk Materne at Evercore. How important is core Fins in terms of the 30% growth framework in the broader Fins Plus category?
Ramin, can you maintain that type of growth if you see more measured adoption of corefins, just given the breadth of your portfolio today?
Certainly, Corfins plays a significant role in our growth story. When we look at the addressable opportunity that I talked Certainly need all of them to be able to perform and all of the other SKUs as well that have maybe smaller addressable markets. And so I guess bottom line is it's super important to help drive that growth, but we have a lot of other Addressable markets that can help along those lines, planning, we talked last earnings call about that growth being 50%, And so it's going to be a balance across those key SKUs, particularly the ones that drive the largest addressable market. But we feel really good about CorFINS, what we see in the pipeline, the momentum that we're seeing that Anil talked about. And so we've got high degree of confidence That Fint is going core Fint is going to be a significant part of that 30% growth story.
Thanks, Robin. I'm going to stay with you for another one. This is from Keith Weiss at Morgan Stanley. The language on margins changed from 25 percent plus at last Analyst Day to a straight 25% this Analyst Day. Does that signal less potential for upside to that Perhaps reflecting lower structural margins given the change in the performance incentives
that you announced last quarter.
Yes. No, I mean, we still believe we have a lot of runway to take margins beyond 25% over the long term. So we have a high degree of confidence that Matt, certainly when we look at our HCM margins, fully loaded margins, we're already proving That out to ourselves internally. So there was no there's no message there. What we've never done before is actually talked about where we believe margins And we believe that we can get to 25% at $10,000,000,000 It might be a little less, it might be a little more.
We've got An evolving growth story here and to the extent that we identify our significant investment opportunities
Thanks, Robin. I'm going to go to Chano to start. This is from Kash Ringing at Goldman Sachs. As Workday increasingly evolves into a more strategic application player with a large product portfolio, what are some of the bigger changes you have to think about a go to market standpoint.
Yes, it's a good question. I guess, it's we're always thinking about the different variables that play in go to market, right, Clearly, industry is becoming more relevant as we try to hit more within financials, clearly, geographies, segment, Large and medium enterprise, how we allocate those specialization, the different motions and some of the motions that may need Some support and definitely where the cross and the concept was the right balancing between that specialized overlay or support that it might be required On some of the motions, land versus span. So I guess, obviously, Kash, to answer your question is where do we see the opportunity that we need to support the most and How that plays out? So when we will be thinking on to next year's go to market, obviously, industry and verticals become more relevant and how We support that. As we are increasing some of our land motions, do we need some specialization to support some of those motions?
If we do into which geographies or into which segments, if we see more opportunity into a particular segment, let's say, medium enterprise we are rocking, how do we Allocate additional sales capacity there. So those are the typical variables we think about in terms to grasp the most that we have the opportunity, Certainly for the next year, but also to ensure that we are building up the opportunity for what is coming
after as we did on customer go
to market for installed base. We've seen For installed base, we've seen another significant sales capacity this last couple of years, but honestly, we started in that journey when we were much younger In terms of the innovation that we have for our customer base and that has paid off really well to us Because we were more ready when really we had that innovation hitting this trade and we have many more new logos becoming our future installed base customers.
If I could add something to that, which is something that Sean always shared with me and Doug has shared with me, I think we're going to expect our sales Reps are AEs to just know more about their customers' business as we go into these verticals. They're going to need to know more about financial Services about state and local government, about healthcare, just so we can map There are issues to the products we're building and I think Chano and Doug have done an amazing job Bringing those capabilities into sales force and as we go further in that direction, we'll just have to do more of that. Is that fair, John? Great,
thanks. We're going to take time for 2 more questions. This next one is directed to Anil. This is from Ray McDonnell at Oppenheimer. Acquisitions have accelerated your opportunity in a number of places like planning, spend management, Now Experience Management, how should we think about the appetite for future M and A going forward?
We're very open to M and A. Let me start with M and A works when you have a great sales force And great relationships with customers. And thanks to Chano, thanks to Doug, and thanks to Emily McKevely on the services side. We have great relationships with customers. We're building great products, but if we don't have the product that a customer needs, what's great about our environment right now is they trust us If we're going to acquire something that it's going to fit their needs and they would prefer on the margin to buy it from Workday.
And so that's the mindset we go into it with. I would describe our acquisition strategy to date as a string of pearls. We're not looking for 1 big Massive acquisition. I don't know, maybe that will change down the road. I don't know.
I don't think so, but maybe it will. It's filling in gaps. And so in the case of planning, We had an effort going on in planning. We were just behind where Adaptive was, and so we bought Adaptive, but we made the commitment we would wrap it into our technology. Same thing with employee engagement.
We had an effort going and we came across Pecan and recognized that they were ahead of us. And the reality is we can't be number 1 on every single front in HR and finance. It's not possible for any company to do that. So in the case of Accounting Center, there was no way other than to build it and we built it and built it fast. But these areas like employee engagement And planning, there were these great companies that we're able to bring into the fold.
And I think we're going to continue to do that. We're going to look at A new market opportunity, decide whether or not we have an offering that we can get to quickly. If not, Is there a good solution? And then the number one thing after that is, are they a good cultural fit? Can they fit within the Workday culture in terms of taking care of employees, And I would just say, as we've looked at a lot of M and A targets, that ends up being the defining Layer in terms of making a decision about whether we should be making acquisition or building it ourselves.
Can we find a company that It fits our DNA and Adaptive fit our DNA in spades and so did Pecan, and we're very lucky. And the more of those companies we can find, great, that fill gaps that we don't have, great.
Great. Thanks, Adeel. So we'll go to our last question. This is from Brent Thill at Jefferies and it's directed to Chano. What does it mean to be FedRAMP certified in the U.
S? And can you talk about the federal opportunity and how you see that playing out over next
3 to 5 years.
Yes. I'll take it and maybe get on to Doug that I I think he covered it during his presentation. But what it means is that we are now part of the marketplace. We think The federal businesses and they kind of start thinking about contracting and working with Huarte. The real contracting with Huarte will happen when we have authority to operate, And that is expected by the May, June time frame next year.
As you know, we're in that process with a federal customer going through all that process. In terms of the opportunity, Doug sizes around ACA and Fins around 2,000,000,000 But maybe, Doug, you can talk a little bit more what are we doing right now on the federal market and how do you see that opportunity going forward?
And then what FedRAMP gets us the ATO is, it's a blocker. You can't write a contract with a federal agency without FedRAMP, in our case FedRAMP moderate is the security level and it's a set of standards that are required of federal agencies. Rewind a couple of years and we had some success with quasi gov and some of the labs that are federal, I have federal mandates, but we're not required to be FedRAMP certified. But to really break into that market, you have to be FedRAMP. And we're seeing that increasingly important, by the In state and local business and in higher education over time, there's other public sector entities that are buying into the FedRAMP standards.
And so We think it's important not just for that $2,000,000,000 market opportunity, it's going to become increasingly important in other markets as well.
Okay. Pat, could
you If I could just add really quickly that historically state and local and federal and higher ed We're 20% to 25% of the U. S. Market from a software perspective. So it's a meaningful Mark the opportunity for us when we put them all together.
Thank you. Sorry about that, Anil. Okay. That now concludes today's event. Thank you so much for joining us.
A replay and slides from the event will be available shortly. And with that, have a good evening.