Why don't we get started here? Delighted to be kicking off the conference this year. New venue. Looking forward to a great week with everybody. Excited to be kicking it off here with Carl Eschenbach from Workday. Very fortunate to have Carl here. Just before I do, I wanna mention that, you know, we have a great week lined up here. 530 institutional investors are here in attendance, 150 companies with fireside chats and keynotes, 15 panels with 25 private companies. Just a reminder that registration is on the information desk on the mezzanine level. Just a few administrative items here. Fireside chats, keynotes, all take place on this level. This is the main room. We have a number of breakout rooms behind us.
One-on-one rooms are on the second floor and the third floor. Don't forget to join us this evening for a cocktail reception in the colonnade, which is the lobby level, at 4:45 P.M. With that, welcome, everybody. Great to have everybody here. Great to be kicking it off here with Workday Co-CEO Carl Eschenbach. Thank you, Carl, for joining us.
Brad, thank you for having me. Good morning. Good morning, everyone. Glad everyone could make it.
Absolutely. Carl, you know, it was late last year that you took on the appointment of Co-CEO. You're obviously familiar with the company, but maybe we could just start with that. You know, what excited you about the role coming in here as Co-CEO, and the future of Workday, and how you plan to drive that?
Yeah. Thank you. Again, thanks for everyone joining us this morning. Listen, obviously, I knew a lot about Workday, having served on the board, and the good fortune of serving on the board for five years, so I was very familiar with the company. I think what Dave and Aneel set up around the culture and the value systems of the company was very attractive to me.
Mm-hmm.
I also, you know, knew that I wanted to end my career, to be honest, back in an operating role after spending the first 29 years in an operating role, with the last 14 years at VMware.
Yeah
... and enjoying that journey, and then the next seven years in the venture world, at Sequoia, where I made a number of investments and was part of six IPOs over a seven-year period. I knew I wanted to end my career back in an operating role-
Mm-hmm
... and I wanted to find a company that I thought fit what was most interesting to me. That's culture, value-
Mm-hmm
... and also work, with people that I trust and respect.
Mm-hmm.
On top of that, if you can couple that with a very durable and resilient business like we have here at Workday, I mean, you look at the financial profile of the company, we're still growing, you know, high teens in growth. We're doing really good, you know, operating margin off, good free cash flow.
Mm-hmm.
We have, you know, a very durable business.
Mm-hmm.
All of that led to many discussions with Aneel over a long period of time, and to be honest, many discussions at home with my wife to say I'm going back into an operating role and doing this again, led me to the decision to join Aneel.
Mm-hmm.
To be honest, Brad, everyone says this Co-CEO thing is really hard to make work.
Mm-hmm.
I respectfully disagree. If you have trust, you have respect, and you have a deep friendship, deep friendships can work together, and that's what Aneel and I have.
Mm-hmm.
I think we both have complementary skill sets.
Mm-hmm.
You know, I've grown up and, you know, I started in pre-sales as an engineer, but then moved into sales and marketing and operations, and Aneel-.
Mm-hmm
... he is one of the greatest technical strategists I've ever met, especially when it comes to, if you will, you know, systems of record like ERP or, you know, HCM. It's working super well, and I couldn't be more excited about the opportunity. We're both working hard, you know, we're doing okay in the first six months. The first couple of quarters have gone great.
Absolutely. I should say so. How do you and Aneel think about that division of duties in the Co-CEO arrangement? Obviously, in February, you'll be taking over as sole CEO. How are you guys thinking about that?
Yeah. I hope if Aneel were sitting here with me, he'd say I freed up a lot of his time to go focus on what he's great at, product and technologies.
Mm-hmm.
He's diving a lot deeper-
Mm
... with Sayan, who's our Co-President, into the Product and Technology aspects of the business.
Mm-hmm.
He's spending a lot of time on AI and ML. I'm guessing that question will come up today.
Yes.
I would be surprised if it didn't. You know, and he's, you know, he's let me, you know, run the operating side of the business, you know, both sales, marketing, as well as the financials of the company and the finance organization. Aneel and I own jointly the culture and the values because that's, I think, one of the strengths of the company. I think the way we're dividing and conquering is working well. You know, listen, I've known Aneel a long time. I feel like he has a little bit more giddy up in his step these days, and he is working hard.
Mm-hmm
... and a lot of people talk about that February transition of next year. you know, that's what we've stated, and that's fine, and that's what will probably happen, but by no means am I like, you know, saying, "Aneel, please, you know, move on." In fact, when he steps back, he's gonna go into an executive chair role.
Mm-hmm
You are gonna be a continued value to the company, and he's gonna stay deeply involved-
Mm-hmm
...in the product side, then obviously, I'll take over, you know, running the company. I'm somewhat of a smart guy, and I want Aneel around as long as I can keep him on the product side. I think it works great because I think both Aneel and I, at this point in our life, if I can say, at this age in our life, we don't have any egos. You know, I don't care what he does. He doesn't care what I do, as long as we're driving an outcome that's best for our employees, our customers, partners, and our shareholders, and I think that's what makes it work, and it's so special right now. He's not going anywhere. Oh, by the way, when he does step back...
He becomes executive chair. He's still my boss, we gotta continue to get along.
Yeah. No, that's great. Sounds like a great arrangement.
Yeah.
Thank you for that. You know, when you do, you know, take over as sole CEO, I mean, what do you see today as the strategic direction of the company, operational? What impact might you have as you take on that role?
Yeah, Brad, if I'm honest, I don't think you're gonna see any radical transitions when, you know, I take over as sole CEO, because I think we already have a lot of that in motion today.
Mm-hmm.
Aneel and I are very aligned on the business as a whole.
Mm-hmm.
You know, if we have disagreements, it'll never be in front of the company or in front of our executive staff. We talk every single day.
Mm-hmm.
Aneel's a big texter. For those who know Aneel, he likes to text. I get lots of texts, so we stay in complete communication. I think a lot of the changes that I would wanna drive in the company, are already being, you know, put in place.
Mm-hmm.
The speed and pace of what we're doing.
Mm-hmm
How we're operating, the operating rigor of the company
Mm-hmm
Thinking about the opportunity on an international basis. I think, you know, our go-to-market motion can continue to improve and drive, you know, more, you know, productivity out of our international markets. Listen, you guys know the size and scope of the company, but we only get 25% of our business outside the U.S., not even North America, outside the U.S.
Mm-hmm. Mm-hmm.
I just think there's tremendous upside as we think about the business in, you know, in Europe and across APJ. You know, I'm driving changes today, and Aneel is supportive. Again, we're aligned, around how we think about the ecosystem.
Mm-hmm.
We're really taking a different approach to our system integrators and how they deploy our product, which is great, but we're in the midst of launching a complete new partner program that entices them to bring us net new opportunities as well-
Mm-hmm
... with a referral program. The last thing, you know, I think Aneel and I are aligned on, is how we think about the ecosystem outside of the partners who are deploying, but really the technology ecosystem. If you're gonna be a platform.
Mm-hmm
You have to have an open set of APIs that allow people to integrate through you, and I think we're doing a lot in there, that area.
Mm-hmm.
I think, you know, as we go forward, you'll see us do more and more, around aligning with strategic partners...
Mm-hmm
... maybe than we have historically. Again, these are all things that Aneel and I are aligned on. I don't think, you know, once February comes, you're gonna see me do anything radically different. I think we've already put those changes in motion, and Aneel and I are completely aligned and supportive of each other's decisions.
That's great. Wonderful. Last earnings call, we learned of the appointment of Zane Rowe as the CFO. I followed him at VMware, so great track record. Just love to get your perspective on that decision.
Yeah
Why Zane is the right guy for the role.
First, I wanna recognize Barbara Larson, right?
Yeah.
Barbara has been with us for nine years.
Mm-hmm.
I love Barbara. At one point, I was really disappointed in Barbara and didn't like her 'cause she quit on me at VMware to go to Workday. Ends up now I get to work with her again, but she's had a great nine-year career at Workday. She came in to run FP&A, so Planning.
Mm-hmm.
We actually put her in a role a few years ago to run our HCM business, our biggest business we have, to run our core HCM business on the product side-
Mm-hmm
...to give her product experience.
Yep.
About a year and a half ago, she stepped into the CFO role, and she's done an amazing job. About four months ago, she came to me. We started having conversations, and she said, "You know, I just wanna spend more time with my family. I'm thinking about.
Mm-hmm
... you know, pulling back." We had a lot of conversations, so I very quickly went out in the market and talked to, a plethora-
Mm-hmm
... of CFOs, and obviously, I'd known Zane. I saw him in action.
Mm-hmm.
I met him when he was at Apple. Believe it or not, I met him when he was at Apple, running sales, which is crazy to think Zane, as a tremendous CFO, is running sales. That shows you his skill set.
Sure.
I talked to him, and talked to many others, and, I think Zane is one of the best CFOs in the industry. Everyone in here probably knows Zane from his days at VMware. He came in, we had an overlap, I think, of one quarter, but I got to work with him when he was CFO at EMC as well.
Mm-hmm.
I don't think there's a better, you know, CFO executive in the software market. For us to get him is a, is a big coup for us, we're super excited.
Mm-hmm.
He aligns with us culturally, too. He's just a great human being, and he aligns with the values that Aneel and Dave started, and Aneel and I will continue to push forward here at Workday.
That's great. Absolutely. Well-
He's here. I don't know where Zane is. There he is. Hi, Zane.
Oh, there you are. Hey, Zane.
He starts next Monday, so, this is a sneak preview for him.
All right, great.
Thanks for coming.
Welcome. Yeah, thanks, Zane. Awesome. You're coming off a real nice Q1. Maybe we could, you know, dive into where you saw the upside this quarter. We didn't see that type of upside from a lot of enterprise applications companies. It's a tough environment, we all know. Curious to get your perspective on what were the sources of upside this quarter?
First, I couldn't be more proud of, you know, the execution of the company in Q1, coming off a real solid Q4, where we announced the CEO transition in the middle of a quarter. People were like, "Wow, that's pretty aggressive to do that.
Yeah.
It was just timing. We backed it up with a solid start to the year in Q1.
Mm-hmm.
I always believe that, you know, your performance in Q1 sets the tempo for the full year.
Mm-hmm
We really focused on getting off to a solid start, despite the macro uncertainties.
Sure.
Listen, the scrutiny on deals is unlike anything we've ever seen or I've seen in my 35 years plus right now. Some deals are taking longer. We talked about all of this on the.
Mm-hmm
... earnings call, but our teams executed well.
Mm-hmm.
We had a great start to the year. We had solid bookings, which drove subscription upside. We beat on subscription operating margin in our 24-month backlog.
Mm-hmm.
I think the reason for that, Brad, is we have a very diversified business. If you look at it, there's not a single industry or vertical or market segment, if you cut it horizontally, that is a significant portion of our business. We have a tremendous install base we can sell back into.
Mm-hmm.
You know, we still sell more net new licenses into new customers versus our install base.
Mm-hmm. Mm-hmm.
I think, Brad, you know, I guess we have to bring it up. Everyone's talking about AI and ML. I mean, you'll talk about it for the next three days.
Absolutely
will be ingrained in everyone here. I think we have a differentiation there versus a lot of our competitors in the market.
Mm-hmm.
That is resonating how we respond to our customers with it when they ask about what we're gonna do.
Mm-hmm.
I think it's the product, it's our go-to-market, it's the diversity. All of that leads to a very resilient business for Workday.
Okay, wonderful. Yeah, we'll get to AI in a second. Since you mentioned it, the back to the base, I believe, is what you referred to it as, the go-to-market effort. Focus on the installed base. You have a large installed base of, you know, global organizations, a lot more to sell them, and I think that's been a key operational focus-
Yeah
..since you've come in here. Maybe if you could elaborate on that motion and what's new.
Yeah, we have a very good sales motion here. We have sales teams that completely focus on what we call net new.
Mm-hmm.
They land customers.
Mm-hmm.
As soon as they land customers, they actually pass it over to what we call CB, or customer-based sales executives.
Mm-hmm.
We have a really good go-to-market motion for net new and customer base.
Mm-hmm.
I think, you know, at our analyst day last year, we talked about the percentage of our business moving from 20% of our business to 40% of our business selling back into our customer base.
Mm-hmm.
As we've innovated and we've brought new SKUs to market, as we've brought new products to market, like Planning, we can sell right back into that customer base.
Mm-hmm.
We've built different sales organizations to take advantage of that-
Mm-hmm
... including an inside out, what we call digital sales model.
Mm-hmm
... and the last two quarters, one of the motions that we are starting to see that's starting to pay off for us is what we call create and close in the same quarter.
Mm-hmm.
As you could imagine, an HCM implementation or sale or an ERP sale literally can take years in the-
Mm-hmm
... in the making.
Mm-hmm.
We now have this motion where we can create and close in the same quarter-
Mm-hmm
...opportunities as we sell back into our customer base and as we sell net new customers, specifically around the Planning product, which was through an acquisition we got of Adaptive.
Mm-hmm.
I think it's working well.
Mm
... and it's paying dividends. Again, I think that's what's so unique about our business model is the diversity of how we go to market. You know, listen, we are super blessed and fortunate. We own more than 50% of the Fortune 500, 25% of Global 2000.
Mm-hmm.
We have a really rich install base of customers. If we continue to innovate and bring new products to market, we can sell right back into the base.
That's great. That's great. Why don't we switch to AI? When I think of the AI opportunity for Workday, there are a lot of directions you could go. Just curious how you think about that opportunity, and where does AI manifest in the product suite, you know, whether it's HCM or Financials-
Yeah
... today, what's kind of the roadmap for more AI-enabled type offerings?
Yeah, I'll talk about it, Brad, in two different dimensions. I'll talk about it in the context of what I'd say traditional AI, ML.
Mm-hmm.
I'll talk about, you know, ChatGPT and, you know.
Mm
generative AI.
Mm-hmm.
You know, for the last, I think, 10 years, I think it's nine years, we have built in AI and ML to everything we do, and I think we're uniquely in a position that our competitors aren't. That's because we have two Qs.
Mm-hmm.
We have quantity of data, and what I mean by quantity data, I mean we have 60 million users on our platform today, and we are processing over 600 billion transactions a year on that platform.
Mm-hmm.
We actually have our own large language model right there.
Mm-hmm.
That's quantity.
Mm-hmm.
We have something that no one else has. That's quality.
Mm-hmm.
The reason I say that is we have a unified data model.
Mm-hmm.
We're on a multi-tenant cloud. Everyone's on the same data structure.
Mm-hmm.
Our competitors have on-premise, they have cloud, they have hybrid. We don't have that. Because we have both quantity and quality-
Mm-hmm
... we are delivering outcomes for our customers based on AI and ML that we built in.
Mm-hmm.
We're not bolting it on.
Mm-hmm.
That being said, we also understand that the hyperscalers, all of them have a whole bunch to offer when it comes to AI, ML.
Mm-hmm.
Three weeks ago, at our Developer Conference we had in San Jose, we announced a new API interface for machine learning-
Mm-hmm
...to allow us or our customers to take advantage of all the other things out there in the market around-
Mm-hmm
...AI and ML and integrate into our platform. I think, you know, for me, I think the key message is, it's built in, it's not bolted on.
Mm-hmm.
We've been doing it a long time.
Mm-hmm.
We have quantity and quality of data that no one else has.
Mm-hmm.
Now, when it comes to you know, generative AI and ChatGPT, everyone's like: Are there use cases? We are exploring different use cases, right, that we think they could be very valuable, but, you know, that's all data that's coming from the internet.
Right.
That's all data that's probably not highly curated like we are.
Right.
We do see use cases around anomaly detection. We see it as a personal assistant. As you're logging into Workday, maybe there's some personal assistant things that you can do.
Mm-hmm.
We also think there's some mundane, you know, tasks that people are doing today that we can leverage that technology for going forward, but-.
Mm-hmm
... we think we're in a good position. We're leveraging it.
Mm-hmm.
We've been leveraging it. We'll continue to explore more use cases. We have our big, you know, customer summit coming up here in San Francisco in a few months.
Mm-hmm, mm-hmm
And we'll probably roll out.
Mm-hmm
Share some actual, you know, working prototypes of what we're doing there.
That's great. That's exciting. Looking forward to learning more about that. Maybe just broadly, how do you think about the opportunity for AI? You've mentioned the platform and the fact that all the data is on one platform organically built. It's a key strength for Workday, in my opinion, it's, I think you're better positioned to execute on AI-
Yeah
...as a result. Do you think of it that way? Do you think AI features are more kind of embedded into the offerings themselves, or do you think of these as kind of separate SKUs that-
It's a great question.
... you know, perhaps you could develop more so you see more of those add-on type sales, whether it's Accounting Center, you know, or even Planning.
Planning
You could see more AI-enabled services for Planning, yeah.
You know, it's a great question, Brad. We have not stated we're gonna come out with a bunch of different SKUs that we're gonna monetize around AI and ML.
Yeah.
How I think about it is, it improves our competitive win rate, so there's another way to monetize it by having a better solution like we have versus our competition-
Mm-hmm
... who doesn't have that unification of data-
Yeah
... on multi-tenant cloud. Everything we do is on one cloud, one model. Our competitive win rates, I think-
Mm-hmm.
... are a way we're monetizing it.
Mm-hmm.
There are other ways.
Mm.
That we're already monetizing it. We have something called the Skills Cloud that sits on top of our platform-
Mm-hmm
... that allows people to identify individuals and organizations and put them in the right opportunities and the right jobs.
Mm-hmm.
That is something we do monetize today, and it has a tremendous amount of momentum because people today want to focus on upskilling and reskilling their workforce-
Mm-hmm
... especially in the macro we're faced with. How do you do that?
Mm-hmm.
I think, you know, that's an example where we do monetize it, but right now it's much more about having the best solution with the best outcomes for our customers through the use of AI and ML. By doing that, our competitive win rates go up, so for me, that's a way to monetize it as well.
Absolutely. Absolutely. Great. While we're on the topic here, maybe we could switch to the balance of growth and margin. The company's talked about getting some leverage here on R&D, stock-based compensation. How are you thinking about making those right investments, balancing that with the profitability, you know, goals?
Yeah. you know, I said from the day I started, and Aneel and I are completely aligned on this, I think this is a unique company that we can continue to grow the top line at a healthy rate and have expanded margins.
Mm-hmm.
You know, some people say, you know, one has to come at the expense of the other, and I disagree with that. We have a lot of employees. We have a lot of great, you know, workmates around the world.
Mm-hmm.
We can get operating leverage and go to market. This year we did expand our operating margin by 200 basis points. We beat that in Q1.
Mm-hmm.
We've moderated our hiring, I think, you know, we want to get back to a 20% growth rate. Our guidance is 18%. You know.
Mm-hmm
... at scale, that's pretty good. As we move towards, you know, $10 billion in revenue, we want to try to get back to 20%. I don't think that has to come at the expense.
Mm-hmm
... of what we're doing on the operating margin side. You know, the 200 basis point expansion this year is pretty good. We're gonna continue to invest in the business.
Mm-hmm.
We see opportunities. We have a product, for example, when it comes to, you know, our higher ed business, we have a great business there. We're the leader in deploying both HCM and Financials.
Mm-hmm.
There's a whole student platform that we're gonna amp up and really go after hard. We think, you know, we can be the clear leader there. I wanna make sure we have some dry powder, right?
Sure.
Invest in the business.
Yeah.
Another example, we'll probably talk about this, we did a big investment in the go-to-market side around Financials this year.
Mm-hmm
We're adding a significant number of resources 'cause we see the opportunity there. Listen, on stock-based comp, we see it as a real expense for the business. You know, we're not naive. We understand, you know, a lot of our shareholders ask us this question.
Mm-hmm.
The only thing I would say, it is part of our compensation philosophy at Workday. It's always been that way. I was on the comp committee for five years at the board.
Mm-hmm.
We did state, though, recently, it will continue to come down over time.
Sure.
It's come down about 100 basis points each of the last couple of years, and we'll continue to drive that down.
Mm-hmm.
We no longer are doing what. You know, Aneel and I talk about a peanut butter spread, where everyone gets it, you know-
Mm-hmm
... a stock every year. We're doing things slightly different. I would say, if I look at the attrition rates we have in the company, they're pretty low, and we think part of that is, you know, the retention we have on people with stock-based compensation. People don't realize there's a cost-
Mm-hmm
...right, on the operating side. If you have high attrition, you've got to go out and bring a whole bunch of people in, you've got to train them, and there's a cost there, too.
Mm-hmm. Mm-hmm.
I'm not saying that's, you know.
Sure
... we can't do better on stock-based compensation, 'cause we will. We understand it's a real expense. You know, we use it as a tool, and we think about a total compensation for our employees and new hires. The outcome of that is less attrition than our peers, too.
Makes sense. That's great. Carl, I followed you at VMware when the company was transitioning from single product to the software-defined data center, you know, going from selling just vSphere to NSX and vSAN. You really had to kind of bridge the gap in the different, you know, buying organizations within IT, and I look at that as kind of analogous to what Workday is doing now, going from office of HR to CFO. It's different. These are different departments, but was there a playbook there that you had that you executed on? How can you leverage some of that as you embark on this effort here?
Yeah. That was a fun playbook. Zane picked it up and doubled it. I went from zero to $7 billion, and he's taken it from $7 billion to $14 billion, so Zane, that's what you have to do here, by the way. There are learnings that I took from that. Like, if you think about who our buyers are, the persona we're selling into today, it's been the CHRO or the people leader.
Mm-hmm
now the CFO.
Mm-hmm.
I will tell you more and more, we are now talking to, and the buyer is the CIO.
Mm-hmm.
You know, my 30 years prior life was selling into the CIO and the infrastructure. The CIO is a very-
Mm-hmm
... key person for us going forward. We have 3 different buying centers.
Mm-hmm.
That being said, going back to your analogy, we built a vCloud Suite, where we took, you know, network, compute, and storage, put it into a suite, and sold it into market as opposed to individual SKUs. We are going through an exercise right now internally, in fact, I have a call after this, to review how the transformation's going, but we're doing a study to see how our largest customers have implemented Workday from day one-
Mm
... and how they're using it today. We call it a customer journey. We're gonna map that out.
Mm-hmm.
We have probably more than, I'll say more than 35 SKUs today, Brad.
Mm-hmm.
If you're a seller or you're a partner selling us into the market, they're all individual SKUs.
Mm-hmm.
I think there's some unique things we can do around pricing and packaging.
Mm-hmm.
I think you can be super innovative around pricing and packaging.
Mm-hmm
Even add in services to simplify deployment as well, so we're working on that right now.
Mm-hmm.
I would expect to see some changes to that, in our selling motion over the coming quarters and years.
Mm-hmm
We can simplify the motion.
That's great. Great. Sounds like a great step. Awesome. You know, I would call Workday a patient acquirer. You elaborated on the platform, organically built, very extensible in these other categories. How do you view, kind of, going forward, the kind of M&A focus and where you have what you need in the platform, where you might need to bolt on over time?
Yeah. Listen, I think Aneel and Dave's vision of M&A is something I agree with and I'm aligned with. Again, spending the five years on the board, being on the M&A committee.
Yeah
... easy to see this. They were never out there looking for the real big M&A.
Yeah.
They were looking for strategic bolt-ons.
Mm-hmm
Ones that fit nice into our distribution channel or our selling motion.
Mm-hmm.
You know, the biggest acquisition we've done as a company is when we bought Adaptive for the planning side of the business.
Sure.
It has been by far the most successful-
Mm-hmm
...because it sells right back into the persona in the CFO office that we're selling into today-
Mm-hmm.
... so we find. I don't think anything's gonna change there. Obviously, we have a solid balance sheet, with lots of cash.
Mm-hmm
I don't think, I will do anything different, and Aneel and I are 100% aligned. You know, you do these big M&As, it feels good for the first year because your growth goes up, but then once you have to lap that, your year-over-year-
Right
... comparables get a little bit harder.
Sure.
Then you have the bow wave of OpEx that's following you as well.
Sure.
We're gonna be smart about it. We have a great corp dev team that's out there looking-
Mm-hmm
... around, you know, the market for different things that are strategic to us, that align to either HCM or Fins. I don't think we're in the, in the market to do anything big or, if you will, transformational at this time.
Makes sense. Great. Great to hear. Why don't we shift back to the HCM core business? Nice, steady grower for you.
Yeah.
If you could maybe just help illustrate for us, where is incremental growth coming from? You know-
Yeah
... still going after the net new land. There's obviously a lot more you can upsell into the installed base. You talked about that earlier. Where is the focus there? Where is the incremental, you know, revenue coming from?
I think it's coming from a couple different areas. I actually think in a positive way, the uncertainty in the macro is a little bit. We're a beneficiary of that at times.
Mm-hmm.
What I mean by that, you know, people are trying to get more productivity from their people.
Mm-hmm.
They're trying to keep them through having a great user experience, and that's what HCM does.
Sure.
It helps manage, you know. We call it from recruitment to retirement, we have the platform that's gonna service those, you know, employees.
Mm-hmm.
We can help drive productivity, and we can give them a great experience. I think, you know, the install base of customer we have is a really strong position for us and sell back into, like we talked about earlier.
Mm-hmm.
That being said, we're still landing more business, net new-
Yeah
... than we are, right, selling back into the base. I think, you know, we have a really good motion there. The other thing that we've doubled down on is industries and verticals, right?
Yeah.
If you look at the professional services industry, whether it's healthcare, it's financial services, it's consulting-
Mm-hmm
... state and local government is a huge business for us.
Mm-hmm.
These are all verticals that I think we are doing super well.
Mm-hmm
Hopefully will continue going forward. You know, there's only 50 states in the U.S. I think 15 or 18 of them have made decisions about doing a transformational, you know-
Mm
... you know, system of record implementation.
Sure.
That gives us a rich opportunity. The last thing I'd say is, you know, people think about our Planning product, Adaptive, to be completely aligned.
Mm-hmm
... our financials, right?
Mm-hmm.
Where we do, you know, plan, execute-
Mm-hmm
... and analyze. Actually, it's a product that helps with workforce planning, too.
Mm-hmm.
So-
Sure
... we can sell, you know, Planning back into our HCM customers.
Right.
Hopefully very quickly thereafter, when people do decide to move Financials to the cloud, we'll have the opportunity to be engaged as well.
Sure
The international market, Brad, as I said.
Yeah
... I just think 50% of our TAM is outside the United States, and we have 25% of our revenue coming from there.
Mm-hmm.
I spent a bunch of time, in Europe, across APJ. I'm heading to Europe for a week.
Mm-hmm
... next week.
Mm-hmm.
I just think we have a great opportunity internationally.
That's great. Planning has just been such an area of strength for a couple of years now.
Yeah.
It'd be helpful, I think, to understand what's driving that? I mean, what's going on in that segment of the industry right now, such that it seems like there's an adoption cycle that has accelerated.
Yeah.
Obviously, you've been working on integrating Adaptive into, as you mentioned, Fins, but also there's Planning for HCM. What's going on here? What's driving that success?
I think there's a couple things. You know, we only have a couple products that we describe as a land product.
Mm-hmm
You can sell it into a company-
Yeah
... without selling the whole system of record on HCM or Financials. That's what Planning gives us.
Mm-hmm.
It gives us the opportunity to go to market, sell it into customers.
Mm-hmm
...and then pull through both HCM and Financial. Planning is, we talked about it on the earnings call.
Yeah
It was, one of the highlights in the first quarter.
Mm-hmm.
I think the team, long before I was here, started a different selling motion around Planning. We built out a sales force to focus on that land component.
Mm-hmm.
We're seeing that bear the fruit that we expected. Planning is-
Mm-hmm
a great product. I think it's easy to use.
Yeah.
It's better performing than our competitors.
Yeah.
It's gonna be more deeply integrated, not into, as I said earlier, Financials, but also HCM. Now you can think about one platform-
Yeah
... for all resource planning. If you're in a services business, like I said earlier.
Mm-hmm
Most of your resource planning is what? People-
Mm-hmm
Your money, I think we are the protectors and purveyor of the two most critical assets a company have. It's their people and their finance.
Sure
T his is what, you know, gets Aneel, and myself, and my 18,000 workmates excited.
That's great. You talked about that planning first install base. You're now going back in there and upselling them for Fins. It seems like it's a bit, you know, almost the source of power has shifted towards planning away from core transactional ERP, whereas planning could become more of a system of record-
Yeah
... given the importance of that system now. I guess the question is, where do you see the opportunity from here with your planning first install base? Do you feel like you have that, you know, seeding of accounts across HCM and Planning, such that it's an easier upsell going in now? You've kind of surrounded that account. You can now upsell Fins.
Yeah. Nothing's easy right now in this market. You know, we're all, you know, fighting through the uncertainty out there. That being said, I do think, you know, we have a good selling motion around-
Mm-hmm
... the Planning, and I think it's a leader for us to get Financials.
Mm-hmm.
I think one of the true strengths of the companies is our HCM business. I will tell you, the HCM business gives us the opportunity to attract people to our Financials.
Sure. Yeah.
Listen, we're still, and I'm sure many of you do the research out there, but we're still in the early days, early innings-
Mm-hmm, mm-hmm
... of the game here, of people moving Financials to the cloud.
Right.
I think CFOs are conservative by nature, and I don't blame them. I'd be as well.
Right.
Moving your Financials to the cloud is something we're still in the early innings of, and for us to have an install base on the HCM side gives us an advantage to sell Fins. We're also doing very well, competing head-to-head with our competition there. The good news is, as people move their Financials to the cloud, we get a seat at the table now.
Mm-hmm, mm-hmm.
We're seeing that start to pay off for us.
Mm-hmm.
We're winning our fair share there, for sure.
Mm-hmm.
Because of that, earlier this year, I think, on our Q4 earnings call, and we reiterated at this call, we are doubling down our selling motion and adding significant resources, on the go-to-market side around Financials.
Mm-hmm.
Both Financials and Planning is part of that, both on land and then selling back into our install base.
Mm-hmm.
We see this as a really big opportunity, and we are investing behind it.
That's great. You mentioned earlier that CIO organization is increasingly part of your sales cycle.
Yeah.
When we think of Workday, we think of, you know, departmental sales into finance or HR, but we hear that more often as well when we do our channel checks. Just curious, how are you bringing in the CIO into the sales cycle more so now with the platform sale?
Yeah. I think, when the market or there's a tailwind out there for companies, the buyers have a tendency to buy what I describe are best-of-breed products.
Mm-hmm.
Over the last, you know, 10 years that we've seen this bull market run, they've bought a lot of different products, right?
Mm-hmm.
I think now what we're seeing is we're seeing a shift from best of breed...
Mm-hmm
... to what we describe or articulate as best-of-suite or best of platform.
Mm-hmm.
We're seeing the CIO say, "I have all these point solutions, and I'm gonna start to consolidate them on these platforms.
Mm-hmm.
Our platforms are the HCM and Financials, so more and more is consolidating on us.
Mm-hmm.
Quite frankly, that's a total cost of ownership sale.
Mm-hmm.
It goes back to my VMware days.
Yeah.
We can reduce your ROI or TCO.
Sure.
That's the playbook we're running right now.
Mm-hmm.
We're seeing more and more people take advantage of our SKUs and consolidating on top, whether it's talent optimization or recruiting or Accounting Center on Financials.
Mm-hmm.
At the same time, we have this product called Extend-
Mm-hmm
... which allows companies to say, "We have these existing applications. We want them to be part of the Workday, you know, platform."
Mm-hmm.
We've opened up our API, and we call it Extend, and we have more than 1,000-.
Mm-hmm
more than 1,000 applications that are built on top of us that our customers are using. That's being driven through the CIO office.
Mm-hmm.
The other piece is we have this product called Prism.
Mm-hmm.
Prism Analytics gives you analytics on both our core platforms, and on HCM and Fins.
Mm-hmm
It also has an interface to allow you to bring a whole bunch of other data sets in, so you're not just looking at the Workday data. You're bringing your other data sets in-
Mm-hmm
...gives you a better output on the analyze side. We do the planning, the execution, the analyze.
Mm-hmm.
We can analyze our own data, but we can bring it in, and that's all CIO driven.
Mm-hmm.
The last thing is, you know, we've announced, you know, partnerships with Amazon and many of the other cloud providers. We announced at this DevCon I mentioned earlier, an API for Amazon.
Yeah.
People who have built or run native service on AWS.
Mm-hmm
Y ou can now integrate-
Mm-hmm
... into the Workday platform.
Mm-hmm.
These are all areas that give us an opportunity to speak, you know, closer to the CIO, as opposed to always just talking to the CFO and CHRO. I mean, there's three buyers-
Sure
...that we gotta deal with.
Yeah, yeah. Makes a lot of sense. Okay, great. Maybe we could go back to Fins. It's not an easy ask to go to the CFO and ask to, you know rip out a legacy system and put in a cloud-based system with Workday. How do you articulate the ROI here, and how do you reduce that initial effort to make that migration, you know?
Yeah. It isn't easy, admittedly so.
Yeah.
I think it's not if, it's when people move to the cloud, and by moving to the cloud in a, you know, a Financials cloud-based product-
Mm-hmm.
... I think your total cost of ownership does go down.
Mm-hmm.
You don't have to. The maintenance on keeping these things on premises.
Sure
very expensive these days. I think we can have a good ROI TCO story for our customers.
Mm-hmm
N umber one.
Mm-hmm.
Number two, I hate to be repetitive, but, our differentiation is, if you have HCM with us...
Mm-hmm
You bring in Financials, it's all the same data platform.
Mm-hmm. Mm-hmm.
It's all the same analytics.
Mm-hmm.
It's all the same APIs. It's all the same planning. As I said earlier, you know, most of the, you know, companies in the services industries, where we have a lot of success, you're doing two types of, you know, planning. You're doing, you know, Financials-
Mm-hmm
... and a lot of the Financials are the people side. I think that's how we differentiate ourself. We have a number of significant, you know-
Mm-hmm
... enterprises. We're in the midst of deploying it, you know, the likes of Salesforce. I think this is a really good motion for us, and we can differentiate ourself, and we can bring our customers a lower total cost of ownership by doing so.
That's great. Last one, Carl. You talked about the platform and how the data platform relates to the overall platform, curious if we get your perspective on other components to the platform for Workday. When I think of Workday, I think of it as one of those few platform companies, where product is built on common components, mostly organically built. Beyond just the data layer, what are some of those other components to the platform, such that the company has been so well enabled to expand into other categories with more modules-
Yeah
... really built on the same code base?
Yeah. No, I think there's two components. It's what I would describe as internal innovation. We bring out our own SKUs, whether it's recruiting, talent optimization, it's analytics. At the same time, if you say you want to be a platform company, you have to be open.
Mm-hmm.
Platform companies integrate both from the southbound aspect and northbound on the application side.
Mm-hmm.
I think we're doing very well, which is why I talked about earlier, we'll probably be a bit more aggressive in our ecosystem partnerships.
Mm-hmm, mm-hmm
Like with an AWS or many others.
Mm-hmm.
I think this is an area of opportunity for us to really solidify us as a true system of record. You know, we talk about having two system of records, you know, between HCM and ERP.
Mm-hmm.
I will tell you, Planning, you mentioned it earlier, Brad, is also a system of record and a platform.
Sure.
You know, we're gonna innovate on top of our platform, but we can't do it all ourselves, so we're gonna continue to have an open architecture that brings much more in to solidify us as that platform of choice for our customers.
That's exciting. Well, Carl, thanks so much for joining us. Great to kick off the conference with you. Everybody, have a great week, and thanks again.
Thanks for having me, Brad. Thank you, everyone.