Workday, Inc. (WDAY) Earnings Call Transcript & Summary

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 want to mention that 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 at this level. You have -- 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. And don't forget to join us this evening for a cocktail reception in the [indiscernible], which is the lobby level at 4:45. So 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.

All right. Thank you for having me. Good morning. Good morning, everyone. Everyone could make it.

Absolutely. So Carl, 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. What excited you about the role coming in here as co-CEO and in the future of Workday and how you plan to drive that?

Yes. Thank you. And 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 5 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. I also 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 at VMware, enjoying that journey. And then the next 7 in the venture world at Sequoia, where I made a number of investments and was part of 6 IPOs over a 7-year period. I knew I wanted to end my career back in an operating role. And I wanted to find a company that I thought fit. What was most interesting to me, that's culture value and also work with people that I trust and respect. On top of that, if you can couple that with a very durable and resilient business like we have here at Workday. I mean, if you look at the financial profile of the company, we're still growing high teens in growth. We're doing really good operating margin off good free cash flow. We have a very durable business. And 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. And to be honest, Brad, everyone says this co-CEO thing is really hard to make work. 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. And I think we both have complementary skill sets. I've grown up and I started in presales as an engineer, but then moved into sales and marketing and operations. Aneel, he is one of the greatest technical strategies I've ever met, especially when it comes to, if you will, systems of record like ERP or HCM, and it's working super well. And I couldn't be more excited about the opportunity. We're both working hard and we're doing okay in the first 6 months. First couple of quarters have gone great.

Absolutely. I should say so. And how do you and Aneel think about that division of duties in the co-CEO arrangement? Obviously, in February, you'll be taking over a sole CEO. So how are you guys thinking about that?

Yes. 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. He's diving a lot deeper with Sayan, who's our Co-President into the product and technology aspects of the business. He's spending a lot of time on AI and ML. I'm guessing that question will come up today. I would be surprised if it didn't. So -- and he's let me run the operating side of the business, both sales, marketing as well as the financials of the company and the finance organization. And then Aneel and I own jointly, the culture and values because that's, I think, one of the strengths of the company. So I think the way we're dividing and conquering is working well. And 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. And a lot of people talk about that February transition of next year. That's what we've stated, and that's fine, and that's what will probably happen. But by no means am I like saying, Aneel, please move on. In fact, when he steps back, he's going to go into an Executive Chair role. And as an Executive Chair, you are going to be a continued value to the company, and he's going to stay deeply involved in the product side. And then obviously, I'll take over running the company. But I'm somewhat of a smart guy and I want Aneel around as long as I can keep him on the product side. And 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. 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, but he's not going anywhere. And oh, by the way, when he does step back and he becomes Executive Chair, he's still my boss. So we got to continue to get along.

Yes. That's great. It sounds like a great arrangement.

Yes.

Thank you for that. And when you do take over as sole CEO. I mean what do you see today as the direction -- strategic direction of the company, operational? What impact might you have as you take on that role?

Yes, Brad. If I'm honest, I don't think you're going to see any radical transitions when I take over as sole CEO because I think we already have a lot of that in motion today. Aneel and I are very aligned on the business as a whole. If we have disagreements, it will never be in front of the company or in front of our executive staff. We talk every single day. Aneel is a big texter for those who know Aneel, he likes to text. I get lots of text. So we stay in complete communication. But I think a lot of the changes that I would want to drive in the company are already being put in place, the speed and pace of what we're doing, how we're operating, the operating rigor of the company, thinking about the opportunity on an international basis, I think our go-to-market motion can continue to improve and drive more productivity out of our international markets. So listen, we're -- 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. So I just think there's tremendous upside as we think about the business in Europe and across APJ. I'm driving changes today and Aneel is supportive. Again, we're aligned around how we think about the ecosystem. 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 with the referral program. And then the last thing, 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 going to be a platform, 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 that area. And I think as we go forward, you'll see us do more and more around aligning with strategic partners, maybe than we have historically. And again, these are all things that Aneel and I are aligned on. So I don't think once February comes, you're going to see me do anything radically different. I think we've already put those changes in motion, and Aneel and I are completely aligned in support of each other's decisions.

That's great. Wonderful. And 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 and why Zane is the right guy for the role.

First, I want to recognize Barbara Larson, right? Barbara has been with us for 9 years. I love Barbara. At one point, I was really disappointed, Barbara and didn't like her because 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 9-year career at Workday. She came in to run FP&A, so planning. We actually put her in a role a few years ago to run our HCM business, our biggest business we have, on our core HCM business, on the product side to given her product experience. And then about 1.5 years ago, she stepped into the CFO role and she's done an amazing job. And about 4 months ago, she came to me, we started having conversations, and she said, "I just want to spend more time with my family. I'm thinking about potentially pulling back." So we had a lot of conversations. So I very quickly went out in the market and talked to a plethora of CFOs and obviously, I've known Zane. I saw him in action. I met him when he was at Apple, believe it or not, I met him when he was Apple running sales, which is crazy to think Zane is a tremendous CFO. He's running sales, but that shows you his skill set. I talk to them and talked to many others. And I think Zane is one of the best CFOs in the industry. Everyone in here probably know Zane from his days of 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. And I don't think there's a better CFO executive in the software market for us to get him is a big coup for us. We're super excited. And 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.

He's here. I don't know where Zane is. Hi Zane. He starts next Monday. So this is a sneak preview for him.

All right. Great.

Thanks for coming.

Welcome. Thanks, Zane. Awesome. So you're coming off a real nice Q1. And maybe we could 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. So curious to get your perspective on what were the sources of upside this quarter.

Yes. First, I couldn't be more proud of the execution of the company in Q1 coming off a real solid Q4 where we announced a CEO transition to know of a quarter. People were like, wow, that's pretty aggressive to do that. It was just timing. And we backed it up with a solid start to the year in Q1. And I always believe that your performance in Q1 sets a tempo for the full year, and we really focused and getting off to a solid start despite the macro uncertainties in this and 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 earnings call, but our teams executed well. 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. And 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 a market segment, if you cut it horizontally, that is a significant portion of our business. We have a tremendous installed base we can sell back into. We're still landing, we still sell more net new licenses into new customers versus our installed base. And then I think, Brad, 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 3 days. It will be ingrained in everyone here. And I think we have a differentiation there versus a lot of our competitors in the market. And that is resonating how we respond to our customers with it when they ask about what we're going to do. So 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. Yes. We'll get to AI in a second, but since you mentioned it, the back to the base, I believe, is what you refer to it as the go-to-market effort focus on the installed base, you have a large installed base of global organizations, a lot more to sell them. And I think that's been a key operational focus is to come in here. So maybe if you could elaborate on that motion and what's new.

Yes. We have a very good sales motion here. We have sales teams that completely focus on what we call net new, so they land customers. And as soon as they land customers, they actually pass it over to what we call CB or customer-based sales executives. So we have a really good go-to-market motion for net new and customer base. And I think 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 as we've innovated and we brought new SKUs to market as we brought new products to market like planning, we can sell right back into that customer base. And we've built different sales organizations to take advantage of that, including an inside-out what we call digital sales model. And the last 2 quarters on 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. As you could imagine, an HCM implementation or sale or an ERP cell literally can take years in the making, but we now have this motion where we can create and close in the same quarter 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. So I think it's working well and it's paying dividends. And again, I think that's what's so unique about our business model is the diversity of how we go to market. Listen, we are super blessed and fortunate, we own 50% of the -- more than 50% of the Fortune 500, 25% of Global 2000. So we have a really rich installed 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. So 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. So just curious how you think about that opportunity and where does AI manifest in the product suite, whether it's HCM or FINS, today? And what's kind of the road map for more AI-enabled type offerings?

Yes. So I'll talk about it, Brad, in 2 different dimensions. I'll talk about it in the context of what I'd say, traditional AI/ML. And I'll talk about ChatGPT and generative AI. For the last, I think, 10 years, I think it's 9 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. And that's because we have 2 Qs. 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. So we actually have our own large language model right there. But that's quantity. We have something that no one else has. That's quality. And the reason I say that is we have a unified data model. We're in a multi-tenant cloud. Everyone is on the same data structure. Our competitors have on-premise say of cloud, they have hybrid. We don't have that. And because we have both quantity and quality, we are delivering outcomes for our customers based on AI and ML that we've built in. We're not bolting it on. That being said, we also understand that the hyperscalers, all of them have a whole bunch to offer when it comes to AI/ML. So 3 weeks ago at our developer conference, we had in San Jose, we announced a new API interface through machine learning to allow us or our customers to take advantage of all the other things out there in the market around AI and ML and integrate into our platform. But I think -- for me, I think the key message is it's built in. It's not bolted on. We've been doing it a long time. We have quantity and quality of data that no one else has. Now when it comes to 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 that's all data that's coming from the Internet. That's all data that's probably not highly curated like we are. But we do see use cases around anomaly detection. We see it as a personal assistant as you're logging in to Workday, maybe there's some personal assistant things that you can do. And then we also think there's some mundane tasks that people are doing today that we can leverage that technology for going forward. But we think we're in a good position. We're leveraging it. We've been leveraging it. We'll continue to explore more use cases. We have a big customer summit coming up here in San Francisco in a few months, and we'll probably roll out and share some actual working prototypes of what we're doing.

That's great. That's exciting. Looking forward to learning more about that. And 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 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 perhaps you could develop more or so, so you see more of those add-on type sales, whether it's accounting center or even planning, you could see more AI-enabled services for planning?

It's a great question, Brad. We have not stated we're going to come out with a bunch of different SKUs that we're going to monetize around AI and ML. 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 had versus our competition who doesn't have that unification of data on multi-tenant cloud. Everything we do is on one cloud, one model. So our competitive win rates, I think, are a way we're monetizing it. There are other ways that we're already monetizing it. We have something called the skills cloud that sits on top of our platform that allows people to identify individuals and organizations and put them in the right opportunities and the right jobs. So 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, especially in the macro. We're faced with, how do you do that? And I think that's an example 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. And by doing that, our competitive win rates go up. So for me, that's the way to monetize it as well.

Absolutely. Great. And while we're on the topic here, maybe we could switch to the balance of growth and margin. The company has 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 goals?

Yes. 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. Some people say, 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 workmates around the world. We can get operating leverage and go-to-market. This year, we did expand our operating margin by 200 basis points, and we beat that in Q1. We've moderated our hiring. So I think we want to get back to a 20% growth rate. Our guidance is 18%. At scale, it's pretty good as we move towards $10 billion in revenue. We want to try to get back to 20%. And I don't think that has to come at the expense of what we're doing on the operating margin side and the 200 basis point expansion this year is pretty good. And we're going to continue to invest in the business. We see opportunities. We have a product, for example, when it comes to our higher ed business. We have a great business there. We're the leader in deploying both HCM and FINS, but there's a whole student platform that we're going to ramp up and really go after hard. We think we can be the clear leader there. So I want to make sure we have some dry powder, right, and invest in the business. Another example we'll probably talk about this, we did a big investment in the go-to-market side around financials this year. So we're adding a significant number of resources because we see the opportunity. Listen, on stock-based comp, we see it as a real expense for the business. not naive. We understand a lot of our shareholders ask us this question. 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 5 years at the Board. We did state, though, recently. It will continue to come down over time. It's turned down about 100 basis point each over the last couple of years, and we'll continue to drive that down. We no longer are doing what I -- Aneel and I talk about a peanut butter spread where everyone gets it, stock every year. So we're doing things slightly different. But 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 the retention we have on people with stock-based compensation and people don't realize there's a cost on the operating side. If you have high attrition, you've got to go out and bring a whole bunch of people and you got to train and there's a cost there, too. So I'm not saying that we can't do better on stock-based compensation because we will. We understand it's a real expense. But 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. And Carl, I followed you at VMware, when the company was transitioning from single product to the software-defined data center, selling -- going from selling just vSphere to NSX and vSAN, you really had to kind of bridge the gap in the different 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? And how can you leverage some of that as you embark on this effort here?

Yes. That was a fun playbook. And Zane picked it up and doubled. I left it. I went from 0 to $7 billion, and he's taking a $7 billion to $14 billion. So Zane, that's what you have to do here, by the way. So 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 and now the CFO. But I will tell you more and more, we are now talking to and the buyer is the CIO, which is where my 30 years prior life was selling into the CIO and the infrastructure. And the CIO is a very key person for us going forward. So we have 3 different buying centers. That being said, going back to your analogy, we built a vCloud Suite where we took 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 is going, but we're doing a study to see how our largest customers have implemented Workday from day one and how they're using it today. We call it a customer journey. We're going to map that out. And then we're going to take -- we have probably more than -- I'll say, more than 35 SKUs today, Brad. And if you're a seller or you're a partner selling us into the market, they are all individual SKUs. I think there's some unique things we can do around pricing and packaging. I think you can be super innovative around pricing and packaging and even adding services to simplify deployment as well. So we're working on that right now. And I would expect to see some changes to that in our selling motion over the coming quarters and years because I think we do simplify the motion.

That's great. Great. Sounds like a great step. Awesome. And 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?

Yes. Listen, I think Aneel and Dave's vision of M&A is something I agree with and I'm aligned with. And again, spending in the 5 years on the board being on the M&A committee, it was easy to see this. And they were never out there looking for the real big M&A. They were looking for strategic bolt-ons or ones that fit nice into our distribution channel or our selling motion. And the biggest acquisition we've done as a company is when we bought Adaptive for the planning side of the business. It has been, by far, the most successful because it sells right back into the Persona and the CFO office that we're selling into today. So we find -- but I don't think anything is going to change there. Obviously, we have a solid balance sheet with lots of cash but I don't think I will do anything different, and Aneel and I are 100% aligned. 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 pairs get a little bit harder. And then you have the bow way of OpEx that's following you as well. So we're going to be smart about it. We have a great corp dev team that's out there looking around the market for different things that are strategic to us and aligned to either HCM or FINS. But I don't think we're in the market to do anything big or if you will, transformational at this time.

Make's sense. Great. Great to hear. And why don't we shift back to the HCM core business, nice steady grower for you? If you could maybe just help illustrate for us where is the incremental growth coming from? 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 revenue coming from?

I think it's coming from a couple of different areas. I actually think in a positive way. The uncertainty in the macro is a little bit of a -- we're a beneficiary of that at times. And what I mean by that, people are trying to get more productivity from their people. They're trying to keep them through having a great user experience, and that's what HCM does, it helps manage. We call it from recruitment to retirement, we have the platform that's going to service those employees, we can help drive productivity, and we can give them a great experience. So I think the installed base of customers we have is a really strong position for us and sell back into like we talked about earlier. That being said, we're still landing more business net new than we are, right, selling back into the base. So I think we have a really good motion there. The other thing that we've doubled down on is industries and verticals, right? If you look at the professional services industry, whether it's health care, it's financial services, it's consulting, state and local government is a huge business for us. These are all verticals that I think we are doing super well in, and hopefully, we'll continue going forward. There's only 50 states in the U.S., I think 15 or 18 of them have made decisions about doing a transformational system of record implementation, and that gives us a rich opportunity. And then the last thing I'd say is people think about our planning product, Adaptive, to be completely aligned to our financials, right, where we do plan, execute and analyze. Actually, it's a product that helps with workforce planning, too. So we can sell planning back into our HCM customers and then hopefully very quickly thereafter, when people do decide to move financials to the cloud, we'll have the opportunity to be engaged as well. So it's again -- and then the international market, Brad, as I said, I just think 50% of our TAM is outside the United States, and we have 25% of our revenue coming from there. I spent a bunch of time in Europe, across APJ. I'm heading to Europe for a week, next week. I just think we have a great opportunity internationally.

That's great. And planning has just been such an area of strength for a couple of years now. It would 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? 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?

So I think there's a couple of things. We only have a couple of products that we described as land product, meaning you can sell it into a company without selling the whole system of record on HCM or financials, and that's what planning gives us. It gives us the opportunity to go to market, sell it into customers and then pull through both HCM and Financials. So planning, as we talked about on the earnings call with one of the highlights in the first quarter. And I think the team, long before I was here, started a different selling motion and around planning. We built out a sales force to focus on that land component, and we're seeing that bear the fruit that we expected. So Planning is a great product. I think it's easy to use. It's better performing than our competitors, and it's going to be more deeply integrated, not into, as I said earlier, financials, but also HCM. So now you can think about one platform for all resource planning. And if you're in a services business, like I said earlier, most of your resource planning is what, people and your money. And I think we are the protectors and purveyor of the 2 most critical assets the company have. It's their people and their finance, and this is what gets Aneel, myself and my 18,000 workmates excited.

That's great. And you've talked about that planning first installed base. You're not going back in there and upselling them for FINS. It seems like it's a bit -- almost the source of power has shifted towards planning away from core transactional ERP, whereas planning could become more of a system of record given the importance of that system now. I guess the question is, where do you see the opportunity from here with your planning first installed base? Do you feel like you have that seating of accounts across HCM and planning such that it's an easier upsell going in now, you kind of surrounded that account. You can now upsell FINS.

Yes. So nothing is easy right now in this market. we're all fighting through the uncertainty out there. That being said, I do think we have a good selling motion around the planning, and I think it's a leader for us to get FINS. I think one of the true strengths of the company is our HCM business. And I will tell you, the HCM business gives us the opportunity to attract people to find our financials. And listen, we're still -- I'm sure many of you do the research out there, but we're still in the early days, early innings of the game here of people moving financials to the cloud. I think the CFOs are conservative by nature, and I don't blame them. I'd be as well. So moving your financials to the cloud is something we're still in the early innings of. And for us, having an installed base on the HCM side gives us an advantage to sell FINS. But 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. And we're seeing that start to pay off for us, and we're winning our fair share there for sure. And because of that, earlier this year, I think, on our Q4 earnings call and we reiterated it in this call, we are doubling down our selling motion and adding significant resources on the go-to-market side around financials and both financials and planning is part of that, both on land and then selling back into our installed base. So we see this as a really big opportunity, and we are investing behind it.

That's great. And you mentioned earlier the CIO organization is increasingly part of your sales cycle. When we think of Workday, we think of departmental sales into finance or HR. But we hear that more often as well when we do our channel checks. So just curious, how are you bringing in the CIO into the sales cycle more so now with the platform sale?

Yes. So I think when the market or there's a tailwind out there for companies, the buyers have a tendency to buy what I describe as best-of-breed products. And over the last 10 years, as we've seen this bull market run, they bought a lot of different products, right? And I think now what we're seeing is we're seeing a shift from best of breed to what we describe or articulate as best of suite or best of platform. And we're seeing the CIO say, I have all these point solutions, and I'm going to start to consolidate them on these platforms. Our platforms are HCM and in Financials. So more and more is consolidating on us. And quite frankly, that's a total cost of ownership sale. It goes back to my VMware days, we can reduce your ROI or TCO. And that's the playbook we're running right now, and 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. At the same time, we had this product called Extend, which allows companies to say, we have these existing applications. We want them to be part of the Workday platform. So we've opened up our API. We call it Extend, and we have more than 1,000 applications that have built on top of us that our customers are using, and that's being driven through the CIO office. The other piece is we have this product called Prism. Prism Analytics gives you analytics of both our core platforms on HCM and FINS, but it also has an interface to the value 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 and gives you a better output on the analyzed side. We do the planning, the execution, we analyze. We can analyze our own data, but we can bring it in, and that's all CIO driven. And then the last thing is we've announced partnerships with Amazon and many of the other cloud providers. So people can now -- we announced at this DevCon, I mentioned earlier, we announced an API for Amazon. So If people have built or run native service on AWS, you can now integrate into the Workday platform. So these are all areas that give us an opportunity to speak closer to the CIO as opposed to always just talking to the CFO and CHRO. I mean there's 3 buyers that we got to deal with.

Yes. Yes. 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 bring 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?

Yes. So it isn't easy admittedly so. But I don't -- I think it's not if it's when people move to the cloud. And by moving to the cloud in a FINS cloud-based product, I think your total cost of ownership does go down. You don't have to -- the maintenance on keeping these things on premises is very expensive these days. So I think we can have a good ROI, TCO story for our customers, number one. Number two, I hate to be repetitive, but our differentiation is, if you have HCM with us and then you bring in financials, it's all the same data platform. It's all the same analytics. It's all the same APIs. It's all the same planning. As I said earlier, most of the companies in the services industries where we have a lot of success, you're doing 2 types of planning. You're doing financials, and a lot of the financials are the people side. So I think that's how we differentiate ourselves. We have a number of significant enterprises. We're in the midst of deploying the likes of Salesforce who -- so I think this is a really good motion for us, and we can differentiate ourselves 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. But curious if we can 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 really built on the same code base?

Yes. No. So I think there's 2 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 because platform companies integrate both from the southbound aspect and northbound on the application side. And 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 like with an AWS or many others. I think this is an area of opportunity for us to really solidify us as a true system of record. We talk about having 2 system of records between HCM and ERP. But I will tell you, planning, you mentioned earlier, Brad, it's also a system of record and a platform. So we're going to innovate on top of our platform, but we can't do it all ourselves. So we're going to 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.