Jan 12, 2021 / 05:10PM GMT
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Hello, everybody. We're really delighted to welcome you to the Goldman Sachs Technology and Internet Conference, kicking off here virtually. For those that don't know me, my name is Kash Rangan. Just a couple of things to get out of the way. Goldman Sachs does not have research coverage of Workday. And also for those that want to look at the safe harbor statement, please go to the Workday website to take a look at the safe harbor.
We're going to do a Q&A with a guest that I'm delighted to bring on this platform, Aneel Bhusri, Co-CEO and Founder of Workday. Some may recollect Aneel as one of the very few executives in the industry that has gone through 2 major technology cycles: the client server cycle, where he was one of the most senior executives at PeopleSoft. That's when we had a [platform] getting to know each other about 20, 21 years back or so; and again, having a very successful stint in the Internet cycle or the cloud cycle with Workday.
So without much ado, welcome -- a big welcome to Aneel Bhusri, Co-CEO, Founder of Workday. So glad to have you with us.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Thanks, Kash. Thanks for making me feel old as well. And...
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Me too.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
No. well, I got to say, hey, so you change firms and now you upgrade your wardrobe.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
I got to tell you the best time to buy a suit is the pandemic. They go on sale, so got to be opportunistic.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Well, it's good to be with you.
Questions and Answers:
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - AnalystLikewise. Thank you for doing this with us. Wanted to first understand, it's been almost a year with this pandemic, and we learn every day something new. What has Aneel Bhusri learned about COVID? What are the big lessons that you want to share with us on running a company of Workday's size?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Yes. Going into it in March of last year, it was a jump into the great unknown. And we modeled our business at various levels of new bookings, 25, 50, 75, just not knowing what would happen. And 10 months later, after the first couple of months, which were tough, 10 months later, our business has been really resilient and it's held up nicely. Digital acceleration and digital transformation continue.
And I'm really proud of our people. I think they've been really resilient as well. We decided very early on to give everybody a 2-week bonus just to get issues out of the way, financial issues out of the way for our employees. And then we asked them to double down on taking care of our customers. And I couldn't be more pleased. I'd like to be out of the pandemic. I'd like to be back in the office, but our company has really stepped up.
And if I have a takeaway during this pandemic, not knowing what was going to be prioritized and what wasn't. Definitely a lot of our applications were high priorities. HR continued to be a high priority from an employee engagement perspective. Planning jumped through the roof. I mean people were doing plans almost every week trying to figure out how their business was going to look over the coming months.
Core financials, probably we'll get some steam going into the recovery but did okay. And then the analytics side has been very strong and -- so across the board, very pleased. I would say one of the things I'm most proud of is we took companies like Walmart and GE live during the pandemic without a single person on site. And if you had told me that, that was a possibility a year ago, I would have told you were crazy. There's no way to do it without anybody on site. It's a testament to our people, but I also think it's a testament to our cloud technology, we were able to do that.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Sorry, just unmuted myself. How have customer priorities changed as a result of the pandemic?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
I think that people -- anybody who was still on data to legacy technology, on-premise technology or even somebody who's on a fake cloud, I think they really suffered. And we had a huge retailer that we've been talking to for 5 years, and the pandemic was actually a forcing function to move to Workday because they couldn't realign their business because of the pandemic, right? They went from being primarily a store retailer to online and curbside pickup. And they really had to change the way they manage their people and the legacy systems to let them do that. So they made the jump to Workday.
The other thing that I hear from all of the CEOs I talk to is that it's really put a sharp point on taking care of your employees and not just getting them paid but being able to connect with them, give them feedback, check in and see how they're doing from a mental health perspective. And I think that, again, has been a real driver for replacing your HR system. So that's been a good one.
But for the most part, I feel like many of the companies out there have just figured out how to get through this pandemic and are trying to run their business as much as possible as usual, adjusting for the remote work but finding a way. And I think, in general, businesses and people have been resilient.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Got it. You don't have to answer this question, but the retailer, you're talking about dots and circles, red color, is it -- am I up in the ZIP code?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
What's that? Guessing?
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Never mind. I was about to guess Target as the retailer that you were working with that...
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Well, Target was already a customer. Think electronics.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Okay. We're buying a lot of electronics during this pandemic, a lot of customer service engagements as well. Starting with the new year, everybody has prognostications. Goldman Sachs' economist -- chief economist is very bullish, a big recovery. What is your demand -- from your perspective, how does demand environment look like? How happy are you with acquiring the pipelines [should got going] into calendar '21?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
I'm quite pleased actually. I think the first half of the year, while people are getting vaccinated, we'll still see a subdued demand environment like we have since March, and I think that's across all IT. It's not specific to Workday, with the exception of Zoom or Teams. Like those are the 2 players that gained a lot of momentum during the pandemic. For the rest of us, we're just happy that we're still in demand.
I'm optimistic that the second half of this year is going to be strong, that the second half of FY '22, as people are going back into the office or getting back to their priorities. I think HR is just going to continue to chug along. Our customer base motion is very strong, but I think finance will come back in a big way. And all the data from Gartner and others suggest that financial transformation is next on the docket, and I feel like we're very well positioned to take that on.
And in the interim, we're selling financial planning. We're selling financial analytics. We're selling, now with Scout, best-in-class procurement solution. So there's a lot of things that keep us busy until the market really comes back in the second half of the year. But I'm bullish. And everybody I talk to just is looking to get back to as much of a normal world as possible.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Got it. Got it. So I think we touched upon vaccines. And one of the questions that we've been planning to ask CEOs like yourself is, how do you specifically see this playing out? I mean we brought the vaccine. How long does it take for people to get -- your employees, your salespeople, yourself, to get confident that I can actually get on the road, get on a plane. How do you see this playing out? And what impact does it have on our economy since your purview to 4,000-plus large Fortune 500 companies. You have all the data. it's got to be incredible insight that you have there.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Well, so one of the things I feel very lucky is to have almost all of the major pharmaceutical companies as Workday customers. And so I know the CEOs at Johnson & Johnson and Pfizer and their teams. And I just got to say we owe a massive debt of gratitude for those -- to those companies and their leadership. And what they've done with vaccines is just amazing in such a short amount of time.
One of the things that I get comforted just having talked with them since the pandemic started, these vaccines, I think, are very safe. I'm not a doctor, but they're going through the gauntlet. They're messenger RNA-based, the 2 that have been approved and are circulating, which means it's not a live virus. You're not going to get sick from taking it. You might have some side effects.
And I know my mindset is as soon as my turn comes up, I'm going to take the vaccine. I'm not going to try to get faster into the mix. But as soon as my turn comes up, and at that point, I still might wear a mask but I'd be very comfortable going back into the office at that point. And so I hope that's April, May, June for the bulk of the country. Although the new administration coming in, I think, is rethinking how to go faster, and maybe there is a way to go faster.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Got it. I'm curious to get your perspective on what aspects of business go back to pre-COVID, what aspects of business stay where they -- how they got transformed during COVID? What are the things that don't change, are more permanent and -- not permanent but lasting?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Every one of these downturns, we were talking about it, whether it was 2001, 2002 or '08, '09 or this one has its own set of characteristics. I think in this case, the cloud has now just become so mainstream and it really is the only platform that works when you have to work remotely. You have to scale up. You have to start new businesses. And so I think like many trends, things that are going into a downturn, there are new trends, tend to get accelerated as the downturn subsides, and things that were slowing down get crushed.
And so I think it is kind of the death knell of legacy technology and, I don't know, that's obviously self-serving but I think it's actually right.
In terms of going back, I'm a big believer that we're going to be back in the office. I know that in the case of Workday, that's what I'm asking. Maybe a handful of people can work remotely. It's hard to collaborate. It's hard to really have a great culture and an inspired workforce if you're just on Zoom every day.
And I think in the early days, people were excited about this remote work, but 10 months into it, most people want to get back into the office. And so I don't see a change. I think instead of having remote work, I think it's more likely that we'll let employees work from home 1 to 2 days a week. Because I do think there's some mental health and -- one of the benefits of the pandemic, you're always looking for silver lining, has been family time. Everybody talks about it, but maybe 5 days is too much family time. 1 to 2 days is a good amount. So I think that will change.
Travel, my guess, is 75% will come back. I think about all my sales travel. And I continue to believe being in person with customers is really important, being in person employees is really important. But there's a lot of meetings that don't have to be in person that you can do over Zoom, especially check-in meetings during an implementation. I used to fly out for all those. And now I think, Zoom works really well for the 1-hour status meeting. So I would say that we get to 75%. I think that probably stays pretty constant.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
That's a very refreshing perspective because there have been some other CEOs of companies that are out saying the work has just got to be completely virtual. There's no need to ever go into an office maybe. Those things have -- absolute statements seem a little farfetched. As a firm, we're certainly in the old camp at being in the office together, more creativity, more ideas, more teamwork. And firms that have -- companies that have strong cultures, they're definitely trying that in person to the office environment. So we're certainly very aligned, and I can see that -- I'm surprised that your perspective, 75% of travel comes back. Because previously, [I've heard previously] maybe 50% comes back, maybe 30% comes back. But 75% is very bullish.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Well, we're a large enterprise hands-on company. And even with the benefit of technology, we're going to want to be on site. And I think any time there's a sales situation, we'll do better if we're on site. And we'll force -- our competition will force all of each other to be on site over time for the big -- for those big meetings. But there's a lot of the day-to-day meetings that will go.
I think people want to get on the road again. I know our people do. They want to be with customers. It's our reason for being, and I just don't see that virtual world. When we do a lot of surveys, I know I'm sure Goldman does, too. I know Fortune has done surveys about mental health, and people are not happy working from home every day. They're just not. 30% of the employees report some level of mental health issues. That's a huge number. And we got to get back to the office and back to being with customers.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
I'm curious with respect to this travel thing, what I was trying to get at was some of the (inaudible) with [70%] of travel back, what are your -- you speak with a lot of CEOs of Fortune 500 companies. You've got 50% market share among Fortune 500. Big market share, S&P 500, Fortune 2000, irregardless what you [type]. What are your peers telling you about how they see the economy opening up? And what are their plans to let employees come back in? Or do they believe that people should be given the chance to work remotely? Or do they also believe, like you, that we should come back to the office and get back (inaudible). What are their thoughts?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
There's a -- I think the tech sector and probably financial services are the 2 sectors that have largely stayed work-from-home. But many of the companies and CEOs I talked to, they are in some hybrid [mode] already where people are going into the office. If you're a retailer, you've got people in the stores. If you're a Walmart, if you're a Target. if you're a health care provider, you obviously have people in the office. And so -- and you haven't seen people getting sick in the workplace. As I talk to CEOs, they've all adopted really, really great protocols.
And so I sense people are optimistic about, hey, we got through this period of time. It's been a really sad time. Not as many people -- so many people did not have to die. It's really sad. And we all want to get past this world and get people vaccinated. But coming out of it, I think people are optimistic. And I'd say the thing that I'm proudest of, the CEOs that I know, the Satya Nadellas, the Mary Barras, the Doug McMillons, they really are not just about the bottom line. They are really investing and taking care of their employees, their customers, their local communities. They are embracing stakeholder capitalism in a really enlightened way. And I feel very lucky to call all 3 of them customers and friends.
But it's a new generation of CEOs that is, in some areas, where government might have not picking signs of the government or government might have dropped the ball. Companies are stepping in, and these companies have a soul. And I think companies need to have a soul. And so if anything, there's been an awakening that companies need to do more in their communities and for their employees and for their customers. I think it's a great trend. Frankly, it's a positive trend for Workday. But I just think it's a good trend all around. It's not just about the bottom line.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Our friend Mark has talked about compassionate capitalism.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Yes, he's at the top of the list.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Yes, very much -- very relevant in these times, and he's going to be on later on today as well. So...
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
I didn't give him credit for being the first person 10 years ago who really get me to focus in on stakeholder theory. I really have not spent much time thinking about it. It was kind of the body of the value system and culture, but stakeholder theory and stakeholder capitalism is a lot more intentional than -- and I like that intentional nature. And I actually think the best companies in the world have to migrate that way. So this is not a tax. It's actually -- it makes it more competitive. It makes people want to do business with you. It makes your employees more loyal to you. There's a lot of really good reasons to do it.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
And you -- it just struck me, as you're talking, that I should get your perspective on ESG. Goldman Sachs certainly is very committed to this idea, and we've been writing about it. Our team has been writing about it. You've been on the forefront. You are -- your core business is human capital management. What are your thoughts on how important this should be as a criteria for investors? And what is Workday doing in this regard?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Well, in what parts of ESG?
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
I mean you could take anything that you have made a strong commitment whether it's environment, sustainability, corporate governance, gender equality, pay equality, whatever it is it that you've been consumed at.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
So I think the one thing we get knocked down would be governance since we still have our dual-class building. But for the rest, we have an increasingly young population of employees, and they hold us accountable to be not just a great company to work at but to be a great corporate citizen. So we are -- we've been carbon-neutral for many years now. Now we're actually trying to go back and become carbon-neutral since our inception much like Microsoft is doing.
You know that from a diversity perspective, we've been very focused on that. Half of the management team for the last 5 years have been female. We need to do a better job with people of color, no question about it. We're publishing our data. Given that we're the HR provider, we actually view it as our responsibility to help all of our customers get a handle and publish their data as well. And again, it comes back to companies having a soul and having a purpose beyond the bottom line. And so I am a big believer in most of the ESG trends. The governance one, I think, is really -- it's really very specific to each individual company and how they want to run their business. And for us, we have a specific way, informed by what happened to our past company. So -- but I think ESG and stakeholder capitalism just go hand in hand.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
That was about 17 years back, but it's still so fresh in our memories. HCM, so one would have thought that HCM is something that you can put off, do it -- get out of the recession, get out of the pandemic. But it does look like your business has done quite well. How are customers -- the new customer, new logos, how are they thinking about HCM as a priority?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Very high. And I think one of the reasons is when we go to this remote work environment, people don't know what's going on with their employees. The CEOs don't -- you just don't know. And so you need systems to replace, which you could -- you can't walk around the hall and figure out how people are doing. You need systems and data. And those -- the old systems were more built for regulatory and statutory purposes. They weren't built as employee engagement systems the way Workday was.
And so it's actually been -- it's been a super high priority for CEOs to gauge their workforce. I can't see them. Are they doing well? What can I do to help them? Doing things like even comp reviews, all these things, all the tools, the anytime feedback, all these things just become more important in a world where you can't see them every day. So really hasn't HR -- after that first month of the pandemic where the whole world kind of froze, it's kind of gotten back to business as usual.
And what I'd say is that the existing HR customers who are already on the platform, they've come back and said, "Okay. Well, this is a time to -- we got -- we have cycles. This is a time to add new modules, whether it's workforce planning or recruiting or learning people analytics. We have a lot of new SKUs that have come to the market." And kudos to Chano, we invested in this new customer-based motion about 18 months ago and it's really paid off.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
That's great. That's great. And do you see this sustaining once we get, hopefully, the day comes when we get past the pandemic? Are these behaviors starting to persist? Are people going to look at the category the way they've looked at it? And you look at (inaudible) my employees. I have got to know where they are, et cetera. Does it stay a priority past the vaccination?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Yes, I think there's areas -- it's -- it was a wake-up call during the pandemic about how many people just required training to stay current, right? And this was kind of a good environment for training, so our learning app has had a great run. So when I think about the HR world, there are only so many core HR systems you can sell. And we do have a strong market share amongst the Fortune 500 companies.
A lot of market opportunities still in that medium enterprise space, a lot of opportunity globally, but more importantly, we're not standing still. We're coming out with new HR modules all the time whether it's around people experience. We're working on the scheduling application, people analytics, workforce planning. And so all of those add up to a significant increase in our spend that each customer can spend with Workday as we continue to increase the footprint.
And when you are the core HR provider versus a point solution, the customer looks to you first when they look at those point solutions. And if you've got something that's reasonably good, they're going to choose you. So I think this motion will continue for a long time. And as you think, we've entered this new world where everybody really does care about their employees. I don't think that's going back. I don't think that's going back to just statutory regulatory. The -- as you know from Michael Bush and all the data, companies that are great places to work have outperformed the regular stock market by 3x over 20 years. Well, if you're going to be a great place to work, you need a great HR foundation -- HR system foundation, and we think that's Workday.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
That's a great marketing tagline.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Michael's on our Board now. We can't be in the rankings anymore, but he's helping us really understand all the ins and outs of being a great place to work. And in his words, for all, not just for a few, for all. And we're trying to really learn from him and not just make Workday a better place to help our customers evolve and become better places to work.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
In the same way, do customers that run their financials in the cloud end up being better investments as well because of certain efficiency? What I'm going with is, how important is cloud-based financials in this environment that we're going through right now? And how do you see this as a priority? We've been talking about this for a long time, right? I mean is this an accelerant or not? How do you see this?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
I think it's actually an accelerant. I would say that going into the pandemic, we were very pleased with financials. Maybe we didn't have as many Fortune 500 wins, but when we were looking at our new bookings, they were growing at 40% to 50% a year and it's a huge market, so we were very happy with that.
For the customers that had moved to Workday in the cloud for finance, they are very happy and you can talk to them. They were able to close their books remotely. They're able to do their planning and transactions all without having anybody in the office to go through audits. It's just a much easier world. If you hadn't gone through the transition and the financial transformation, I do think some companies said, "Hey, that's a big project to take on without people in the office. Let's wait until we're out of the pandemic."
What we heard from Gartner is that while there was a delay in fiscal year '21 and there will be some delay in fiscal year '22, they see projects from fiscal year '24 and '25 getting pulled into fiscal year '23. Like people realize, "Okay. These systems don't work in this pandemic. They have not worked well for us. And as soon as we're able to, we need to change them out." So I really think when we get back to being healthy, you'll see the Fortune 500 really start moving in mass to financing the cloud. What we heard from Gartner was that inquiries on core financials was down 10% year-over-year, but inquiries into planning, I think, was up 30% year-over-year. So it's all about the modules. But I think there's going to be quite a bit of pent-up demand and we're gearing up for that. And we see it in the pipeline.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
It's down 10% year-over-year. I mean sequentially, is that percentage getting better because...
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
That was just inquiries. That's just how many people are calling up Gartner and the fact that planning was up 30%. And the Gartner numbers are going to be lower than our old numbers in terms of -- we're always going to be going faster because there's -- we're in the high-growth segment of the market. This was all aspects of finance and all aspects of planning. So yes, I suspect that it's stabilized now and is trending upwards.
And so going into the second half of next year, I'm -- or actually this year -- well, this year, calendar year, next year, fiscal year, we got a few more weeks to close out this fiscal year. But I'm bullish about fiscal year '22, especially the second half.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Got it. Aneel, you mentioned fake cloud. I've never heard that. I'm kidding. Of course, [I heard about fake cloud]. Where are we with -- I'm not going to say fake cloud financials. But just legacy, let's say, financials legacy competitors. Is that customer base now better able to discern what's truly cloud, what is not? And how clear do you think is the Workday value proposition to customers when it comes to financials to the cloud today?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
I think the value proposition is pretty clear. And I made a point of not picking on competitors during the pandemic. It doesn't feel very seemly to do that. But I would just say that as we look at the competitive marketplace, whether it's HR or finance, frankly we tend to see Oracle in most places, but I think they tend to see us in most places. And frankly, other than pockets of Europe, we just don't see SAP very often. I think they're probably just fine as a company. They're relying on manufacturing and distribution. But in terms of core HR and core finance in the cloud, it's really become us and Oracle.
And the buyers are smarter. They do a lot of reference calls. And I think actually, Oracle has done a decent job transitioning their products to cloud. It took them probably longer than they expected. But you never discount Oracle. They're hypercompetitive and technology-savvy company. And so it's a huge market to carve up between 2 companies. So I feel very good about that.
Win rates, get asked this question all the time. They have been surprisingly consistent and resilient for the last 5 or 6 years. They just haven't changed that much. And I do think referenceability is a big part of that. I would just say, again, that it's more -- when we go at -- when we go into a deal, it's much more -- even in an SAP account, it tends to be more us versus Oracle than SAP for HR and Finance.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
I want to do a quick pulse check if that's okay with you and check on some questions that have come in through the forum. One question is, what changes are you making to go-to-market this upcoming fiscal year? I suppose calendar '21 will be a better way to say that.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
So when we looked at our business model, I think one of the things we talked about in terms of resilience, we will have seen our operating margins grow by 600 basis points this year from last year. So that's been -- that's our current guidance. And I think that's pretty remarkable in terms of the flexibility and underlying strength of our business model. But we're still a growth company, and we're going to continue to invest in new products.
I think the big area of new investment going forward, though, is going to be broadening our distribution channel, in particular, direct sales. I think we've always been very efficient on direct sales. I wouldn't mind being slightly less efficient in having more of our feet on the street. I think that would be a good thing going into it. And so we're going to -- given our optimism, we're going to probably -- and we have started the process of increasing the rate of hiring in the sales and marketing world.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Got it. This is another question like this. What is Aneel excited about in 2021? What does he think about pipelines they have for 2021? I suppose I didn't ask you the question. Is there anything else you want to amplify on that?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
We'll get a better picture of our pipeline post the -- our fourth quarter close. But all the lead-generation activities we've had are all trending in the right direction. And I do think as some of the industries like hospitality and transportation come back online and start getting momentum, that will be another area of pickup. We've seen quite a bit of pickup in health care and in higher ed, in state and local government and in the financial services. So very pleased with where the pipeline is going right now.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
You had mentioned that you were able to successfully deploy for Walmart and GE during the pandemic. What processes such as go-to-market deployment, et cetera, would benefit materially from a return to the office/return in person?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
I think the -- there's a lot of education in the sales cycle upfront that can be done over Zoom. But then there's always that penultimate meeting where you're going in and doing demonstration for 2 to 3 days, and I think those really do benefit from being in person. It allows us to showcase the product in a really powerful way. You have everybody's attention. More importantly, it allows us to showcase our people, and we build that bond with the potential customer and show them why Workday is different as a -- not just as a software solution but as a vendor.
And I'm itching to get back to that because you just can't build -- we have great relationships with our existing customers that were built pre-pandemic. But for the customers that are signing up with Workday during the pandemic, we just don't have that personal touch that we're used to. And I think we benefit -- I think Workday, more than most companies, benefits from that personal touch at that particular time in the sales cycle. And then it's the kickoff meeting for the implementation. But what we've seen is a lot of implementation work can be done remotely, a lot more than we have thought.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Got it. Another question here. What will drive financial acceleration that -- I guess there's an assumption there. What will drive financial acceleration? Who will you take share from? And in what portion of the market do you have the clear right to win, the R-I-G-H-T to win? That's a really good question.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Good question. I think when I look at our success with financials, we have the right for all the services industries to be that provider, financial services, health care, higher ed, state and local government. If it's a service -- industry business services, we should do very well. And in terms of who we take share from, well, there's only 2 other companies in this space. And so just like HR, every time we win, we're taking somebody away from SAP or Oracle, sometimes AAP, but usually, it's SAP or Oracle, and it's the same in the world of finance.
I think with our finance -- our enterprise finance product, which is basically a combination of consolidation and planning, we don't actually have to be the core finance solution. So even in manufacturing accounts, we can go in or a retail account where we're not the underlying ERP system but still sell enterprise finance so people can use our consolidations, our planning or analytics on top of a legacy general ledger. So I think we're really well positioned. I said this many times. 5 years ago, we'd go in and try to pitch core accounting. If they didn't want it, well, we left. Now we say, well, you want to start planning. You want to start with enterprise finance. You want to start with Scout and procurement. There's a lot of ways for us to get in. And if we do a good job, and we've penetrated a lot of those applications, we should hopefully be the call when they switch out their core accounting system. So we definitely surround strategy and it's working.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Planning...
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
It's been the biggest run of all. But Scout is -- and Scout is playing out in a similar way. It's got their best quarter last quarter in the history of the company. Small numbers, but that's an application that can be purchased stand alone and is very viable during a pandemic when you're trying to get your arms around your supply chain and your costs.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
I've got a dumb question. Accounting center, is that same as consolidation? Or is it different?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
It's different. I think it more of it as something that can sit on top of the general ledger and do all of your accounting and take it from multiple ledgers and be that solution for high volume, high trends actual level industries like a retail or financial services is probably the best one where it absorbs the applications from everything else. And it's effectively a combination in a place where you do your analysis and your reporting. So it's a very powerful application. It's helped us win. Every time we've introduced it into a financial services deal, we tend to do very well.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Wonderful. The next question is about the mid-market HCM opportunity. Do you believe you are well positioned to take share from Ultimate and Ceridian?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Take share, I think when I look at our competitive win rates against Ultimate, we win, we beat them pretty handily. The last time I checked, 2 out of 3. At one point, we were closer to 50-50 with Ultimate and the issue was not the cost of software. It was the cost of deployment. So we made a big investment in deployment tools to bring down the cost of deployment more to $1 of services from $1 of implementation, which is more competitive. And since then, we've done quite well.
I think they're both good companies. For us to really go after Ultimate and Ceridian, we might have to think about being more of a service bureau solution for payroll down-market. And that's something on our radar because there are some companies that just want outsourced payroll, not just the software but the entire process. And that tends to be those sub-5,000 -- above 5,000, they won't worry about either Ceridian or Ultimate. But below 5,000, they're good companies that are effectively run and a lot of companies in that market just want that service bureau solution.
And as we've learned, there's not a ton of work to do that. We could do that. And so one of the strategic things we're thinking about, and if you look across the globe, that also would play into a lot of the markets outside the U.S., early payroll service bureau, not just -- not payroll software markets. And so it's an interesting way to leverage our software assets and gain access to a bigger part of the market.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Got it. In the past, the competitive offerings from Oracle and SAP were not competitive. Today, they may be inferior products but they at least have a cloud alternative. Do you expect your HR business growth rate to be lower going forward?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
I think the growth is less about the competition. As I said earlier, win rates have stayed very consistent. There are some parts like the Fortune 500 market, we have 50%. It tells you there's some level of maturity in that marketplace. And then it's the law of large numbers but it's not the win rates. They've come up with -- Oracle has a viable product. I don't honestly believe that SuccessFactors was ever meant to be a system of record. And from what I can, it's still struggling to be a system of record.
So as they transition to the cloud, it's not like we're standing still. We're adding all these new capabilities that are at the cutting edge, whether it's in the areas of employee engagement or learning or skills cloud. We're just years ahead of them from a state-of-the-art capability. If you're a seller that just wants a cloud solution and you don't care about best-in-class capabilities, maybe they're a good fit and maybe price is an issue. But for the folks that really are engaged in trying to be a world-class HR organization, I think we're really well positioned. And we just stay ahead from a -- there's a lot of innovation still left in this industry, and our job is to continue to innovate and be the innovation leader.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Another question. Best needle-moving product for the next 1 to 2 years?
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
Best needle-moving product? I've got several.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
That's a good thing.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
I'm very bullish on people analytics. And in many ways, our Prism Analytics came out and it was a great analytic platform, but our customers want apps on top of those platforms. And so our people analytics is an app on analytics that fits what customers want from us. Bullish on people experience, PeX. Basically, effectively a next-generation employee portal. Tied to that is Workday Help, which is a help capability for HR. So that PeX a help combination plus people analytics.
But the one I think that's probably going to be the biggest driver will be the skills cloud and the talent marketplace. That is the biggest in terms of addressable market. That is the most visionary area for HR leaders. They really want to first, create internal talent marketplaces. They really want to get an economical understanding of all the skills in their company, and we -- I think we really have nailed it. I think we've nailed it. They're a great leader there, [David Summers], who's really driven us to great places. And that is just -- that is the next-generation of talent and that's a massive market.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
We've got so many more questions, but we got to wrap it up. On that note, I wanted to say a big thank you, Aneel, for doing this for us. Thank you for inspiring people in the industry. Thank you for moving the cloud along and making our jobs all the more richer and life more exciting. So that -- all the very best for 2021 and beyond. And unless you have anything to close with, thank you once again, and thank you.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
No, I appreciate all the great investors we have out there. Thanks for sticking with us through this pandemic. And we're very optimistic about the future, right? I can see it. Before, I could feel it. Now I can actually see it in the data.
And a special thank you to Kash. We've been friends for a long time. I think this is our eighth year -- sorry, eighth year of doing this?
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
I believe yes.
Aneel Bhusri - Workday, Inc. - Co-Founder, Co-CEO & Director
We have 2 of these a year. So one of them is with you and then one other is -- I forgot. I've to do -- also to do one with your previous employer because they're such a great and important customer to us. But I always enjoy being with you. And I can't wait to see you in person and keep up that singing career.
Kasthuri Gopalan Rangan - Goldman Sachs Group, Inc., Research Division - Analyst
Thank you so much. Thank you, very kind for you. And to our clients, he kicked off this series of CEOs. We've got Pat Gelsinger, [Susanne Gudarci], Doug Merritt and Marc Benioff. So it's going to be an exciting day. Thank you, Aneel. Those are all your friends, by the way. Thank you once again. Have a lovely day. Take care. Bye-bye.
Call participants:
Corporate ParticipantsAneel Bhusri, Workday, Inc. - Co-Founder, Co-CEO & Director
Conference Call Participants
Kasthuri Gopalan Rangan, Goldman Sachs Group, Inc., Research Division - Analyst
Refinitiv StreetEvents Transcript
Workday Inc at Goldman Sachs Technology and Internet Conference (Virtual)
Jan 12, 2021 / 05:10PM GMT
