Q&A: Workday's CFO outlines growth strategy and innovation focus

As a leading provider of enterprise cloud applications for finance and human resources, Workday has experienced tremendous growth. We recently sat down with Zane Rowe to get an inside look at Workday’s financial strategy and plans to maintain its competitive edge.

In the exclusive interview, Rowe shares specific revenue, profitability, and investment goals for fiscal year 2024. Workday aims to reach $6.6 billion in subscription revenue this year, representing 19% year-over-year growth, by expanding share of enterprise wallets, winning mid-market companies, and accelerating international expansion.

The CFO also discusses how Workday balances growth and profitability by prioritising high-potential growth areas over time. Investments will focus on international markets, partners, financial solutions, strategic acquisitions, and AI/ML capabilities. These areas are expected to drive operating leverage over the next three years.

Additionally, Rowe elaborates on Workday’s plans to maintain its competitive advantage by enhancing its cloud platform, applying AI across products and processes, and upholding responsible and ethical AI principles.

On the innovation side, the CFO provides an inside look at Workday’s R&D roadmap centred on cloud, AI/ML, HR, and finance solutions. He explains how Workday incorporates customer feedback and market trends into product development through various touchpoints.

Read the full interview below.

Can you share specific financial goals for the coming year, such as profitability metrics, or investment priorities?

Following our continued momentum in the third quarter, we raised our fiscal 2024 subscription revenue guidance to $6.598 billion, representing 19% year-over-year growth. This will revolve around expanding our enterprise wallet share, winning mid-market companies and expanding internationally.

During our Financial Analyst Day presentation in September, we provided analysts with a three-year path for investing in Workday’s continued growth toward achieving our goal of $10 billion in revenue over the next several years. What this means is that we’re putting our money back into those areas where we see the greatest opportunities to grow the business:

• International: We’re focused on making international markets a bigger driver of our growth. We’ve more than doubled our investment in international Tier 1 markets, such as Japan, during the past three years, and plan to continue to increase our investment in these regions.
• Partners: We’re investing in growing our partner ecosystem, which is critical in driving deployments and go-lives, and has grown even more important in driving referrals and sales; we’re signing 100 new referral partners during FY24, while also increasing our relationships with existing partners.
• Financials: We will continue to invest heavily in our financial software business, adding hundreds of Financials-targeted sellers who are driving momentum across industries, customer sizes, and geographies; we’re also making significant investment across key product areas, such as Workday Accounting Center, as well as converting our planning-first customers to FINs.
• M&A: We’re continuing to take a thoughtful, targeted approach to acquiring and integrating technology into Workday’s portfolio, following the example of previous acquisitions like Workday Adaptive Planning that have added revenue and talent to the company;
• AI: And finally, we’re excited about the opportunity that comes with our ongoing investments in AI and ML.

How does Workday plan to balance growth and profitability, especially considering the current global economic climate?

 Workday has built a powerful and efficient business model that creates value through a combination of growth and expanding profit margin.

We’re able to maintain that balance by prioritising our revenue and growth opportunities and being deliberate about our investments in key areas of growth over specific periods of time. In addition, we are constantly evaluating our performance and initiatives on the go-to-market and research and development (R&D) side of the business.

As a result, our three-year forecasts through FY27 call for annual subscription revenue growth consistent with the environment we see today. And we believe we have the ability to drive growth at these levels while expanding profitability at the same time.

Our FY27 forecasts also project consistent margin growth through scale across the business, while continuing go-to-market investments that are likely to drive sales higher in the near-term. And as these investments grow – in areas I mentioned previously, such as our enhanced sales teams or investments in our partner ecosystem – we expect them to drive operating leverage over time.

How does Workday intend to maintain or enhance its competitive edge in the rapidly evolving enterprise software market in the next year?

 At Workday, we believe our core strength lies in the durability of our platform and our continued leadership in the cloud. Our customers rely on the resilience, performance, and scalability of our technology to manage their most important assets: their people and their finances. And we intend to enhance this core strength by leveraging AI.

When it comes to AI, we are focusing our investment and development in several key areas, among them: delivery of AI in our product; expansion of the ecosystem; and incorporation of AI and generative AI internally at Workday.

When it comes to AI, the importance of balancing the enormous potential of AI with the responsibility we have towards society is vital – only responsible and trustworthy AI systems will positively impact society and amplify human potential. These systems exhibit characteristics like validity and reliability, transparency and interpretability, fairness, privacy enhancement, and security and resilience.

Could you discuss any challenges Workday foresees in the industry, and how the company plans to address them to stay ahead?

For any business, there are a number of challenges in navigating the global macro environment, while also managing the various segments of your portfolio.

To address these kinds of challenges, and to maintain our track record of consistently strong and durable growth, we’re focusing our investments on such areas as expanding our presence in key global markets, enhancing our ecosystem of sales and implementation partners, and leaning into segments of our portfolio – such as our comprehensive suite of financial management software – that have the greatest potential for future growth.

In today’s increasingly complex business landscape, Workday’s platform enables faster decision-making by collecting and blending information from a variety of sources, which makes for more agile planning, executing, and reporting. And by using our own products more effectively than ever before, Workday is able to capitalise on the fundamental durability and strength of the platform.

Could you elaborate on Workday’s plans for research and development? Are there any specific areas or technologies where the company is focusing its innovation efforts?

 Going into 2024 and beyond, Workday will continue to invest in research and development with plans focused on driving innovation. Specifically, Workday’s R&D developments will grow efficiently and take advantage of AI, leveraging the Workday platform and the broader ecosystem. Furthermore, an increased focus will be placed on the cloud for both the HR and finance disciplines.

As for new products that are under development, we are working on AI modelling solutions for enterprises to create and map employee growth plans and retain talent. We are also building solutions that use AI to analyse and correct contracts for faster, more accurate revenue recognition with our contract analysis generative AI capability. Finally, we previewed and continue to preview capabilities that explore the intersection of conversational AI and generative AI that enhance user ability to interact with information and tasks in a natural way.

How does Workday integrate customer feedback and market trends into its R&D processes to ensure relevance and competitiveness?

At Workday, we conduct regular interactions with customers through channels such as user groups, conferences and support forums that provide valuable insights that drive the direction and focus of Workday’s innovation efforts.

For example, through initiatives like the Workday Brainstorm programme and customer advisory boards, we engage with stakeholders to understand their challenges, gather insights, and co-create innovative solutions. We additionally release updates and enhancements to our platform in order to incorporate new features, functionalities and industry best practices.

We also leverage our own expertise with our platform through Workday-on-Workday, an ongoing initiative that takes our in-house use and experience and feeds it back into product development. Workday-on-Workday (or WoW) gives our employees the opportunity to drive innovation, test new products, act as sounding boards for ideas, and always be thinking about customer success.

What’s especially exciting for me is the opportunity for our Finance organisation to provide value beyond our normal responsibilities, by collaborating with our Product & Technology teams to support FINs customers by driving innovation in intelligent cash forecasting, faster expense reporting and invoice scanning, hedging against fluctuations in foreign exchange markets, and our ongoing efforts to achieve zero-day, or continuous close.