Good morning. Welcome to Gartner Investor Day 2019. Thanks to all of you in the room and on the webcast for joining us today. I know you have busy schedules. We appreciate your taking the time to be with us this morning. Whether this is your first Gartner Investor Day or you've been following the company for a number of years, we believe you will leave with a greater appreciation for the indispensable, unrivaled value we offer clients, the Gartner Formula we apply, and the long-term sustained double-digit growth we drive. Before we begin, please take note of our safe harbor statement shown on the screen. Today, you will hear a compelling story of Gartner and its relevance for investors seeking long-term, sustained, double-digit contract value, revenue, earnings, and free cash flow growth.
We will begin with our CEO, Gene Hall, who will discuss the way that the pace of change is impacting leaders across all enterprise functions. Gene will describe Gartner's unique business and our powerful history of disciplined execution, applying operational excellence to drive growth and shareholder returns. Mike Harris, our head of Research & Advisory, will share a compelling view of Gartner's value proposition for leaders across all enterprise functions. He will go deeper into the dynamics that are creating urgency for our insight, illustrate how our clients get mission-critical value from Gartner, and describe our scalable, continuously improving research model.
Following Mike, our leaders of global technology and business sales, Joe Beck and Chris Thomas, will introduce you to their growing teams, talk about how they are going to market, and share with you how they apply our Sales Excellence Playbook to drive productivity and sustained double-digit contract value growth. After a break for lunch, Craig Safian, our CFO, will describe the powerful combination of the Gartner Formula and business model and how they enable us to drive long-term, sustained double-digit growth in revenue, earnings, and free cash flow. Gene and Craig will answer your questions. Thank you again for joining us today.
Enterprise leaders are on a journey of opportunity, risk, and unrelenting change. Across every business function, the goal is not simply to arrive, but to thrive. The roads that led to success yesterday offer no assurances today. Every decision carries greater uncertainty than ever before. As their worlds become more interconnected than ever, leaders face decisions that will impact not only their own organization, but the enterprise as a whole. They're turning to Gartner for help. Talent, technology, strategy. Critical building blocks of their success. In every area of their business, Gartner sits at the intersection of decisions that matter most. We understand the roles, the challenges, the risks, and we know how to maximize opportunity.
Leaders across every function in every industry everywhere in the world rely on Gartner for the indispensable insights, tools, and advice to help them address their mission-critical priorities, to get ahead of change, to challenge, to lead, to thrive. Welcome to Investor Day 2019.
Ladies and gentlemen, please welcome to the stage, Gartner CEO, Gene Hall.
Well, good morning and welcome to Gartner Investor Day. We're living in accelerated times. Digital disruption, regulatory change, shifting customer expectations, cybersecurity risks, changing socioeconomic expectations, geopolitical risk, macroeconomic dislocations. It has never been a harder time to be a leader. The rate of change continues to accelerate. The average tenure of a company on the S&P 500 has declined from 61 years to 18 years, and it's expected to decline another 12, to a mere 12 years by 2027. For enterprises, it's no longer just about incremental improvements. Their very survival has never been more at risk, and the same is true for their leaders. Leaders in every major function of the enterprise, across every industry and in every geography need help, and they need it now. Who do leaders depend on to survive and thrive in this environment? Gartner.
For investors seeking long-term, sustained double-digit growth in the top line, growth in free cash flow, Gartner is an unrivaled opportunity. You look like you needed a break.
Today, I'll give you a detailed overview of our business. You'll get a snapshot of our indispensable, unrivaled value proposition. I'll outline our vast market opportunity, and I'll share a strategy to capture that opportunity through our three businesses, Research, Conferences, and Consulting, which will fuel long-term, sustained double-digit growth. I'll take a minute to introduce our executive leadership team who's here with us this morning, starting with those who are going to share the stage later today. First, we have Mike Harris, who leads our global Research & Advisory team. Can we bring the house lights up? You'll hear from Joe Beck and Chris Thomas, who lead our global sales organization. Most of you know Craig Safian, our CFO. The other members of our leadership team that are here today are Ken Davis, who leads products and services globally. Our head of Conferences, Alwyn Dawkins.
Our Chief Information Officer, Mike Diliberto. Mike's back there. Our head of Consulting, Scott Hensel. Excuse me. Our General Counsel, Jules Kaufman. Jules is over here. Robin Kranich, who leads Human Resources, and David Gouveia, who heads up Marketing. During our break and after the presentations, please get to know our team. All right, thanks. You can sit down now. We operate in three business segments, Research, Conferences, and Consulting. Last year alone, Gartner helped 15,600 enterprises in 100 countries around the world with their mission-critical priorities. We delivered about $4 billion in revenues. We provided great jobs to 15,000 associates around the world, and we delivered market-leading returns for our shareholders. Few organizations have this level of global impact. The Gartner Conferences deliver incredible insights to our attendees while building our brand and making a profit. This segment represents about 11% of our business.
Our mission is to produce must-attend conferences for the communities that we serve. Our conferences are aligned to the same roles and functions that we serve in our Research business. By combining the outstanding value of our Research with unparalleled peer networking and the magic of live events, every conference we produce becomes the most important annual gathering for the executives that we serve. We inspire, educate, and equip our attendees for success. As a result, the first thing that many executives do at the beginning of every year is decide to attend their annual Gartner Conferences had its best year yet in 2018, with virtually every metric hitting new highs. We also accelerated our Evanta conferences, which are C-level, invitation-only regional summits. We expect to produce more than 300 conferences throughout the world, including 70 destination conferences covering IT, HR, Supply Chain, Marketing, Sales, and Finance.
Across these conferences, we expect to attract more than 100,000 attendees, including more than 15,000 Chief Information Officers and thousands more C-level executives in the business functions that we serve. Gartner Conferences deliver incredible insights to our attendees while building our brand and, of course, making a profit. The Gartner Consulting makes up about 9% of our business. Gartner Consulting supports Chief Information Officers and their teams. We provide clients a deeper level of involvement through extended project-based work to help them execute their most strategic initiatives. Gartner Consulting is highly differentiated. First, we're independent and objective. We don't sell software, we don't sell hardware, and we don't do implementation services. In addition, all of our engagements are powered by Gartner Research, the best content and insights available anywhere. We evolved our Consulting strategy to align more closely with Research.
We rolled out a new organization, a new operating model. This is going to improve our execution in driving growth and delivering value to clients. We've strengthened our consulting solutions and offerings. We defined new career paths, upgraded recruiting capabilities, and set performance management processes, all to position this segment for a strong 2019 and beyond. Gartner's Consulting serves as an extension of Gartner research that provides clients with a deeper level of involvement through extended project-based work to help them execute their most strategic initiatives. Research is our largest and most profitable segment, and it represents about 80% of our revenues. Our research segment sits at the core of Gartner's indispensable, unrivaled value proposition. Our value proposition addresses the critical needs of leaders across the major functions in the enterprise.
Every leader has make or break initiatives that disproportionately impact the ongoing vitality of their enterprise and, of course, their personal success. Critical initiatives like these extend over a period of time. They span multiple business functions. They extend several layers into the organization, and they have ongoing, important decision points. Some examples might include integrating a large acquisition, implementing a new financial management system, or driving digital transformation to achieve competitive advantage. With the accelerated pace of business, leaders have to make these decisions faster than ever, and they have to get them right. The penalty for getting them wrong is high, both for the company and the individual. If that weren't enough, executives must simultaneously handle multiple of these high-impact initiatives. Executives need help getting to the right decisions. They need someone they can trust, and they need that help now.
Our indispensable, unrivaled value proposition addresses this critical need. We have more than 2,000 world-class experts on the most important priorities for business and government leaders. We create indispensable insights, best practices, peer exchanges, and implementation guides across every major enterprise function. We're independent, and we're objective. We have an unparalleled community of C-level peers to complement our expert advice, to share real-world case examples, and to validate major decisions. With the accelerated pace of business today, business leaders need help in real-time. We deliver critical insights on demand, and we do this through our cloud-based subscription service and through the ability to talk one-on-one with our analysts and advisors, also on demand. We play where the stakes are high, delivering incredible insights at a price that's extremely low relative to the value. Even our largest clients, Gartner costs are a tiny fraction of their budget.
There is no other place that our clients can get such valuable insights on demand and at a very modest cost. This is why our clients stay with us, renew at high rates, and spend more with us year after year. Our indispensable, unrivaled value proposition gives us a vast market opportunity. We developed a detailed bottoms-up estimate on that market opportunity. It's based on looking at the actual number of companies, the specific roles within each company, and the pricing for the appropriate products for that role. Using this approach, we estimate that the market opportunity for technology is about $55 billion. The opportunity for supply chain's about $23 billion. Marketing adds another $25 billion, HR, $14 billion, finance, $24 billion, sales, $38 billion, and legal and other adds another $19 billion. In total, we estimate that the combined market opportunity for all nine functional areas is almost $200 billion.
This compares to today's contract value of about $3 billion. This means we can grow at double-digit rates for a very long time. Over the past decade, we've developed the Gartner Formula to drive long-term, sustained double-digit growth. The Gartner Formula has four elements to it: indispensable insight, exceptional talent, sales excellence, and enabling infrastructure. For all of these, we drive globally consistent execution of best practices and continuous improvement and innovation to sustain and accelerate our success. This is our formula for long-term, sustained double-digit growth, and it's how we're capturing our vast market opportunity. global technology sales, or GTS, represents about 80% of our research contract value. We began developing the Gartner Formula for GTS back in 2005, and we've improved on that formula every year. Every year, our research content becomes more insightful and more indispensable.
We've packaged these incredible insights in online products that are tailored to the needs of individual roles. We hired and developed exceptional talent. We grew our sales force at a compound annual growth rate of 13% per year over the last decade, this provided a great foundation for long-term, sustained double-digit growth. We developed sales excellence with ever-better training, tools and processes, we call this the Sales Excellence Playbook. We supported our salespeople with ever-improving infrastructure, such as recruiting, contracting, and service delivery. The result, contract value grew at a compound annual growth rate of 13% per year. That's a track record of long-term, sustained double-digit growth. Consistent application of the Gartner Formula is what's driven the sustained success. To achieve the sustained success, our new salespeople need to learn the Sales Excellence Playbook.
We, of course, have world-class training programs, learning the Sales Excellence Playbook isn't easy. Our GTS salespeople sell to large, medium, and small accounts. They're located in countries around the world. Some are account executives who grow our existing clients. Some are business developers who sell to prospective clients. Here's an example for experienced U.S.-based new hires that are account executives. These salespeople take about three years to reach full productivity. The rightmost bar shows third-year productivity indexed to 100%. In the first year, they sell about 48% of full productivity, as you can see in the leftmost bar. In the second year, it's about 83%. That's an example of U.S.-based new hires who are account executives. The other types of new salespeople also have similar learning curves.
The Sales Excellence Playbook is incredibly effective for driving long-term, sustained double-digit growth, it does take time to learn. Looking forward, we'll keep developing new innovations and making continuous improvements to the Gartner Formula. We'll focus on relentlessly consistent execution of the best practices that drive success. We'll continue getting better, faster, stronger each and every year. You're going to hear more about GTS from the extraordinary leader of that team, Joe Beck. global business sales, or GBS, represents about 20% of our research contract value. The GBS sales organization supports all the enterprise functions beyond IT. Each of these roles has the same need for our services as in IT. GBS includes the supply chain practice, which we established at the end of 2009 through the acquisition of AMR. We applied the Gartner Formula to supply chain.
We introduced Gartner for Supply Chain Leaders, and our supply chain business had a compound annual growth rate of 23% per year over the last nine years. The GBS also includes Gartner for Marketing Leaders, which we started organically back in 2012. We applied the Gartner Formula to marketing, and our Gartner for Marketing Leaders business had a compound annual growth rate of 76% per year over the past six years. The GBS now includes HR, finance, sales, legal, and more. In 2017, we began building the foundation for long-term, sustained double-digit growth in these new enterprise functions. Of course, that foundation is the Gartner Formula. We developed indispensable insights, combining legacy business content with relevant Gartner IT content. We deliver these indispensable insights in products for business leaders across the enterprise. We refer to these products collectively as GXL. Gartner for Marketing Leaders is GML.
Gartner for Finance Leaders is GFL. Gartner for Sales Leaders is GSL, and so on. GXL products deliver sustained growth compared to legacy products. They provide greater value to clients because they're tailored to clients' individual needs, and this in turn results in higher prices per user and stronger retention. Beyond better pricing and retention, GXL products provide exponentially more growth opportunities because we can sell these high-value products throughout our clients' organizations. Beyond indispensable insights, we hired and developed exceptional talent. Last year, we grew our sales force 23%. We implemented the same training tools and processes as those in GTS that have led to ever-improving sales excellence there. We further supported our salespeople with the same enabling infrastructure that we have in GTS. Salespeople in GBS have a learning curve in adopting the Gartner Formula, just like in GTS.
To build a foundation for long-term, sustained double-digit growth in GBS, we made significant changes. We restructured the organization. We reconfigured contract terms conditions. We eliminated discounting. As I just mentioned, we introduced a new suite of products that we collectively call GXL. These products were rolled out and salespeople trained during the first half of 2018, as you can see on this chart. One way to think about it is GBS salespeople and their managers were in their first year with Gartner in 2018. They were like new hires. This chart shows the sales of the new GXL products, HR, finance, sales, and legal, from when we began piloting them in late 2017. You can see the learning curve as our sales force was trained and gained experience in selling these new products. Every GXL product is gaining momentum.
These charts show the cumulative bookings of the new GXL products. We've indexed the 2018 ending value to 100 so you can more clearly see the growth trend. HR, finance, legal, sales, they're all accelerating. As the GBS sales force continues to gain experience selling the GXL products, we expect that acceleration to continue. To summarize, we're applying the Gartner Formula across GBS. We're delivering indispensable insights through our GXL products. We enter 2019 with a richer mix of GXL products, which have higher retention. We have a 23% larger sales force with exceptional talent, and that sales force is further up the learning curve on the Sales Excellence Playbook. We've invested aggressively in the enabling infrastructure to support our talented sales force. This is our path to long-term, sustained, double-digit growth in GBS. Here's what you should take away from my remarks. We're living in accelerated times.
Enterprises need to constantly evolve to get ahead of the competition. Leaders across the enterprise need help. They need help with their make or break initiatives. Gartner is the best source of that help. We have an indispensable, unrivaled value proposition, a vast market opportunity. Through consistent execution of the Gartner Formula, we know how to capture that opportunity. We have applied the Gartner Formula in GTS and delivered long-term, sustained double-digit results. We are applying the same Gartner Formula in GBS and expect to achieve long-term, sustained double-digit results beginning in 2019. With a culture of continuous improvement and continuous innovation, we get better, stronger, faster year after year. We are in the best position we have ever been in to provide sustained double-digit growth across our key financial metrics. To deepen your understanding of Gartner and our expanded research and advisory capabilities, I will introduce Mike Harris.
Mike's our global head of research and advisory. He's had various leadership positions across the research advisory team for more than 20 years. Mike's a strong leader who's driven substantial improvements in business results and client value measures. Mike.
Thank you very much, Gene, and good morning, everyone. Nearly two-thirds of CEOs and CFOs anticipate business model change within the next three years, typically due to digital transformation in reaction to new growth opportunities and competitive threats in their industries. These leaders often initiate significant change programs, which have a ripple effect across the entire enterprise. Other C-suite leaders, like heads of marketing, HR, IT, and supply chain, then work with their leadership teams and their peers to modernize the way the entire enterprise runs, changing the very way that value is generated in the enterprise. Gartner's model is to provide subscription-based, on-demand, indispensable research and advisory services to help all functional leaders and their teams navigate precisely these types of challenges. Clients find our services so valuable because of a combination of three fundamental things.
Expert advice, the ability to speak with our over 2,000 global experts on a variety of critical topics. That advice gives them the confidence to make better and continuous decisions. The subscription model provides ongoing access to the insights needed by leaders and their teams on a step-by-step basis. An on-demand response through already published research content, data, and benchmarks. Leaders need that insight, and they need that data. For example, about two-thirds of marketing leaders say that access to data, metrics, and advice are critical for their role. You all know there's no shortage of information out there. Executives try to access as much information as possible, but that has an opposite effect. They have access to a huge volume of information, but the sheer volume of it is overwhelming and often conflicting, increasing the uncertainty about the best path to follow for a given decision.
Our research shows that executives who are presented with lots of unsynthesized and conflicting information frequently make the wrong decision. Their probability of getting it right is no better than a coin toss. One client of ours is a senior IT leader in the U.S. federal government. He had been overwhelmed with differing perspectives on if and how he should move his applications to the public cloud. He told us that what he valued most about working with Gartner was our ability to synthesize the information he needed and to distill it into a clear action plan. Critically, that the recommendations that we made were from an independent organization with no downstream business influencing those recommendations. In an era where information is so abundant, access to truly independent, unbiased, and expert advice on the most critical priorities facing an executive is extremely valuable.
That need for independent, objective advice about how to run a function to improve the odds of making a good decision better than a coin toss applies to every functional leadership role across the enterprise. These functional heads, they know that their jobs, frankly, their careers, are on the line when they are running their function. Every decision counts about strategy, talent, technology, budget, and they need to demonstrate performance, or frankly, their CEO will replace them. Because at any given time, more than one in five C-level executives are in their first year in role. 46% of all executives underperform relative to their performance goals for the first 18 months of their tenure as head of a functional unit. All executives and their teams, whether they are new to the role or highly tenured, are faced with these constant change and daily complex challenges that can impact the entire enterprise.
They come to Gartner for the provocative ideas and pragmatic advice they need. They certainly come to Gartner for technology advice, and technology is a critical enabler of all enterprise functions, and I will speak more about that in a bit. There are so many other factors within each function where clients seek Gartner's advice. Let me give you some examples which come from our own analysis of client interactions across all functions. Take talent. It is a major challenge for everyone. CEOs have increased the amount of time that they spend talking about talent on earnings calls, with the most commonly discussed talent issue being culture. Why? Because their functional leaders are struggling to fill open roles, to upgrade the talent pool, and to change the culture of their organizations. For example, fewer than 10% of finance leaders today employ data scientists.
Within just three years, more than a quarter will employ a data scientist, and 60% will employ data specialists. Organizational changes are also constant. In 2018, fully one-third of all heads of HR dealt with a company-wide reorg. In fact, 99% of them have dealt with at least one major organizational change in the past three years. Acquisitions, divestitures, CEO transitions, and major launches of new technology or entering new geographies. When HR is effectively supporting major change initiatives in the organization, the success rate doubles. Most CEOs expect their HR leader to make these organizational changes happen faster than they did three years ago. Customer behavioral changes are also creating new challenges. The number of stakeholders in business-to-business purchasing has roughly doubled in the last five years, creating extended decision-making teams and increasing the frequency of no decision.
At the same time, the average B2B sales professional has direct customer access for only about 5% of the purchase experience. These are just a few reasons why marketing and sales leaders are coming to Gartner to get advice on how to manage the multi-channel customer experience, to build the right content marketing programs and direct the sales force along very different customer journeys. Chief supply chain officers have another set of challenges due to changing consumer behavior. Millennial consumers are demanding a transparent supply chain across the entire global ecosystem. Corporate social responsibility and ethical sourcing are now top of mind for supply chain leaders and CEOs alike, not only for distinguishing their brand, but also for attracting investors. Every industry is being impacted. Apparel is being asked about factory conditions and child labor. High tech needs zero conflict minerals in their devices.
Food and beverage have to prove the source of supply is safe and ethical. Life sciences has to deal with ongoing counterfeit risks. Gartner helps all these companies build sustainable ecosystems and powerful brands. Then there's regulation. Leaders in every function face board-level questions when significant regulatory changes take effect. For example, tax reform here in the U.S. It's had real benefits in reducing corporate tax rates and repatriating overseas cash, finance executives seek expert advice on how to properly communicate these changes in SEC filings and annual reports. Recently we published a pragmatic set of research sharing extracts of 10-K disclosures regarding U.S. tax reform from multiple companies like Schlumberger, eBay, and United Rentals Inc. to help other companies communicate their own disclosures. Talent, organizational changes, customer behavior, regulation, all of these things are underpinned by technology.
Our CIO, IT leader, and technical professional clients come to Gartner seeking provocative ideas and approaches to help them adapt to all of these changes. They also come to us for pragmatic advice on how to benchmark their maturity levels and costs against peers so they can continuously improve their speed, agility, and efficiency. Now we can help CIOs and their teams better engage with their C-level peers on issues that extend well beyond IT. In our GXL products, we include relevant technology research for heads of sales, customer service, finance, marketing, and so on. The content needed to digitalize those functions and select, implement, and manage functional tech. In our symposium keynote just a few months ago, I said that leaders in all functions apply technology and information in unique and creative ways to outperform their peers.
For instance, the Chief Sales Officer is not only involved in the selection of a CRM system, they're often the primary driver. While 27% of finance teams are currently making use of advanced analytics, that number is expected to triple within three years. In marketing, technology spending has grown incredibly quickly to where it's now the single largest area of investment for that function, even more than the labor budget. How do we know all this? We research all of these functions, we quantify and benchmark executive performance to help our clients outperform their peers. We conduct literally hundreds of thousands of one-on-one conversations every year. Most held remotely over video and content-sharing conference calls, and some held face-to-face during our conferences. We analyze the millions of content pieces searched for and accessed on our website.
Every function across the enterprise has enormous pressure to transform, to respond immediately to internal changes and external shocks, and to continuously improve their teams, to benchmark competitors, to stay ahead. They turn to Gartner for the singular combination of expert advice, the confidence to make better decisions continuously, and to get those things on demand just when they need it. We stay abreast of the latest things that are happening in enterprises large and small, in the public and private sectors, and all around the world in every industry, and we shape our content and resources to meet those needs. Information overload, talent and organizational changes, shifting regulations and customer behavior, they all add up to constant change for every senior executive. Which means that every functional leader is in urgent need of indispensable insights, advice, and tools to achieve their mission-critical priorities and outperform their competition.
The one company that is best able to address that need, Gartner. Let me show you how Gartner helps clients by sharing with you a year in the life of a representative HR executive whom we'll call Maria. It's week six on the job for Maria. She's recently been named the new Chief Human Resources Officer for XYZ Precision Manufacturing, a multibillion-dollar company that produces precision metal components for the aerospace, industrial, and agricultural industries. As head of HR, she's responsible for recruiting, talent development, performance management, compensation and benefits, and a host of other activities that are essential for running the business. She has managers with teams of people underneath them leading each of those key areas.
As she's settling into her new role, she engages with Gartner on campus recruiting because she needs a lot of new engineering talent to support the company's growth plans. Maria goes to our website, finds several research reports online, including ones detailing the career aspirations of Generation Z and a how-to guide for building on-campus recruiting programs. She reads those two in detail and has some questions about how she'd apply this to her particular environment. She emails Gartner and says she'd like to speak with one of our experts on the topic. The next day, she's on a video conference call with the expert we've identified who shares content on how she can best address her issues. As we all know, priorities change rapidly. What if the Chief Operating Officer resigns unexpectedly for health reasons?
In that situation, Maria suddenly has a new and more urgent challenge. In addition to her other responsibilities, she now has to throw herself full tilt into finding and hiring a new COO. She needs expert advice, and she needs it right away. She turns to Gartner, and we provide her with our succession management playbook. That helps her identify candidates, work with the board of directors in the hiring process, and quickly onboard the successful candidate. In parallel, Maria's understaffed recruiting team is still struggling to hire that engineering talent needed since, as you know, in the U.S., there are currently more open jobs postings than there are candidates who are actively looking.
Maria has her head of recruiting engage with Gartner to access our big data solution for planning and recruiting TalentNeuron, which provides her the analytics her recruiting team needs to understand where to find the hidden talent pools for the experienced hires the company seeks. It specifies the compensation and benefit levels that are needed to attract that talent, and therefore speeds the average time to hire through more targeted recruiting activity. Throughout the year, Gartner continues to help Maria with the ongoing critical functions of her HR operation. In fact, Maria and her leadership team attend the Gartner conference, ReimagineHR, to hear the latest thinking on these topics and on ways that HR can drive leadership development. What if XYZ Precision Manufacturing announces an acquisition?
The company now needs to be completely reorganized to integrate teams, brands, and infrastructure to realize anticipated cost synergies. Clearly, that's not just up to HR. That requires intense coordination with other functional leaders such as the CMO and the CIO. Maria still needs advice on new operating models and how to blend two very different cultures. She has to assess how long to keep the acquired company's brand, how best to transfer the equity to the newly combined entity, and what the new combined corporate brand ultimately should be. The CMO also is deeply involved in the integration. He needs a master data management strategy to manage customer data sets from both companies because he wants to avoid sending competing pricing for overlapping products to a single customer and also looks for cross-sell and up-sell campaign opportunities.
He brings in the CIO to the conversation to discuss a master data management strategy. Meanwhile, the CIO also needs to figure out how to consolidate two payroll and accounting systems. Each of these leaders calls on Gartner for help, not just for themselves, but for members of their teams who haven't gone through a major acquisition before. By watching pre-recorded webinars, reading published content, and having one-on-one conversations with Gartner experts, team members entitled to our research and advice rapidly accelerate their M&A knowledge base. They can also better coordinate with other functions all across the company. I could go on, but you get the idea. Functional leaders today have a wide array of critical operational issues that they have to deal with every day to keep the business running.
At the same time, there are multi-year priorities to be managed and numerous events that crop up unexpectedly that they have to solve very quickly, either with their own teams or in collaboration with other C-level leaders in the enterprise. Gartner is there to support them in every case with provocative, innovative ways to transform their business and solve their most pressing challenges, as well as with pragmatic and practical tools and advice to help them execute. All delivered on demand through our subscription services. How do we do it? How does Gartner generate the insights and advice for 15,000 enterprises day in and day out for Maria and every other client? Let me first explain how we structure our products, such as Gartner for IT Leaders, Gartner for Sales Leaders, or Gartner for Marketing Leaders.
We identify the target client roles, including the C-level functional leader and their leadership teams. For sales, that would mean the chief sales officer, sales operations, territory planning, strategy, and division heads. Using external market research and the years of knowledge accumulated by researching each of these roles, we prioritize the content that we produce on the topics that are most critical for our clients and prospects. In our recently launched GXL products, we've made several enhancements to legacy offerings. We've brought together all relevant research for each functional leader, combining content from several leadership councils to provide the integrated insight the leader and their teams need to execute on their priorities. We've enriched the products further with technology content that's relevant for each function, such as CRM for sales and marketing leaders, for example.
We've added new additional research to help drive cross-function priorities such as digital transformation, cost optimization, and talent. All of this is targeted to individual seat holders with more service and greater value. For every topic that we cover within each product, be it talent acquisition or digital transformation, we ensure that our content is provocative, helping the client see something differently and take action, such as envisioning a major digital transformation. Pragmatic, helping clients with practical guides for how to execute, like a job description for a new data science talent needed to drive that digital transformation. We share content methodologies across functions for scale and consistency. For example, we've developed maturity assessments for every function.
These help functional leaders and their teams benchmark how advanced or immature their operations are, and then identify the specific steps needed to progress, say, from a level 3 to a level 4. We recently worked with a utility company to benchmark its operations and figure out how to cut costs by 10% company-wide over the next three years. Because of our benchmarking and proprietary database of more than 1,000 cost-saving strategies, the company is now on track to hit its savings targets. Our clients really value our proprietary benchmarks, like our annual audit fee benchmark or our methodology to benchmark digital brand performance called Digital IQ. Let's take a look.
L2's Digital IQ Index is a tool for brands looking to benchmark their digital performance relative to peers. The Digital IQ measures brands across 1,250 data points against four dimensions: site and e-commerce, digital marketing, social media, and mobile. Brand scores are indexed to an average of 100 and assigned into one of 5 classes: genius, gifted, average, challenged, and feeble. Our published research reports provide a robust overview of online investments across the sector, including best practices and case studies. In the customized deep dive, our client strategy team delivers brand-specific insights to your organization's leadership team. In the two to three-hour presentation, we go a layer deeper into the data, looking at where your brand is strong and weak, and make both strategic and tactical recommendations that feed directly into your annual roadmap.
The Digital IQ offers brands a way to hold their team and vendors accountable and provides a framework to shape capital allocation decisions.
I heard a few of you chuckle at the idea of rating a client feeble on the IQ scale. It's true, that gets clients' attention, but it is a fantastic way to focus our engagement on those areas in greatest need of improvement. There are other methodologies as well. Consider our best practice methodology. When people use the phrase best practice, often what they're really talking about is common practice, the approach that most organizations use for a function or process. In our approach, we focus on what is truly best practice. That is what the top 10% of organizations do differently to achieve exceptional results. Methodology involves extensive quantitative analysis of business results and correlation to specific practices. We then break down those truly best practices into modular steps that other companies can follow, which is perfect for disrupting established practices with new insight.
We're also applying the Magic Quadrant methodology for vendor selection into areas beyond IT. One of our more popular examples is where we help supply chain leaders choose third-party logistics providers. Using all of these models in each of our practices through modular and repeatable methods affords us operational scale, and more importantly, a consistent platform for C-level executives and their teams to continuously improve their functions and continuously adapt to whatever comes next. We've built a similarly scalable platform for service delivery. As I mentioned earlier, we have hundreds of thousands of one-on-one conversations with clients every year, and those clients have access across our areas of expertise. We use machine learning algorithms to identify the right expert to take a client's call.
The algorithm takes into account an analyst's profile, along with data on all prior advisory sessions that they've had. We identify the best available resource for every client question. Then we feed back into the algorithm the topics that were covered on that call, as well as the client's satisfaction level, to direct more calls of a similar nature to the best-equipped Gartner experts. When the discussion is complete, we guide the client on what they should do next. We provide links to relevant research to delve deeper into the discussion topic, or we direct them to another expert in a related area to continue the discussion. We do this on common platforms for all functional areas, enabling a 360-degree view of all the functions in an enterprise.
No one else is able to have this kind of scalable content and advisory service for any role in the enterprise, and yet we're doing it across the entire C-suite. We're delivering significant results. We literally have thousands of testimonials from satisfied clients, with clients often noting time saved and money saved. For example, Gartner paid for itself in 15 days, saving $2.1 million in inventory alone. Project acceleration is often cited as a key benefit, as this client reported: "The value that Gartner delivered to us was speed, focus, and access to best practices." I like what this chief supply chain officer said and how they succinctly summed up the value that we delivered by saying, "Gartner offers the total one-stop shop. Frankly, we are better because of Gartner." Every team in every function in every enterprise faces dynamic challenges every day.
Continuously improving functional performance is an ever-present need. Layer onto that disruptive events and transformations, and you see why Gartner is such a valued resource for insight and advice on how to provocatively approach a challenge in a new and different way, or how to pragmatically accomplish critical activities to save time, money, and to speed up the operating tempo of the organization. We continue to build our platform. The content methodologies for maturity, digital performance, and vendor selection. The service technology to rapidly route client queries to the best available expert, and the indispensable insight to provide unrivaled capability to help all functional leaders and their teams anticipate, adapt, and act. Let me turn it back to Gene to introduce our sales leaders. Thank you.
Well, thanks, Mike. You just heard how our research team provides senior leaders in all major functions across the enterprise with indispensable insights, advice, and tools. These indispensable insights are at the core of the Gartner Formula for driving long-term, sustained double-digit growth. Next is Joe Beck, who runs our global technology sales organization. Joe came to Gartner through an acquisition back in 1997. In the 20-plus years since then, he's held various roles of increasing responsibility within sales. He's been instrumental in creating and evolving the Gartner Formula. Joe's going to give you a vivid picture of how we're using the Sales Excellence Playbook to drive long-term, sustained double-digit growth. Joe.
Thank you, Gene. Good morning, everyone. In my role as Executive Vice President of Global Technology Sales, or GTS for short, I have the privilege of leading a strong and passionate and best-in-class sales organization that knows how to leverage our proven practices to drive growth. Today, I'll talk about why we have just delivered the best year ever for global technology leaders and how we will continue to deliver strong sales productivity while growing at double digits. First, a brief summary of our global technology sales organization. GTS has $2.5 billion in contract value, 80% of Gartner's total CV, and is comprised of roughly 3,000 sales professionals who sell our indispensable research into nearly 13,000 enterprises in more than 100 countries around the world. Our strategy continues to be to sell to and serve every level of the IT organization, from the CIO down to the tech professional.
We understand the business priorities of the team and how they translate into initiatives for every individual on that team. Starting with the CIO, our salespeople work diligently to align our IT expertise to their specific business objectives. We then expand to the members of the CIO's direct team, and then broadly into the IT organization to help them execute. This proven strategy enables us to deliver incredible value to unique individuals and then their team members, effectively expanding our overall opportunity within an account. All of this is substantiated by the fact that most, a full two-thirds, of our new business comes from existing accounts. While the results show that this account expansion strategy works, we have only just scratched the surface. On average, GTS clients have only five or six seat holders in their IT organization.
Yet there are seven clearly defined departments in IT with leaders in charge of each, like the head of data and analytics or the head of security. In many of the IT organizations we sell into, there are hundreds of people under each of those leaders. Even our mid-size clients have full teams under those roles. The opportunity is there on org charts with names and boxes, and that's just with our 13,000 enterprises that are clients today. We've identified over 138,000 enterprises that can and should be our clients. If we count enterprises with even just one seat holder, we're only working in 9% of the available enterprises. We know the organizations to target. We have a winning strategy for selling to them, and we can confidently position our value proposition to every level of the IT organization.
This is why GTS can and will continue to grow at double-digit rates. Every year we get better, stronger, and faster in capturing this opportunity, and our outlook for the future is very strong because the GTS team knows the Gartner Formula inside and out. We have reaped the benefits of this Formula for years and are completely committed to the relentless execution of the sales-focused plays, specifically Indispensable Insight, Exceptional Talent, and Sales Excellence. Of course, this is all built upon Research & Advisory's long track record of continuously meeting the needs of CIOs around the world. The products we sell target Gartner's provocative and pragmatic insight that Mike just mentioned to improve the outcomes of any IT organization's initiatives. In lockstep with our sales strategy, these products are tailored to specific roles.
Whether a global CIO whose billion-dollar IT transformation will dictate the future health of their business, or the IT leader establishing a cybersecurity plan for a government in thriving emerging markets, or the working team managing an ever-expanding cache of business data. Regardless of their role or their initiative, when IT leaders face tough challenges, Gartner has a proven product designed for their role to support their unique needs. Absolutely no one else provides our level of insight and advice. No one. Like our Indispensable Insights, hiring Exceptional Talent is a critical element of how sales leaders execute on the Gartner Formula. As you know, this is one of our largest investments, and we are incredibly selective in our hiring process. For every 100 sales applicants, we hire fewer than three people.
Over the past 10 years, we have increased sales capacity by 13%, which is directly in line with our 10-year CV growth rate. In 2018 alone, we grew GTS headcount by 15%. GTS is a diverse group with a balanced global footprint. We call on all industries in every region of the globe, in every size enterprise. Gartner has a highly collaborative culture using leading-edge tools and best practices. Our growth translates to unparalleled upward mobility opportunities for our people. We offer a truly special kind of sales opportunity that talented and successful people crave. A performance-driven compensation plan, the ability to strategize with C-level executives and work alongside some of the brightest minds in technology. It's not surprising that Gartner is regularly recognized as a best place to work, and that associate referrals lead to an amazing 30% of our sales hires.
These are all strategic advantages as we continue to attract top talent for many years to come. We have the indispensable insight. We've got exceptional talent on board. How do we leverage them to capture that market opportunity? That's where the Sales Excellence part of the Gartner Formula comes in. We capture and continuously improve our best practices over the years, leading to a dynamic and detailed Sales Excellence Playbook that is designed to ensure we execute the best practices consistently across the globe. When I say Sales Excellence Playbook, I don't mean just any playbook. Let me draw an analogy, and since I played college football, the analogy I'll use is a NFL coach's playbook, but not just any coach. Imagine joining a team and being handed Bill Belichick's Patriots playbook, the one that year after year leads to playoff and Super Bowl wins.
Sure, it's going to take time to read, learn, and master, but you know that everything you need to win the Super Bowl is in that playbook. That's what the Gartner Sales Excellence Playbook means to our people. In fact, let's hear from some of our GTS salespeople on what makes our proven approach so impactful.
Ray has a 10-year plan in a spreadsheet that lists how we are going to double NCVI every year and meet the goals long term for this team. We don't question whether we're going to meet the plan. We figure out how we're going to meet it. Get an org chart, be at power, confirm value in the client's voice, use engagement plans, create urgency, and close the business.
The conversations that are required to accomplish that will give you the insight that you need to understand not only the organizational goals, but also the tactical struggles on the front lines. That depth of insight is what you need to justify a larger investment in Gartner.
We know what our goal and our vision is 2 years out. We make the territory plan and design headcount growth to achieve those goals well in advance. We get a lot of value out of our new AEs because we invest a lot of time upfront with them to help them use the tools that they've developed at Academy and apply value to each of their clients in the field.
It's clear from day one what the expectations are and the actions that will deliver results.
This is the greatest place in the world. It's got a great culture, and I love what I do.
We know there will be bumps in the road, but we also know what the right things are to do to keep getting these results. We tell our new hires, we tell our team, there's room for growth. There's room to raise the bar and take things to the next level. Keep doing those right things. The results will follow.
This level of execution across GTS is why we have achieved meaningful increases in our sales productivity and double-digit growth year after year. Our teams know exactly what to do when it comes to recruiting, training, using tools, and applying best practices. This is GTS's proven approach to future success. We start by recruiting top talent into territories optimized for success. In 2018, our investments in recruiting and territory planning paid off. Accelerating headcount required significant investments in recruiters with systems and training to ensure sales maximize the benefit of these great resources. As I mentioned earlier, in 2018, we grew our sales headcount by 15% and reduced the number of open positions to a record low. Open territories mean that no one is selling into those accounts. This is a big deal for 2019 and will lead to increased productivity.
Innovating this approach was a multi-year journey for GTS that will yield better results each year. We also invested in a world-class territory planning function that identifies exactly the right places to put additional salespeople. This capability is systematically prioritizing the enterprises where we can capture the most opportunity, both within existing accounts as well as those enterprises that don't do business with us today. Expanding our sales capacity and execute on a rigorous recruiting and territory blueprint means better coverage on our clients and more people engaging with future clients. To ensure we nurture and develop our exceptional sales talent, we offer best-in-class training programs with proven team of tenured trainers across the globe. In GTS, we know it takes most salespeople three years to get to full productivity. This three-year ramp, peppered with various training experiences, has been consistent over time.
In the first year, our new hires need to be taught the playbook. They begin to learn, but are not fully productive. In the second year, they improve their skills, along with their confidence and conviction, and sell more. By the third year, they have mastered the playbook and are producing like a veteran player. The ramp-up begins with a six-week Sales Academy, which is focused on the best practices for driving retention and growth. This investment in getting new hires off to a good start is important and has resulted in material improvements in new hire productivity. Every year, we're piloting innovative approaches to getting new hires up the learning curve more quickly. By the time our new salespeople take on a quota-bearing role, they're set on a path to fully understand the economics of our business and how to execute the Sales Excellence Playbook.
We have also committed significantly in sales training throughout their tenure to ensure the latest best practices are consistently executed throughout the world. We also know that having the right set of tools is instrumental to driving productivity and improving that ramp-up Gene talked about. Our enabling infrastructure allows our sales teams to have access to a robust set of proprietary sales tools that are specifically architected around our best practices, and our Sales Excellence Playbook is crystal clear about when and how to use those tools to maximum effect. Used daily, these tools guide new and tenured salespeople to the most productive activities for each sales cycle. The incremental investments we made in tools during 2018 are already helping us to prioritize and engage with new prospects. With 36 quarters of double-digit CV growth for Gartner under our belt, our sales force knows what to do to be successful.
Our best practices are ingrained in every touchpoint with sales. With our focus on continual improvement and innovation, we're always updating and evolving our playbook. This has become a massive advantage for GTS and for Gartner, our opportunity is to continue to improve execution on what we know works. All of these chapters in the Sales Excellence Playbook allow us to disseminate the known best practices across all of our sales teams. We only recruit people who can deliver on what we know works. We train them on the right things, and we build tools to make the pathway to success as easy as possible. Moving into 2019, we have a series of strong advantages. Unrivaled solutions for every environment and every role of an IT organization, from the CIO and their direct reports down into the organization. Strong, trust-based relationships with our existing 13,000 enterprises.
We have a tremendous market opportunity, a proven strategy for growth, and hundreds more salespeople attacking that opportunity. All of this will enable GTS to grow double-digit rates in 2019 and beyond. Thank you.
Thanks, Joe. Joe just described how we built the strong sales capabilities that are fundamental to the Gartner Formula, how execution of these capabilities is going to continue to drive long-term, sustained, double-digit growth. I'll now introduce Chris Thomas, who leads our Global Business Sales team. As I mentioned earlier, this team works with the enterprise functions that are beyond IT. Chris has been a member of our executive team since 2013, and he's led GBS since it was formed in 2017. He also has a long history with Gartner. He's been with us for 19 years. Throughout his tenure, Chris has had various roles of increasing responsibility in our sales and in our service delivery teams. Chris helped write the Gartner Sales Excellence Playbook, and using that playbook, he's led technology, supply chain, and marketing teams to long-term, sustained, double-digit growth.
Chris is going to share how his team leveraged the Gartner Formula in 2018 to build the foundation for double-digit growth in GBS in 2019 and beyond. Chris?
Thank you, Gene, and good morning, everyone. Today, I'll share more detail on our GBS journey, the significant progress we made in 2018, building the foundation for acceleration, and how that progress now allows us to deliver on our promise of long-term, sustained, double-digit growth. We know the right things to do. You just heard about many of them, as they're driving GTS' consistent double-digit growth. They're the same right things that are behind the success of heritage Gartner supply chain and our marketing teams, both of which are now part of team GBS. The Gartner Formula works. During 2018, we applied this proven formula across the entirety of GBS to accelerate our CV growth, and it's paying off, as I'll share over the next few minutes. First, a brief summary of our global business sales organization. With $600 million in contract value, GBS represents 20% of Gartner's total CV.
We now have a team of roughly 800 quota-bearing salespeople with 5,400 client enterprises. GBS sells into all functions across the enterprise beyond IT, and our strategy is to target the C-level across the functions we serve and then expand into their teams. Our 5,400 GBS client enterprises represent only 4% of the 138,000 addressable enterprises. Our market opportunity is untapped across all functions, roles, geographies, and industries, giving GBS a long runway for rapid and sustained growth ahead. HR, finance, sales, marketing, and supply chain, each have the potential to have contract value well in excess of $1 billion. The Gartner Formula is the foundation of our double-digit CV acceleration. That's why in 2018, we moved rapidly across GBS to put the various elements of the formula in place.
We leveraged the many strategic investments in enabling infrastructure, we put a special emphasis on implementing three key areas of the formula, Indispensable I nsight, Exceptional Talent, and Sales Excellence. Let me talk a little more about each in turn. Gene and Mike both shared the compelling and immediate need across all roles and functions for Gartner support and insight in their decision-making. In the first half of 2018, we launched GXL products across the largest GBS functions, including HR, finance, sales, legal, and service, to better address these needs. These added to our already existing GXL products in supply chain and marketing. Over time, we'll add more GXL products for other roles that we serve.
As Mike shared, these products provide significantly greater value to clients with a powerful combination of practice-specific research, technology, and cross-functional content, as well as insight and advice tailored to the individual needs of business leaders and their teams. The reaction from our clients to these new GXL solutions has been phenomenal. I wanted to share the feedback from two of our clients, one from sales and one from HR, as they talk about their experience.
The big difference between the seat-based and the Leadership Council activities is actually the value we get. The tailored experience that we have in the new engagement is significantly improved. I would say that it's probably saving me, in labor terms alone, about 1.5 FTEs in the whole research, best practice finding, designing new thing, all of those things added together. We're quicker to a better starting point. It's hard to put a real number on it, but I would say it's probably 5 to 7 times as much as the actual cost of the license. That's one of the big differences I see between what we had before and where we are today, is that the return on that investment, I'm paying more today for the membership, but I'm getting more return faster.
Our partnership with the staff here at Gartner really helped us hone in on what were the areas of what we didn't even know yet. Things are constantly evolving and changing. What happened was, is I came out and said, "We are really leaning into these areas, particularly around HR analytics as well as HR technologies." This entire new world of additional research that I didn't even know that was happening, was presented to us and in a very timely fashion, and it actually resulted in a deepening of our partnership and expansion of seats. Today, we have 3 primary seats or points of contact, that interact with the company.
As a result of our recent dialogues, we're actually expanding that to more of a 5 primary seat model, and that would include both myself as well as our head of learning, our head of talent acquisition, and then most recently, our head of analytics and HR systems. It's a match made in heaven.
This feedback is consistent with what clients across all GBS functions are telling us. I hear the same feedback from finance leaders, legal counsels, heads of diversity and inclusion and recruiting, customer service leaders, and more. These GXL products allow us to deliver significantly more value, in turn, driving much stronger retention. The opportunity isn't just from retention improvement. These GXL products allow us to provide more growth opportunity as well, because we can sell these high-value products throughout our clients' organizations and grow our CV in each account year after year. We've seen this retention and growth uplift in supply chain, marketing, and GTS for many years, and we're now seeing the same thing across the rest of GBS, where we now have the GXL products.
Through the first half of last year, we then trained our entire sales organization on how to sell these new offerings while also putting in place our proven retention programs and support. This transition was significant. Even our tenured associates essentially became experienced new hires to Gartner, as they needed to learn an entirely new sales process and product set. Like all of our experienced new hires across sales, they needed to learn the Gartner best practices, and it takes time for them to become fully proficient. With strong training support, the team is moving rapidly up that learning curve with $100 million of GXL new business sold in 2018 and a steep acceleration in the second half across each of the new products. Gene shared this slide, which shows the acceleration across the new GXL products.
Following the product launches and training throughout the first half of last year, the learning curve was evident. From essentially a standing start, we ended 2018 with over 90% of our prospect-focused sales associates selling one or more GXL deals. Even more encouraging, the fastest acceleration we see is within the group selling multiple GXL deals in 2018. Demonstrating that once they sell one deal, they get it and now have the confidence and capability to rapidly close additional deals. These results and the trajectory into 2019 are proof that we've only just begun to scratch the surface of the enormous market opportunity that we have across GBS with these new products. Product's not the only place we're investing. We're also adding exceptional sales talent to GBS, growing our sales force by 42% since the start of 2017.
This territory growth continues into 2019, while simultaneously accelerating the learning curve of all of our growth hires to date as they now enter years two and three of their tenure. Our coverage model is based on that of GTS, but customized for the unique needs of Global Business Sales. We methodically design territories and recruit the best salespeople aligned to the areas of greatest opportunity. Sales professionals looking for a great opportunity to succeed and build a long-term career, they're attracted to Gartner, and they're attracted to GBS. Here's why. A high-performance and highly collaborative culture, a vast and untapped market opportunity, unmatched career development opportunities, the ability to interact at the C-level and across the entire C-suite, all combined with the power of the Gartner brand. These are all significant and compelling advantages as we continue to attract and recruit top talent and grow our team.
Beyond these product and people investments in 2018, we also put a significant emphasis on executing each element of the Sales Excellence Playbook. As Joe shared, this detailed and ever-evolving playbook has helped GTS win the equivalent of multiple Super Bowls, delivering double-digit growth year after year, and it will do exactly the same for GBS. There are many chapters within the playbook, and it's not easy to implement overnight. We need to learn, practice, and master the plays, and adapt and innovate for GBS wherever needed. GTS has been doing this consistently, and it's delivering results. GBS is now doing the same. We're seeing the impact, and we will reap the rewards in 2019 and beyond. To support our growth, we've added significant recruiting and territory planning capacity.
The Sales Excellence Playbook is clear on what it takes to consistently hire great talent, we're now leveraging all of these recruiting best practices across every part of GBS. Great talent still needs great training to be the best they can be and to get them there faster. Throughout 2018, we've worked to implement best-in-class training programs. Now the same team that onboards and trains GTS new hires also trains GBS new hires. We follow the same six-week sales academy process focused on the Sales Excellence Playbook for retention and growth. With additional GBS function-specific training, ensuring our teams know how to position Gartner as mission-critical to finance leaders, HR leaders, sales leaders, and so on, as well as the same ongoing training to enhance mastery of their craft.
This combination is helping GBS new hires progress rapidly up the learning curve and will ensure they deliver a strong productivity ramp. Beyond implementing recruiting and training proven practices and investments, we also introduced our full suite of sales tools across GBS. These tools are a key component behind improved sales productivity and accelerated learning, and it was critical for GBS to have access to those same analysis, coaching, and prioritization tools. This was a significant change throughout 2018, and our salespeople and their leaders are continuing to ramp their skills while leveraging those tools to accelerate growth in 2019. When it comes to retention and growth, we know what to do to win, delivering indispensable, unrivaled insight through the right products, adding and leveraging exceptional talent, and consistently executing the Sales Excellence Playbook. Our playbook is proven, constantly evolving and highly effective when executed well.
GTS is showing just how powerful it is. We successfully implemented this same playbook in our supply chain and marketing GBS functions. We're now executing these plays across the rest of GBS, and we're seeing win after win here as well. In 2019, GBS has so many advantages compared to where we were a year ago. GXL products with expanded content to better address our clients' needs. A significantly larger and now more tenured team to sell and renew those products. A strong retention outlook, thanks to a richer mix of GXL in the CV base, combined with a year or more of execution on our retention programs. The GTS-proven recruiting practices, training programs, productivity tools, and best practices all in place to now accelerate performance, and that same vast, untapped market opportunity in both new and existing clients. We know the right things to do.
We did those right things in 2018 across GBS to build the foundation for long-term, sustained double-digit growth. We're seeing really strong traction and a positive trajectory as our GBS teams accelerate up that learning curve. We will deliver double-digit growth in 2019, that will only be the start. Thank you.
Thanks, Chris. As you heard from Chris, we've been aggressively applying the Gartner Formula in GBS throughout 2018 to provide that foundation for long-term, sustained double-digit growth. We're now going to play a short video to help you better understand our value proposition. The first part of the video shows how clients actually access our insights on demand. The second half gives you a view into our peer community, how our clients can interact with that peer community. After the video, we'll take a short break. We'll have some lunch for you outside. When we return from the break, Craig Safian, our CFO, will share how the Gartner Formula actually connects to our business model. We'll be happy to take your questions.
I encourage you to take advantage of the lunch break to connect with some of our executive leadership team, which I introduced earlier, also to network with each other. Here's the video.
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As always, the search function takes you right to the information you need. We hope you find the new gartner.com experience faster, easier, and more useful. Get started on your priorities today. In a world where everyone has a voice, how do you know what's valuable and what's simply noise? You play a critical part in the transformation journey, and you're not alone. As part of the Peer Connect community, you decide what's important. Experience a new kind of collaboration and tap into an unlimited network of qualified peers, just like you. You'll gain trusted insights, managed by Gartner to ensure high-value content, and build your own experience with each connection. We're the world's most influential network of IT and business leaders, and your trust is our top priority. No hidden agendas, no sales spins. Transform your challenge into value.
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Here come old flat-top. He come grooving slowly. He got ju-ju eyeball. He one holy roller. He got hair down to his knees. Got to be a joker he just do what he please. Yeah. He wear no shoe shine. He got toe-jam football. He got monkey finger. He shoot Coca-Cola. He say, "I know you know me. One thing I can tell you is you got to be free." Come together, right now, over me. He roller coaster. He got early warning. He got muddy water. He one mojo filter. He say, "One and one and one is three. Got to be good-looking 'cause he's so hard to see." Come together
Come together right now. Come together right now. Come together right now. Over me Oh, oh, oh. Do you believe that you can walk on water? Oh, oh. Can you even see what you're fighting for? Bloodlust and a holy war Listen up, hear the patriot shout Times are changing In the end, the choice was clear Take a shot in the face of fear Fists up and the firing line Times are changing Oh, oh Do you believe that you can walk on water? Oh, oh Do you believe that you can win this fight tonight?
Look at the sky, see a dying star White lies with the man on fire Making love with the devil hurts Times are changing A thin line, the whole truth The far right, the left view Breaking all those promises made Times are changing Oh, oh Do you believe that you can walk on water? Oh, oh Do you believe that you can win this fight tonight? Oh, oh Do you believe that you can walk on water? Oh, oh Do you believe that you can win this fight tonight? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Oh, oh Do you believe that you can walk on water?
Oh, oh Do you believe that you can win this fight tonight? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water? Do you believe Walk on water?
Whoa, oh Staring at this empty room Looked at 1,000 different pictures that your mother took of you. You see, I had this crazy dream last night. This man he talked to me. He told me everything that's good and bad about my history. He said that you are the future. He said that you are the future. The future looks good. The future looks good Oh call me anytime That every time you're losing it Tell me everyone who makes you feel like shit. You know everybody else can lie. Honey, I won't See you with these broken set of eyes. I swear that you are the future. I say that you are the future. The future looks good Ah yeah. Because the future looks good Ah yeah.
Oh yeah. Whoa, whoa. Hey. Whoa, whoa. Woke up staring at this, staring at this empty room. Looked at 1,000 different pictures that your mother clicked of you. I see the dawn of a new beginning. This time, this time we can't go home. I hear the streets of tomorrow calling. I go where you go. We belong to something, we belong to something new. In the midst of the midnight hour, you said to me, "We are a different kind." Oh, like we've been kissed by a higher power. Saying, "Don't wait, don't wait until it's gone." We belong to something, we belong to something, we belong to something new. We belong to something new. We are the ones that will be remembered. Singing, "This time, this time we can't go home." Oh, like we've been kissed by a higher power.
Saying, "Don't wait, don't wait until it's gone." I tell you if you need to know, here is where my heart belongs. Silver threads among the gold. Kids are sold to Babylon. Faces full of high command. Where is the honesty? We belong to something, we belong to something, we belong to something new. We belong to something new. We belong to something. We belong to something. We belong to something new. There's a fire that burns inside. It's an instinct that never lies. A target tattooed between our eyes. Stand and fight. Under the lights on the highest stage. A part of your life they can't take away. Just like the blood running through your veins. Everyone's watching through your eyes. There's only two options, win or die. Win or die. Win or die. It went from a spark to an open flame.
Destiny's calling out your name. Reply. Reply. There's a power that's underneath. You can't see it 'til you believe. On the edge of infinity. Feel the rush. Under the lights, on the highest stage. A part of your life they can't take away. Just like the blood running through your veins. Everyone's watching through your eyes. There's only two options, win or die. Win or die. Win or die. It went from a spark to an open flame. Destiny calling out your name. Ignite. Ignite. Ignite. Ignite. It went from a spark to an open flame. Destiny's calling out your name. Ignite. Ignite.
I'll be the last one standing. Two hands in the air, I'm a champion. You'll be looking up at me when it's over. I live for the battle, I'm a soldier. Yeah, I'm a fighter like Rocky. Put you flat on your back like Ali. Yeah, I'm the greatest, I'm stronger. Paid my dues, can't lose, I'm on ya. Yeah. I've been working my whole life. Now it's do or die. I am invincible, unbreakable, unstoppable, unshakable. They knock me down, I get up again. I am the champion. You're gonna know my name. You can't hurt me now. I can't feel the pain. I was made for this. Yeah, I was born to win. I am the champion. When they write my story, they're gonna say that I did it for the glory. Don't think that I did it for the fame, yeah.
I did it for the love of the game, yeah. This is my chance I'm taking. All them old records, I'm breaking. All you people watching on the TV, you go ahead and place your bets on me. Yeah. I've been waiting my whole life to see my name in lights. I am invincible, unbreakable, unstoppable, unshakable. They knock me down, I get up again. I am the champion. You're gonna know my name. You can't hurt me now. I can't feel the pain. I was made for this. Yeah, I was born to win. I am the champion. Oh.
Born champion. The C is for the courage I possess through the trauma. H is for the hurt, but it's all for the honor. A is for my attitude working through the patience.
Hey.
Money comes and goes, so the M is for motivation.
Yeah.
Gotta stay consistent, the P is to persevere. The I is for integrity, innovative career. The O is optimistic, open and never shut. The N is necessary 'cause I'm never giving up. See, they ask me how I did it, I just did it from the heart. Crushing the competition, been doing it from the start. They say that every champion is all about his principles. Carry on.
I am invincible, unbreakable, unstoppable, unshakable. They knock me down, I get up again. I am the champion. You're gonna know my name. You can't hurt me now. I can't feel the pain. I was made for this. Yeah, I was born to win. I am the champion.
I'm the champion, yeah. The past are rivals.
Ladies and gentlemen, the program will begin in 10 minutes. At this time, please take your seats.
That's what champions are made of.
I am the champion.
No time to pretend. Dust off and try again. Straight out of lion's den. Strong as a thousand men. That's what I've been told since I was six years old.
I'm gonna hit the shadows. I'm gonna place my bet on every step I take. Go tell everyone under the sun. I'm on my way. If I hit rock bottom. I'm gonna try and dance with every step I take. Go tell everyone under the sun. I'm on my way. On my way. Way. Way. Way. Way. Way. Way. Way. Way. Way. I'm on my way. On my way. I'm on my way. On my way. On my way. On my way. I'm on my way. On my way. Go throw the key away. No matter what they say. All for a better day. You will always be the same. That's what I've been told. Since I was six years old. The damned will come and get you. I'm gonna hit the shadows.
I'm gonna place my bet on every step I take. Go tell everyone under the sun. I'm on my way. If I hit rock bottom. I'm gonna try and dance with every step I take. Go tell everyone under the sun. I'm on my way. On my way. Way. Way. Way. Way. Way. Way. Way. Way. Way. Way. On my way. On my way. On my way. I'm on my way. On my way. I'm on my way. On my way. On my way. On my way. I'm on my way. On my way. On my way. On my way. On my way. On my way.
Ladies and gentlemen, the program will begin in five minutes. Please take your seats.
I want a new world without the order. I want to resurrect and live a little shorter. I want it heavy. I want the fury. I want to bleed out the judge and the jury. From the outside, everything looks right. From the outside, from the outside. From the outside, everything looks right. From the outside, from the outside. We are, we are the face of the future. We are, we are the digital heartbeat. We are, we are the face of the future. We don't wanna change, we just wanna change everything. A-a-a-a-digital, digital. A-a-a-a digital heartbeat. A-a-a-a digital. We don't wanna change, we just wanna change everything. I want a new world without the order. I want to resurrect and live a little shorter. I want it heavy. I want the fury. I want to bleed out the judge and the jury.
From the outside, everything looks right. From the outside, from the outside. From the outside, everything looks right. From the outside, from the outside. We are, we are the face of the future. We are, we are the digital heartbeat. We are, we are the face of the future. We don't wanna change, we just wanna change everything. A-a-a-a digital. A-a-a-a digital heartbeat. A-a-a-a digital. We don't wanna change, we just wanna change everything.
We are, we are the face of the future. We are, we are the digital heartbeat. We are, we are the face of the future. We don't want to change, we just want to change everything. Digital, digital. Digital heartbeat. Digital, digital. We don't want to change, we just want to change everything. Digital.
Ladies and gentlemen, the program will begin in just a few minutes. Please take your seats.
Digital, digital. We don't want to change, we just want to change everything. Here's to my future, here's to my yesterday. Here's to change, oh, here's to my yesterday. No tomorrow without a yesterday. Here's to my future, goodbye to yesterday. All these years I've been searching for who I'm supposed to be. All this time I've been wasting, and I was right in front of me. Now it's a crooked old tradition. I am master, fool, magician. In all this trouble I've met, I've not one single regret, no. Here's to my future, here's to my yesterday. Here's to change, oh, here's to my yesterday. No tomorrow without a yesterday. Here's to my future, goodbye to yesterday. Yesterday. Well, I'm a hopeless crash collision 'cause I'm a hostage to my pride. By my own volition, I've been a saint, I've been the truth, I've been the lie.
Now it's a crooked old tradition. I am master, fool, magician. In all this trouble I've met, I've not one single regret, no. Here's to my future, here's to my yesterday. Here's to change, oh, here's to my yesterday. No tomorrow without a yesterday. Here's to my future, goodbye to yesterday. Yesterday. A new day, you can go. You can do anything you wanna. It's your play, swing low, go high, any way you wanna. You can reach for the moon. Anywhere your dreams could take you. Go astray, fade away. Here's to my future, here's to my yesterday. Here's to change, oh, here's to my yesterday. No tomorrow without a yesterday. Here's to my future, goodbye to yesterday. Yesterday.
To keep my hands to myself. To go the tomorrow.
Ladies and gentlemen, please welcome back to the stage Gartner CEO, Gene Hall.
All right. Welcome back. I hope you were able to take advantage of the lunch break to connect with some of our executive team and also to network with each other. Now our CFO, Craig Safian, is going to illustrate the fundamentals and economics of our business and how the Gartner Formula actually connects to our business model. Craig's been with Gartner for more than 16 years, and prior to becoming our CFO, he led strategic planning, corporate development, and our corporate and business unit finance functions. Craig brings a unique combination of strategy, a deep understanding of our business and its economics, and finance and accounting leadership. He's uniquely talented both strategically and operationally, and his contributions to Gartner have continued to expand since he took over as CFO four and a half years ago. Craig.
Good afternoon, thanks for joining us today. Earlier, Mike Harris told you a story about Maria, a global HR leader, and all the interconnected challenges that Maria has. I can tell you from my own experience that the CFO and his or her team are going to be impacted significantly by those same challenges. Whether it's the head of HR, the CFO, the CIO, CMO, they can all turn to Gartner for the insights and tools to help day-to-day priorities, as well as the unplanned obstacles that come up throughout the year. Gartner helps by enabling leaders and their teams to make those decisions with greater confidence and speed to greater outcomes for every enterprise function. My role this morning is to talk about how we're delivering on that value proposition through the lens of our financial and business model.
I'll cover how we leverage the Gartner Formula and a powerful business model to drive growth, how the combination of that formula and making smart investments leads to double-digit top line, bottom line, and free cash flow growth, and how we deploy our cash flow and balance sheet to enhance shareholder returns. As Gene addressed who we are, what we do, and how we succeed, all stem from what we call the Gartner Formula. We address our customers' mission-critical priorities through indispensable insights. We invest in and develop exceptional talent. We drive excellence in our sales organizations, and we invest in a robust enabling infrastructure to support that sales effort and growth. These are all incredibly powerful elements of our formula. What really brings all this to life is our relentless focus on globally consistent execution and continuously improving and innovating every single thing we do.
If our Gartner Formula embodies who we are and what we deliver across every line of business, it's our business model that generates the free cash flow that allows us to reinvest in our business, return capital to our shareholders, and execute strategic value-enhancing M&A. It's a simple, yet highly effective financial model, research sits at the heart of it, as it accounts for 80% of Gartner's revenue. This is a recurring revenue business with very high renewal rates. We write a piece of research once, we sell it over and over, leading to high contribution margins. In research, we bill and collect ahead of recognizing revenue and delivering services, the business inherently has low capital requirements. As Gene pointed out, we also have our world-class conferences and consulting businesses that directly complement and fuel our research business.
That's how we're set up for long-term, sustained growth. This powerful combination of the Gartner Formula and business model enables us to drive double-digit percentage growth in contract value, revenue, earnings, and free cash flow. With that framework in mind, what I'd like to do is take a closer look at exactly how Gartner approaches growth and investments in our business. Our growth potential starts with our market opportunity. As Gene showed you earlier, we operate in a vast, untapped market of close to $200 billion spread across the enterprise functions we serve. We have a huge runway in each and every one of these functions, including IT. To illustrate, if you were to take our current total contract value of $3 billion and grow it at a 15% compound annual rate for 20 years, we'd have only captured 25% of today's addressable market.
As we've shown, we've consistently expanded our market opportunity through organic launches and M&A. Here's how we think about driving growth and capturing that market opportunity. Sustained growth in research comes down to two primary levers, growing our sales headcount and driving improvements to net sales productivity. Levers we know result in growth, which might sound simple enough, we've developed, iterated, and honed numerous programs and initiatives around each. With headcount growth, we're focused on recruiting the best talent. Talent that has the best opportunity to be successful at Gartner. We're investing in and building recruiting capacity and capability to find that talent, as well as innovating our training program so salespeople can be more productive faster. We're planning and designing our territory so our teams are aligned to the greatest opportunity and plenty more. The other lever we have is sales productivity.
We measure sales productivity as the Net Contract Value increase, or NCVI, per individual salesperson. We calculate it for both GTS and GBS on a rolling four-quarter basis, where the net increase in contract value is the numerator and the number of salespeople at the beginning of the period are the denominator. There are several ways we improve sales productivity. Joe and Chris went through all the details of our Sales Excellence Playbook. It was created with the express purpose of driving sales productivity. That's what drives research growth, a combination of growing our sales force and improving productivity. We've successfully taken this approach with GTS for a long time. Gene and Joe showed you how we've been growing our sales force at a consistent 13% for the past decade. At the same time, we've driven improvements to sales productivity.
Over the last three years, we've achieved consistent improvements to sales productivity. As a result, contract value growth has accelerated from 12% to 13% to 14%. As Joe highlighted, we're set up to continue our CV growth. We've consistently grown this business at double-digit rates, and by continuing to leverage all the elements of our Sales Excellence Playbook, we will continue to grow this business at double-digit rates into the future. At the same time, we'll continuously improve and innovate and ensure we make the appropriate investments to sustain that growth. We're running the exact same plays for GBS. In GBS, we're growing headcount. We're applying the Sales Excellence Playbook, which has built the foundation for productivity improvements in 2019. We're seeing GXL contract value accelerate. 2016 and 2017 are obviously dominated by our supply chain and marketing GXL contract value.
In 2018, we really start to see the impact of our new GXL products. Growth in GXL is what will drive us to double-digit overall CV growth in 2019, and even faster in 2020 and beyond. We're confident in our ability to get GBS to double-digit growth for a number of reasons. Notably, we have GXL, and the growth rate has been accelerating. We have a larger sales force, with 16% growth in 2017 and 23% in 2018, and they are all significantly moving up the learning curve. The richer mix of GXL and a full year of our retention programs will drive higher retention. We're leveraging the Sales Excellence Playbook, and we have a vast addressable market opportunity. With those advantages, we entered 2019 in a position of strength.
Last week on our earnings call, we highlighted this sensitivity table to illustrate our path to accelerated GBS growth in 2019. I thought it would be helpful to briefly touch on it again here. Let me show you one of the paths to 10% growth. We entered 2019 with $594 million worth of GBS contract value at 2019 FX rates. A two-point improvement in attrition means roughly $149 million attrits in 2019. A 1% improvement in new business productivity across our 790 salespeople equates to $209 million of 2019 new business. That combination of attrition improvement and modest new business improvement would yield 10% contract value growth for 2019. That's just one of the paths to double-digit growth for GBS. Again, Gartner is a growth company. We've been consistently delivering double-digit top-line growth, primarily by growing our sales force and focusing on productivity.
Our 2019 guidance and medium-term objectives continue to reflect that. These are the same medium-term objectives we shared with you last year. To sustain that double-digit growth, we know we have to continue to make smart investments each and every year. We're always pushing the business to innovate and improve in everything we do. We have more money to put back into the business to support and drive that kind of growth for the long term. The largest investments we make are in sales. We're investing in all other areas of the business as well. Let's just take a closer look at sales investment. We have a very successful sales model. There are two economic lags that impact the profitability of our business. The first, which Gene, Chris, and Joe covered, is our sales productivity ramp. We hire salespeople. They go through training.
It takes three to six months for their first sale, three years until they're fully ramped up. From first hire to contract value, there's a productivity lag. As we sell the contract value, we collect the cash shortly thereafter. That takes us to our second lag, which pertains to how we account for revenue and profit. While we get paid shortly after the contract value is recorded, the revenue and profits get accounted for over the next 12 months. That means there's a big lag between contract value and profits. As the productivity ramps, CV, cash, revenue, and profits scale. Everything scales except the cost of the salesperson, which modestly grows as compensation increases. In GTS, because we've been doing this for over a decade, we're primarily impacted by the productivity lag. In GBS, we're impacted by both the productivity and P&L lag.
We've hired the salespeople in GBS. We're on the path to realizing the contract value and the revenue and profits will follow. To understand how we garner returns from our investments, it's important to understand all the inputs into our profitability. It starts with our revenue mix. In 2018, research made up 80% of total revenues. The remainder of our revenues are split between our conferences and consulting segments, which support and amplify our research business. All of our businesses generate strong contribution margins, but research at 69% is by far our most profitable segment. Research is our largest business. It has the highest contribution margin of our three segments, and it delivers consistent double-digit growth with continued amazing growth potential for the future. That combination drives our overall margin contribution of 63%. Moving down the profit statement, we have our selling and G&A expenses.
We wanted to take the opportunity to provide greater visibility to the components of our SG&A and help you better understand how we think about investing in these areas. Our SG&A splits roughly two-thirds of selling, with the balance being G&A. Taking it one level deeper, we have three distinct sales teams within the sales expense line, GTS, GBS, and the sales teams that support our conferences business, what we call GCS, or Global Conference Sales. As you'd imagine, GTS is by far the largest expense within sales, making up close to 70% of our total selling expense. GBS makes up just under 20% of the total, with GCS approximately 5% of the total, and the balance in marketing and sales operations. Our G&A expense represents about one-third of our SG&A, or about 16% of revenue.
The largest components of G&A for us are technology and real estate, followed by HR and finance. We have been consistently driving significant productivity out of our G&A functions to allow us to invest in the enabling infrastructure we need to support our growth, most notably in recruiting expense and facilities. In the future, we continue to expect to grow G&A expenses at a slightly slower rate than revenues, providing ongoing operating leverage that we can reinvest back into the business. Let's walk through an example of all of that for our 2018 P&L. In 2018, our contribution margins improved by around 60 basis points. This improvement stemmed from a combination of improvements in margins to both conferences and consulting, and a continued shift in mix towards research. I'd note that we continue to drive investments within our cost of services.
For example, we launched a half dozen new GXL products. We're growing our analyst and advisor capacity, we're always improving the client experience. We're also always focused on continuous improvement and innovation, freeing up expenses so that we can make the right investments to support growth. When we break apart selling from G&A, you can see two different trends. First, that our continued investments in GTS, GBS, and GCS negatively impacted margins by about 140 basis points, meaning these expenses grew faster than revenues. G&A positively impacted margins by about 30 basis points, meaning these expenses grew slower than revenues. The net was a roughly 50 basis point decline in adjusted EBITDA margins, all because of thoughtful strategic investments in sales and the productivity and P&L lags that we talked about earlier. In 2018, we made lots of investments across the business.
The largest investment we made in dollar terms was in support of GTS. We grew GTS headcount by 15% in 2018, with GTS expense growing about 2 points more than that. That significantly lowered the number of open territories we have. Additionally, through efficiency improvements, we were able to invest in numerous other initiatives around hiring and training programs, new business and retention initiatives, and a host of others. We started seeing the payback in 2018 with the accelerating contract value growth that we showed you earlier. We took the same investment approach with our conference sales teams, investing for both immediate and long-term growth. In 2018, we grew the sales force and reduced open territories. In addition to further adopting the relevant pieces of our Sales Excellence Playbook, the growth rate of our conferences business accelerated dramatically.
We've taken that same approach with GBS, investing in products and services, rapidly growing the sales force, adopting the Sales Excellence Playbook, and investing in all the enabling infrastructure we know supports growth, all of which builds the foundation to drive sustained long-term double-digit growth. The impact of all of that on our 2019 projected margin is shown here, we're using the midpoint of our guidance to do the math. The story is roughly consistent with prior years. At the contribution margin level, we are dealing with a roughly 50 basis point drag from retired non-subscription products in the GBS space. We've retired these products because they're non-core, we believe it will drive greater focus and ultimately productivity in GBS. Within the selling line, there is margin investment in 2019.
This is almost entirely for GBS, as GTS and GCS expense growth is roughly in line with the corresponding top-line growth. As is our normal practice, we are seeing operating leverage in G&A. The midpoint of our 2019 guidance calls for an approximately 30 basis point contraction in EBITDA margins. Said another way, margins would have been approximately flat without the drag from retired products. Looking forward, consistent with our medium-term outlook, we expect EBITDA and free cash flow to grow roughly in line with revenue. We talked earlier about the power of the Gartner business model. We've architected our business to take advantage of all of its positive elements. As we accelerate the growth of GBS, the benefits of the model start to compound. That's because of the upfront billing. We'll continue to collect cash in advance of delivering the revenues.
Our 2019 guidance for free cash flow growth is strong. As we move out into 2020 and beyond, the combination of our growth and our business model will continue to deliver significant free cash flow well in excess of net income. In 2018, we primarily deployed our capital to delever. Through a combination of utilizing proceeds from divestitures and our free cash flow, we reduced our debt balance by $1 billion in 2018. That reduced our leverage ratios down to around 3.4 times gross debt to adjusted EBITDA at December 31, 2018. We are now in the position to return to our longstanding capital allocation strategy. Over the last decade, we deployed $1.9 billion on buybacks at a weighted average price of just over $61 per share. In 2018, we resumed our share purchase activity, buying back $260 million of our shares.
We've deployed an additional $4 billion on M&A. The CEB acquisition was obviously the largest deal, but we've also done a series of small and medium-sized tuck-in acquisitions as well. Going forward, our top priority is to reinvest back in the business for organic growth. There are two other ways that we use our free cash flow, stock buybacks and M&A. We have over $850 million available on our buyback authorization. We'll continue to be price sensitive and opportunistic when buying back our shares. In terms of M&A, we are an organic growth company, we don't need to do M&A. We can be very disciplined. When we do M&A, we look to enhance our core business. We prioritize research, we seek differentiated content and data.
As we have proven in the past, we'll remain focused on ensuring that we deploy our free cash flow and balance sheet flexibility on shareholder value-enhancing initiatives. This is a very exciting time for Gartner. You heard Gene talk about how rapidly the world is changing and how leaders across every enterprise function turn to Gartner to help them accomplish their mission-critical priorities. Mike Harris, our Head of Research and Advisory, illustrated the pressures and dynamism across those functions as leaders face challenging circumstances every day, and how our research helps them with make or break decisions at a low cost. Our GTS and GBS sales leaders, Joe Beck and Chris Thomas, shared how they're leveraging the Gartner Sales Excellence Playbook to accelerate the growth of our business.
Every enterprise function we serve, from IT to HR, to supply chain, to finance, is rapidly changing, and our value proposition in all of these functions is indispensable and unrivaled. We take that value proposition and leverage all of the elements of the Gartner Formula, where all of our businesses contribute: research, conferences, and consulting. We have an amazing business model. Gartner remains committed to delivering sustained double-digit growth to revenues, profits, and free cash flow. Thank you again for your time today. Gene and I would be happy to take your questions. Gene, if you would join me on stage, please. David Cohen will be facilitating, he's going to join us as well. Just wait for David to call on you and move ahead.
If you have questions, please raise your hands. We'll bring over a microphone. We ask that you wait until you have the mic to ask your question so everyone can hear.
Can the house lights come up anymore?
Jeff, the mic's going to come around.
Yeah, thank you. Two-parter. They're related, but the first, can you just help size up how much the reset was from going from tenured sales associate level productivity to experience new hire on the people that were retrained, plus the promotions to kind of offset the GXL new sales ramp? That looks great. The related question, everything you're saying makes a lot of sense. The new data you're giving looks good. The Q4, some of the GBS metrics didn't really look very good. I guess I'm struggling to understand, are there new things that you're still doing that are incrementally disruptive? I think there was a tough wallet retention comp in Q4. I think CEB renewed a lot of business in Q4. Can you just help square the Q4 GBS metrics with the progress you're seeing?
Yeah, I'll take that one first, and thanks for the question, Jeff. In terms of what we're seeing from over the course of 2018, Q1 to Q2 to Q3 to Q4, 2018 was, as Chris highlighted and Gene highlighted, we made a lot of changes, but they were thoughtful changes. Again, all about laying the foundation for us to be able to accelerate the growth rate of GBS in 2019 and accelerate it further beyond that. I think the key thing to remember is we only fully trained the last people in Chris's GBS organization on the GXL products in roughly the June timeframe. We really only had two full quarters of the GBS team, the full GBS team, really fully trained and able to sell the GXL products.
Again, as we talked about, there is a ramp that comes with selling that exact precise type of value proposition in the market. As Gene showed, and I think as Chris showed as well, under the covers, when you look at the GXL CV, the slope of the curve definitely accelerated in the second half of the year as people got more comfortable. As Chris's chart showed, people were getting much more comfortable. Again, it's like if you get one at-bat and get a hit, you have that much more confidence the next time you come up. I know I'm mixing metaphors with what Joe did earlier on football, but you gain confidence and you gain the skill set required. Again, I think Chris's data reflected that.
Specifically around Q4, it's really the combination of the phasing out of legacy Leadership Council new business and replacing it as we come up the curve with the new GXL new business. The ramp, while very, very impressive, wasn't enough to offset that known decline that we had planned for. As we continue to ramp up, we expect that GXL new business and GXL contract value to significantly accelerate over the course of 2019.
The sequential trend in CV and GBS from Q3 to Q4, is it just that there's more business to renew on the
Yeah
Legacy Council or Leadership Council business? Just because it took a step back and everything you're saying was that most things were done by June.
Yeah, no, you're precisely right. One of the great things in our GTS business that Joe and his team have been really focused on is the expiration SKU of our contract value is roughly even over the 4 quarters. You'll note that we generate more new business in Q4 than we do in Q3, which is more than we do in Q2 and so on. That even SKU really helps us grow contract value dollars in the second half of the year. On the GBS side, there's a heavy weighting towards Q4, particularly December, expirations. We just had a large volume because of the amount of CV, think in the 45%-ish range of the contract value came up for renewal in the fourth quarter. Actually, more accurately in December.
We have programs in place to try and even that out a little bit more over time. Again, our goal is to really make GBS look like GTS on all the elements of the playbooks we talked about, but also in the timing and phasing of the business.
Thank you.
Question from Tim in the back.
Hi, thanks. Just to ask about GTS. On your last call, reduction in the number of open sales territories was mentioned quite a bit. Can you elaborate how big of a change was that? I guess there's always going to be some open territory, is there any risk you're below normal, right? You're over-performing, I guess, relative to what you would expect long term in that metric?
Yeah, Tim. It has been an objective of ours for years to reduce the number of open sales territories. The reason for that is that we sell less in a territory without a salesperson than we do with a salesperson. We had that brilliant insight. We want to minimize the number of open sales territories. The problem, as you pointed out, is that we'll promote somebody to be a manager, for example, and that gives us an open sales territory. The way we used to do it is you'd start recruiting after you promoted someone, and then it might take six months or even longer, depending on what country you're in, to get that filled. Over time, we've been innovating to look at ways to how can we reduce the number of open territories over time. We've done that over a period of several years.
In last year, in 2018, I'll say we overachieved our expectations. We reduced the number of sales territories substantially more than we had expected to. It's not random. We had operational programs, and those operational programs worked even better than we had expected them to. That made a material difference in the overall number of salespeople we had, the growth rate of the number of salespeople we had, because we had so many fewer open territories. This is all great. As Joe said, going into 2019 with a record low number of open sales territories is just terrific for us because those salespeople then have all year to sell. Again, I expect that we will continue to drive down the number of open sales territories over time. You asked if that's kind of a one-time high and it's going to get worse.
I'd say quite the opposite, actually, that it's not zero, we're going to keep driving that down. I expect that we will end this year with even fewer open sales territories than we ended last year with.
Okay. One follow-up, you also showed a presentation with the new gartner.com and some of the search functionality, essentially. Where are you at in terms of actually successfully matching, I guess, if you can measure drop-off rates in terms of people doing searches and do they engage with content on the website? How good are you, I imagine you've tried to benchmark that, can you give us any sort of relative performance or sense of that in terms of how mature that is or good you are at that at this point?
As you hopefully got from the presentation, we want to be on demand for our clients. When they have a problem, we want to be able to give them answers to that problem immediately. One way they do that is they go and they search out the documents that we have. We've got those documents prepared. They go and do that search. Search is very important for us.
Just as I described with open territories, we've been on a mission for years to improve our search experience, every year we get better at it. If you looked closely there, you saw things like what search experts would call type ahead, where if you start typing things, it guesses as to what you might be searching for based on what your role is and If you're a security person, if you type the same words in, you might actually want different documents than someone that is in operations or in application development. We're quite sophisticated, if I can put it. It's a major investment area for us. We have spent a lot of time innovating. We have what we think are real great breakthroughs there in terms of innovating on search. Again, you can expect to get better and better every year.
Even right now, I think we are very good. If you watch the video closely, or if you go use our website, you'll see that it's quite very sophisticated.
I see Gary's got a question.
Yeah, thanks. Gary Bisbee, Bank of America Merrill Lynch. Craig, you've pushed back or resisted at least the claim or the concept of margins rebounding at some point in the future from the recent declines, because you've talked about the desire to continue to invest heavily to drive long-term top-line growth. I think we all get that concept, I guess I wanted to push back a little bit on two fronts. Given how low the GBS productivity is, and given a lot of evidence that you've provided today that you really believe that's going to improve, why wouldn't we see that flow through at some point? Maybe the second way to ask the question, your adjusted EBITDA margins are down 100 basis points or so, I think, adjusting for the divestiture since the CEB acquisition.
Maybe the other question is, are what you're really saying is that the CEB deal just is long-term dilutive to margins by 100 basis points or more?
Thanks for the question, Gary. Good to have you back as well.
You probably wish I wasn't.
No, that was an honest, earnest welcome back. What hopefully we were able to present today, as well as what we talk about on all of our earnings calls, is when we put the money to work from an investment perspective, we get the returns. I think that we've got proof points of that with GTS. We talk a lot about the money that we put into conferences. Again, you look at where we went from a growth rate perspective there, essentially almost doubling or doubling the growth rate in our revenues in 2018. That doesn't happen by accident. It happens because we made smart, targeted investments in areas that we had a high degree of confidence we'd get returns on, but it is an upfront investment.
I think, the way we think about the business going forward and the way we think about creating value is, this is going to sound a lot like what we said last year, we want to accelerate our top line. The EBITDA and EPS and free cash flow and all other metrics should accelerate with that top line as well. Getting GBS, which again, as we've talked about, represents 20% of the contract value from 1% growth to 10% growth, that accelerates everything, all other things equal. That would accelerate the EBITDA as well. We believe because of the vast market opportunity and because we've proven that when we put money to work, it drives returns, we would go a little bit faster in areas. The market opportunity is there. It is certainly not a governor on our ability to keep growing.
I think as we get productivity in GBS and as the top line accelerates, the bottom line accelerates as well. We want to make sure that we are appropriately reinvesting into the business. Again, sustained is kind of the story, right? I think everyone believes the double-digit. That's great. We're going to get there. It's really about doing it over and over and over and over again. We've proven that when we put the money in the right places, we can make it sustained double-digit growth.
If I could just ask one quick follow-up. Both businesses are at the 12%-16% long term. If you're talking accelerate to offset some improvement in productivity, would you consider growing GTS sales above the 12%-16% for an extended period? Is that not realistic?
The way we determine how fast we've grown GTS is we look at each individual sales manager and what their capacity is to take on additional new salespeople. That gives us then a bottoms-up way to think about exactly how many salespeople we can add and exactly where we can add them. If that number turned out to be higher than the range that we projected, absolutely, we'd be thrilled to grow higher than that. It's driven by operationally, what's the ability of our area managers to take on more new sales associates at a faster rate. By the way, I talked about continuous improvement. We want to do that. We work really hard to bring new salespeople in and shorten that time to productivity and make it so that it's easier for sales managers to get them up to speed.
We're not satisfied where they are. We want to get better on that metric. That's what constrains our growth rate is, it's the bandwidth of our first-line sales managers' ability to take on all of these new people we have every year.
Peter's got a question.
Thank you. The 13% CAGR in GTS contract value, very impressive over 10 years. To the extent that it's correlated with 13% growth in sales force over the same period, it might suggest, or I guess it does suggest, that there really hasn't been any productivity gains over that period, which might correlate with sort of the static to declining margin. What am I missing in this arithmetic?
Good morning, or good afternoon, Peter. Our productivity measure is on the growth generated by each individual salesperson, not necessarily the amount of contract value that they're generating. I think the thing that we're really focused on is every incremental dollar of growth and contract value we sell is worth a heck of a lot more than $1 because of our client retention rates and because of our wallet retention rates. The average client stays with us for, let's say, on average, six years. If you look at our wallet retention, it actually grows each and every year over those six years. When we talk about making sure that we're making the investments to fuel sustained long-term growth, when we hire a new salesperson, as they come up the productivity curve, they are generating incremental contract value.
We get that contract value in that first year, again, there's a much longer life to that. The investments we've been making are what have allowed us to continue to grow at 13%, 14%, 15% on much larger numbers, right? We're generating significantly more growth dollars each and every year, and those have a greater than one-year value. Think five, six, seven-year value on average, that's greater than 100%.
Okay. Then sort of related to the earlier question on just the margin leverage. As you see the maturation of the GBS sales force investment you've made in that, why wouldn't it be realistic to think you'd see some pop back in margin then in 2020, for example?
I think when we went through the detailed margin walk materials earlier, it's important to understand that we are getting productivity everywhere in the business, and we're doing that so that we can reinvest back into the business, again, to support and drive that sustained long-term and hopefully accelerating double-digit growth. We never stand still on that. We are always driving productivity, and I think our investment philosophy and approach is that when we drive the productivity on GBS, that will give us an opportunity to make even more investments to further fuel long-term double-digit growth.
There's a question from Jeff in the back.
Thanks so much. It's Jeffrey Silber with BMO Capital Markets. I appreciate you gave us a little bit more color about GXL than was able to do last week. I think it was said that the GXL pricing was a little bit higher than the legacy CEB pricing. Could we get some order of magnitude? I'm just curious how much of that is driving your expected contract value growth this year.
Yeah. Good afternoon, Jeff. It's a little bit like apples and oranges. In a leadership council that was enterprise based, it's hard to compare the pricing of that to an individual seat or a group of seats that we're selling to HR leaders or finance leaders or what have you. The approach we've taken from a pricing perspective, and I think one of the and Gene hits on this often in earnings calls and in private sessions with the whole team as well, simplicity is really important. We've modeled the pricing on the GXL products to look just like what we've done on the IT leader side. The pricing there is very similar and consistent to what we have on the IT side.
The Heritage leadership councils could range from average pricing in certain channels of around $20K-$25K, or they could be in the $40K-$45K range. Again, it was an offering for many as opposed to an offering for one, they're truly not comparable.
Okay. I understand. Just as a follow-up, I'm sorry to go back to margins, just focusing on the G&A leverage, I think you highlighted you did about 30 basis points in leverage last year. The midpoint of the guidance is 50 basis points this year. Is that kind of a good long-term range we can use if we're modeling out over the next five years or so?
I think we want to make sure that we're making the right investments in areas that will, again, support our long-term growth. One of the most notable ones we talked about is obviously our recruiting capacity and capability. We need to make sure that we are constantly investing there so that we can find the great talent and drive productivity across all of our sales forces. That said, we expect to drive net G&A expense growth at a rate slower than revenue growth. Whether that's 30 basis points, 50 basis points, or 20 basis points, it's hard to say. It'll be dependent on the situation, dependent on the needs that we identify to drive and support growth, but we're committed to ongoing operating leverage in G&A.
Okay, great. Thank you.
Joe's got a question.
Hi, Joe Foresi from Cantor. Maybe I'll go back to the football reference. I want to stay with one sport, plus I like the Patriots. You certainly might have the same playbook, but is it possible that maybe the players are different in GXL? In other words, could it be that the product is maybe not as good as Gartner's? Could it be that the end users operate differently because there are better and worse Patriot teams?
We developed the playbook on the IT side. As we talked about, we applied it in supply chain, and we got the exact same results. We applied it in marketing, and we got the exact same results. We started applying it, as you saw, in HR, finance, legal, and sales. If you look at the uptake, it's exactly what we would expect when we start applying that sales playbook. In addition to that, when we talk to salespeople, they tell us the products are terrific, and that they really love selling them. We're getting good feedback from salespeople and from clients on it. We're pretty confident that it's going to be very much the same in the new functions, HR, finance, legal, sales, et cetera, as it's been in IT, supply chain, and marketing.
When you think about the 10% growth in GXL, you've obviously got a small sample set because you just started to sell it and the sales force is starting to ramp on it. Have you risk-adjusted that sample set for a longer period of time, so that you could see what the attrition rates would look like, what the pricing would look like? I'm wondering how that's been looked at, when you've given the 10% contract value.
I'll answer the first half of that, which is, we know why it's 10% better. In other words, there's operational reasons why it's 10% better. It's things like, Mike went through this, there's much more and much broader content. There's a different service delivery model with it. There's different kinds of support. There's actually underlying reasons why it's better. It isn't just we thought it would be better or we got a couple of data points. There's underlying reasons why it's better. Again, on IT, we saw what it is. It's quite good. Supply chain and marketing have the same kind of deltas as well. In other words, they're getting the range of IT as well.
Because of the underlying economics and because everything we see looks that way, even though there's a small number of renewals yet in HR, finance, legal, and sales, again, we've seen very good results in the ones we've had longer, like marketing and supply chain. The underlying operational measures are exactly the same as in the others.
On the GXL side, you've changed the product or you've relabeled it. What areas were you specifically trying to address when you looked at the product? Were you trying to make it more sticky? Were you trying to bring together a bunch of different functions? I'm just trying to understand the difference between GXL and prior CEB. Thanks.
The main thing we were doing is building a very strong value proposition, the same very strong value proposition that we have in IT, Marketing, and Supply Chain. If you compare, and Mike talked a little bit about this, which is there's a lot more content in the GXL products than in the legacy Gartner Leadership Council products. The legacy Gartner Leadership Council products were a much narrower set of content, and it varies by group, but you can think it's whole number multiples more content. In some cases, maybe as much as 10 times more content in the GXL products. The way we get that is first, within the business function itself, there's a broader set of content. For example, in finance, if you had audit and risk, you'd only get audit and risk.
In addition to audit and risk, you may get financial planning, et cetera, because they care about those things. You get more actual business content first. The second thing is there's IT content that we already had existing that is relevant for a finance leader. We take that IT content, like on financial planning systems or on analytics, which are a very big deal. In fact, if you look at the issues CFOs care about, half of them are technology related. We added the business content that's much broader. We took the technology content that we already had and then tailored it for CFOs. In addition to that, there's some content that is very relevant across many different functions. An example of that would be developing talent.
When you're developing talent, many of the same principles apply, whether you're developing talent in IT, in finance, in sales, some of the basics of that apply across the business. We have this cross-functional content. When you add all that together, the amount of content you would get more, think about ranging from five times as much as you had in a Gartner Leadership Council to 10 times as much. It's a lot more content. On top of the content, I mentioned, I talked about the events that we've added. Events are a way that people get value. We've added a number of events and made those events actually Conferences, I should say. We made those conferences also much more robust than even the ones that existed where they existed in the past.
The actual productization itself, uses the great search function that we just talked about, the world-class search function, and those other kinds of capabilities that are built into the Gartner for IT Leaders, Gartner for Marketing Leaders, Gartner for Finance Leaders. They all have the same product back support, that we've had in the past just in IT. The whole point really is to have that very strong value proposition and make that value proposition just as strong in all the other functions as it was in IT, Marketing, and Supply Chain.
I think we've got time for two more. Ryan?
How you doing? Ryan Leonard from Barclays. You've mentioned the success in putting the playbook to work in supply chain and marketing, and I guess the big difference that I see is that you have a book of CV already in place with the legacy CEB piece. You're working on maintaining what was already there in addition to accelerating growth, and presumably the 40+% of sales hires are dedicated towards new sales. Maybe can you walk us through the attrition that you've talked about? What are your assumptions baked in for 2019? How operationally you go about maintaining levels, and what gives you confidence there's not further to go before we see normalization?
Yeah. Good afternoon, Ryan. From an attrition perspective, the way we've thought about and modeled into 2019, and you can get a sense of it from the sensitivity table that we walked through. Essentially, if you take the mix of GXL CV, which is about a third of the $600 million, and then it means two-thirds is the legacy stuff, and apply the rates we talked about on the earnings call last week, where it's a roughly 30% attrition rate on the legacy side and a 20% attrition rate on the GXL side, you get a weighted average attrition rate around 27%, which is roughly flat to what we did in 2018. We're not standing still and assuming that, wow, we just hope we get that same attrition rate on the legacy stuff.
Chris alluded to it, Gene alluded to, or directly said it, Gene alluded to it, I alluded to it as well. We have a significant number of retention programs that we have in place supporting both the GXL subscribers and the legacy subscribers. We're working very hard to make sure that the attrition actually improves on the legacy side and on the GXL side. We're doing both of those things. Again, if you use that sensitivity table that we walked through, even with no improvement in attrition, and no improvement in new business productivity, when you run the math with our 790 AEs we had on board at the beginning of 2019, you get roughly 8% contract value growth.
Got it. One more if I could sneak it in. Obviously the hiring plans for next year, 14%-16% in GBS, 11% in GTS. But if we get to halfway through the year and GTS is flat to accelerating, is it fair to assume that you would take that as an example of when you would like to reinvest? As you talked about, that gives you a good return.
As I said earlier, the way that we decide how fast to grow our sales force down both GTS and GBS is looking at the bandwidth of those managers. As we get through the year and we see that it looks like the managers have bandwidth or that we can promote more managers and create more managers, which we do all the time, we'd accelerate that growth rate. Similarly, if we saw that the bandwidth wasn't really working, we'd be at the lower end of the range.
Before we take the last question from Toni, please note you'll have a survey that you will receive via email from the Gartner for Finance Leaders team. The replies will only be made available to us on an aggregated basis. We appreciate you taking the time to complete this survey to help us improve how we communicate with you. After the last question, Gene will make some closing remarks. Toni?
Thanks. Toni Kaplan from Morgan Stanley. Gene, I know you don't have many direct competitors, if you could just give us a quick update on the competitive environment. Craig, if you could talk a little bit about the M&A pipeline. You haven't been so active since the CEB deal, you've been de-levering. Any sort of specifics on cash flow like return to shareholders now that you've reached your leverage target. Thanks.
With regard to competitors, we have a very strong value proposition. When we go and talk to clients and talk to them about our different products, the GXL products and other ones that we have, it is very infrequent, think less than 1% of the time, that there's someone that would be called competitive in that deal. Usually either we win the deal or it's no decision, as opposed to they went to someone else. That's true for all of our products across every single one of the enterprise functional areas we talked about.
In terms of capital allocation, Toni, as we went through, and as you noted, we're back to our rough leverage targets of where we wanted to be. We generate a lot of free cash flow, and we expect to generate lots of free cash flow into the future. Tax reform now gives us the ability to actually leverage almost all of our global cash flow, which we weren't able to do in the past. We want to put that to use. We talked about really three uses. Obviously, reinvesting into the business, which we'll continue to do, returning capital to shareholders through our buyback programs, and strategic value-enhancing M&A. On the M&A front, the way to think about our pipeline or the way we're thinking about M&A, we've got a corp dev team. 2016 and 2017 was really focused on buying CEB and L2.
2018 was really focused on divesting a number of small business, and I'd argue we did a really fantastic job, both in terms of the speed and the value we got for those deals. Now the team is back focused, and they were always focused on that, but now even more focused on M&A opportunities into the future. Not going to get into specifics of what we're looking for, but our expectation and the bulk of our pipeline, as you'd imagine, are small and medium-sized tuck-in type deals that we'll be looking at. In absence of that, and actually because of our free cash flow capability, I'd say, in addition to that, we will always be looking at ways we can return capital to shareholders through our buyback programs. We did $260 million worth of that in 2018.
We've got over $850 million on our authorization, plus plenty of cash flow and balance sheet flexibility if we should need it. We'll treat it the same way that we showed you what we've done over the last decade, where I think we've done a good job of both strategic value-enhancing M&A and returning capital through our buyback programs.
Great. Well, thanks for your questions. Here's what you should take away from today's session. We're living in accelerated times. Enterprises need to constantly evolve to stay ahead of the competition. Leaders across the enterprise, HR, finance, IT, legal, sales, they all need help with their make or break initiatives. Gartner is the best source of that help. We have an indispensable, unrivaled value proposition, a vast market opportunity, and through consistent execution of the Gartner Formula, we know how to capture that opportunity. We've applied the Gartner Formula in GTS and delivered long-term, sustained double-digit results. We're applying the Gartner Formula in GBS and expect to achieve long-term, sustained double-digit results beginning in 2019. With a culture of continuous improvement and continuous innovation, we get better, stronger, faster year after year.
We're in the best position we've ever been in to provide sustained double-digit growth across all of our key financial metrics. We hope you found this session useful to deepen your understanding of Gartner. We look forward to updating you on Gartner's progress throughout the coming year. Thanks for joining us today. Happy Valentine's Day.