Welcome to ServiceNow's 3rd Annual Financial Analyst Day. For those of you who don't know me, I'm Dominic Phillips on the finance team. Thank you for traveling to Las Vegas to be here with us, and we have a great program planned for you today. Please note our Safe Harbor slide. During the course of today's presentation, we may make forward looking statements, and we intend for such statements to be covered under Safe Harbor provisions.
The slides that we're going to go through today are currently available on our investor website at ir.servicenow.com. Before we get into our program, I'd like to invite Mike Scarpelli, our CFO up on stage. And we'd like to spend a few minutes with you upfront before we get into our materials, discussing some of the frequently asked questions that came out of after our earnings call back last week.
Good morning. So one of the first questions that people were asking at our conference call was what was the sales reorganization that you guys did? And just to clarify it was not a sales reorganization. As part of every company every Q1 in January when you're allocating quotas and you're looking at what territories you're going to split, there's a sales realignment that starts. That is very common.
Typically 15% to 20% of our accounts both are existing customers and prospects are reallocated to different reps within the field. What happened this year that made a little bit more pronounced was the fact that we hired a we always had a commercial and enterprise segment, but they rolled up into management that it didn't matter from the management's perspective because they were quoted on all of that. We now have in place effective January 1, a separate commercial organization and an enterprise sales organization, principally in North America, but some of the larger geos internationally were splitting that as well. And as a result we had a number of reps historically who bridge that gap between enterprise commercial and they had enterprise accounts, they had commercial accounts both prospects and existing accounts. So we did a very hard line we drew and you either had to be a commercial or enterprise.
And what this resulted in is in the Americas 66% of our accounts got reallocated between reps and not just existing but prospects is an important thing. And why I say prospects is because of the pipeline. And one of the things and a lot of these reps knew in Q4 that this was going to happen. And as a result they only focused on the deals that were very advanced in the pipeline. They never and this came to light to us in late February, March is the fact that our pipeline coming into Q1 was not as mature as we thought it was within the company.
And as a result, a number of deals pushed from Q1 into Q2. But as I'm going to talk about later on this is normal in our business. We tell people we have a very long and lumpy sales cycle. There's nothing new from a competitive standpoint that we're seeing out there within the IT service management area. And our biggest competition is not the competitors, it's our customers kicking the can down the road another 2 months, 3 months, a year sometimes.
And at the end of the day our customers will not sign a contract until they have their internal resources lined up to do the implementation. As we've told people many times this is very much akin to a financial ERP implementation. So with that the other thing we're and by the way you can see here how we segment it and we do our segmentation based upon Dunn's employees numbers. So the other question we're getting a lot about was currency. To be honest we saw the impact of FX in Q4.
We just had such a big Q4 no one even asked us anything about FX and we didn't even bother talking about it. But you also saw that further impact in Q1. And Don can talk a little bit to show you kind of how we look at things. And also when you look at our forecast, looking at our forecast on a constant currency basis what is our real forecast on a constant currency basis. And we're happy to answer questions on all this after in detail, Tom.
Yes. So as Mike mentioned, we did give constant currency growth for Q1 actuals for revenue and for billings. And a lot of the questions were around, what was constant currency and other historical periods where FX impacted you? And also what was the constant currency growth for the guidance that you gave? So we've laid out a few slides here.
This first one is revenue growth year over year and there are 4 periods shown here, Q4, Q1, Q2 guidance and FY 2015 guidance. And for each of these, there are 3 bars. The blue bar represents the prior period growth. The gray bar represents the actual growth reported or the guidance given and the green bar represents constant currency for each of those periods. So the way to read this is, in Q4, a year ago, we reported 67% growth.
In Q4 of 'fourteen, we reported 58% growth, but that would have been 63% on a constant currency basis. In Q1, the quarter that we just reported, a year ago, we reported 62% growth. On the call last week, we reported actual growth of 52%, but then we did give you the 62% year over year growth, so you can see no deceleration in growth from a year ago. In Q2, a year ago, we did 63% growth. The guidance that we gave you was 42% to 45% growth for Q2.
On a constant currency basis, that guidance would be 54% to 57%. And then for the full year, last year in 2014 we did 61% growth. The guidance that we updated you and gave you $970,000,000,000 to $1,000,000,000 represents 42% to 47% growth, but on a constant currency basis that represents 51% to 56% growth. We did the same thing on billings. In Q4 a year ago, we did 71% year over year billings growth.
We reported 66% in Q4, but on a constant currency basis that would have been 70% or just slight deceleration from where we were a year prior. This last quarter Q1, a year ago, we did 62% growth year over year. We gave you actual results of 48% billings growth in Q1. And again, we told you on a constant currency basis that represented 59%. And then finally, in Q2, a year ago, we did 61% growth.
In Q2, we gave updated guidance of 260% to 265%, which represents 38% to 41% growth, but on a constant currency basis that represents 50% to 52%. So you can see how FX played an impact and what the constant currency growth would have been. So that can hopefully gives you a little bit more color around what we actually reported and what that those amounts would have been on a constant currency basis. The other FX related question really came around the 2 constant currency growth numbers that we did give, the 62% growth for revenue and 59% for billings. So we put together a very high level back of the envelope math.
Again, these are available in the IR deck that's available now on our website. I won't spend the time to walk you through the math, but you can follow this math at a high level to understand how we came up with those rates. I will say, I'll mention a few things. This first one is on the revenue, the 62% and how we got there. The way that we think about constant currency growth is we take we have foreign currencies that get translated in U.
S. Dollars off the income statement. The way that we think about constant currency is we take the prior period year ago FX rate and we apply those to the current quarter operating metrics, so in this case revenue. We took the average Q1 'fourteen rate and applied those to our Q1 'fifteen revenue balances and that's how we got to the 62%. Similarly, this page is a little bit more detailed.
Again, I won't walk through the math, but this is for billings. There are 2 ways to really get to the 59% billings growth that we gave you. 1 is off the statement of cash flows. There are 2 components there, the change in deferred off the statement of cash flows and revenue. I just walked you through how we got to the revenue constant currency balance.
It's similar for the statement of cash flows. We translate our local currency statement of cash flows into U. S. Dollars using an average FX rate. So we took the average rate in Q1 of 2014.
We applied that to our Q1, 2015 statement of cash flows, recalculated constant currency billings and then recalculated the growth. That's one way to get to 59%. You can get there similarly off the balance sheet, but that was a little bit more complicated because there are 3 components to that. Revenue, we've talked about already. Ending deferred revenue, which uses a threethirtyone 15 spot rate.
We retranslated it using the threethirty onefourteen spot rate and the beginning deferred revenue is the 3rd component. It's using a twelvethirty onefourteen spot rate. We retranslated it using a twelvethirty onethirteen spot rate. So if you take those 3 components, you retranslate them into constant currency, you recalculate it. That's another way to get to the 59%.
So hopefully, Mike talked a little bit about the sales segmentation. I spent some time with you on the FX. Again, as Mike mentioned, there was a formal Q and A at the end. Feel free to ask questions. We'll be around after the session as well and happy to spend more time on this.
But hopefully that cleared some things up and now we'll get into the program that we have set up for you. Great program. The theme of the event is $4,000,000,000 of revenue in 2020. And each of the speakers that come up here are going to spend some time talking to you and supporting this thesis and ultimately how we plan to achieve that. First, Mike is going to come up and he'll talk to you about how ServiceNow is modernizing the enterprise and how that is growing our market opportunity and ultimately driving future growth.
Frank Slootman, our CEO, will come up next and he will talk about how ServiceNow is not only modernizing the enterprise, but more increasingly transforming the enterprise and ultimately changing the way people work. Dan McGee, our COO will come up after and he'll talk about ServiceNow's cloud architecture and how that's a competitive differentiator for us. Pat Casey, our VP of Platform will follow Dan. He will talk about ServiceNow's platform strategy. He'll give you an intro to ServiceNow store, our app store that is
how they are building applications and
using ServiceNow to not only how they are building applications and using ServiceNow to not only support the business, but ultimately to run the business. We have a partner that will come up lastly, and he will talk about how they are building a business around ServiceNow. And then finally, Mike and Frank will close with the formal Q and A. Two quick housekeeping items. When the program ends, there will be a grab and go lunch out the doors.
And then as we mentioned on the Q1 earnings call, there will be a preview and a partner expo hall preview from 4 to 5 p. M. In the South Conference Center. Feel free to show up to that. It will be a great opportunity for you to meet a number of our partners, get some demos, understanding how they're doing work with ServiceNow.
It ends at 5. The opening reception for Knowledge begins at 5. You're more than welcome to stay for that as well and food and drink will be available. So with that, I'll now turn it over to Mike.
Thank you, Dom. So vision of $4,000,000,000 in 2020, well, how do you get there? Oh, sorry, I went the wrong way. How do you get there? First of all, you have to have a large market.
So I want to talk a little bit about the market and where we are. So as Don mentioned ServiceNow we're modernizing the enterprise. We're changing the way people work. Traditionally we've always sold into IT service management $6,000,000,000 market. I don't think anyone questions that.
What's the other thing we're doing? IT operations management. You've seen where we've done acquisitions with Nebula with ServiceWatch. We have a robust portfolio of products within IT Operations Management with Discovery, with orchestration, cloud provisioning, event management and service watch as I discussed. 2014 that was about 10% of our new ACV was coming from IT Operations Management.
We think that will be a growing segment of our market. It's about a $10,000,000,000 opportunity that we are going after within that segment even though it's a bigger market segment. The other thing we're going after is business management. What is business management? Business management is our project and portfolio suite of applications.
Our GRC, we talked about on our call, we did the Intraeus acquisition. If you're here for the week, we're going to be talking a lot about GRC. That's a very hot topic area for us and not just IT GRC, it's GRC across the entire company. The other thing is vendor management and we talked about it at our Knowledge Conference in 2014, our financial management application and we said stay tuned for this year. We're going to be talking a lot about our financial management application as well.
In total, we estimate this is about a $9,000,000,000 opportunity. The other thing management, this is our Express product. This is about $1,000,000,000 market opportunity. We think this is a conservative estimate as to the size. This is a very different product from the Zendesk and Freshdesk.
This is still a very robust full IT service management product. The nice thing about this is if a customer we can land them with service management some of these smaller customers but it can be large customers as well too who want something out of the box that's going to they can stand up very, very rapidly. You can upgrade to our enterprise product by a flip of the switch. We've already had 3 customers upgrade to our enterprise product. We're now formally launching this in other parts of the world.
We just started in November in the Americas. We have about 135 customers in that already. Enterprise service management, overall this is a $25,000,000,000 market and IT service management falls in there. That's going to be a big focus of what we talked about today with Frank as he's talking about changing the way people work. You'll notice on here it just really has you can even forget about the IT service management.
We sell enterprise service management to customers. The HR service management, field service management, legal facilities all that falls within that. The other question we're getting is, is this why aren't you talking about HR and others? Well, the fact of the matter is our customers buy ServiceNow. They buy service management.
They don't separate between what is IT service meant, what is HR service management. It's $100 The price is the same. We've always we've for the last 6 months been charging the same. It's $100 per user per month for this. And that is how we go to market.
So overall it's a $45,000,000,000 market and large markets are what are going to drive our revenue growth. This vision of $4,000,000,000 of revenue in 2020, how do we get there? We've always talked about it's not the number of customers, but the quality of customers we land. In 2013, we really focused on we started getting our sales organization focused on the Global 2,000. We now have 545 Global 2,000 customers.
On average, the annualized contract value for Global 2,000 customer as of March 31 was $746,000 The G2K mix in our revenue has always been 50%, if you go back the last number of years. Actually in 2014 it was exactly 49.5%. Annualized revenue coming out of that now is about $800,000,000 a year. If we add 20 new logos per quarter we have been averaging north of 20 per quarter. Last quarter we added 23 which is traditionally one of our slower quarters.
And if we see a 4% sequential growth we've been averaging well north of 4%. Last quarter was 4.4%. But once again Q1 is generally a slower growth. You may say why is Q1 a slower growth? Most of your upsells to our existing customers a lot of that happens in Q4 because people are really trying to drain the pipeline and then you're rebuilding pipeline going into next year.
We maintain that growth or that mix of 50%. That's how you get to a $4,000,000,000 market our other customers contribute that other half. So this is just showing you the progression of our customer count and just to validate how we can get there. So you can see, we added 32 Global 2000 in Q4, 23 in Q1. We'll continue to grow those.
You can see how our average revenue or ACV for Global 2000 has progressed well north of 4% historically. So a lot of people ask, well you guys are really penetrated. You've got all the low hanging fruit in North America in particular you've probably touched most of the Global 2,000. We're showing you here what is our penetration by number of logos within GEOs. You can see here in North America, we've only touched 42% of the Global 2,000.
In EMEA 35%, Asia Pacific we're just scratching the surface. So there's still a big opportunity to grow within North America our biggest market. And you can see too our saturation within accounts. One way to look at it is how many employees are licensed on ServiceNow within your installed base of customers. There's about 30,000,000 employees within our Global 2,000 customers, so actually slightly bigger than that.
There's about 5,000,000 licenses. So you can see we're still not that saturated because as Frank talks about ServiceNow is changing the way people work. We think one day every employee in the company similar to Microsoft Office should be licensed on ServiceNow. Is that going to happen overnight? No, it's going to take time, but we're patient.
We're here for a long time. The other thing that gives us the confidence that we can get to this $2,000,000 per year out of our Global 2,000. Well, if you just look at our largest accounts, a lot of people focus on how many $1,000,000 deals did we do in the quarter. That's an important metric. What's more important to us is because we continue to upsell customers is looking at how many customers pay us more than $1,000,000 a year.
As of March 31, we had 168 customers paying us on average $2,000,000 a year. And you can see how that continues to grow. It increased by $15,000,000 from the prior quarter yet we only added 8 customers, new customers and initial transaction of well actually that's not just new that's also upsell. We did 8 transactions north of $1,000,000 last quarter. Another thing people ask about is well what does a customer buying experience look like?
And the answer is it's different from customer to customer. But on average it's pretty darn consistent. You don't see this that often. This is showing how our customers have grown over time. We started looking at this data in 2010.
And you can see on average our customers annual contract value is growing 50% plus per year. You may say, well, why is 2014 only 27%. You got to get to the end of 2015, so we can do the full data. And I think you'll see we're 1 quarter into it in 2015 and we've already grown 27% for 2014. So this also gives us the confidence that once we land a customer, we grow within a customer.
What this also does is it drives the economics for our customers. A number of people have asked, so what is the customer economics? We pretty much if you look at this here, the red line is showing our revenue we're getting out of those customers. The blue the dark blue is showing us what is our cost of hosting those customers within our data center. And you can see that doesn't grow that much, but it does grow over time because they will need more capacity as they get much bigger.
But the cost of sales doesn't grow that much, yet the revenue is growing so much. We think we're getting the ROI over a customer's lifetime is 4 times. Remember, when customers are making a decision to buy ServiceNow, this has not taken a PO. This is a strategic business decision for these guys because we are going to be installed in those customers for 10, 15, 20 years. The systems we're replacing and this is what leads to the long sales cycle are 10, 15, 20 years old.
So once you get in, you're generally in for a long time. And this is what gives us the confidence again that we can get to those revenue targets we talked about. So a lot of you guys have seen this. And a lot of people have always thought well it's growth at all costs. We have never run this company at growth at all costs.
Yes, revenue growth is a key driver for us and we're very much focused on the top line. But you can see over time we've been also very focused on our operating metrics and we do have a greater focus on leverage as we continue to grow. We think our longer term target we can be at 83% to 85% subscription margin. It's pretty hard to get above that because what we have is our high availability with mirrored data centers that becomes very costly. And we think you need to do that if you're going to run-in enterprise cloud.
And Dan McGee is going to talk about that. We think our PS and other gross margins we can get to 20% to 20 2%. That's really training as a big component of that. That's what we want to focus on. And then sales and marketing is where you get your real leverage over time in that 32% to 34%.
And you can see that with that ROI. This is as we slow our hiring down, you tend to drop a lot to the bottom line. And our operating margin, we think we can get to approximately a 28% to 30% operating margin. A number of people have been asking us what are these revenue targets? We think in 2020 this is a realistic operating margin for us at that $4,000,000,000 in revenue.
The other thing we're focused on is free cash flow. You saw last quarter we did $41,000,000 $40,700,000 in free cash flow. We did $85,000,000 the year before. We gave guidance for $40,000,000 in free cash flow this quarter. You just annualize that.
It's almost a doubling of cash flow from the prior year. We are very, very much focused on free cash flow within the company. What are our investment priorities? We will continue to invest within our data centers. We have a if you recall in 2012, we started migrating into our co location facilities.
We used to be on a hosted model. All that hardware is coming up on its refresh cycle. On average, we're going to get 3.5 to 4 years out of our hardware within our data centers. The other thing as we're adding employees, you can see we're adding roughly 1,000 employees a year and that's what we're factoring in into our longer term model as we'll add about 1,000 employees a year give or take. So there's facilities expansion.
You got to house these people. And we're also going to make some strategic investments in private companies to help accelerate our platform. These aren't going be big investments, but these are going to be with some small companies. We'll invest some money to get them to develop on our platform. And this is some housekeeping.
A number of people as you're building your model you're asking what are your long term tax rates? What are your cash taxes you're paying? I want to remind people, we pay very little cash taxes other than our foreign cash taxes because of all of the NOLs we have generated as a result of our stock based compensation charges. On a non GAAP basis though, you have to back those out. And as a result you can see in 2015 we estimate our non GAAP tax rate is 61%.
In the longer term, it's going to get into the high 20s. From a cash tax as you can see here, we're just estimating the actual cash taxes based upon the foreign operations as we grow to that $4,000,000,000 in revenue there. And then the other thing people are asking about is share count. What's our share count for longer term EPS models that we're building? We're not doing this on a treasury stock basis because to do it on a treasury stock basis you have to make estimates as what your stock price is going to be valued at.
I'm not even going to try to guess what that is. You guys can do a better job of that. This is showing you what our truly fully diluted shares are going to be in terms of RSUs, options and common stock. So long term we think and this is based upon adding about 1,000 employees a year and with their normal refresh that will be getting down around 3%. So with that, I'm going to turn it over to Frank and he's going to talk about changing the way people work.
Thanks, Mike.
Good morning, everybody. Is this thing on? Yes? No? All right, good.
Really appreciate you taking the time to come out here. We worked very hard during the year to get all our customers out here, all our prospects because this is the one event that we do where the entire ServiceNow community sort of catalyzes for 3, 4 days and you get the full measure of what our business is all about. So if you are an investor or you're thinking about becoming an investor, you just literally owe it to yourself to be here. So thank you for making that journey. So you heard Dom Phillips.
He's going to quiz you later on everything he said about how that foreign exchange stuff works. It went over my head halfway. But very, very detailed, very, very specific. Mike 2Q Alpha level, basically trying to show you what the next 5 years look like in a very mechanical sense, how do we get there. What I'm going to do here is lift things up a little bit.
What knowledge is all about as a conference is an opportunity for our customers to get a much broader perspective on what is possible with ServiceNow. And that's really what we're here to do. The conference is called Knowledge. It's not called ServiceWorld or ServiceNow world because it's really about how do we get people inspired, motivated to undertake projects that they otherwise may not have. I mean, a lot of people bias to for very specific applications.
Obviously, the whole ITIL set, incident problem and change, asset management, a lot of the other things we talked about, right? But what makes this conference special is people to find out things that are possible that are very, very high impact that they may have never thought about. Every quarter when we do our earnings script, I always highlight stories. And we do that on purpose because it's not just our customers that we want to try and give ideas to, but it's the same for you. You really get a sense of what is really the full measure, the full scope of what's possible in this platform.
Because that's what's really exciting. That is really the full promise of ServiceNow because it goes way beyond the $4,000,000,000 in 2020. So the theme of the conference, everything as a service, obviously, we like that to be a reality. It's happening in many parts of our world and that's what I'm going to talk about next. Before I do that, we can go step back in time to the late '90s.
Back then, not everything was a service. I mean, we just started to get used to the notion of software as a service, right? And there is no company that is more affiliated and associated with the drive towards software as a service as Salesforce. I've said publicly and privately many times that we stand on the shoulders of giants. I mean Salesforce has done an enormous job really getting the whole industry to understand that software can be consumed this way.
This is actually their mascot, very iconic representation for no more software. Software needs to be consumed as a service. I think they refer to this mascot as SaaS. So once software as a service became a notion that was reasonably well understood, you get a very quick proliferation and people started to figure out other as a service type things out there. And you probably have seen this depiction, this rendering of thinking about the whole as a service landscape.
We still have software as a service at the top, but then we had PaaS, right? We still talk about platform as a service a whole lot. Not that many companies that are pure platform as a service, right? But a lot of us here combine the platform as a service with other layers and then infrastructure. Infrastructure has gotten really big, especially in Amazon Web Services and Microsoft, which actually combines both the infrastructure and the platform.
ServiceNow doesn't quite fit this delineation either because we combine the platform and the software as a service, right? So not everybody falls neatly into these buckets, but it shows the proliferation that was going on all during the 1st decade of this millennium. Now meanwhile, on the consumer side, things were just exploding from the standpoint of as a service. And we don't even think twice about it. I mean, there's whole generations of people now that really don't know any different than this is the way that you do things and the way that you get things done.
On the consumer side, it was really born out of necessity, right? On the enterprise side, it sometimes feels like an uphill battle. But on the consumer side, wow, we were just off to the races. I'm sure many of you have Ubered around your major cities. I don't know how we ever lived without OpenTable.
Waze is something that I use on a daily basis. I mean, crowdsourcing information and then using that not just for graphical depiction, but also for rerouting and things like that. It's just amazing what we're able to do just using standard off the shelf technologies. There is no new technology here. There's just the application of technology to things that we've always done and with a lot of new twists.
The consumer side of us, that's sort of how we do things. That's how we work. It's how we do everything. But it's just incredible over the last decades how quickly we have adjusted to not talking to people, but talking to systems, right? We're talking to clouds all day long and we don't think twice about it.
Now you get inside the enterprise, not so much, right? So there's a real dichotomy here between how we live in our personal lives and how we live in our business lives. One of the reasons for that is the money in the enterprise tends to flow to the outside where things are visible, where customers can see you, where customers can touch you. That's logical, right? Because that's where money is being made.
So that's where the resources are going. But things look pretty hip on the outside, and you on the inside. It's a throwback to the 1950s, right? This is not where the money is going. I mean, it's almost depressing.
I travel a lot. I see a ton of customers, I mean, literally every single week of the year. And this is not an exaggeration of what I encounter and that dichotomy of things being very, very shiny and bright on the outside. You get in the inside, you still see the overstocked mailrooms and the mail mobiles and just a work environment that is just a scene out of a Charles Dickens novel, right? It's just depressing.
It's just they're not getting any money to really modernize their workplace and their work environment. And of course, the CIOs are like, well, I'm painting you guys, so shut the hell up and take it, suck it up because that's what we're here to do. But we at ServiceNow, we actually think there is just an incredible opportunity to drive productivity in the workplace and that we see that as one of our key missions as an organization. And we think that the enterprise IT organization is really the organization that has to take on that mantle and drive that opportunity. Now how many of you have still work with interoffice envelopes?
Show of hands. I see them everywhere. And recently, I was with a big customer in Chicago. It's actually a brand new company, very modern, fresh systems, fresh buildings, fresh furniture, fresh everything. And I'm checking in at the front desk and there's a whole stack of these things sitting right there.
I said, give me one of those things. So I literally walked into the meeting with the CIO and there's an entire stuff and I went like what I found, right? I mean, it's just a relic, right? I'm old enough to have been in this business where we had physical inboxes and outboxes on our desk and they brought these things in and we put those things out. And there were forms in there that we got out of the mail room.
That's how we work in the enterprise, right? It should be an embarrassment to us, but we do it every day without thinking twice about it. And then we go home at night, we're back on Amazon and online banking and Facebook and all these things that are just ultra modern and slick. Now for some people, e business, even there's not much e about that business, actually feels like a big step forward, right? We actually get to e mail or download a PDF, right?
And then we print that PDF. And then we're going to go manually fill that out and then we scan it and then we e mail that back and then whatever person is taking receipt of that is going to rekey that into the system and hopefully the show is now on the road. Now how ridiculous is that, right? In this day and age, we can just dispense with that entire circus, right, and really push that service experience directly to the person who is requesting. This doesn't require new technology.
We do this all day long, right? But if you know about how many hundreds of millions of PDFs are out there, especially on public sector websites, everything that has to be requested or any formal interaction you have with these organizations happens in this way, right? So much opportunity. This is actually showing you a form on how to request an Apple iPhone. I'm going to talk about that a little bit more as we go through here.
Now, when we go to work, right, as I said earlier, our work has been dominated by messaging. Messaging is just a fancy word for saying, we talk, we chat, we banter, we interact. That's how work gets done, right? In the Middle Ages, you literally have to be physically present to be able to talk to another person to be able to get work done or business done. And markets used to be like your farmers market at home.
You have places where you literally exchanged money for goods and you walked away. And that's how all markets were. Obviously, that was the spoken word. The written word was incredibly powerful for a very, very long time because that really overcame the limitations of time and space, right? I mean, the notion of the U.
S. Post Office was actually written into the Constitution of the United States for that reason. That is how important written communications were and how work gets done. Now what had an even bigger impact, not so much in the 1960s when really the use of telephony became widespread, but later when we sort of drove the prices down to the point where telephony was almost free. Now we've completely overcame the constraints of time and place.
So I think people don't realize what a formidable catalyst telephony has been for the development of our economies and now obviously with cell phones, weigh more. Over the last 20 years, what has really changed our way of working on a day to day basis is the notion of e mail combined with personal file sharing, spreadsheets, PowerPoints, Word docs and so on, right? In 20 years' time, I mean, it's been an enormous transformation. We are so reflexive on e mail as people, It is almost to the point of absurdity, and it's only been 20 years. Many of us in this room, we've lived long enough to have known a work life that didn't involve that whole paradigm of e mail and personal file sharing.
So quick story. Last fall, I'm flying from West Coast to East Coast like I often do. And iPhone 6 had just been launched and I was like, hey, I want one. They had Internet to have Wi Fi on the plane, which is great. So what do you think I did?
You can answer that if you'd like. But I e mailed our CIO. CEOs do that sort of thing, right? I e mailed our CIO and I said, hey, I want an iPhone 6. I don't know why I want 1, but I want 1.
I'm an Apple nut. So what did he do? He then sent me a reply to my e mail that went like this. Had no text in it, just a link. And I'm smart enough to know when there's a link there.
I probably ought to click it. So I clicked that link. Guess what? Here comes the form, right? Our IT in other words, this is a form to order the phone that our organization had already put in place.
They knew that a new iPhone comes out, we're going to be avalanched by people asking for a new phone. You're going to collaborate the organization that doesn't scale when you have an annual e mail based process, right? What's so nice about is you get to enforce all the logic and business rules upfront. You can't make an illegal request and then make sure it doesn't get lost, doesn't get routed. But of all people, I should have known that, geez, I should have gone to the right place, found this form and behaved in the way that we tell other people to behave.
So e mail is really something that has limitations. We've taken it too far. We all know that e mail is really tough when you're talking about topics that are contentious. Usually not a good thing, right? If it's contentious and difficult, better to pick up the phone or even better to go talk about in person.
It is back to what we just said. The bigger problem with e mail is it is unstructured, right? There's a little bit of structured e mail. There's a to and a from. There's a subject field, right?
But the body text, the payload of the message, if you will, it's whatsoever. Now, I'm going to warn you, this is going to feel exhausting to you after a couple of clicks. But it's just to demonstrate to you how ridiculous our daily work lives have gotten because of the excessive use of e mail. This is a typical service model. The guy on the left is a requester.
This is an employee in the company. He wants something. In this case, like me, he also wants a phone. The guy on the right is somebody in procurement, right? Could be somebody in HR, could be somebody in IT, could be many places.
Actually, this guy is actually an IT guy on the procurement side of the business. But this is typically how our business works. There's requesters and there are fulfillers. So the guy in less than this says, I want a phone. Okay, message 1.
How do I get 1, just like me, asking the same question? The guy says, well, we have a form for that, mail room, I can e mail it to you. Seriously, e mail it. Okay, here it comes. Now, nice thing is we go through the e business shuffle here, print, fill out, scan, e mail back.
Great. Here you go. Very good. See the message count going up? Did you get it?
Because there's no acknowledgment. Right now, I know you even it. The guy says, what? Not sure. We all recognize this, right?
I e mailed that to you. Okay. Found it. Need more info. You didn't fill out your form correctly.
All right. Here's some more information. This is the dance that we do on and on and on. So thanks. I'm going to get it for you now.
Now another reasonable question, geez, when am I going to get it? Yes, no idea. Geez, it depends. They don't always tell us. Well, how do I get charged?
When will I get charged? All reasonable questions, right? Everything forces, constant interactions and people not having the answers to that information. We have some people in creative services that have a penchant for ESPN. So that's why we have scoreboards like this, right?
The week has gone by. We've exchanged a lot of messages. So after the 1st period, we still don't have a phone. So let's start calling now because we're getting a little sick of mail and getting all these evasive answers. Maybe we can get something better out of it.
Okay, fine. I'll follow-up over e mail. Yes, great, because I really don't want to talk to anybody. Tracking it down now, do you have a purchase requisition number? No.
Didn't know I needed 1. By the way, do you ever get that from AT and T and from DIRECTV and people like that they ask you for all your account information? It's just exhausting. All right. Get back to you shortly.
Message count keeps going up. Oops, this is now the 2nd period in a hockey game. Message is going back and forth, still no phone. Oops, there's a 3rd guy gets involved now. This is a time honored tradition in American business, right?
When we don't get good service, we get the manager involved. Now the thing is, you go talk to manager, he doesn't know anything either, right? So he starts asking the exact same questions and we go through this again. See the on the left now is getting really excited. Look at that facial expression, right?
And he's also asking for a purchase rep number and not happy about it. Okay, a few more interactions. Now the manager has a little bit more pull. So he actually gets to find out that the phone is on back order. Wow, after all this, geez, we come to this status.
So still no phone, a lot of messages. I'm getting exhausted here too, guys. It's almost over. It's on back order. Well, fine.
So now our guy gets really excited and he gets one more guy involved, the guy on the bottom right. And that's the executive. He says, I'm really upset. Do you know how hard this is with you folks? Now the executives are going to get in the game, right?
And this is a family program, so not that happy. But now the executive, what is he going to do? Oh, I'm going to go talk to the manager. I want to report now. I want you to compile.
So now we're getting into the whole Excel mode, collecting data of all the requests that are out there. So we invoke all this work on each other because we don't have a structured way of working. Now, here it is. Here's your spreadsheet, email it over to you, status. Now, we've gone through all this.
I have 4 very upset people, a lot of messages, a lot of time spent, and we still have no phone. Now I've shown this to people where they go like, well, I'm here. Maybe so. Now you may think of this, yes, this is anecdotal, and it is. We actually commissioned a survey, which we're going to release tomorrow.
And we surveyed 900 managers in the U. S. And the U. K. To try and quantify how much time would people really spend doing this kind of stuff that has nothing to do with their jobs, only one that was a funnel, right?
There's, of course, numerous other types of requests, whether it's I need a credit card, I need to have credentials on the system, on and on and on, where we just sink so much productivity. So what the survey said is as follows, right? That people are spending almost 2 days a week doing administrative work, right? And typically, when you hire on with a company, it's more like 99%. You spend almost all your time doing that kind of work, right, or when you're separating or relocating.
So you get the sense that there is just an insane opportunity here for productivity improvement history of unstructured messaging that sort of has is we're moving from a history of unstructured messaging that sort of has reached its pinnacle with e mail and messaging to where we're now, we're saying, look, we're going to go to a different approach. We're going to go structured, right? We're going to invent the wheel once and then we're going to enforce very consistent 4 guys. I'm just doing the 4 guys because, you. Still the same 4 guys.
I'm just doing the 4 guys because it gives you the contrast. So, the number one thing that makes the most difference when you go to a structured workflow experience, single source of truth, right? Everybody referencing the same information, right? That is the single biggest impact you can have on a process like that, because then they stop calling and e mailing each other, looking for updates in context to what's going on with whatever unit of work that's in play. Secondly, hey, there's a nice service experience.
There's actually a place where people are supposed to go. They want something, they can ask for it and they are shown how to ask for it, right? So they don't make invalid requests causing more interactions to happen between the parties. So the guy is smiling now on the left. That's a good thing, good start.
So here's the form again. Give me my phone, phone goes into the system. Now, nice thing is that phone request actually shows up on the visual task force. A big organization that wouldn't happen because we like to show off our visual task force. We put them in this example, which is literally direct our request from one column to the next that changes the status in the system.
And then our guy gets an acknowledgment, right? Because we let him know, hey, I actually got the request instead of I have to follow-up and find out. And now it's routed for approval. Those are all business rules, right? If the guy is paying for his own phone, there doesn't even need to be approval, and the thing just flies through.
But let's assume in this case, the other guy that's smiling at the bottom, he gets his approval request, and he's also feeling very productive and useful in this business process. So fine. It's approved. It's moving on. Our guy gets up there.
Do you notice that information is chasing this person versus this person chasing information. That whole inversion of information flow is what makes this so much more productive. It's how you work with Amazon, Federal Express, they all do that. You don't have to call them because they always follow you with new information. So unfortunately, damn thing is back ordered.
But our manager, the guy in the bottom, actually gets a report, finds out, wow, I've got quite a few back order requests here. I better start doing something useful around here. So what he does, it changes the supplier. Now, I'm doing this for by way of example, because in reality, you would have put the rules in to automatically change suppliers. In other words, there really doesn't need to be a person in the middle of doing these kind of processes.
I mean, once you start getting the scent of
automation and process optimization, it
becomes very obvious how much faster these processes So, hey, good news. It's moved up by a week. She's smiling again. And then, whoo, it's getting a phone. In the end zone.
That's a big improvement. Process is not quite over. Survey, how was your service experience? Awesome. Thank you.
And Then our executive hasn't gotten involved yet, but he gets a nice dashboard and he's smiling too, doing a pretty awesome job over here servicing my organization. So he can go back to sleep now. All right. So the point is, we now have 4 people, right? And that's good.
But the reality is, a lot of these people are actually not going to be in the process going forward, right? This was just for contrast purposes, right? Because these processes should be able to run lights out, light speed and it really fully transforms organization, right? And that's what we're excited about. And very, very simple examples, but that's really what it's all about.
The way to approach services is really to dramatically improve the customer experience, the service experience itself. What is it like to do something, to get something done, right? If you can improve that dramatically, it is very compelling. I mean, you see the things like Uber compared to hailing a cap in the rain, right? It's just dramatic how much better that service experience is.
But the second thing is scale, right? Whether I am ordering 1 phone or I'm ordering 1,000, it should scale effortlessly, right? And that then affects the cost, right? You can't imagine the process as we depicted it earlier, cost wise, what that will entail, right? It's just impossible to work that way as an organization.
Yet that is what we do in corporate enterprises and institutions. Now if everything is a service, service management is going to become pretty important, right? You probably figured I would be coming back to service management because we're a service management company. If you're not doing service management, you're really doing service delivery. Service delivery is like an golf ball in the dark, right?
It feels great. Don't see him land. Nobody is keeping score. We don't know how many strokes it take to get the ball in the hole. And the same thing with a golf game, it's all about minimizing the number of strokes to get the ball in the hole, right?
It's the same thing in service management. We're trying to fully optimize that process and further, further optimize it for optimal effect. The service management, fundamentally different from just service delivery. We're going to make 3 quick predictions on how we see the industry develop. And I think it's interesting for pundits, but also trying to project where is this all going, right?
Structured workflow and orchestration is really what our business is all about. So far, we've seen it sort of in 2 major realms. IT services, very oriented. ITSM, big business. IT organizations, very, very hip to the whole structure workflow thing.
It's in their mindset, in their mentality. Same thing on the consumer side, because that's how we live our lives. Where is it going next, right? We're going after business services. These are the services that actually support the business.
But then, run the business, right? Because today, a lot of that stuff is still dominated by message oriented communications. So this is where a lot of the action is going to be. Mike talked about what's going on in the next 5 years. Next 5 years, there's going to be a battleground right here in the middle, because consumer side, hey, well in hand, IT services, well in hand.
This is where a lot of the action is going to be. Secondly, we're going to real time, right? This whole notion of reporting and analytics in where we do this business intelligence, data warehousing mentality, where we forklift the data every 24 hours and then we produce time dimensional reports. Really not that interesting, right? Unless the data is real time and we see the blow by blow of our business, after a while, you lose interest.
We have an incredible opportunity because we are sitting on the operating data, right? We have up to the second data. So for us to be able to render that is really, really important. It becomes like a cockpit to your business to the services that you're actually running. I've heard CIOs say, I really would like my whole office just plastered with LED panels and I just want to see business executing in real time all over.
That's my vision of how I want to manage IT. And that really requires a real time orientation. As a business, we've had not had that, right? There are certain places where we have it, in a network operation center and places like that. But for the most part, data tends to be very after the fact.
That's going to change. And then finally, this is probably interesting to you. It certainly has been clear to us for some time, the people that are coming from the sales and marketing side, the whole CRM crowd, they also are the rhetoric and all that kind of stuff, it's kind of the same thing. And then from the internal side, typically advocated and championed by IT organizations is the service management crowd, right? They're different.
Managing service versus customers, it's not the same. They're different orientations, but they can be used for solving the same problems. And we already see a lot of our customers go like, hey, I want to do this project, this application, this service. And then they use ServiceNow for that, and then they use something like Service Cloud or Force, right? And we actually need our help to understand what are the trade offs, how do I think about this, right?
This is going to become a very important thing. It's really becoming sort of 1 mega market with different orientations, boundaries that have historically existed between us and people like Salesforce, they're going to disappear more and more and more. I don't think that it's going to become open warfare, but there's going to because our businesses are so big now, right? Salesforce whatever they are, dollars 6,000,000,000 we're busting through the $1,000,000,000 mark and $4,000,000,000 in 2020. Obviously, our customers are going to be looking more and more in terms of, hey, I can go this way, I can go that way.
So this is a dynamic that we're very locked on onto as a company to make sure that we stay well ahead of that. We really think this is well underway and it's going to become more pronounced as time goes on. Now, very important in 2015 for us, and I think you've heard me say this a few times, if everything is a service, right, we're going to be talking about service management and not about IT service management. It will be very clear from context whether we're talking about IT or any other particular service domain. So our mission as a company is to very much drive service management HCM, HCM, all the alphabet soup out there.
So that's really what we're about. I mean, we're succeeding at this mission, right? I mean, we're going to be able to drive much bigger numbers than the one that Mike talked about in his previous presentation. So with that, I'd like to up Dan, our Chief Operating Officer. I think I'll steal a little bit of his thunder real quickly just to give you context.
We think it's really, really important in the enterprise what your cloud is made of. We don't think all clouds are created equal. Equal. We think the distinctions are becoming more and more and more important to our customers. And we think we're going to see a lot of men separating from in our business in terms of being able to truly provide an enterprise cloud.
So again, take it away.
Thank you.
Good morning, everybody. Thanks for coming. So I'm the technical guy, but I promise my presentation won't be as currency conversion. But I'm going to start with the finance slide. So I'm going to start with a much broader market than you heard Mike talk about.
This is the total enterprise software spend around the world in 2014. So you could see a tremendous amount of money being spent to deploy applications across the enterprise. But only a minority of this is actually being deployed in a public cloud today. So about 15% or $91,000,000,000 is actually being pushed into the public cloud to run applications like ServiceNow or like Salesforce. So when we talk to customers, right, what is on their minds, right?
They're thinking of wanting to put more things in the cloud, but they're asking of questions. And a lot of those questions have to do with the infrastructure that they're going to be deploying in. Is it going to be safe? Can I trust to have our data up in the public cloud? Is it going to be reliable?
Can I actually run our business on something that I don't have 100% control over? These are big questions on their mind. Is it transparent? Can I actually see what is happening in that cloud? Is it performant, right?
Can I have some sense of control over it? Or is it going to be just this big, opaque thing that I can't see into and I can't control maintenance windows and other kinds of things? So what I want to share with you a bit today is the framework for how we're suggesting to customers they go about thinking through answering these kinds of questions. And ultimately, I'm going to assert that the majority of public clouds out there today are simply not appropriate for running about because ultimately, these folks, they didn't start out to create sort of a bad about because ultimately, these folks, they didn't start out to create sort of a bad cloud, right? It just sort of happened.
And so here are some of the early pioneers in our space, right? EBay was actually one of the very first. They started in 1990 6. Yahoo! Mail, I think, went live first in 1997.
And then Frank talked about our cousin Salesforce. Salesforce actually was formed in 19 90 9 and really started getting real big headway in 2000. So when these folks started to got this idea to take these previously enterprise only focused applications and now serve them up to the broader world, they had to use the architectures of the day to actually run that stuff on. And the architectures of the day were very heavy iron, large database servers. I got a picture here of a Sun Spark station, IBM mainframes and others were around in those days.
And many of you might remember, and many of you might still be running today in your data centers, some of the same hardware to run SAP Financials or airline reservation systems. You got to remember, VMware didn't even exist until 1999. So very scalable, very fast hardware and the ideas of virtualization, all that stuff sort of came to be in the 2000s and beyond. Back when these guys were getting started, none of that really existed. So they took these very large databases, they partitioned them up and then they gave them to their customers.
And these actually became known as got started. So a multi tenant solution is everybody sharing the same common database. And this worked quite well for a long while. But as you all know, these companies were wildly successful, and they got bigger and bigger and bigger, and they slowly got to the point where adding one more customer just simply overran that single multi tenant database solution. No matter how fast of a computer they got, no matter how quickly they made it run, they just simply couldn't scale.
So the next thing they did is they basically just duplicated it. And this became known as a multi tenant, pod basically is a replica of all the other ones, again, still very, very large multi tenant solutions. And to this day, most everybody is running still multi tenant architectures, and they have some real fundamental problems that I'm going to share with you that really drive customers nuts. Now ServiceNow actually had the benefit of getting started much, much later, right? And we even hired some of the folks that lived through the early days of these multi tenant architectures.
So we had the benefit of not having to redesign a freeway that we already laid the concrete and had people driving that. We were able to start fresh. The ServiceNow architecture was created in 2010, and it's actually called a multi instance architecture, significantly significant advantage, which is fundamentally important for running your enterprise on the cloud. So this is my most complex slide. I'm going to take a little bit of time in it, so hang with me.
But I'm going to use a metaphor here. I'm going to use sort of the housing metaphor as I'm going to talk about multi tenant versus multi instance. So multi tenant, the metaphor here is that we're all living in an apartment building. We've all got our own units in this apartment building. We're all living in side by side.
And because we're running the enterprise and we're all kind of concerned about things, we got a backup hotel across the street, right? So if something happens with our primary hotel, we're all going to go over to our backup hotel. So I got a little graphic here that shows you how that might work. If somebody's unit catches fire, pretty soon the whole apartment building becomes engulfed. And the idea is we're all going to fail over and we're all going to go over to the back of apartment building across the street, okay?
All sounds good on paper, right? So again, playing the analogy or the metaphor through this is we have our multi tenant database, something goes wrong with it, everybody gets failed over to the backup database, life is good. Well, the reality is, failover in a multi tenant environment actually never happens in practice. It's simply a data sheet thing that is communicated to customers to make them feel comfortable that we've got a backup in case we need it. The reason why failover in error rate happens is because it's an incredibly risky thing to do.
In a multi database and you're going to fail over 1,000 customers at the same time, what we find in practice is many customers do things that actually hardwire their connectivity database. So when you fail everybody over, you immediately have a certain percentage of your population that can't connect to the new database, it's a main major problem. The metaphor on the apartment building side would be it's like your phone lines are hardwired to your backup apartment building, your phone lines didn't get connected in many cases. So the support phones ring, creates major headache. So folks that have these multi tenant things are just scared to death to actually use them.
So this then leads on the backup side and then failed everybody over there. They have to do maintenance on the primary side. So what they'll do is they shut down
the primary database, they shut down your apartment building, your lights
go off, they do their maintenance and then they actually take a very long time. And this is what you see. I'll show you some data later. So that's sort of scheduled maintenance. What about unscheduled maintenance?
When something breaks, same thing happens. They fix the primary apartment building in place. They shut the place down, everybody scurries in, figures out what went wrong, repair it and bring it back up. So break fix takes a very long time in a multi tenant environment as well. There are some secondary issues associated also with multi tenant environments.
First one is scalability is kind difficult for them. I mentioned earlier that when you run out of space in a multi tenant environment, you basically have to provision a whole new battleship. You have to build a whole new infrastructure to get one more customer up to speed, difficult thing to do. Also, into what's going on inside their infrastructure. They want to be able to control into what's going on inside their infrastructure.
They want to be able to control it. In a multi tenant environment, you are locked together with every other person on that database. You're going to go with them and you can't see how your instance is running. You can only see how everybody's instance is running. You're all going to be running the same version.
Lastly, isolation. If you live in an apartment building, it makes sense, right? If your next door neighbor's apartment blows up, chances are you're just going to catch on fire, too. So your isolation in a multi tenant environment is not as good as if you had your own version of the database. Okay.
Take a breath. So the multiple pod version of a multi tenant solution is really no better. It's just now you got many doing the exact same thing. So you have all the same problems that we had in the multi tenant environment. They still don't do failover because they're scared to death to do it, okay, real problem.
Now contrast that with the multi instance solution. So again, multi instance, everybody has their own version of the database. So in our housing metaphor, everyone's got a house. We're all now living in the suburbs, and we have a backup house across the street. So the way this now works is it's very easy to do failover because we're doing one failover at a time.
Now we still will have some of the issues that the multi tenant folks have, but we're going to have them 1 at a time. So if somebody happened to hardwire their IP address to the primary data center, we fail them over to the backup data center and there's now a support issue, we can deal with it because we're not getting swamped by 1,000 people having the same problem at the same time. So in reality, we're doing failover all the time at ServiceNow and actually working through any of these sort of hardwire issues as we find them. And over time, we actually don't have them because we've failed everybody over at least once or twice. Failover is a very easy thing for us to do when you do one at a time.
Failover for ServiceNow takes less than 2 minutes. It's a very simple thing to do. So when we're going to do scheduled maintenance, what do we do? We fail them over to their backup data center. Maintenance, what do we do?
We fail them over to their backup data center and then we go do work on their primary instance. Then we can fail them back if we want to. What do we do when we have an unscheduled problem, when there's a break fix issue? We don't spend time trying to diagnose what went wrong. We immediately fail them over to their backup side.
They're up and running in 2 minutes. Then we can go take however long we want to repair the Scalability is a lot easier. Now when we have one more customer than Scalability is a lot easier. Now when we have one more customer than we can actually have capacity for, we just provision another server. We actually put about 12 customers on a server.
So we have very granular infrastructure that we can add at will, keeps our utilization rate quite high, helps out our margins as well. And then lastly, we have these instance specific metrics. So now we actually can control each individual instance individually. Customers can choose when they want to do their maintenance window. They don't have to be bundled together with everybody else on the same server.
And lastly, isolation is better. A lot of these folks are quite concerned about sharing a database with their competitor or somebody else. And so in the ServiceNow situation, everybody has their own instance. You're much less likely to be affected by an issue of one of your neighbors. Okay.
Let's take an industry cut at this. So lots of folks that are delivering public clouds today are that, they've made some simplifications, right? You can't customize these guys, right? My Gmail account looks like your Gmail account. I'm telling you it's not any different.
Maybe we have different colors. But you can't customize it to make it do what you want to do for the enterprise. You want to negotiate a scheduled downtime with these folks, there's probably not even a phone number that you can call to actually work with them. So some enterprises have actually experimented with using some of these folks for their corporate e mail account. And when you talk to those folks, yes, okay, it's kind of good, but they're really at the will of the provider because they're just a pipsqueak compared to the broad market that these consumer folks are facing.
Now the departmental oriented clouds, life's a little bit better if you're an enterprise customer for these guys. They really are focused on the enterprise. They care about what we're trying to do and you can definitely get somebody on the phone to help them. But if you look at these folks, they're very narrowly focused within the enterprise, sales forces at the sales organization, Workday on HR, NetSuite Financials. And they take advantage of that fact that they're working with narrow parts of the enterprise that typically don't work on weekends or typically don't work late at night.
So this is where they hide sort of these deficiencies of their multi tenant architecture and they do these large scale these large scheduled maintenance windows, right? So you will find, if you're a customer of one of these folks, every Friday night, they go down from 8 p. M. To 2 a. M.
Works fine if you're just focusing on a small piece of enterprise. But if you're trying to do stuff Frank talked about, where you're going to solve all these issues across the broad enterprise, that simply isn't going to be acceptable. Now when you get to the folks that talk about the enterprise, you see a bit of a differentiation. So now people here are focused on 20 fourseven functionality company, but they're provisioning bare iron, right? You have to go in and implement your own OS and your application.
Microsoft Azure, a little bit higher up the stream. They've got their own platform, but you got to be a software engineer to actually make that thing do what want it to do. ServiceNow is the only company that's delivering this enterprise class platform, on top of which the common man can actually write an application and get this thing up and running in very short order. Let's talk a little bit about where data is resident around the world. As we talk to customers, a concern that's growing in more and more importance is where you actually house the data.
The Edward Snowden events that we've all read about in the news are actually creating a lot of paranoia of our customers outside the United States. They're worried that if the data is is sitting here just in the United States that the CIA is going to be able to hack it and it drives them kind of nuts. So ServiceNow has made a significant investment to actually place data centers around the world where our customers are. And this is a huge deal for these folks. Now we're not everywhere, but we are in 8 regions.
And in redundant pair of data centers. So we have 16 data centers around the world, right? Compare and contrast this to the other folks that are out there delivering cloud solutions today, and you see a significant difference. What we're trying to do is they're only putting one data center there. A lot of good that does, right, if your backup data centers in the United States, it doesn't fundamentally solve the problem that these customers are trying to see trying to get after.
All right. Some numbers. We're now up to 11,000,000 licensed users on ServiceNow today. This number continues to grow very, very large. We have about 16,000 instances were deployed at the end of last year.
The impressive thing about this number to me is that sort of the raw number of instances that we have, but the fact that it's completely automated in how we run our cloud. So we use ServiceNow, not surprisingly, to actually run our cloud. And towards the end of the last year, we got large number of orders. It's a very automated process for us to actually read where the order is from, what region across our infrastructure that they want to be deployed in. We automatically then run routines that will check for capacity in that particular region and automatically deploy customers' instance, send them a welcome letter and they're up and running without a lot of fanfare and more importantly, without failure, without
issues, without reliability problems. Change management is
another big thing. Reliability problems. Change management is another big thing that providers need to worry a lot about because typically, when everything is running fine, all you have to worry is a hardware failure. It's going to cause an issue. But when people are actually going into the data centers to make changes in the data center, that's when things can go screwy and cause outages.
We do a tremendous number of changes across our data center. We do about 15,000 per month, more than anybody else, probably by an order of magnitude because our customers have control over their instances in our data center and they drive a lot of that change. The typical changes that are relatively routine, they happen automatically. The more complex or scary ones actually get kicked out and will go through a review. And in some cases, we'll actually pick up the phone and call a customer and say, are you really sure you want to do this before we go about doing it?
People like to talk about storage. We have about 35 petabytes of storage provisioned across our data centers. But I always remind people after they ask me, how much storage do you have? That storage really isn't our currency. Storage matters to folks that might be storing videos or storing pictures or things that are very sort of storage intensive.
ServiceNow, people don't typically store very large files in our systems. So what really are they doing? Well, they use our systems to do work. They use our systems to do the things that Frank was talking to you about, to really automate processes, make life a lot more efficient inside the enterprise. So the real currency of a ServiceNow solution is transactions.
How many times per day are people actually using our product to get work done and save themselves a lot of money. So you can see at the end of last year, in December, over 5,000,000,000 transactions were run on ServiceNow. Now you guys are all going to write that number down and you're going to go compare it to Salesforce or somebody else, and I'm going to help you with a little bit. So Salesforce does do more aggregate transactions per month. Why?
Well, they have a lot more customers than ServiceNow does right now. So a more fair comparison is what's the average customer doing across these companies. So for Salesforce and NetSuite, 2 folks that we actually were able to get good data on, the average customer is doing about 500,000 transactions per month, pretty big number, right? Sounds pretty cool. But when you compare that to the average ServiceNow customer, you see a stark difference.
Almost 2,000,000 transactions per month are the average for the ServiceNow customer. Why a difference? Because back to what Frank was talking about. Our customers are using our product to get work done, and they're getting a lot of work done. The other thing this tells you also is that our fundamental architecture, we have a very flat architecture, very simple architecture, makes it very easy to scale, makes it very easy to run, but it also makes it very efficient and very fast.
So we can scale to fundamentally any size customer out there, and we can do all the work for their entire enterprise should they choose to come our direction. All right, security. Security is a big concern for folks. And much like that data sovereignty issue I was talking about, this is another topic that comes up a lot because again, customers want to go with ServiceNow. They want to get into the public cloud, but their CSOs and other kinds of folks need to sign off on it too because they don't want to wake up and see New York Times that they got hacked and their data was lost.
So security is really on our minds a lot. And I'm not going to go through everything we do on security, but it's definitely our one focus. Keeping customers' data secure really matters. But I do want to say something that perhaps hasn't occurred to you. And it's occurred to some of our customers, but not all of them yet.
Fundamentally, I think security is easier for ServiceNow or for some cloud providers than it is for the enterprise at large. I don't think that we are smarter at security than all of our customers. I think they're just as smart as we are about it. But what I will assert is that we're trying to do a much simpler thing that they're trying to do. This is a model of a typical customer environment.
They're trying to do 1,000,000 different things in their data center. They got e mail infrastructure. They got financial infrastructure. They got who knows what kind of infrastructure. They're doing 100 different things.
And in fact, if you look at and you read beyond sort of the headlines of what caused some of the recent hacks, right, when you get down to the cause because we figure out frequently a situation where there's some loan server or some loan application that was in a far quarter of their data center, they just kind of forgot about it and it didn't get patched. Somebody found it, somebody got into it, now they're into the backdoor and they were able to exploit their data center. So the number of on ramps and off ramps, the number of doors and ways into the classic enterprise data center is a very, very large number. I feel for these guys. They have a very difficult problem to solve.
Contrast that with ServiceNow. We do one thing. All we do is serve up customer instances. And every one of our data centers is architected identically. All the infrastructure, all of our network operation centers that monitor these things are all identical.
We have processes that are the same across them all. So chances are much less likely that we're going to forget about some loan application or some loan server in a corner. We do everything the same way. Much simpler problem to solve. Hence, you will find some of our customers actually saying their strategy for security is to get into the public cloud, quite opposite from what you might have when you sat down this morning.
Okay. Last topic here is we're going to talk a little bit about transparency. I teased up earlier that folks really do want to take advantage of the public cloud, but they're nervous about it being opaque. They're nervous about not having control over it. And in fact, because of that multi tenant architecture, most are in fact that way.
We're not. I'm going to start off by talking about the classic metric from the old days that everybody sort of focuses on and most still do today. And it's this measured availability number. So this is the percentage of time that people claim their systems are up. This is that metric shown for ServiceNow.
And you can see that we're north of 4 9s of uptime. And in fact, we're approaching 5 9s of uptime. You'll go out and talk to some customers and they'll claim we're 6 9s, 7 9s. Everyone likes to brag about how many nines they are because they're basically trying to communicate that they're up a tonne. I'm going to challenge this in a minute, but I'll just take this on for what it's worth and so that we're all sort of talking the same language as I compare how ServiceNow stacks up against the folks going forward in this next slide.
So there's that average uptime number that we quote just like everybody else does. And I've shown some of the better than a lot of folks. But now you add to that, that planned maintenance stuff I was talking about. Remember those multi tenant folks have very long maintenance windows and I was saying ServiceNow doesn't because we're multi instance. And here you can actually see it.
We're significantly shorter than most everybody up there. So now you add unplanned downtime to planned downtime. Now you start getting an aggregate sense of total uptime. And again, if you're running in a broad enterprise, you need to have a system that's up all the time. And you can see now even further differentiation between ServiceNow and the others.
But wait, it gets better. Recovery time objective is how long it takes you to repair something once it goes down. Remember I said the multi tenant folks have to do fix in place, right? They swarm in with their SWAT team to go figure out what went wrong. Meanwhile, the customer is sitting there chewing their fingernails because the system won't run.
ServiceNow immediately fails people over. So we have a 2 hour recovery time objective, but remember I told you in reality, we're to fail somebody over in about 2 minutes. In reality, our recovery time is far shorter. So the folks that even had the courage to publish what their real multi tenant architecture. And then I talked earlier about the data centers.
So this is sort of the full sort of report card here. And you can see the ServiceNow enterprise is actually a whole different class animal than what we see from the other folks out there. And this is becoming more and more important for customers as they change that pie chart and put more stuff into the public cloud. All right, I was picking on uptime. So this is where I'm going to get specific and talk about it.
See, we've all seen these kinds of pictures when logged into systems, right? Yahoo! We'll be right back. Okay. So my issue is that these folks are claiming their systems are up in their statistics when they show pages like this.
Basically, the statistic that has been used in this industry forever is can I reach the server? Can I ping the server and get a response? They don't care about the quality of the reply. They don't care about whether the service can actually do anything. They just want to ping the service and see if it's up.
And so they deliver these kind of messages, which basically don't do you any good, and they claim their system is way up. And so this leads to this sort of cartoon situation where the service providers are actually reporting 5 nines, 6 nines, who knows how many nines. But what you're really experiencing as a customer is that red line, much worse service. And so you've kind of they kind of get to the point where you're just kind of numb to these stupid numbers. So more specifically, there are 4 components that make up the difference between what folks have historically reported I reach the server?
So is the server plugged in? Is it turned on? And is it functioning enough to be able to send me either a working application or that stupid maintenance page that we all hate to see. So that takes up one component. But below that, there's more, right?
Other things that can bring a service down is if there's a software glitch. So I can reach that server. And in fact, in most of those images I showed you, this is exactly what's going on. Their server is up and working, but there's a software glitch. And for some reason, they actually can't perform the service.
So there's a software problem going on. Well, sometimes it's not all the cloud provider's fault. Sometimes the broader Internet connectivity between the customer and the data center is down. There's a lot of reasons why that internal infrastructure could go down. The obvious one is somebody is digging a trench and they break a fiber optic cable and now you can't get there.
But there's other sort of interesting things that can happen in Internet that can clog the pipe and slow traffic down as well. ServiceNow actually has some very unique architectures that minimizes the effect of the 3rd party Internet providers. You'll see that in our statistics in a minute. But there is a fair category that isn't the service provider's fault. Lastly, our customers, we love them, but they can do things too that will actually bring the service down.
A very classic example of this is where we all need to check back with the customer about the credentials of somebody that's trying to log in, right? We don't hold the credentials. Service providers don't hold the credentials for customers' users. The customer does. And so we do this thing where we actually take the credentials of somebody logging in and we send it back to the customer for them to validate it.
If the customers move their authentication infrastructure somewhere, which happens quite often, we won't be able to authenticate their servers. We won't be able to log a customer in or user in and then the service will not be usable. So these 4 categories together actually paint the real picture of availability that a of availability. And we actually provide that to our customers. This is the statistics of what it actually looks like for ServiceNow over last year.
So you can see that first category of the hardware issues about 27%, 28%, about half the time, a little more than half the time, it was actually ServiceNow's fault that there was an outage. A very small percentage of the time, it was the about 4% was the Internet third party folks, because we have some really clever ways to reroute around Internet problems. But 42% of the time, it was due to things like that authentication infrastructure not accessible on the customer side. So what we do is actually deliver this statistics to our customers. Every single customer of ServiceNow has their own personalized landing page.
This is what it looks like. And it has a number of things on here. I'm not going to go into them today. But you can sort of see there's that real availability. This is the actual computed availability for all issues, ServiceNow issues, 3rd party issues, customer issues.
This is your real availability. You could click on that and you can get it in a detailed format for all of your instances. Here you can go in and also view any open issues you might have going on. But then on the far right, there's that manage instances. You can go in and request clones.
You can request upgrades. Yes, with ServiceNow, you can run on different versions of the software than some of the other folks on the service because you're in a multi instance environment, right? So even if some of the other folks out there delivering public cloud services were so desired to deliver this kind of transparency and control, they couldn't do it because they are multitenant. So that's sort of the punch line here. You really got to have a multi instance type architecture to be able to do the kinds of things that the enterprise is going to be asking for in the future, right?
The bars are going up. People want better and better classes of service, better classes of control than they've been getting in the past. So it all starts with the multi instance me talk about today, right? You got to have the footprint for it. You got to have the scalability for it.
You got to have the me talk about today, right? You got to have the footprint for it. You got to have the scalability for it and you got to have the approach for it, right? You got to be thinking about these customers are running their enterprise on your service, it better darn well be up. Then lastly, once you have those technical capabilities, you need to deliver that transparency and control, so folks can actually get
the
I'm Pat Casey. I'm the
General Manager of our Platform Business Unit. And it's been time talking to you today about our platform, how it's different and some of the new stuff we're working on here. And we're actually going to try something a little unusual for a Financial Analyst Day. We're going to actually close with a live demo, which is always a little dangerous. Something can always go wrong.
So bear with me. I'm going to start though by talking a little about what the platform market looks like. And I'll say that we're sort of going through this sort of first wave of for everything. And you can't actually be perfect at everything. It's the nature of the universe.
So what you end up with is a platform, which is pretty good at a lot of things, but not optimized at any specific thing. And you see that we're changing over now. We're seeing a second wave of platforms out there that are more targeted at specialized solutions. So whereas you see 1st wave platforms, Google App Engine tries to do almost anything, but it's not really specialized. Amazon, AWS, you can buy infrastructure there to build whatever you want on top of AWS, but you've got to build it yourself.
I think there's probably about 30 first wave platforms that allowed you to do surveys, for example. Pretty much everybody now uses a second wave platform, SurveyMonkey. SurveyMonkey is is great at surveys. They don't claim to do anything else, but they're really good at surveys that are specialized. And that's what the market is doing right now.
It's specializing. People are moving into platforms that are targeted at specific business needs. And that's where we fit into it. We are a specialized platform targeted at enterprise business applications, at building the kind of service management applications we've been talking to you about. And it really comes down to 3 things.
First of all, we really are good at building them fast. I'll talk to you in a few minutes about why we really do have some unique capabilities there. 2nd of all, and you saw Dan hit on this pretty hard, we invested very heavily in building a cloud, which actually lets you run enterprise applications. And it's not just about the infrastructure, it's also about the compliance, it's about the security, it's about the documentation that lets you take enterprise grade apps and run them here safely. And finally, we're applicable to the entire developer spectrum and that's relevant if you're looking to deploy a single cloud across your enterprise.
You don't want to have one cloud for your professionals and one cloud for your administrators and one cloud for your, I'll call them no code developers. In terms of how we do this fast, it really comes into 2 different sides. If you're an engineer, there's a bunch of low level primitives in our platform that lets you build service management apps quickly. This platform natively understands data structures, forms, lists, reporting. It's literally point and click.
You're writing 0 script to build a structured app, put some forms around it, put some lists around it, build some homepages, build some reports. You can do all that with a line of code. And you can do it because it was designed to do that. That's what we were built to do is make it really good at building these kinds about building forms on the Internet. This is about putting service management apps, business applications out there on the web.
And that means that there's business primitives built in as well. There's notifications, there's approvals, there's workflows, there's routing, there's categorization, all the sorts of things you need to take a service management and put it out there on a platform, they're built in, so that you can focus your engineering resources on the things which are specific to your business need. You have to build any of this plumbing. It's all designed in. We talked about this a little bit with real availability from Dan's perspective, but I'll hit on it again.
This platform is designed to be available 100% of the time. We don't always hit it. Dan showed you we don't. We're realistic. But from an engineering perspective, this was designed to be a no downtime platform.
We designed it from the beginning to host enterprise grade applications with enterprise grade availability requirements. It's built in, it's architected into the system. 2nd of all, we have invested heavily in compliance. It's worth pointing out that it's not just about actually doing the work because we do do the work. It's also about being able to demonstrate we've done it.
If you're a pharmaceutical, we have an audible QMS system. I don't know of anybody else in the market who has that. It's a really big differentiator for us. During federal government, we have a FedRAMP certification. We've actually done this to let you move your apps onto our platform.
It's a differentiator for us. And finally, and Dan mentioned this as well, we are heavily invested in security. And so far as I know, we're the only vendor out there which actually lets you penetration test us. We'll actually want to be warned ahead of time, so we don't decide to shut you off, but that's part of our practice. We are actually willing to work with you and let you validate.
You want to take our word on it. You can actually test this yourself. And people do take us up on that. Talk a little about developer spectrum because this is important as well. When this platform was founded about 12 years ago, we were really aiming at what I'll call a low code developer.
This is kind of a Gartner term. And a low code developer is someone who can make some forms, make some lists, maybe do a little bit of light scripting, kind of a traditional system administrator. And this was kind of a sweet spot we designed the platform around. And our assumption was that we could actually take these people and enable them to build powerful business apps if we made the platform good enough and specialized enough. And that was really the secret to our success.
Our Eureka and Fuji releases, we've actually been expanding into the no code space. And this is the developers who can build meaningful business apps with even less skill set. If you can use Excel or make a paper form, you can use what's called our citizen developer offering in is an internal estimate, so don't go tweeting this, but I think we're right on this, who we would classify as professional developers. And professionals are people actually live day to day in an IDE and get paid for it. It's a much smaller group.
And generally speaking, if you're a professional, you can work in the no code level. You can work in the low code level, but you would prefer to work with tools you're familiar with. We're investing very heavily in this release in Geneva, you'll see some of it in K15 and enabling the platform to be more familiar and approachable if you're a pro. We want these people on the platform as well, which leads me to some of our major investments. Couple of these we've done in our Fuji release, which was I believe January, I hope I'm right on that date, someone will get you the exact release date for you.
1 was scoped applications. This is a little bit of inside baseball, but historically our applications were not independent of one another and could not be deployed independently of the platform. There were workarounds and people did do it, but it was kind of awkward. Scoped applications separates the concept of the platform from the concept of an application. So you can distribute applications willy nilly, don't have to change the platform, they can run independently, install independently, get managed independently.
And that's a really important piece of plumbing. We also invested heavily in that no code section, that big section in the top right where we had 500,000,000 no code developers out there. You can do dynamic forms, you do lists, you can do editing, you can do workflow, you can do notifications, you can do approvals, all of this without one line of script. And this is a really big enhancement there. We're really excited by it.
Here at Knowledge 15, we're launching our developer program. Developer program is aimed at making the platform appealing to the professionals of this world. It's a couple of things. It's a portal where you can actually go and sign up. All you need is an email address.
It's free, like free beer. You don't need anything special about this. You get access to forums. We moderate it, but we're really hoping it's going to be more a peer to peer between developers, access to documentation and equally importantly, you get access to the products. Historically, that's been a barrier to entry when people wanted to learn our platform is they needed to buy our platform first.
And since we're not a consumer platform, that was sort of challenging. If you join developer program, all you need is an email address, you can sign up and you get a free developer instance. As long as you keep using it, it's yours. If you stop using it, we take it back and give it to someone else. But it's a really big empowerment that we have for our developer community.
And I mentioned scoped apps. Scoped apps actually allowed us to do something we've won to do for a long time, which is the ServiceNow store. I'll have a few follow-up slides on this, because I think it's probably relevant to a room full of financial analysts, but this is a big marketing pitch and a big release we're going to announce tomorrow with the main stage. We have a lot of apps there, it's going to be exciting. Talk a little about Geneva.
Geneva, we have a developer studio coming out. That is our IDE to bring professional developers into the platform. It's not just about the developer program. In the platform. And you get to see some of this demoed tomorrow.
I think Fred Luddy is actually going to talk about it and we have some follow-up sessions on that. You can come down to the demo floor and take a look if you want to see that one. And finally, I'll mention interesting feature we're adding as well. One of the things we're seeing in the marketplace as our customers get more mature in the cloud is data sovereignty becomes a bigger and bigger concern. And maybe we can thank Edward Snowden for it, maybe we can thank market maturity for it, but there's been a pull from our customer base that says, well, we really want to be able to put data in your cloud in such a way that that even if you were malicious, even if you were complicit with the NSA, you couldn't see it, whether it's for data sovereignty or personal or data privacy that's really been a challenge historically.
So in Geneva, we're addressing this problem. We're releasing an Edge encryption proxy. This is a piece of software that runs inside the customer's data center and that lives there along with its encryption keys and it encrypts passes from the customer to us and back and forth. And data that was so encrypted, we only see ciphertext. And that means that even if we were malicious, even if we secretly work for the NSA, we couldn't decrypt it.
So it allows more and more customers to move mission critical apps up onto the cloud for us. And this is going to be released again with our Geneva release. Talk a little about the store, I think this is relevant to everybody here. We really view the overall service management market, the TAM, to about $25,000,000,000 And we think about $9,000,000,000 of that is going to be where we're going to be the majority player. And that's our historical ITSM space.
We're obviously selling well into that space. It's incident management, problem management, change management. We don't expect we're going to stop selling that and we expect we're going to keep selling more of it. Likewise, what I'll call the near abroad, there's HR, facilities, field services, they're close to what we've already done as well. Have apps in this space.
We expect to continue selling well into this space. But the greater service management market, the $16,000,000,000 grace up here, our play is not to address this with our own apps. We want a vendor community to write apps and sell into this, which is why the store is important for us. It's a way for us to enable the vendors to tap into this marketplace. From our perspective, this is an unmitigated good thing because we still make money no matter who sells the apps, because we sell the platform licenses.
And that's this big black section you have down here. I think it was blue on an earlier version, but through the beauty of overhead projection it became black. The platform license is a minimum of 35 dollars for a fulfiller. If you're not really dug into what our platform licensing terms mean, a fulfiller is basically a full time user of the platform and that's per month. And we get that, the customer of the system has to buy that from us.
On top of that, once you're licensed to run the platform, you can buy the application. The applications you buy through our store from our vendors. And the application license, the vendor gets 75 percent of that and we get 20%. That's our coverage fee to basically cover the cost of the store. And about 5% of it goes into transactional fee or sales tax.
I say it's about 5% because as you know it varies a little bit based on the geography of the buyer and the seller. Important point here, the vendor sets the price for the application. Because we have the revenue stream on the platform license, we don't have to insist that our vendors do anything unnatural when they're pricing. There's no minimum price. There's no maximum price.
It's entirely between them and the customer what they want to charge. We have the economic value they can get out of the app. Couple forensics on the store. Any buyer, any ServiceNow customer can buy on the store, any geography, it's supported. Sellers, yes, join our technology partner program, cost you $5,000 It's hard to clip, but you got to join the program.
We will certify your app. Only certified apps go in the store. The only U. S. Sellers this year will be adding rest of World in 2016.
If you're a multinational, just go ahead and start have your U. S.-based subsidiary listed as a seller of record. Before I go here, I'll give you a couple more stats. We seem to have auto advanced. Can just a hair over 80 apps on the store at this point and these run the gambit from utilities, things that make ITSM apps better, all the way up to full featured apps doing things that have nothing whatsoever to do with ITSM.
I've got a mobility asset management. I've got a lab and clinical asset management app. There's a good spectrum of stuff up there that's kind of outside of our typical wheelhouse. The inside baseball point here, when we conceptualize the store, I think we all expected, at least I certainly expected that most of the go live apps would be utilities. It would be one of our vendors who said, hey, I can make an existing ServiceNow app a little bit better by adding some value, space than I was expecting.
So that's been kind of heartening from us. And it's also made the store kind of more interesting to poke around it. With that said though, let's actually go ahead and switch to my laptop and we'll try a little live demo here. All right. So this is actually a demo done for a couple of different users.
And we have an author here. We have Wendy Partner, and Wendy has written an application. And for purposes of this application, we actually asked one of our partners if we could use their app. So instead of writing like a llama farming app something for you here, this is a real live application. It's from one of our vendors, CallLogic, and this is actually an ACD integration.
It actually integrates with call center applications and actually feeds the data from your ACD right into this table here. But Wendy has written this, and Wendy wants to publish this to the store. And we're going to go ahead and do that right here, so you see it actually happen, if I can click properly. She needs to go into her list of applications. There's the 3C Logix app, and we're going to publish it.
If I can scroll down, there we go. So while this publishes, I need to provide some credentials again, I do need to log in, which is hard for me to do because this is not my laptop. Never ever demo on somebody else's laptop. That's one of the rules of demoing. So this is actually uploading to our store right now.
And behind the scenes, the store is actually in our cloud. It's an instance of ServiceNow that we've actually configured to act as an app store. But if you were curious, it's actually our own technology behind this all the way down. And as far as Wendy is concerned, she's done on this portal. She's actually
submitted her app for certification.
What would happen normally in outside of the has actually submitted her app for certification. What would happen normally in outside of the demo environment is that we would actually certify her app for her and that would potentially take up to 30 days. That's our SLA for certifications. We have historically done much better than that, but we're fairly defensive on our SLAs because we don't want to miss them. Let me get in here.
Bear with me. I'm having typing challenges. There we go. Once Wendy actually provides her app, it's actually sent up to the App Store and we can see it right here. And you see this states in draft.
It actually hasn't been published to the store at this point. For demo purposes, I sort of hot wired the certification. Everything right now in this instance is auto certified. So we can actually go ahead and just take a peek at the app and we can publish it to the store. Let me make this screen a little bit bigger for you.
There we go. So we're going to go ahead and submit this to the store. And as you can see on the screen here, while we wait for the submission, as the vendor, you get to fill in your marketing collateral. You get to send up images, you send up videos, you send up descriptions, you set up the keywords. That's what end users will see when they search for your application on the store.
To save time on the demo, I filled that in for you already. When you submit for certification, we likewise require you to submit a test plan, design documents, installation documents. We want to make sure we have enough information to certify this thing well, because ultimately our name is going to go on these. So it's not a rubber stamp certification. You actually do have to do some work to get certified and we do actually fail some people.
With that said, we hotwire the certification. So instead of taking 30 days, it says certified there. We'll go ahead and publish it. Publication really takes no time at all. We're published.
Our app's in the store. We are now going to change personas. We're no longer Wendy. Wendy's done her job. She has her app in the store.
She can sit at home, watch soap operas or whatever she does at home and collect checks. Maybe she writes more software. We're actually going to change over to Ben Bayer, and Ben is hopefully going to buy some software. So Ben is going to go visit a store as a buyer. And as you can see, Ben is actually seeing a different interface.
This is actually the store interface that customers see when they want to come in here. Let me log in as Ben, so we know who we are. And we see a variety of apps there. And here's our actually new Cloud Content Center app that we just uploaded. We can go ahead and click on it.
And let's buy it. One of the nice things about this, there is a click through because everything in life has a click through at this point. And once you do that, we can accept the terms and conditions. This app is $125 per month. Again, the vendor sets the price where they want to set it for.
Click on buy here. And this is a real time transaction. If you provide a credit card number, will actually authorize it right here. And we're actually going to do one here. This is actually don't try using this.
It's a fake credit card, just in case you were curious. I think I got 9,207. See, normally one of the rules of demoing is you should talk while you're typing, but I didn't want to type that wrong. So you had to deal with me not talking for about 10 seconds, I apologize. Assuming I got that typed in properly, this should authorize and this is available for purchase.
And the way this model works, it's a lot like when you buy something on the Apple Store and that first you buy it and then you install it. So Ben just bought this, but he hasn't installed it on any of his instances here. We're going to go ahead to one of Ben's instances now and go ahead and install it. And for that, we're going to switch to a 3rd browser, just to kind of make life confusing, but at least prove that we have different browsers involved here. And we're going to go here to Internet Explorer.
And you can tell me if I'm typing wrong too. I won't be offended. Service now dotcom. And we're going to be Ben Beyer again, and we're going to go ahead and install this application. And just as your iPad or your iPhone has an application set, there is now an application link inside your ServiceNow instance.
There is applications I have developed. Ben hasn't developed any. There is applications he is authorized to download and you see the 3C logic right there. We'll go ahead and click install right here. And this will take about 60 seconds.
So while this happens, I'll kind of explain what's happening for you. Behind the scenes, this application is bundled up into a binary package on our store. It's basically a big zip file. And that actually gets downloaded inside our cloud from the store instance to the customer's instance. Again, we're multi instance, as Dan explained.
Every instance is individual. The code moves down and then it goes ahead and gets loaded in. First, we create any data structures, forms, tables, lists, and then the business logic comes in. And on top of that, we potentially have first knowledge based articles or other data related to that comes in. So you see the installer going through a series of different phases here.
A small app, this one just finished, will install in 15, 30 seconds. The biggest apps we have will take about minutes to install. There's no upper bound. If you make a really huge app, it could potentially take longer. But we're generally speaking small numbers of minutes here.
Think about installing something your Apple. This is not a multi day installation process. And assuming all went well, we now have the 3C logic application right here in this application. It's kind of the closed loop of the whole system. Can we pop back to my slide for a second, please?
All right. Three quick takeaways here. First of all, I hope I made the case that this is a platform for the enterprise. It was optimized for that. It's designed for that.
That's our sweet spot. We're not claiming we're great at everything. We are claiming we are fantastic at building enterprise business apps. 2nd, we make our monetization play across that big $25,000,000,000 TAM selling platform licenses. There's a part of it where we're also going to make good money selling applications, but there's that big $16,000,000,000 part where we're probably going to make most of our money on platform licenses and the 20% we'll make off the vendors as well.
And our goal with all these initiatives you saw here is to enable the vendor community. We want a lot of vendors out there. I want successful vendors because as they do well, so too will we. That's our big investment here. And with that said, I'll bring it back to Jimmy.
So that concludes the first half of our program. We're going to take a 15 minute break. There are refreshments out the doors and the bathrooms are just across the halls. So please be back in your seats at 10:05. Thanks.
Perfect. So now we're going to get into the second half of the program. We have 3 customers that are going to come up and speak to you about how they're using ServiceNow to build applications, not only to support their businesses, but more increasingly to run their businesses. And so our first speaker, our first customer is Brooke Stover from Envision Healthcare. Brooke is on the HR shared services leadership team.
Envision has been a customer of ServiceNow since 2013, and they their first module with ServiceNow is the HR Service Management. So we'll welcome Brooke up to the stage. And one other interesting tidbit about Brooke, she's actually getting married today. She's here in Las Vegas. She's getting married at 2 p.
M. So, pretty exciting. And she has graciously come here to speak with us today. So
Good morning. Thank you so much. I'm excited to share with you our implementation of ServiceNow for human resources. My name is Brooke Stover, and I'm the manager of shared Services for Envision Healthcare. So first, I'd like to tell you a little bit about our company.
Envision Healthcare is a large healthcare organization. We're actually providing services in 2,200 communities. We touch 15,000,000 patients annually. We've got 3 main lines of our business. Envision is our public entity name, but our most recognizable entity is American Medical Response, which is a private ambulance provider.
You might recognize our AMR ambulances, red, white and blue ambulances around Las Vegas and other parts of the country. We also operate MCARE, which is a physician practice management and emergency room staffing organization. And then finally, our newest segment is called Evolution Health. Evolution Health focuses on home health care for folks with acute illnesses, chronic conditions. And they're providing services mostly through telemedicine, which is a very cool up and coming thing in our industry.
So very exciting stuff. Evolution Health actually bridges that gap between American Medical Response and Emcare to provide a continuum of care. So we have about 35,000 employees across our organization. And when we rolled out ServiceNow, we did not have any service management for our enterprise. So the human resources implementation was the first foray into service management.
AMR, since we implemented with AMR first, I want to tell you a little bit about AMR as well. We have 3 main business regions for AMR, and our regional CEOs are given the autonomy to run those businesses, how they see fit. So what this has resulted in was a lot of inconsistency in practices. This is actually not a picture of me, but it may as well have been when we first started this process. So we had a lot of inconsistency in our hiring processes primarily.
This resulted in our human resources team and more concerningly, our business leaders being bogged down with transactional human resources work, extending offer letters, getting people hired into our HRIS system. And this was a very highly manual process at this point in our service delivery with no service management in place. So why did we select ServiceNow? We were looking for service management. And in the Envision world, what that meant to us was we wanted case management.
We wanted the ability to track HR issues as they came into our all the way through to resolution so that we had some metrics on those different cases that were coming in. We also wanted knowledge management. We wanted to be able to provide our employees with access to information at their fingertips whenever they needed it. We are a 20 fourseven business. We wanted our service to reflect that even though we don't have HR staff actively working 20 fourseven.
We wanted to get our arms around inconsistencies in process. So an example of this is our background check process. In some of our areas of the country, we had business units that were extending offers and then completing the background check, make sure that folks could successfully be integrated with our company. We had other areas of the country that would do the interview process, then do the background check prior to extending an offer to make sure that the candidates that they offered positions to would go through. So again, just very inefficient, very disparate processes.
When we came into the knowledge of service management, we didn't have a lot of pre existing knowledge about this. So we engaged a consultant to help us navigate this process with an eye toward efficiency.
So we went through an
RFP process. We evaluated 5 different vendors, 2 of whom were actually focused on human resources service delivery and then 3 of whom were not, such as ServiceNow, more of an IT platform historically. We invited our 3 finalist vendors to come and do a demo for us. And that was actually really the most selling thing for us for Service Now. The demo was fantastic.
It showed us primarily what we were concerned about was ease of use for our employees. And looking at the ServiceNow demo, we could tell that the instance was familiar, like maybe a Google search. So we knew that it would be familiar to our employees. We wanted scalability. So as I mentioned, we've got 3 main subsidiaries.
We implemented ServiceNow for HR in one of those subsidiaries. But we do have goals to bring on our 2 other subsidiaries into ServiceNow. So we wanted to be able to scale that. We wanted to be able to show user relevant information to our employees. So an example of this might be an employee in AMR Hawaii would have access to different handbooks, local policies and procedures, and just general information than an employee in, say, California or Denver.
So we wanted to be able to restrict the information that was given to folks to what they needed to know. And out of this process, My HR Connection, which is how we branded our service delivery, was born. So, a few use cases that I utilizes workflow. We have an offer request that comes into the system through our ATS and a change in applicant status in our ATS is integrated with our HRIS and then ServiceNow. So that change in applicant status kicks off the workflow process in ServiceNow.
The candidate is then sent an email with an invitation to accept their offer that brings them back into ServiceNow. We also allow them to do that through mobile. Once the candidate accepts their offer, then the service management system actually guides the HR center team to make sure that all of the things that need to happen prior to that onboarding occur. Background check, any pre employment screening or pre employment physical ability tests, which we have in the ambulance industry. We also do all of our new hire paperwork through ServiceNow.
So prior to standardization, we had about 130 different new hire forms that were used in different areas of the country. We've narrowed that down to 4 forms for our employees. So now when our new hires come on, they're presented with those 4 forms in ServiceNow. They're able to accept those forms or acknowledge them or whatever needs to happen with each of those forms. They are then saved in the ServiceNow database, date and time stamped with a signature, so we can retrieve them at any time.
And then we also automated some of our other processes like direct deposit. So historically, our direct deposit form was a piece of paper and employees would write on it exactly what they wanted us to do with their check. We automated that form. And through integration, now when an employee accesses the direct deposit form, their information is pulled in from our HRIS system. So any current configuration that they have for their direct deposit, they're able to add an account, change an account or delete an account.
And once they submit that form, that employees. So what have our outcomes been? I know outcomes are really important. And prior to this effort, we didn't really have a handle on how we were delivering HR services across the enterprise. Now that we're on a shared services model, we can kind of estimate the level of effort that we are putting out into human resources service delivery, how many requests, how many cases, how many new hires we're doing.
You can see on the slide that in 2014, we handled almost 50,000 e form requests. So these are things like direct deposits, W-4s, any of those forms that we automated. We handled 8,700 hundred hour cases. So these are things like employees asking, what's my PTO balance? Or I feel like I'm being treated unfairly.
How do I handle that? And then the most quantifiable of these efforts is we processed 2 new hires through shared services last year. So that equates to about 1900 hours that were previously spent in the field by our HR and business leaders that has now been brought in to our transactional service center, which has lowered our cost of service delivery considerably. So overall, we need fewer HR resources. We've been able to reallocate our field HR staff, and they are now working on bigger and better HR, performance management, succession planning, employee relations.
And all of that transactional work is being done by a shared services team. So what's next for us? As I mentioned, we are looking at bringing additional lines of business into shared services. We would really like to be able to share efficiency and standardization with our other business lines. We're looking at development of additional e forms.
And these are not just necessarily HR forms. In the ambulance industry, there are many certifications that folks have to have EMT licenses, paramedic licenses. So we're looking at how do we leverage ServiceNow for our certification tracking. Or for example, another department may have some HR related certifications that we're tracking. So we want to bring those into ServiceNow.
And then finally, we're also looking at implementation in other departments, perhaps even our IT department, so that we can leverage that ServiceNow instance throughout our organization. That's it. Thank you.
Thanks, Brooke. And congratulations again on your Service Management Program Manager. REI has been a customer of ServiceNow for a number of years. They first started by replacing their IT service management systems, but have since greatly expanded into another a number of other service management modules. REI is using ServiceNow to not only support their business, but are now creating applications to ultimately run the business.
Samantha will talk to you more about that.
Is Samantha Reid. I work for Recreational Equipment Incorporated, better known as REI. And we are a more traditional customer of ServiceNow, but we're also a long time customer. So we started back in 2009. And over those years, this has continued to expand and expand and expand.
So let me stop and talk about what REI is for a minute, just for any of you who don't aren't familiar with it. With REI to go take a guided trip to teach you how to kayak and climb the mountain at the end of it. Because it can be a little challenging for people to get out there on their own and really build those skills. So we provide the training and the classes and the adventures and the gear to go with it. It was actually started in Seattle back in 19 38 by 23 crazy people who, you know, when you're driving down the road and you see a beautiful mountain and you want to stop and take a picture, they see the beautiful mountain and they want to get out of their car and climb up it.
And then it doesn't matter how snowy it is or anything else. So these 23 people couldn't find a good ice axe. That's all they wanted was a really ice ax and they couldn't find one. So they started a co op. And here we are all these years later with far more than ice ax's.
Looks like we had a little formatting challenge here guys. Sorry about the dates here, but hopefully you can follow along. So I wanted to start and just kind of walk through our time line first, like here's how we've expanded over the years. So I said we'd only been customers of ServiceNow since 2,009, but our journey really started back in 2004. That's when we first kind of heard about service management as a practice, idle as a best practice framework.
And that's when we kind of first brought that in. So 2,004 was very focused on our strategic rollout. 2,005 was our first IT rollout of just processes for service management. We started moving into tools that would provide a service a kind of operational department. You need something from HR, you need something from kind of operational department.
You need something from HR, you need something from facilities, there's a lot of different people involved. So we scoped our service catalog around people you would touch when hiring an employee. And we use that as our way to drive more services into those groups. So let's say we started by doing new hire and you need business cards from this one area. Well, that link into the business cards was our link into that department to start talking about what other services we we're very highly focused on new hires and the corporate facilities and then the access and client pieces.
And then we hit a wall. And we just to get any further. So we needed a different tool set and we needed also a tool set that could be blended into the existing task management tools people had. Because if you're already getting tasks somewhere, you don't want another thing to go and look at. So we had to get some place where we could start to integrate all those things together.
And that's what drove us to ServiceNow. So in 2,009 is when we brought ServiceNow in and we replaced our old ticketing systems, our old change system and our old service catalog with ServiceNow. And that's what really gave us the opportunity to start touching all kinds of different business units. So after 2,009, we went into supply chain services. That's when we did SAP rollout at REI.
So there was a lot of SAP, all the transactional operational things that had to happen for the teams who use SAP. So all of that went into the catalog. And then you'll notice 2011 is missing. I had a baby in 20 11. And it was funny because as I was putting this slide together, I honestly stopped and I was staring at it going, why was 2011 such a bad year?
Like were we completely non strategic that year? Like I didn't do anything and I went, oh, yes, I had a baby. That counts, but totally counts. Not in the service catalog, but it counts. So 2012 is when we started looking at our online store and that's what we call our digital retail services.
It required a massive amount of information and ask the expert advice. And so we use ServiceNow to workflow how we support that online store and how we get content into the store. So you need a new product image, you need to fix a link, you have a compliance problem because there's some image up on the site that shouldn't be there, any of those things. Those are the workflows that we worked on that year. 2013 is when we stepped into finance, but that's rife for improvement.
Finance is a very form heavy, process heavy team. And then we went into security services and marketing services. So typical information security services, but our security team, our information security team is actually part of our legal team. So it's not just the information security, it's all the rest of our compliance and risk management for the company. And then in 2015, we are actually ready to rebrand our catalog.
So the benefit. Like the piece of us, our work that you guys have automated, we want to see the rest of our work do that. I want to be able to get those reports. So it's time for us to go back and rebrand. And all I mean by that is that when we put that first portal out there, we didn't necessarily understand all the content that would be in it and all the people who would be utilizing it.
So we've redeveloped that front page to give it a more holistic and needing something. And so that's what the new portal is about. So what I'm going to do next is just walk through, I think there's 5 or 6 examples of some really specific things that we've done in different areas just to give you some ideas of the kinds of things that we've hit. So corporate services. This is one of the early ones on my list.
Very form heavy, very, very transactional. There's a lot going on in corporate services. So for us, this is all maintenance of our corporate headquarters, safety issues, ergonomics, physical security, if you a security badge, all of those things are driven by our corporate services department. And we've now covered, I think, 95% of their services in the catalog. The last one to go and it will go this year is our mail request.
And so we're actually even working on integrating our service catalog with our shipping software and with our external vendors as well. So we can close that whole mailing loop. Finance. Finance, we've actually approached this from a few different areas. There is financial forms that you as an employee just have to fill out.
I need a check fit here. I traveled and I need to be reimbursed for my costs. There's a lot of different things. And when we first sat down to talk to finance, we discovered that all of those things were pieces of paper and that they would go in one of those ugly orange envelopes with all the little scratched out names like Frank was showing earlier and that they would get sent someplace and maybe be returned. And then at any given point in time, no one knew how many of those pieces of paper were out there, what they were for or how much money they were worth.
That just seems mind boggling to me, right? Like finance is all about money. And now all of this representation of money is just sitting in piles on people's desks and we have no idea what's happening to it. So finance was a great opportunity for us to pick those off, self-service forms, chart of authority approvals, approval workflows. There are a lot of special circumstances where you have to understand
your financial chart of
authority or your special authority or your special matrix for approvals. And ServiceNow allows us to just simply program all of that in. Nobody has to know anymore. You don't have to go read some form and figure out who it is you're supposed to talk to or who you have to ask for permission. So finance was a really great opportunity.
We're working on some new finance forms right now actually to manage internal orders. So like if we let's say someone in marketing wants to order a stack of gift cards and they're going to go to a show and they're going to hand them out to people. So now we're actually processing those internal orders that we're doing as well. Built. And I'd like to start off by saying, so I'll explain what it is in a second.
But the entire process from the moment they gave us the requirements to the moment we rolled it out was about 40 hours worth of work and that's everybody from the person who designed it to the person who built it, the people who tested it, 40 hours. And I think that's just phenomenal. So what we did here. So think you're on rei.com and you see or a coupon that's not working quite the way it says it is. Or you click on the image and you say show me that in pink and you get the little x that says, hey, the picture of pink is missing.
And then you log that somewhere. Give me some feedback on this page and you say, hey, your link didn't work or your coupon didn't give me what it should have. What was happening before was we had 3 different partners who collected that information depending on where you were on the site, how it was collected, how you interacted with it. And those partners all had different stores of that data in different formats. So if I was to go up to an analyst and say, I want to understand what kind of feedback we're getting off of our site and what it relates to.
They would have to go out to 3 different sites, put in their search criteria, get the download of the data, take the 3 different downloads of data and try and merge them into some sort of format where they could actually report on of it. Horrible, horrible process. And that would have to happen every single time. So it means we weren't making great planning decision based on that customer feedback because it was so painful to get to it. So all we did was we had all three sources, batch it nightly at ServiceNow.
All that data just gets sent directly to us. It's just a simple e mail. We standardize the format in the transformation. So they're all sending us slightly different things. But our inbound e mail process translates all of that into a single format, categorizes it based on keys and then allows it to be connected to our other processes like incident and change.
Like we've got some feedback and this feedback is valid and there is something broken. So now I can click on that and say create me an incident out of that. So I can go assign it to someone to get it fixed. And we couldn't get anywhere close to that process before. So I think this is one of the best ones that we've done simply because it was so fast, it was so easy and it was so much benefit.
And it's both a good and a bad. I absolutely adore the analysts that used to do all of that manual work, but we no longer have to employ a person to do that. I mean, that's an entire body count lost in just data collection and maneuvering and putting it back, right? They're not doing anything useful. So big, big, big win.
This is a pretty recent one. Okay. So whenever we put out a new offer, let's say our marketing people are hanging out and they're like, you know what we really need? We need a little weekend sale at the end of the month that has a nice coupon on it to encourage you to go and buy something. And they put together an offer.
Someone has to get all that out there, right? It has to be disseminated to all the different places that are going to offer that offer, create all the different pieces, all the technology, the actual ordering. And we actually employed a body who just guided that. That was all they did was guide the process, right? I know that we need this bonus card and I'm going to make sure all the pieces go where they should, pass the communications back and make sure that that offer comes to fruition.
And instead, we built a workflow, passes the information off from role to role as necessary. You can see just from the screenshot that it's fairly complex just far as how many times we have to pass back and forth. But again, it's an opportunity to take all that manual process out and just make this something we can do as easy as possible. And it can be triggered by the business person who needs the service as opposed to the business person trying to figure out who to go talk to, to try and make some service happen, right? Excuse me, I talk with my hands a lot.
So instead of going and looking for resource, they're just going to the catalog, say, I've got the rights to go and start a new bonus offer and here's the information, go ahead and do that. We do the same thing with a lot of other things like tax wear and tax updates and things. I mean, there are things that IT generally handles, but we're not the drivers of them. We're not the people who start them off. It's someone in a business unit, somewhere who knows that this need to happen.
And so now they just drive it from the service catalog. And we automate as much as possible and we
only use people when we
have to. This is our Holy Grail service item. It's not actually finished yet. It's about 85% done. But this is open a store, open an rei.com, start to finish.
We just picked a new location over there and signed a lease, now build me a store. So this one has actually been under work for about a year and most of that isn't manually managed process, it's pretty easy to do things a little one off here and a little one off there. So just even the exercise of attempting to workflow these things often creates its own improvement simply because you had to go through the process to standardize it. So this one should be very, very cool when we're done. But I like the idea that we can be that aggressive, right?
It can be anything from get me access to the system over here to build me a Thor, all in a service catalog. Catalog. I think that's pretty cool. I don't have a slide for this, but the next one that we're going to do is Retail Depot Hardware Management. So you're in a store and you're holding a scanner or a printer or something and it breaks, instead of having to call IT and go through a process to get all that replaced, they'll just simply say, hey, I broke one of my and it will tell them what to do with it, stick it in a box and ship it here and here's your label and we'll send you a new one.
So lots of great opportunities really just across the business. We've hit almost every business unit at least a little bit by now. And now our goal is to just continue to expand until that services portal really is our vehicle for everything that we do. Okay. Thank you.
Okay. Thanks, Samantha. So now we're going to pivot slightly. Our next customer speaker is Brian Clark from RMIT University. He's the former Executive Director of IT Services.
I say former because Brian actually recently left RMIT to start his own company, a consulting firm that focuses solely on building applications and implementing applications on the ServiceNow platform. Brian was part of an RFP process to implement an admissions application at RMIT. So please welcome Brian.
Thanks. All right. Thanks for that. Yes, I was going to give that So I started as the CIO at RMIT just over 4 years ago. And we Frank was talking about those interoffice envelopes.
And I come out of Financial Services in Australia and I've done a decade there. And we had done a lot of process reengineering, a lot of Lean 6 Sigma stuff. So I was really quite surprised to see these things en masse, but just tens, if not hundreds of people doing that data entry shuffle like taking paper, putting data in and sending it off and not really adding lot of value. Today, I'm going to tell you a little bit of a story, I guess, about a challenge that RMIT faced. I guess just to set a bit of context, RMIT used to stand for the Royal Melbourne Institute of Technology.
Education is Australia's 3rd largest export industry. I know you also love those sort of stats. So behind mining and manufacturing, education is a massive export for Australia, worth probably around about $10,000,000,000 RMIT as a provider is a very large international provider. So, the organization has 40% of its students either as people coming from Australia to study in Australia or studying in one of the campuses in Vietnam or in Singapore. I will still say we throughout this presentation for a couple of reasons.
I've still really connected to the brand at RMIT, but I'm also consulting back as the project director for their admissions project, which is the thing I'm going to talk about today. So just to mention the organization, they're about over 85,000 students now. It's fairly large organization. That staff base grows with adjunct professors to close to 9,000 when you include partner lecturers overseas as well. I guess to give you a little bit more of the dimension, 6 campuses, 3 of which are on the left hand side that are located in Australia, 3 of which are outside Australia.
The university has its own campus in Ho Chi Minh. It has a campus that it leases in Hanoi and is looking to expand into its own campus in Hanoi. And they've opened a center in Barcelona, which is largely post doctorate, a lot of connecting into Europe, a lot of the organizations in Europe. RMIT has a very strong architecture program, and so there's some nice strong links there. It's about a $1,000,000,000 business and operates at scale.
So it's an interesting sort of organization and an interesting challenge, I guess. When you think about admissions of a university, I'm a pretty commercial guy, it's customer acquisition, right? That's what admissions is about. It's about getting high quality customers into the organization. Like many universities, it evolved from a number of disparate schools.
A little bit of acquisition, often you don't think about acquisition in this space, but a little bit of merger and acquisition happened from some of the from smaller schools in Australia. And again, having a commercial mindset, it's basically run with 3 divisions and business units. The schools are the business units, they own the P and L, and they sit in 3 different colleges. They teach everything from a cert 2 in plumbing to a PhD in physics. So it's a fairly interesting business organization as well.
We heard about sort of poor customer experience. As I said, I started there in 2011. The only way to apply to the Royal Melbourne Institute of Technology in 20 11 was to download a PDF, fill it in with hand. You couldn't scan it and email it in, you actually physically had to bring it to the organization. And it was quite an interesting, I guess, for me, as I said, often a step back in time coming out of Financial Services.
But there's also a lot opportunity. And you look at a cost base and you look at changing service experience, there's a lot of opportunity there. One of the big things that we saw in this global Missions project was, we had low conversion rates. So we were making offers to students. People were interested enough in the brand.
They had applied to study. We were making offers and we weren't converting at the rate as our peers were. And that was an interesting challenge for us in terms of trying to understand why that was. So international onshore students, the industry converts about 32% offer to acceptance. We were converting about 27%.
And I guess to make that a little bit tangible in dollar terms, every one percentage point was worth $7,200,000 in dollars So, it was fairly important to us to figure out why we were converting so such a low rate. And we set up the admissions project to do just that, not just to sort of solve the we've got 24 different schools and we all do it a different way, but at the end of the day, we need to have a sustainable revenue line to have a sustainable organization. My role as CIO, I expanded outside that role to take on this project because we were completely changing our operating model, redesigning all our processes as well as putting the platform in. So as a Project Director, I had all of those responsibilities and still do today as a consultant back to the organization. A few things that we really wanted to address in this, in particular, the service experience.
So if you're offshore applying to study in Australia or if you're applying to study within Australia as a post grad student, that experience is really important. And we talked about earlier in the day, sort of cloud, consumer cloud experience versus enterprise, sort of IT experience. We really saw that. These applicants were spending time on Amazon and getting that experience and then coming to what was meant to be a technology organization and being asked to fill out forms. And so there was a lot of, I guess, service experience stuff that we were quite concerned about.
But also, academics get really excited when you start talking about students as customers because excited in a bad way because they don't really like that idea. They want to make sure that academic rigor and discipline is still applied. And I guess coming from a Financial Services background, credit policy, notwithstanding the whole 2,008 GSE problems that we had. Credit policy is really important to get applied in a commercial process in a bank as well. And so we saw a lot of those similar disciplines needed to be brought to this domain.
We've taken the numbers out, but this is actually a graph from the business case that we put together for this, which I guess I wanted to explain, not only were we trying to do something that made sense to us to our prospects, but also there's a really strong financial reason for doing this. Sort of bottom left hand side, role realignment. So we looked across the 24 different schools and went, some people do this selection with academic staff, some people have got specialized admin staff and we wanted to standardize on the way we did that. Streamlining processes, which is really just what I like to call not doing dumb stuff, was going to save us a lot of money. Systems automation, so where we can automate workflow and get the system to do it for us instead of humans, again, was going to save us a reasonable amount of cost.
But that green line is a very conservative revenue uplift number. And I say very conservative because when we did quite a lot of analysis on it, the CFO and I had long discussions about the fact that he believed the number, but
he wasn't going to let
me put it into the business case. So we brought it back down to a more conservative estimate. But that combined the process improvement, productivity improvement and revenue is worth about 5 $1,000,000 a year to the university.
So we
had a compelling business case in terms of financials. When we actually looked into the problem about why were we getting these low conversion rates and what was the actual issue, we saw these high turnaround times. So as I said before, we were making plenty of offers. We just weren't getting the conversions to acceptance. And so we did quite a bit of analysis on why that was.
And in some cases, it could take us up to 2 or 3 months to respond to an applicant and our peers organization, that's when we actually found out why that was, because that sort of e mail thing about how I want to order an iPhone was kind of how we were deciding whether or not we would offer someone a place in architecture or I'm not kidding. It is it was exactly that. So someone needed to assess the portfolio of work, an academic who was on leave, it said in their inbox for 3 weeks, no one knew about it. People kept calling going, why haven't we responded on these 10 offers, to these 10 applications and no one knew. So we sort of looked in that and went, this is really a service management problem.
We've been really we knew that we really need to manage the way people work. We need to apply some business rules and automate some of those. And we need the ability to get back to our prospects and say, here's where your application is in this step of the process. I spend a lot of time in sort of service management and customer service. That whole idea of next issue avoidance is something that became really important to us.
We didn't want our prospects to have to chase us up on where the application was. So we went out to market and I like the slide Frank presented earlier with sort of the 2 sort of converging forces prospect experience perspective, that's of the sales process piece and what their interaction is like and how do we get them interested, how do we attract and convert. But if you look at all the work and so we look at that, so that's kind of the revenue line, how do we grow that. If we looked at all the work in the organization, that was all the service management problem. And really, we thought they were so inextricably linked that if we kind of fix a service management problem, do some smart stuff about attracting prospects, we were really going to solve the problem.
So we went out to market and said, we really core fundamentally have a service management problem, but there needs to be some sales and CRM capability in whatever platform we selected. And Pat's sort of pointed earlier in his technical presentation where he said, you get the core platform functionality of workflow and task management. That was a real big differentiator in our mind about selecting ServiceNow because we needed all that core functionality and we just want to build our own business logic on top of it. So what's live? So we're as I said, we're relatively new customer, certainly newer than the other 2 that you've heard.
We signed, I think, our I think we officially became a ServiceNow customer in September of last year. In that time, the HR team were starting to look at how they handled internal service requests and the way they did that was with phone calls and emails and they thought they should do it in a slightly better way. They actually went live in February with the HR Service Management component. So whilst we were actually working on the admissions project, another team quickly spun up and we deployed the HR service management. We built our first part of the admissions process in credit transfer, which is one of the things that we were doing is if you applied to study at RMIT and you had taken 3 subjects at Monash, which is another competing university, and you want to transfer credit, we assess that every time individually.
So a different academic might say, I'm in the computer science department, yes, I'm going to give you credit for software engineering 101 from this university.
And next week, if someone else is assessing that, they would
do the same thing. It we've actually then maintained it in ServiceNow as, hey, if someone applies for credit from this university and it's this subject, we've already approved it for these other subjects that we have within RMIT. And that's live as well. So that went live in February. What we're currently building is our entire admissions platform, so managing that whole selection process for our domestic admissions.
And then next year, we plan to go live with our offshore admissions. So as I said, HR Assist is currently live. One of the other things and this seems to be a common trend I've seen and talking to other ServiceNow customers who've been on the platform longer than we have is sort of once you do one thing, you kind of go, we could use it to solve this problem, we could use it to solve this problem, which I think is quite strong sort of testament to the way the platform has been built. But we also do program and course management. So again, if you think in commercial terms, this is our product development.
So I described the product development life cycle at RMIT as about 2 years for a new program or a new degree to be dreamed up by the academics literally and we did the analysis on this 2 years to get approval. So that's 14 different committees, over 2,000 pieces of printed paper, 52 people involved
in approving that. So we spent
2 years sort of deciding whether
or not we want number of on it and we put it out and see if anyone wants to buy it. And then we spent 2 years figuring out that no one wanted to buy it in the 1st place, so we shut it down. That was a 6 year product development life cycle inside the university. We've actually we're actually bringing ServiceNow, and the team are working on this right now for all those program and course approvals to bring that down into months rather than 2 years. And it was quite literally just because things would move around the organization in a really manual way.
We're also then managing all our marketing information about our programs and courses. So those are sort of it's a core fundamental piece of the commercial side of the university. So how you manage your product and then how you manage customer acquisition that's currently being built on ServiceNow. I think it's kind of funny, we came about the I guess we came to ServiceNow slightly differently. Differently.
We didn't do IT service management. We didn't do sort of that core function. We applied it to our business applications. And now we're saying, oh, yes, it might work well for ITSM and maybe we can put that stuff in. And IT Asset Management is something that's sort of grown out of that as well.
So and then sort of out of that, the new CIO, who I know quite well, is building out the road map to say, okay, well, we could probably solve all our problems with ServiceNow, but what ones do we really want to focus on over the next few years? And that's the stuff that we'll build. Luckily, our account executive is not in the room because I'm sure he would be really excited about he already knows, really excited about the prospects of what RMIT can do on the platform. So I guess that's a little bit of an overview of, I guess, a really commercial challenge where we saw the strength of the platform could be leveraged to do what we all want to do, which is grow revenue and take cost out, so and deliver an exceptional service experience for our customers. So that's me.
So that concludes our customer portion of the session. Brooke and Samantha talked to you about how they're using ServiceNow to support their businesses with internal applications. And then Brian came up and gave you an example of a customer facing application that's being built on ServiceNow. All 3 of them have agreed to hang out after the program during the lunchtime. So if you have questions about what they talked about, feel free to reach out to them.
Our final speaker is we're bringing a one of our largest customers, and he's going to talk to you about how they're building a business around ServiceNow. Please welcome KK.
Thanks.
I think.
Good morning. Hi. This works. Yes. So I'll just give a quick overview of who we are.
I think we are the Indian IT outsourcing's best kept secret. I think we've been not so focused on doing a lot of marketing, but off late, we've been trying to do that. HCL is India's first original IT garage start up. Company started in 'seventy 6 in a garage literally. We're about 6 $300,000,000 in revenue.
We went through a very interesting evolution as a joint venture with HP, had multiple JVs with Perro Systems and this entity literally came into existence around 2,000. So we grew from roughly $0 to like $100,000,000 to $6,000,000,000 in about last 14 years. IT outsourcing services operate in about 32 countries. One of the the way we go to market, we believe that historically outsourcing engagements have gone into a black box kind of a model. People have been nickeling and outsourcing contract after we've signed it.
See, the entire goal is how can we outsourcing contract after we've signed it. See, the entire goal is how can we push trust, transparency and flexibility and start engaging with the customer in a more holistic way to start driving business outcomes. Situations evolve and change over a period of time and we saw this current we do the right thing for you. I think and that really helped us break away in the curve when customers came back out of those downturn, post 2,009 and '10, I think they started working with us and partnering with us. We're pretty good at cannibalizing our own revenue.
And I'm going to give some examples of why it's important going forward. The fundamental shift which we are seeing in the industry today and whenever we have a customer conversation, there's a huge expectation gap which exists between IT and the business customer. So whether it is the IT customer the customer of IT, the employee, the
business, the expectation from IT, the IT
no no installed. So IT had a different problem together. But so the shadow IT became more and more real and a lot of push happened towards how the hell do I go and get my business functionality up and running irrespective of how IT is trying to pull it back. I think that expectation gap is trying to be bridged with a lot of changes happening in the IT space. That's one drive.
And then the other side, the expectation employees expecting VIB already, business expecting, self-service on BI and a lot of us pull, which is really trying to drive towards 1. The second is which we're seeing is that there's a big shift. Traditionally IT has been supporting business functions. So you have HR, finance, legal, so you rolled out ERP, supply chain, CRM. And then what you did was you created systems which were supporting a function.
We are seeing that the shift which is moving towards in the next 3 to 4 years. This whole conversation about how do I move towards driving better customer experience. The entire digital conversation within the business is all about customer experience conversation. How do I drive user experience? How do I make user as the center of the universe for delivering my business?
Connected ecosystem, people are talking about connected devices, hyper connectivity, Internet of Things. That's changing businesses, even traditional manufacturing heavy industrialized businesses to move towards a connected ecosystem. And then IT, which is still supporting functions, is being pushed towards moving towards what we call service based ID. So a service could cut across multiple functions. So how do I make sure my service delivery, which is enabling the enterprise services, evolves from a function centric approach to a value chain centric approach.
So this is the single biggest problem, which collectively as an industry we've created for the last 30 years. We built technology to solve a vertical functional use case problem. So I needed systems to deliver HR, procurement, logistics, finance and then we started putting together certain value chain based systems, correct? So I said we want to do ERP for going to supply chain, so we do procure to pay. We want to do order to cash.
We want to do hire to retire for HR. And some of those interesting examples, which some of the we Because when you start building systems to solve a function problem, when your business wants to change and the business is really driving change around doing digital, digital is all about user centricity. Doing IoT, it's all about asset centricity. Trying to do multi supplier, multi service integration across cloud, on prem, business functions is a service use case. We really start to see them they cut across functions.
But traditionally we build platform strategy that functional use cases become an app inside a platform. And many different approaches have been taken to really go and start to address this space. I think the biggest easiest area which we see consistently in our customer conversations is can we take any function which does request response based engagement, which is driving a service conversation. Anything which I request using a structured data entry, a lot of examples, the university farm example, the HR example. There are tons of such examples where anything which you can do transaction based on request response and Frank talked about some e mail examples how people move things around.
There are hundreds of stuff. Can you take those functions and put them into a platform and use the same philosophy which you have traditionally been using to run service management in an IT world and apply it to the enterprise. And I think this is really an area which we have identified as what we call the service value chain is how do we help our customers create a service centric value chain engagement. And anything which is delivered using service as the core is what our entire service strategy is all about and how we go about doing this. And this needs a shift because outsourcing is also going through interesting shift.
So you see the Generation 1 outsourcing was all about T and M resource staffing, correct? That's where the entire ADM evolution happened, correct? In our business too, we literally we skipped the 1st time outsourcing world because we were non existent during the Y2K time. So the Stack HOG model literally non existent. You really see the generation 2 is moving towards managed services.
We see the Gen 3 is really about how do I help a customer disrupt value chains? How can I create a catalog based engagement? And how can I move IT towards a business orchestrator engagement? So if you really see this whole shift, it's all about how do I bring in more agility and drive down what we call service transaction cost. Every time a human touches a workflow, it costs money.
Is there a mechanism through which I can streamline the workflow of any type of request response engagement and drive down the entire service reduction or the transaction cost so that I can take that money and spend on digital initiative, spend on customer experience initiative? Can I go and take that cost out of this old way of doing things by leveraging a more simpler platform to program my business? So what we started doing is that when we first took this example, we said, hey, this is 4 years back and we started engaging with ServiceNow. So we want to go and build an ERP to run our outsourcing business. So every time a customer comes and engages with us, how do we make sure that we create a suite of applications on top of the ServiceNow ITSM platform and then bolt on a lot of other applications.
And it's been a long journey. And we've evolved and gone through this phase in line. And every time ServiceNow released a new app, release of the platform, we made sure applications just continue to move in. So some of those examples, we started with 2 customers in Release 1. In Release 5, we moved 70 customers.
And that consistently has been moving over a period of time that we keep adding customers over and over on the same platform. And it comes in both multi tenant and single tenant tenant variants and how do you go and build it. And we really created this like this was like what we call the app on top of ServiceNow or even before the App Store existed. And all our customers today can subscribe to all the applications and they could download it onto their instance the way they would go and download anything from an app store in a more controlled way. So we've been going through this journey for a long time.
We're sitting at Release 12. We're adding more and more functionality to the system. And just to give you the scale of numbers, we have about 100 customers. We have more than 500 end users being supported using the ServiceNow platform, about 25,000 fulfiller users. And I think the CI number, it's quite big.
I think it's spreading a couple of more 1,000,000, it's more than 1,000,000 CIs. So which means for us ServiceNow is the most important in our system because we use SAP to run billing. That's it. But other than that, this is the single if anything keeps our president of this business awake in the night, if there is a blip even in the business system and it's delivered. I think Dan gave some examples of availability.
I think we've pretty much seen that and that's I can give it different time zones. And we use virtually instances across all those geographies which ServiceNow operates today. For us, the key lever of benefits are it's one platform. When we went and started migrating off a lot of different we had like 5 systems before on which we used to run our businesses. Today we collapsed everything running on one system.
So the focus was can I use this to have a unified platform? We use our entire employee onboarding, interview management processes. So we hire like as an outsource, we 100,000 employees. We hire people. Our interview management process completely runs on ServiceNow.
Candidates come in, run their interview selection process, customer service integration platform, which is about how do you help a customer operate in a multi supplier, multi vendor environment runs on ServiceNow. And the benefits, I it's been talked since morning, it's easier to use, it's licensing is far simpler, competitive to a lot of the other options in the market. Upgrades work. And I think 99.9% of upgrades work without any issues. Support is pretty good.
And we've got pretty deep support examples and we've seen ServiceNow respond back whenever there's a need for a support or a complex situation. So these are the benefits which we continue to see for the last 4 to 5 years. This is the what we call the ERP for IT suite, which we have those 3 set of applications. We built all this add on functionality about quarter 1,000,000 lines of code running on top of ServiceNow today. So it works, it's sitting at Release 12.
Each one of those modules is used by in different shapes and form by over those 100 customers. We have a suite of apps called IAP, which is these are think of this like a development enablement layer, which allows you to make sure that if you're building custom apps, you're able to manage the licensing, dev environment bolt on to help people easily build applications on top of ServiceNow, leveraging lot of the underlying platform capabilities. Think of it like a more developer accelerator, a developer accelerator, which we've created so that we can really make sure that we can even dumb down the need for a developer. So we talked about low code developer. Our goal is to make sure no code ecosystem apps.
There's 2 candidate apps that we're going to launch in the App Store coming up. So there's a CMDB reconciliation app which we built. It's a standalone app. It works across multi vendor, multi platforms. It tested across every competitive form of service now today.
This app can reconcile data from every possible ITSM system in the world. And we use this today real life example across tons of customers who have a retained ITSM system. We need to reconcile data for doing CMDB reconciliation. We built an app store like a enterprise app store for mobility, desktops and clients for people to self-service and subscribe and deploy applications. So that's an AppSmart app, which we have.
So we're going to continue to release more and more applications because we've been doing in a way packaging applications in App Store even before the App Store platform came out. So for us it's going to be a big advantage. We're going to keep publishing more and more apps so that we could let our customers use this for a period of time. I want to give you an example of a customer engagement. We've got quite a few of how they moved beyond IT.
This is a Finnish company. They are one of the largest paper apply. So if you read glossy paper magazines, they are the world's largest supplier of glossy paper. So this company, when we went through the journey, we started off using ITSM and then helped them do SIAM. But what we've done today is 20% of the entire user base is non IT.
But if you take even the existing IT user base, HCL users are even less than 20% the total users. So we're really seeing the platform being used for multi supplier, multi vendor and now pushing beyond IT. They use complete CRM, finance, HR, logistics. They're using every request response engagement here. This customer came last year to talk in the theater now.
At that time, they were in the process of going through this. And now they've really started to use the system beyond this and pretty large. They're about a €15,000,000,000 company. So they're pretty large scale. They're trying to their goal is basically to move every shared services enterprise function in the next 18 months into ServiceNow.
The challenge if you see is a lot of times it's not the platform. The platform is the most easiest thing. It's about how do you start working with those business functions who've traditionally never been able to understand the concept of an SLA. You go to HR, traditionally these functions never understood SLA. They were always behaving on a best effort basis.
Lot of times many of these functions can't even describe what they deliver. So most of the time what you end up doing is creating those services. What we've done is for so we have an offering which we do call function as a service in our BPO business. So we've taken all the templates of FAO, HRO, supply chain. So we have a SCOR model available on ServiceNow.
If you are a supply chain optimization player for procure to pay, we are building a SCOR model as a template in that that service. Now those workflows are all coded as a blueprint. So that's why we call our platform the blueprint, the gold blueprint. So you can take the blueprint, deploy it. So the same philosophy which you're applying on SAP, when you do blueprinting, only thing we've quoted the blueprint into the system so that we could take some of these functions as a template and do that eighty-twenty change.
80% of the time, most of these functions across enterprises, across verticals behave the same. People say I'm unique, but literally if you go down and see 80% of the time, they are literally the same. So hence, we're trying to find that eightytwenty mix about quarters of 80% templatization which you could do on blueprints and really help onboard those functions. What we did with IT with our blueprint, our goal is to take our blueprint across all these functions. And there's a lot of work happening in this space.
Our goal is that by release 15 of our platform, we will have all this as a blueprintable and onion system. That's my last slide, I think. And yes, I'm done. And I'm happy to take any questions later around during the lunchtime.
Thank you.
Thank you very much, KK. That was good. Okay. With that, I'm now going to advance the slide. Okay.
We're going to do some Q and A. I just want to kind of refresh some of the themes you heard today. So we gave vision for $4,000,000,000 in 2020. How are we going to get that? It's through really changing the way companies operate with service management that Frank talked about, Dan talked about.
Our cloud, not all clouds are created equally. We really feel we have an enterprise cloud, and that's a huge differentiator for us and why customers will want to build more applications on also, there to be developing more applications that our customers can download as well. You heard some of the interesting things our customers are doing beyond IT on HCL, and we keep hearing that more and more for our customers. What we offer, is that HCL, and we keep hearing that more and more for our customers. What we offer is a mission critical platform and applications for our customers unlike most other cloud vendors out there.
With that, Frank is going to come up and we'll go into a little bit of Q and A. There will be someone walking around, I think with mics, if I'm correct. Yes. So just put your hand up if you have a question. Yes.
We had the mics turned on. So on the subscription margin side, what's really changed is, as we you've seen, we just did 80 1% margins on our subscription last quarter. And we know in a number of our data centers, we are not at scale. There's a lot of overcapacity in a number of our data centers that give us the confidence that as we grow internationally, in particular, we'll get more scale within data centers. And we also have a plan in place longer term within the U.
S, how we'll go more into a wholesale model with our colos, which will further take costs we are paying based upon actual power consumption versus just rack space. And as we go through our depreciation cycle on our racks that we've been putting in place the last few years, we have a new hardware configuration that has a lot more flash that allows us to get denser within a rack space. It also takes cost. So that's why we have confidence on the subscription side that we will be able to have higher margins. And the others are just through leverage you're going to get as we showed the customer ROI over a 4 year period or the ROI over the lifetime, you get leverage on the sales and marketing that way because we pay a much lower commission on those renewals.
Yes. I can happy to address that. I think Dave Schneider is here as well in case we he wants to weigh in on that topic as well. It's essentially an evolution. Organization between us since that time, you noticed that we split up our organization between existing accounts and new accounts, right?
That was a really big structural change for us that we affected at that time. Now, the next major change that happened is that we started to separate ourselves between people, reps that had enterprise accounts and reps that had commercial accounts. Commercial accounts, you know, had more of a geographic destination, enterprise accounts were by name. But on a managerial standpoint, these reps were these organizations all the way to the top. So what you've seen in this organization is we've now gone the full distance on separating all the way to the top leadership level to have the separation between commercial and enterprise.
So now we don't have managers anymore that are running both enterprise and commercial because these are very different markets. They have very different dynamics. They have different marketing programs and so on. So this is just the latest installment in a set of alignments that have been going on for years. When I joined the company, it's almost exactly 4 years ago, there was just 1 sales organization and 1 group of salespeople and they did everything, right?
So you've seen further more and more specialization and alignment happening in a sales organization. Why are we doing this? This is all to increase our impact at the customer interface. So this is all going to yield benefits to us. We have to do these things in order to continue to scale doing reorgs almost continually.
Obviously, on an annual basis we do it because when we reset comp plans and so on that's the time to affect these kind of reorganizations. But we split territories all the time because there's new reps coming on board every week, every month and so on. So a continuous process that we're involved in and it's not going to stop with this alignment either. But this was a big installment, if you will, and is a very pretty good sized separation in the organization between commercial and enterprise that happened here. A long explanation, but that's what it's about.
Kashlan from Berenberg Lynch. When you've laid out your long term targets, you had about 25 G2 pay accounts that you're planning to target every quarter. I'm just wondering how you're giving thought to managing that flow because when you start off in a small base, there's enough of a large base, enough to have some volatility in the number. But as you keep closing the gap towards the Global 1,000, it occurs to me that the degree of accuracy of nailing these customers needs to be higher and higher. So that in the context of what exactly are these customers using today since you have identified who these customers are presumed that they're in some stage of your pipeline trying to handicap what could be the resistance points you have to overcome?
2nd and final, the other part of the 2 $1,000,000,000 if you could hear your drivers, Buffon, what gives you comfort that, that business can scale from whatever it is to $2,000,000,000 that would be great. Thank you.
So first of all, we're adding $20,000,000 not $25,000,000 per quarter is what we need to add to get to that $1,000 in 2020. And the driving factor in getting into most Global 2000s to start with has been the same driving factor as we've been into most of our accounts is ITSM. It's an ITSM replacement generally. And it may not be everything. We may start out with a subsidiary or a division, but then we quickly grow.
We look at GE. GE pays us over $9,000,000 a year. I think they started out at a couple of 100 1,000. They just continued to grow over time. So most Global 2,000, when they buy, they don't do 100% replacement day 1.
It happens over time. And as we get more feet on the street, we have more opportunities to work on. And longer sales cycle to get into them. A typical sales cycle is 9 months, but some of our Global 2,000 is 2 years. So I would say we have pretty good visibility over the next kind of year or 2 based upon the leads we have now, but the history has shown that if we get in front of them, we can sell to them.
The remainder of the $2,000,000,000 as we said, historically, the large enterprise and other commercial accounts have represented half of our business. And we've been pretty consistent at doing that. This is also why we feel it's very important to have that commercial segment as a separate business as well too. We just we think based upon what we're seeing today, we don't see any slowdown that that non Global 2,000 will the other half of our business. Now obviously, this is our vision and it's going to take some time to prove to you guys that.
But I think in the past, we've shown you guys we've done what we've said we're going to do. Walter, Steve.
Steve, actually Robert Baird. So first, I'd like to just ask a housekeeping question. You talked about closed slipped deals in the Q1. You talked about you've closed about half of them. Was it a normal amount of deal slippage in this Q1 versus other 1st quarters?
I would say this quarter, we saw more slippage than in the past. But to be very clear, every quarter, we have slippage. But we also usually have deals we're pulling in from that when we have deals that slip, we usually have some deals we can pull into the quarter. I would say we didn't have many deals that we pulled in. We had some, but I wouldn't say there was a lot of deals that we pulled in.
Can I make a general comment on it, because I think it's really important for you to understand this business? We don't lose any deals in the sense of competition or in the sense of deals just evaporating and going away. I mean, the biggest competition that we face is kick the can down the road. And it's not because customers don't want to do it. Sometimes they simply don't have the priority inside their own organizations.
They can't clear the decks. They can't make the resources available to go and attack these projects. And that's when you see projects move. I mean, we've seen deals move not just 1 quarter, sometimes they move 2, 3 quarters, right? And that's all part of the mix.
Now some quarters, things bunch up and they all hit and it's great and high fiving. Other quarters, you struggle a bit more and especially a March April boundary is not very compelling for customers, right? That's not very interesting, whereas December to January is very big in the world of IT procurement, right? So that's why you see these things. But to do nothing or kick the can down the road, that's always the sentiment that our sales organization is up against.
Walter?
All right. I think we're on. So Mike, just on the profitability, I was looking back at last year in the slides and you just said long term, you didn't say 2020, you're being more specific here on 2020. Should we think about the timeline of getting to the 28% to 30% versus the prior 23% as suggesting more of an accelerated ramp in profitability? Or is it simply more we're now 2020, maybe before we're something like 2018?
Just wanted to make sure I understood that.
That was 2020 that I showed you is where we think we can be at that $4,000,000,000 rate, and that is the target. And obviously, the $23,000,000 we were showing before is before 2020 because this is kind of what we've been thinking for a while.
Okay. And then just
a question on sales productivity and sort of the puts and takes. I mean, I'd imagine in areas like the U. S, you're starting to see some improving sales productivity, but then you're sort of not branching people off, but having people spend time chasing some opportunities in areas where you haven't been at it for 5 years like in HR and in some of these other markets. Can you just talk about kind of as we think about the next few years, the puts and takes on sales productivity? Is this one of those where you'll run sales productivity sort of even as mature businesses see leverage, but you enter enough markets to offset that?
Or how are you thinking about that generally?
Our people are not caught out on HR versus IT, right? They're pursuing service management business. They're pursuing platform business. They're pursuing operations management opportunities. So the nice thing about our product portfolio, which really is quite broad and we're going to showcase that tomorrow morning in our main stage presentation is, we have many ways into the enterprise, right?
And you heard today as well. In Brian's conversation, we haven't even done the IT piece yet at the university. So we're not also now enables new conversations that before weren't possible. So this really helps productivity, right, because our salespeople have a lot of clubs in the bag where they can pursue accounts even when some opportunities that we want are just not open to us right now. Sometimes for contractual reasons, sometimes for political reasons, whatever is going on, but there's always another play that we can pursue.
So that's really important in the whole productivity game for us to enable our sales force to have all that.
What I would say, Walter, is on the productivity side, you're going to have more consistency in productivity on a quarter over quarter basis with the commercial business that tends to be more transactional versus the enterprise business and especially some of the larger accounts that you tend to have lumpier quarters. So you can't look at productivity necessarily on a quarterly basis. We definitely don't look at it on a quarterly basis per se on the large accounts, because there are certain some of our best performing reps, they had 0 they sold in Q1, because they're going after these big deals and they will more than make up their annual quota in another quarter. So we do think the productivity in some of the more developed markets, because we have a lot more brand awareness, a lot more reference accounts, you'd expect productivity to be higher. But when we see productivity so high, as we've told people before, that's where we'll split territories and bring more reps on to cover those opportunities.
Some of the international markets are a little bit slower than we'd like, but that just happens. And over time, we think we'll be able to ramp the international markets to get productivity similar to the United States, but it's going to take a little bit of time. Just hand it to whoever. Yes, Matthew.
Thank you. Hello. Thanks guys for having us here. Mike, relative to your 20% to 30% operating margin targets, is there a way that we should think about the free cash flow margin relative to that? Should it be more and maybe the magnitude of that sort of that scale?
Well, the free cash flow margins right now as we're growing are higher than our operating margin. I think that will continue for a while. But over time, they will converge. And I'm not going to try to build a free cash flow model to 2020 right now. You guys can all do the spreadsheets.
You guys are probably better at it than us.
And then maybe just a quick one
on your the $10,000,000,000 IT ops management market. Can you give us maybe 2 of the top 2 or 3 areas of focus to go after that because that seems like a of white space there as
well.
Well, traditionally, I think you know that's been around discovery orchestration. Obviously, those things are staple type products. Those are existing spending categories. So we have a lot of opportunity there. But ServiceWatch really is, is to really have a really big add on sale, if you will, onto the CNDB and onto the Discovery spend, right?
So we're really going to draft Discovery spending with ServiceWatch. The other area, Orchestration, by the way, we believe has a very, very low level of penetration in the organization where we still have a long way to go because that's really the automation dimension of workflow. So the people pushing things around. It's really machines doing it. Event management is another area where because we're doing so much now through ServiceWatch, right?
So event management, event correlation, signaling out the noise from signal, those things are very important. And the events and incidents, by the way, we always talk about this. They're very close cousins, right? Events are raised by the infrastructure, but then they automatically become incidents in the ServiceNow Service Management environment because what is an incident other than a structured workflow. So those areas are natural touch points.
Those are natural adjacencies, if you will, that we go into. You'll hear from our customers that if we don't enable that, they're going to have to go do that themselves. And that's what our customers have done over the last several years. And so we tend to sort of push off in a very adjacent value added added manner that really gives people new and interesting capabilities. We're not going to be in IT operations management in categories where we have no affinity or affiliation that area.
Where you're not going to find us, we're not going to have a database tools type of business, right, in the sense that the way that companies traditionally have pursued that or in network management or in security. Security is a big topic. You heard Dan talking about it. We actually have an application coming out in the Geneva release that is specifically incident management for security incidents, right? So that's actually become very important to us.
But again, that is again related to service management and how you run workflows as it relates to security. So those are some of the things. Definitely, if you're going to be here tomorrow, we're going to have a slice on the ITOM segment in the Mainstage presentation tomorrow morning. And so we're going to talk about that some more.
Jason? Hey, guys. Frank, what are appropriate expectations for the App Store?
Can you hear me okay? I can't hear you.
Can you repeat that, Jason? Frank, what are appropriate expectations for the platform and application store? And then I guess second part of that would be, if when do you foresee ramping up a dedicated sales effort with folks with quotas to try and drive either ISV partners or system integrators to build on the platform.
Yes. We may well get to that point. In terms of expectations, what we really want to be is a minority provider of the applications on our platform, okay? Today, 1 in 2 platform 1 in 2 apps on our platform is ours and the other is by customers, is by partners. It isn't bad because we used to be pretty much everything for a long time until our customers really started to take off.
I mean, you saw the REI example, they've been at it for years years years, one after the other. But if this strategy really works, we are going to be a minority, a small minority provider of the application services on the platform. So what HCL is doing, that is our vision of the future is that we're very content driven, right? Our business is content enabled, right? So content is king, right?
Our platform doesn't drive our platform enables our business, but content drives it, right? People are not interested in buying a platform. They want to what they want is the service itself. So that's the reason why you see all the infrastructure that we're putting in place, free developer instances. People can now literally come into come out into our world and just have a developer platform and explore it and start building things.
We give them a monetization vehicle through the store. So they feel like they have routes to market, they have monetization, they have tools, they have everything to essentially build the business on ServiceNow. So expectations, it's early to have precise quantified presentations around it. But essentially the goal is we're going to unleash as much content on the ServiceNow platform as we know how to do. It's our applications, it's our customers and our partners and then it's the ISV community, people that not just build software for a living, they sell it for a living, right?
And that's a different class of people. I think Salesforce has done a really good job, by the way, in this category and we're taking pages out their book to do that justice. I think we've been very good in terms of internal development. I think we've done really, really well there. But I think we have a lot of room up in going after ISVs and that's what this is about.
Kirk Materne with Evercore. I guess, first or I don't know who wants to take this, but Mike, earlier you talked about your pipeline not being as mature in the Q1 as you guys had hoped. I guess when you think about and I realize pipelines are always moving, but if you think about the maturity of where deals are, are you back to where you'd hoped to be in sort of late April on that front? And I guess depending on the answer to that question, I guess how did you contemplate sort of conversion rates on that pipeline when you gave 2Q guidance? And then just really quickly, the second question is really around vertical opportunities.
You guys have spent a lot of money building out your federal vertical. Are there any other sort of vertical or places where you see opportunities to try to get deeper with people, say, financial services, areas where you think you have some natural, sort of synergy there? Thanks.
Yes. So what I would say first on the pipeline, as we mentioned on the call, there were a number of deals that slipped and we are off to a very fast start in Q2 where a number of those transactions that slipped have closed. And so we have fairly good confidence in our pipeline for this quarter, maturity. And we gave our guidance, and we're sticking with that guidance for Q2, and we'll see at the end of the quarter how we fare. And with regards to verticals, yes, federal is a specific vertical that we have focused on in the past with a number of certifications and whatnot we've done.
There's no real other verticals per se we're building.
Well, I mean, we're obviously a super horizontal platform, right? I mean, we think of IT as the backbone of the modern enterprise and the modern institution. Everywhere where IT is important and dominant in terms of how the business runs and in some businesses it's bigger than others. That's where we're going to be, right? We think the federal government is interesting because they have so far to go in terms of automation, right?
So I think they're early stages. Higher education and public sector in general, so much opportunity in terms of automation. I mean, they're the kings of PDF. You think about being able to replace all that business with online workflows, The opportunity out there is just it's hard to get your head around it and that's exciting for us.
Jen?
So going back to the point around App Store and how it fits in visavis some of the things that you've built yourself, you are seeing a lot of success in the app categories you've built out so far, things like HR and facilities desk. And there are other relatively large categories within the service desk space like customer support that are a little bit more needed for you. People do it themselves, but maybe not productized by you yet. How do you think about the line of delineation around big categories that you could still pursue by your own app development versus where you'd like to see the partners really contribute and drive a lot of business on the platform side through App Store?
Yes. So, Jen, we're not driving the partners into specific categories. We're just not smart enough to tell them what to do. And the whole idea is to create a marketplace where people find their own routes to market based on their knowledge about opportunities, right? But for us, major categories, I mean, one thing you'll see tomorrow if you're here in the keynote, service management is such a broad area.
We're releasing in this release a templated approach to building a service management application where people can go literally click, click, click and it generates the catalog, knowledge management modules, all the functions of the service management app and it all does that automatically. And the reason we're creating that templated approach is because there's so many subsets service management. Not everything is a whole service domain like human resources or procurement or facilities. There's so many one off services that need to be captured in that manner. So that's another big area.
It sort of sits between sort of raw tooling versus finished apps. We now have a template approach to go after that as well. You mentioned customer support. That's interesting to us, right? One of the 1000000 opportunities and being a mile wide and an inch deep.
That's not a recipe for success. I'm also not looking for competitive confrontation in areas where I'd rather wait a while before I basically open up another front with another set of competitors. So we sort of have to sort of measure ourselves very carefully before we go, all right, here's the next confrontation that we're seeking out. Our platform is very, very broadly capable. That's great, but it's also something that can inhibit the company by just going too broad, too early, too quickly and us then basically sending our sales organization out there not really set up to win.
So those are sort of the restraints that we have on our own progress in some of those areas. But you mentioned some of the categories. Yes, they're interesting to us and we are sort of looking at those things whether there are sometimes things are you might be able to get closer to a business than you actually thought you were. And one of the ways we do that, we watch our customers. What are they doing, right?
Because and this is why we have this event. This is where customers learn from each other. That's why it's called knowledge, right? And that's how you see classes of applications being started because they find out about it and they go like, hey, we'd like to do that as well. The presentations from REI and so on, that's really great content for everybody to hear here at the conference because it's going to inspire them.
Justin?
Thanks. Justin Furby with William Blair. Frank, I wanted to go back to the other 50%. You made the comment that there's dynamics there versus enterprise. So could you talk if you look at the competitive landscape in the non G2K space, what do you see there?
Is it more or
less competitive than the enterprise? And then what are you seeing from platform adoption within the mid market specifically? And then Mike, if you could maybe hit on acquisition costs in that market versus total 2,000? Thanks.
I think commercial has a little bit of a different competitive dynamic in enterprise. I mean in the enterprise, we've been the large enterprise, we've been exceptionally strong because the platform is so capable and so powerful into really dealing with that set of requirements. When you get to the commercial market, people are looking often for a much more defined set, faster time out of the box. I mean, one of the reasons that we came out with our Express product last year was not just to go and pursue sort of the next 1,000,000 enterprises, if you will, that are in the SMB space, but that product will also get applied to the commercial space because there's just classes of customers there that just want to they want to put in their user definitions and then just hit go and move on. They're just not interested in pursuing the broader service management strategy at this time, right?
And things do change once people get a taste of it. So the competitive dynamics is actually different. We see other people in the commercial market that we don't see that much on the enterprise side. It also tends to be more price sensitive and more commoditized in that sense. But it's up to us and this is why we have conferences like this to really inspire people and say, look, are you just buying a service desk?
Do you just want to do instant problem change? Yes, that can be the initial conversation. That's often how people shop, right? They have a very, very sense of what's possible, they come to places like this. They're sense of what's possible, they come to places like this.
Things change, right? And then the competitive dynamic changes as well. But the reason why we have this rework that we just talked about is that we can be in those markets with more staff, much more concerted effort and really bring those people along. So yes, we are be enterprise. We're going to be fighting these battles in a lot of different places.
I think it's good for us to be in all these markets.
So your other question about the customer economics between a commercial versus an enterprise customer. The one thing I'll say is the smaller the customer you are, the stickiness probably goes away on our product over it's not as sticky because it's not as disruptive to change out. But with that said, we continue to have very high renewal rates. And right now, we don't see a big economic difference between the 2, quite frankly. Our large enterprise customers tend to be more demanding on the support side.
So there's a little bit there's the economics are tougher on them, but we make up for it in terms of the scale we're able to get with upsells and the stickiness over the life of those customers. So it's not that different today. That may change over time. I don't know.
I thought I think if you talk to other SaaS vendors, you know all the names, they will tell you that the enterprise business is by far the most compelling to them. The renewals are much higher. The upsell opportunities are greater. That's just a dynamic that exists for all of us, not unique to ServiceNow.
And hence why we tend to focus on large customers.
Yes.
Once again, it's not the quantity of customers, it's the quality and quality is really looking at how big can these guys grow with us. And it's not just G2K, there's a lot of other big enterprises out there. Yes, Alex.
Alex Zukin with Stephens. I wanted just to ask you about kind of long term ASPs around the largest of accounts, the ones that are at $2,000,000 today. Where do you see those going? And where is the natural resistance point do you feel like in the enterprise where they feel like they are paying
too much money?
So in terms of the ASPs, we have a number of customers today paying us well north of 2,000,000 and we know they'll continue to grow. So we're just using 2,000,000 on average out of a Global dollars a year based upon looking at customers we see today and how they can grow with the different things we're doing across the enterprise in terms of service management, but also ITOM. ITOM is going to be a big piece of that as well too to help drive those ASPs with our customers.
Derek Wood at Susquehanna. I'm curious what you guys think about the kind of Internet of Things opportunity. Road? Or does your back end database platform not that conducive for that? And then second question on pricing.
I know things have changed a little bit over the last couple years. Can you just remind us where you are? I think $100 per fulfiller per month, requester doesn't there's no charge there, and the platform fees $35,000,000 Anything else you could elaborate on, that would be great.
I can talk about real quickly, I'll comment on Internet. Thanks. There's really absolutely nothing that limits our customers from dealing with assets that are not IT equipment, that are not servers and storage and networks and so on. And we have customers that are managing other classes of equipment. Intel does it with semiconductor equipment.
We have medical imaging companies managing machines that way. So that is something that is going to start to happen. You got to understand where we are in our journey towards moving to service models, right? Still for a lot of organizations having a sophisticated IT service model is already a fairly novel thing, let alone having business services captured in the service model before they start moving on to Internet of Things, which is a great idea and it sounds really good, right? But for most organizations, it's still a little bit farther removed from reality.
We are going to get there because there's literally nothing stopping us from being in that business to us. If it's a programmable device whatever the limits of programmability are and it's network connected, it is a computer to us, okay? It really doesn't matter whether it's a car or a toaster or actually it is a a real server. So I think that's all to come still. That's still part of the opportunity scope that's in front of us.
On your other question on pricing, we really haven't changed pricing in a while. The pricing, the only thing that we talked about the other day is the skewing we sell service management, dollars 100 per fulfiller. That's what we were charging before, and that's what we're charging today, and we envision continuing with that right now. And then on the platform, we talked about this $35 We do have a if you and that is all on a fulfiller, as I said, not on a requester. If a company wants to do an ELA, we do an all employee model as well too, but I'll tell you we have done very, very, very, very few of those.
Most of our customers talk or they want to do it on a fulfiller basis because they get it, they understand that. Raimo, and then Lisa Abay, he's put his hands up a few times next in the front.
Ryan Molensjo from Barclays. Quick one on the if you look at the Global 2,000 that you haven't captured yet, I mean if I look into the industry, you're becoming more and more the easier for you? Or what's the factor that's holding those guys back? Because it seems like so obvious to go to ServiceNow at this point and still there's not enough?
That's actually a very good question. I mean, first of all, there's a geographical dimension to that conversation because I think a third of the global 2000s are actually in Asia, which is the reason why we started setting up shop and infrastructure over there because we know we have to be there because that's where a third of those guys are and a third are in the EMEA hemisphere and then the other third the Americas. That's one. The other sort of vector of this thing is that we've dealt with early adopters, aggressive adopters of technology people that can really see the promise and they move aggressively. Markets.
The nice thing is, cycles, the nature of markets. The nice thing is there's so much evidence, so much proof out there that how well this works, right? That's why we have these conferences, right? I mean, look at how big this conference is, the amount of evidence that we can accumulate in one place. So that early majority then comes here and they go like, wow, I think it's I think I'm ready now because it doesn't look so scary and so bleeding edge or so leading edge as I thought it might have been.
So these are natural stages of progressions that we have to go to. We have to get to the natural stages of progressions that we have to go to. We have to get to the majority of enterprises. And it's not the same dynamic as the early guys, and you know that.
Thanks. Mike, given the leverage in your that you showed us in your customer profitability slide, when you get to $4,000,000,000 why shouldn't we see margins better than 30%? A licensed maintenance company of that size gives margins in that neighborhood. But you guys have much better customer economics and I think sales and marketing was in line
with So as I've told people before when they've asked me, why can't it be bigger? You can always build a spreadsheet to make anything you want. But what I will say is, let's walk before we run. As you've seen historically, we've kind of got up and more comfortable with giving expansion, we've given expansion in our longer term model. Another year or 2, we may be changing that longer term model.
And generally, we like to change it on the upside. Greg?
Just one for me. You have roughly $1,000,000,000 in cash on hand. You've done small acquisitions historically. What's the appetite for larger M and A right now? And how do you think about that as you scale the $4,000,000,000
So not a lot would be short answer. I think large M and A would really come into play when we are running out of opportunity, which I don't see that day on our horizon anywhere near. Number 2, I think the risk of acquisitions goes up tremendously. I mean our acquisition model is built around acquiring talent and technology. We're not really interested in paying for the business.
I mean, we have an army ourselves. We can generate revenue just fine. So we just want to buy the assets and the talent to be able to essentially feed our sales organization. We're going to give them more opportunities to sell. So I think large M and A, unless there is some tremendous strategic sort of situation coming up, I can't see that at this point.
And the risk profile of doing deals like that, we are not sort of culturally inclined towards that. And that's I just sort of want to give you that. Is it impossible? No, it's not impossible, but it's not likely.
Three acquisitions we've done, they've all been pretty small, but they've all been partners. They've all been people who have been presenting in that partner expo. And generally, we like to we look at companies that we have a history with them as a partner.
The other thing that we do that's important for you to understand is when we companies, we make really sure that we can reimplement the technology, not integrate it, okay? We reimplement it, right? It's on our cloud. It's on our platform. It's in our data model.
It's in our UI framework. We want what we acquire to look like a native industry will service now application, right? Otherwise, we will become BMC and HP and companies that never did that, right? And that's not easy. We literally spend 9 to 12 months doing that when we acquire technology.
You can't always do it. Some companies just will not lend themselves to that model. So that's another sort of constraint that we put in front of
that. Okay. Any other questions?
Sarah with Bring Capital. Just one last question. As you guys start moving to services automation beyond IT and you continue to add to your product suite, do you foresee any need to change the way your sales team approaches its customer base, I. E, land in IT and expand from there? Do you see a reason to see that shifting maybe as you start to do larger and broader
deals? It's a good question. We talk about this internally. It's a very tough question and the reason is when you start segmenting your sales organization by opportunity, you can have side effects from that that defacto actually reduce your coverage and ensure that your depth of approach that your whole sales motion starts to become fragmented, especially in places where you might not be that productive. So I think it's certainly possible that at some point we get large enough in some of these submarkets where we are going to say, you know what, we are really going to launch full on dedicated people that are just focusing on that opportunity.
I think that is absolutely a possibility. Do we feel we're there yet? No, we're not at this point. And I think it has to do with critical mass and size and scale. Nation areas right now.
I mean, I think we've done really well in the HR area with our general sales force, right? Now we've done a bunch of work. One thing I will tell you and I've said this to a few folks, I mean, we last December, just a few months ago, we set product organization up by product line. That is sort of our first move, if you will, to bring a level of specialization to our product line. So they now have dedicated engineering organizations, product management, product marketing, business development activities and so on, it's certainly conceivable that down the line, you're going to see sort of the sales equivalent developing of that organizational approach.
We're not there. We just started that out on the product side to develop a lot. We're now really multi product, multi market. That's what we are from a product standpoint. We used to be single market, single product.
So that evolution just happened and we're still sort of in the middle of really making it executable and really getting ourselves in that mode. So the sales equivalent of that is still a little bit little ways off, I would say. We're going to be cautious because you can do a lot of damage, fragmenting your sales organization. Talk about product issues.
Okay. Well, it's noon right now. I want to thank all of you for coming today. As Dom mentioned earlier, we do have a boxed lunch, Frank and I, as well as the customers who came up here to talk as well as KKR partner and some of the other members in the management team are here as well. You guys feel free to you can come and talk to us 1 on 1 or you can just have your lunch and go, do whatever you like.
Thank you very much for coming.