Thank you for joining us for our 4th Annual Financial Analyst Day. We've got a great program in store for you. It's great that we're able to host this event in conjunction with our Knowledge Conference to give you a much broader overview of ServiceNow. The theme of this year's Knowledge Conference is Experience the Service Revolution. The Service Revolution is all about redefining how we engage with each other and everything around us and how enterprises are transforming into a collection of integrated services using a common service model.
The theme of this year's Financial Analyst Day is executing on the service revolution. And today, we're going to talk to you about how we're growing the business with new and innovative products, deeper partner relationships and driving service management disciplines throughout our customer base. Please note our Safe Harbor slide. Throughout today's presentation, we may make forward looking statements, and we intend for such statements to be covered under Safe Harbor provisions. So we've got a great program in store for you today.
First, we're going to have Frank Salutman, our CEO, talk to you about experiencing the service revolution and how service management is becoming a key pillar in enterprise software and how we're changing the way people work. Then Mike Scarpelli, our CFO, is going to talk about how ServiceNow is built for growth due to key investments we made in 2015. Then we're going to have Jack Seppell, Head of Accenture's Cloud Business, talk to you about Accenture's growing investments in its ServiceNow franchise. And we'll have Dave Shuckelman, CIO of Oshkosh, talk to you about how Oshkosh is going all in with the service management transformation that's being led by the IT organization. After Dave, we're going to take a short break, and we'll follow it up with the second half of our program where we're going to have some of our emerging products leaders speak with you.
The first is Dave Stevens, GM of Customer Service. He's going to talk about how we're taking our proven service management strategy and applying it to the customer service market. Then we're going to have Mike Nappy, Head of Product Management for ITOM, talk to you about our service centric approach to IT operations. And then finally, Sean Convery, our GM of Security, is going to talk about our recent entry into this market and how we're creating a new category for ourselves. After Sean's finished, we're going to have Frank and Mike come up and do Q and A.
All of the other speakers will have Q and A attached to their specific tracks, so you'll get a chance to ask everyone questions. So again, thanks for attending. And now I'll turn it over to our first speaker, Frank Slootman, President and CEO.
I get music. This is really nice. Good morning. Good morning. Kind of a little bit of energy on this Monday morning.
So really pleased that you're all here. I mean, all year, we're trying to get people to know it's become a huge event. We're well over 11,000 people registered. So we're it's just great. First knowledge I ever attended was in 2011 in San Diego.
And there were about 900 people there, and I thought that was already a huge number back then. So just for you, it's really important because we can talk to her blue in the face, but everything you want to know about ServiceNow, what our business is like, it's all here. The concentration of content and feedback that you can get is just incredible. I want to talk for just one minute about the theme of the conference because it sort of relates to what we're trying to do as a company. Know that it talks about the service revolution.
Service revolution is not dissimilar to what we've talked about over the past several years. Last year, we talked about everything as a service. That's really defining work into workflow. So that becomes more manageable. We can monitor it.
We can report on it. We can automate it. That's the revolution we're talking about. That's not new. But this word experience is becoming very central to the entire software business, I'd say.
I mean, when we engage with customers, we always try to understand what's sort of pushing your buttons these days, what's top of mind, what's bugging you when you get up in the morning. And there's a bunch of different vectors depending on who you talk to, but there's themes. One of them is obviously cost, right? It's very hard to have a conversation with IT anywhere in the world, and cost is not an issue. And especially in large financials, that's dramatically center stage for them.
So that's one conversation. The other one is about risk. There's a lot of different kinds of risk. You probably think about cybersecurity type risk versus the risk of critical services not being available and what does that mean to the business and then also risk of noncompliance, which, again, in financial verticals, is a really big deal. So we got cost, we got risk.
The third one that we talk a lot more about these days is velocity. Velocity is just sheer speed of business. And for most people, velocity is not an issue until somebody else is faster, right? And for example, in higher ed, we have some customers that were very, very slow in accepting or rejecting applications. And that became a real issue because the best students were getting very rapid acceptances from competing institutions.
And all of a sudden, they realized we're just too slow. And it's becoming an existential issue for our business as a university. So, velocity became a real thing. And the reason was they weren't automating, they weren't structured, they were sitting in stuffy faculty meetings with huge stacks of files, sort of doing things the way they have always done it. And that's going to kill you in this business.
So you really got to watch for the velocity vector in business. And you see it with a lot of cloud businesses like Amazon, speed is the center of their universe. But the word that has come up more than any other over the last year is this notion of experience. So many CIOs, that's what comes out of their mouth. It's the service experience.
It's the user experience. And there's a reason for that, right? There's this huge separation that is happening between the experience that we are having as consumers, right, because, as consumers, our lives are pretty good, right? On our devices, We can call a ride. We can bank.
We can retail. We can socialize. We can do just about anything on our devices. And then you go to work, and it's a little different. And that gap that is opening up and that is widening between our experience as employees and our experience as consumers is putting enormous pressure on IT organizations.
IT organizations are supposed to be the people that know technology, and they are tend to be the most So we really want to emphasize this notion of experience. Our whole enterprise So we really wanted to emphasize this notion of experience. Our whole sales motion, our whole go to market motion these days is really about not telling people, but showing people. Here's what it could be like. Here's what you can aspire to.
And what's interesting about that is it tends to get a lot more traction because people, they see things, they buy things, they experience things through their eyes more so than through their ears. So everything is becoming very experiential, very visual. That's where the world of software is going. There was a time our software was about architectures and all this sort of thing and boxes and arrows and what kind of storage are you using, nobody cares, right? In the world of cloud, it's all about the top layer that you are touching as a user.
Everything else sort of right, it's no longer part of the conversation, and it used to be in this business. So experience is the thing, and we've really sort of retooled parts of our organization to really be able to lead with experience into the marketplace. Now I've talked to some of you, maybe all of you, maybe in some of the calls that we have as well, about this transition that the company has been going through. We're always in transition. We're doing a software.
In transition, you're just standing still. But we sort of broke it up in 3 major segments. And some of the greatest is contract, but it serves our purposes. Phase 1 was very clear. The company was a start up.
I wasn't here at the time. These were the days of our founder, Fred Luddy, in San Diego. They created our platform. They reached Escape Velocity, drove the business up to $100,000,000 very, very successful. At that point, things needed to change quite dramatically because the company was so entrepreneurial.
Fred Lutter used to say, it's like a car barreling down the mountain with sort of 1 lug nut kind of half tightened on each wheel. It was precarious. So in Phase 2, the focus was really around discipline and stability and predictability and most of all scale. You can do this at 10 times the size, which is really what the last 5 years have been about, company republic in 2012. You all know that.
So a very different focus in Phase 2. Now we could have just gone on. We used to refer to this internally as ladder, rinse and repeat. You just keep doing the same thing and just hoping that the history will continue to repeat itself. As we all know, in the world of software, nothing stays the same.
Everything is always changing. So to be in a mode where you're just rinsing and repeating is something that you end up regretting sooner or later. You always want to reinvent your business and think ahead. So even in 2014, when we still were firmly in Phase 2, we we were already thinking very hard, geez, what is it going to be like when we hit that $1,000,000,000 threshold? And what do we have to do to be able to have a head of steam and be able to thrust the business forward.
And we really instead of scale, our focus really started to move towards being strategic to the customers. And being strategic to the customers just means being so important that it's very hard for customers to think about living without you. I always say to customers, when you talk to us as a tool, we're tactical. When you talk to us as a platform, we're strategic. Now that may be somewhat contrived, but the reality is there's a big difference between the tool and the platform because tools come and go, and platforms have very, very long lives in our business.
But the big difference between Phase 2 and Phase 3, and that's really what we have set ourselves up to go through the transition, is that Phase 1, Phase 2, we have a single product, single market, single channel. It was a very simple business, organizationally as well because we were functional. Phase 3 is not that anymore. We've embarked since late 2014 on being multiproduct, multimarkets, and multichannel. Now what's great about that, it's a much harder model, obviously, because there's so many moving parts and much more matrixed and so on, is that it sets you up for growth because it's a model that we can continually expand, build assets, add assets and have a model for how we take that to market.
So that's really where you find us on this day in 2016 is that we're well on our way in executing on the transition to strategic. I don't know what comes after Phase 3, probably Phase 4, but probably $4,000,000,000 to $10,000,000,000 or some crazy number like that. I like nice, round numbers. And maybe the challenges and the approaches will be different. But this is what it is for us right now.
So we're going to show you more of our organization, how it executes. We're going to have 3 of our business units up here this morning so you can get a sense of how we now approach this. And before we do that, I want to sort of give you how we view ourselves in the sort of evolving world of software. If we go back to the sort of early '90s, most of you were around to sort of witness this transition firsthand. The world of ERP didn't exist back then, right?
We had general ledgers and accounts payable, and the world was very fragmented. It was spreadsheet heaven or spreadsheet hell, depending on your point of view, until that started to change, right? And the 2 it was a very fragmented world in terms of vendors. Then SAP and Oracle really built enormous software estates, and it sort of became the backbone of the enterprise. Very successful, I think, between Oracle and SAP, there's probably $200,000,000,000 $250,000,000,000 worth of market cap.
So I always refer to this as the 1st estate in software. We just can't think of ourselves. Even ServiceNow, we run almost everything on ServiceNow but not our ERP system because we are an SAP shop at ServiceNow. And then came the 2nd estate. This one is a little bit more recent, but that much more recent.
It's just not as big yet, but it's growing much faster, right? It's really set off by Siebel Systems, the whole notion of CRM. And of course, Salesforce has taken that to umpteen other levels. And it's really the front office customer facing side. And this has become quite a sizable estate, but it's moving and it's growing.
Now everybody sort of thinks in terms of having these massive investments, these very big platforms, these very big stacks, And they're all trying to grow, right, because all the ERP vendors, of course, are also on the CRM side, and CRM guys, of course, want to chew off bits and pieces of the ERP side. But our goal is really to play within those 2 big estates and touch them, right? And it's sort of a this may be somewhat dramatic. This is the new dawn. This is yes, we're going to create our 3rd estate here, right?
And you're like, well, that sounds a little self serving, and it is just because I got the clicker here and I'm doing the talking. But we see this happening, right, because enterprises are saying, Hey, we are creating organizational structures now that have global business services where we think of all our service domains as a single organization with a single center of responsibility, single center of system. They're trying to go there. They have seen that for years years years being fragmented in cylinders and people having one off things. It's going nowhere, right?
So obviously, we really like this point of view, this notion of the 3rd estate. And I don't know how many of you are history majors, but the 3rd estate was a term that was coined during the French Revolution. The first estate was the clergy, the second estate was the aristocracy, and the third estate were the people. So that's us. We don't plan to do to the 2nd Estate what they did during the French Revolution.
We'll be a little bit nicer. And I'll tell you a few more slides why we believe this. But first of all, we think that IT is massively expanding. For a long time, it was like IT is just becoming a somewhat irrelevant function. CMO has more budget than the CIO, all this kind of talk.
The role of IT is really moving from being sort of another department to really being the backbone of the enterprise, and it's really the new manufacturing. Everything runs on IT. And IT is also moving in all the line of businesses, right? Every HR organization has a systems function. And by the way, there's hundreds of people here at the conference that are HR IT people.
And that's our audience. Even though they're HR people, they're still our IT homies, and we view them as our folks. Of course, sales organizations have IT functions. Finance speaks for itself. Marketing is very heavy on systems these days.
This is really good because this allows central IT to really have somebody to talk to that understands them in the line of business itself. That's been a problem for a lot of years. That conduit didn't work very well because they just couldn't have a dialogue because they spoke different languages. So you sort of see that red sort of creeping up because really everything becomes IT after a while, right? So all these departmental organizations become very heavily IT invested.
So if anything, IT is really expanding in terms of scope. We also see that in terms of the world of IoT. Unless you were living under a rock for the last couple of years, everybody knows what IoT means, right, Internet of Things. But it really means that the scope of IT has moved beyond servers and network devices and SANs and things like that that are used strictly for computing to really anything that has an IP address, anything that's connected, anything that's searchable, anything that's curriable, right? So IT is just incredibly important.
And because we're focused on IT as our core constituency, We think that, that matters a whole lot. So if anything, it is dramatically expanding its posture versus sort of fading into the background. Now we have had customers like Siemens, and they'll be talking tomorrow on the main stage, that came to us and said, Hey, we actually have a much bigger vision about Service Management, and we want to know whether you people can enable that, whether we can partner with you on that. And they said and they drew pictures that look like this, and they said, we sort of organized our entire global enterprise into a series of service assets. The service assets is a very Can be a service organization, doesn't have to be, right?
And then there are constituencies that request services, can be people, can be systems, can be a combination of things. And what they wanted to do is then draw this service integration layer throughout their entire enterprise that would standardize on how they would broker requests, supply and demand, right? So very, very expansive, and it involved any audience and any service asset. And it would also integrate with other clouds that they would have adopted, systems of record in all the other states that we just talked about. And the whole thing will be part of their enterprise cloud.
So they really talked about that not just as service management but as service integration and management, right? And there's a whole movement afoot around this notion of SIAM, which is the acronym for Service Integration and Management. It has a very narrow focus on partnering, but they really conceptualize this to be completely enterprise wide and not just involve the enterprise, but involve relationships outside the enterprise as well. This is why we're talking about the 3rd estate, right? These are much bigger views of service management than we historically have had within the confines of IT.
Siemens is not alone with this. I mean, EMC came to us at one point, and they couldn't use the words, but they were drawing pictures pretty much showing the same thing. Beck and Dickinson, very, very similar view. They were very, very hard over on cyan. Cyan, by the way, is something that, in Europe, is very prevalent, just like ITIL came out of Europe and really had a lot of traction in Europe before it came here.
The other thing that's changing this is sort of the 2nd estate and the 3rd estate sort of chewing at each other a little bit, which you would understand, right, if given the historical context, there's a little bit of conflict there. But traditionally, we think of Service Management as something that is inside the enterprise that is internally facing and customer service was something that is going external. Those boundaries and those distinctions are not that useful anymore. I mean historically, it sort of meant like, well, on the outside of the company, it's got to be a little bit nicer in terms of the experience. Maybe it had to scale differently because you had a business to consumer model that had different operational workflow characteristics.
But in reality, these models are now competing, and especially in places where the service management model is very relevant. And we actually are really chewing off a piece of the customer service market where the service management model, and I'll explain that in a second, is particularly relevant to customer service. And this is something that we're also going to show you later on in the program because it's sort of our take, our unique way of approaching the entire estate around customer service. Really interesting. We have a bunch of customers now.
There'll be one on stage tomorrow with KPMG talking about their experiences on how they do this. But what are we talking about? Because this is a hybrid between Service Management and customer service. Now what service management and CRM have in common is they both have engagement models. What's an engagement model?
A customer has a question or a problem a request or whatever it is, and they have a need to engage you as the service provider. And they can do that in any number of ways. They can call you up. They can e mail you. You can chat.
They call that omnichannel. That's sort of the industry term for that sort of thing. But essentially, the customer opens the ticket. That's sort of service management lingo. On the CRM side, they typically refer to them as cases, but they have a beginning.
They eventually come to an end and get close. Service Management does that because that's really what we mean by incident management, but it does more. And that's because we have our underpinnings in the world of IT and ITIL. IT people can never talk about an incident without immediately asking the question around root cause analysis. Root cause analysis is in the IT person's DNA.
They just can't help themselves. They have to ask, what is the reason why we're having this problem? On the CRM side, they don't even know to ask that question. They just want the pain to go away for the moment, and they move on to the next thing. So this model of incidence, problem and change on the service management side, so we have an engagement model, we have a diagnostic root cause model, and then we have a model to fix, which is the operational process.
It's holistic. It's not just about the quality of the service. It is about the quality of the product or the service itself, right? So you can imagine that our customers really dig this model and this philosophy because this is what they've lived. And you go into the world of IoT, where people are managing devices, right, that are not IT devices per se, this becomes even more important because it's not just like, okay, I'm going to make your issue go away and then not deal with the underlying causes.
So on the CRM side, the software fairies sort of have to take care of the root cause analysis, the engineering processes, the change processes. Somebody has to sort of wake up in another department and decide, hey, we've got a problem here. I sometimes wonder in the auto industry, when they do a recall and they've got to bring in 10,000,000 vehicles, how long did that take? Because that's really the operational side of the process, right? How long did it take before they realize that they have this problem?
The more connected these processes are, the faster they work. And you'll hear tomorrow from GE, for example, GE doesn't talk about the Internet of Things. They talk about the Internet of really big things, the industrial Internet of Things. Those are the terms that they use because it's locomotive, it's aircraft engines, it's power turbines. A single warranty claims is 1,000,000 of dollars.
You start to go, wow, that service model is insanely important because the moment they have an issue, the engineering change cycle has to kick in almost immediately before that spreads and becomes an economic crisis for that line of business. So this is our unique way of really going after customer service with a service management philosophy. Now with the expansion in scope of IT and the enterprise being the backbone of the enterprise and the institution and the notion of IT, we've moved along as well. The Service Management was 100% of our business in 2010, 2011 when I joined the company. In 2015, last year, it was about 70% on a bookings basis.
Don't go trickier model yet. And then in 2020, we don't know where the ship will hit the beach, but our general assumption is that it's going to be somewhere around half, not on revenue but on a bookings basis. That's still a phenomenal amount of growth because you know what our long term goals are, and Mike will share more of that with you in a moment. But in 2015, we had a whole bunch of business, 30% of our business coming from all these areas. You know that IT Operations Management has been the fast growing part.
ITOM is important. We're going to talk about it later in this program because we simply cannot think of our business as not having an ITOM dimension. Service Management and Operations Management are two sides of a coin. And I think the world of OT where we're managing devices, this is going to be even more important because just doing service management on refrigerators and cars is not going to matter unless I'm able to query the devices, I'm able to restart them, able to request log files. All these kinds of things, they become integral to management.
You just can't think of operations management as separate from service management anymore. Platform, we're not going to talk about it this morning, but with Day 3 of this conference, the entire day is dedicated to Platform. It is a huge deal for us. It is foundational to the entire business. I know many of you can't stay the whole week.
It's a lot of time. But I would encourage you to watch the keynotes online because there is a ton of new capabilities that will be announced and demonstrated at that session. Then on the business management side, we have things like product management and financials. These are really important because they really add to the value that people get from implementing these kind of services. Now 2020, this gets a bigger and bigger part of the business.
There's new things in there as well. I just talked about customer service management. According to Salesforce, that's a $12,000,000,000 market, not a small nut. So we're going to chew a piece out of there. Security management, you're going to hear about that.
You're going to see about that. That's a very exciting new area. And then the other areas, we're going to have continued investment. So there's a lot of moving parts. And I understand why this Phase III transition is so important to the company, right, that we can execute on a model like this.
I'll leave it up for another second. You can take a picture. Now whatever we do, all these assets that we're building, some of the assets that we're acquiring and by the way, you've heard me say this before. When we acquire an asset, we don't integrate it. We replatform it.
What does that mean replatforming it? We pretty much take it apart and rebuild it on our platform. That's always been our unequivocal commitment to our customers that we don't end up like some of the legacy customers out there where their whole product portfolio exists on PowerPoint but not beyond that, right? So for us, our commitment is it runs on our cloud and it runs on our platform. It uses the same database, the same data model, the same UI framework.
It is indistinguishable from anything that we built, and that's because we actually build it and rebuild it. It takes time. Sometimes it takes a year, 1.5 years to do this, and it slows the business down, but it's just something that we don't negotiate on. We have to do this. I mean, the premise of ServiceNow has always been, wow, 1 cloud, 1 platform.
That's pretty incredible to have all these services that way. We are a platform company. We were started as a platform company back in San Diego in 2004. We tried to go to market. I wasn't there at the time, but Fred tells me all the stories.
Really, as a platform that people could stand up applications in a very, very quick configurable way, no programming, all that sort of thing, right? Very excited about it. The problem was platforms are really hard to sell as a product because customers would not know what to use it for. And when you asked them, they said, Well, what does it do? What do you want it to do?
These are very, very unfocused conversations. People have a they're more capable at reacting to content in terms of applications themselves than they are reacting to general capabilities. Platform is really the enabler. Applications is really how we're led into the marketplace. So, customs app had a lot of capabilities, but of course, our company really took off when we started building the service management portfolio on that platform.
The service management portfolio triggered a whole bunch of enhancements to the platform. It's a very symbiotic relationship that goes back and forth. It's not so much that the platform drives the applications. Oftentimes, the applications drive the platform because the applications have unique needs. We don't want to implement it in the application.
It has to go into the underlying platform. That's sort of the conversation that we have at ServiceNow all day long. So all these data services were implemented. There's asset management, CMDB, all the things that you have to have. And then the whole engagement model because we're not just a system of record, we're also a system of engagement.
You've got to have both those things in order to be truly effective. And I said earlier, Operations Management, can't think of it as separate anymore. So that's really the model, right? We go to market. We acquire assets.
We build assets. They will always be fitting into this framework. So there'll be a lot more taps as time goes on, but we're building the company to be able to do this and then also be able to take that to market. This is a really nice growth model because there's really no limits to the number of opportunities that we can address. For the most part, we have very much a fast food model.
You sell a burger and then there's fries and dessert and Coke and what have you that comes with that. And that drafting sales model with a single motion is very powerful. And for the most part, our products all fit into that model, if you will. But there's products that are a little bit farther afield. Customer service, we now have to engage with a different audience.
Security, we now have to engage with a different audience, right? So those are departures from the traditional model, and we'll do more of that. And our distribution model will adapt and evolve to deal with those realities. All very exciting for us because we sort of get to consider new opportunities all the time, and we do. Our overall passion as a company is that we just love this notion of trying to change the way people work, and you're probably like, why?
Why is that so important? We're pretty happy with the way that we work. But the reality is people, in general, don't like change. They also don't like changing how they work. I'll try to demonstrate that to you.
It's pretty hard. The reason that it is becoming very topical is because of that separation, that variance that I talked about earlier that our lives are consumers are just light years ahead compared to our lives as employees and as professionals in companies. A lot of money has sort of flown to the outside of the company that is customer facing. So where customers touch the company, it's very nice web interfaces, very consumerized, colorful, nice and lightweight, very, very engaging. Our best resources, the most amount of money that we have to spend goes through that place, and we like it, right?
And then you look inside that company, and it's 1996 again. Outside, it's 2016. Inside, it's 1996. And why 1996? That's the year when Outlook was launched by Microsoft, right?
And we're still carrying interdepartmental envelopes around. I still see them, by the way, in customer. You probably don't believe this, but I absolutely see interdepartmental envelopes. And there's paper forms inside of them. That's not 1996.
That's like 1976, right? The point is there is this incredible separation between how we operate on the inside versus how we operate on the outside. That's what's putting pressure on CIOs because it's becoming intolerable. You're just not going to hang on to your job. Young people coming into companies now, into the workforce, and they've never used e mail or they use e mail like once a week, right, because they use everything else and they come into the workplace.
And they've got to use e mail all day long, right? This is just backwards, right? So there's a lot of pressure on this whole equation, which is why we think we're well positioned. Now this is not just an issue in terms of wouldn't it be nice. It costs money, right?
There is an enormous productivity frontier, in other words, an enormous opportunity to boost productivity if we really get our heads around it. We did this research last year, and it showed that people, on average, were spending sort of 2 days a week doing stuff that has nothing to do with their jobs because it's so damn onerous just to get through the week being an employee doing the simplest things. And I can demonstrate that to you over and over again, but we won't spend the time on it. I don't know whether it's 2 days, but it's a huge amount of time. And why is the question, right?
We should just be a cloud like experience. Going to work shouldn't be like getting your driver's license renewed by the DMV, and we all know what that's like. We did some new research as well. I found this interesting. If you look at the external perimeter, the customer facing side, we're finding that, on average, about 84% of those interactions, those service experiences are actually highly automated through web interfaces, mobile and so on.
It's a high number, and you would expect that because I said earlier, right? This is where we feel the pressure. This is where the resources are going. But then we compare that to the inside, and the number is a lot smaller. And I actually think the 33% is heavily overstated, but this is the research, and this is what it says.
But we don't know. Web Interface sometimes does nothing more than just generate an e mail, right? So we're not really that far afield from where we used to be. So this is the gap that we're talking about. This is the opportunity that we collectively have to close that.
Now I said earlier, people don't like to change how they work. A lot of things have changed. I mean, you look at how we went from 11 in our desktop phones. I barely use my desktop phone. This is where all the solicitors go typically.
Smartphones, the most amazing thing that's happened in the last I don't know how long, right? Written communications, we don't do written communications anymore, right, because people are not even taught cursive anymore in school. They can only print or peck at a keyboard. So everything is typed now, which is fine, right? And then meetings, most meetings are virtual these days.
I can honestly tell you that ServiceNow, we almost never have a meeting where there's not one or more person that is not virtually piped in through telepresence or whatever method that we use. So incredible distance covered in terms of base technology. Now you think like, well, didn't this change how we work? To some degree, yes. But in the more fundamental way, really not, right?
You take your desk. Your desk went to a desktop. And from the desktop, it went to a laptop. And from the laptop, wherever it went, right? A lot of people just use phones these days, especially in developing countries.
Your file cabinet went to the cloud. This Very nice, by the way. You no longer have to have data on your systems. Very nice, by the way. You no longer have to have data on your systems.
Your inbox and your outbox is now in e mail. Your phone has been replaced with interactive chat. And then your clipboard is now in your Microsoft Office. We still refer to these things as slides. I don't know why.
I know there's nothing sliding here, but view graphs, we used to call them, remember, overhead projectors, right? They were very exciting technology back in the day. But the point is, it really hasn't changed. It's just technology is just making us do things easier and nicer. We fundamentally work in exactly the same way we always have, not just going back decades.
We're probably going back I don't know how many years. We have a hard time changing. Now I find it interesting that on the consumer side, when we see something good, we move through it with an incredible speed, like things like Uber. I mean, people have a hard time stopping Uber in cities and countries. Tesla, they want to buy Tesla.
Well, they can't do it in certain states, right? So when we see something good, Amazon was ridiculed for years years years, and now it's the single biggest retailer out there, right? So it is happening. But in the workplace, we struggle. Now we have some suggestions, and we're going to demonstrate that tomorrow on the main stage because there's one thing for me to tell you.
I'd rather show you. This is just simple things that are not revolutionary. They're very evolutionary that you can start doing today or tomorrow. It doesn't really all it requires is a change of mindset and really a desire to become much more deliberate and precise in how we work because truth be told, as we go through our workday, we sit on our inboxes, right? We are reactive, reflexive.
We spend a lot of day working on stuff we don't even know why we're working on because somebody pinged us and teed up the top, and I couldn't help myself and engage on it, right, versus being extremely focused and purposeful and precise on the stuff that you should be working on. And that's because we're people. We're very, very communal in the way we do things. It's kind of hard to ignore in e mail, though it gets easier as time goes on. One of the things that we do at ServiceNow, and this is what our subsystems enable, is to really reverse the flow of information.
Instead of you looking for information in reports or updates or meetings or wandering around, why isn't information finding you when you need to be found, when there is an event of sorts. Now you're like, that's actually not that new because that's what Amazon and FedEx already do, right? I mean, you can't call these guys when there's the package that moves from A to B. You get an update, great. You can't call them.
Don't call them. They don't let you know. There's no new information. There's no point in calling, right? And our workplace is going to move to the same place.
I will tell you that at the end of the quarter, the last 2 weeks of the quarter, maybe you're happy to know this, I monitor the last the top 20 transactions in our pipeline, but I'm not actively monitoring them. Any time a rep makes a change to the status of any one of those 20 transactions, I know about it 2 microseconds later. It's just kind of unnerving to the organization that it works that way, that that's what software does, right? The guy or the gal might be on the golf course and go, I'm going to push this deal out to Q3. Bang, 2 microseconds later, I know about it.
And here's the problem, right, because I also have the ability to immediately now engage with that person. I don't have to traverse my hierarchy anymore to go and find out who is this and who is the manager and all this kind of stuff, right? So the velocity goes way up, right? So subscription notification, the same thing is true when we have events. I have several episodes with our top customers.
I know about it instantaneously, right? So it really, really accelerates the cycles. So subscription notification, we are going to really try to make that a main mode of really doing work and how we do things in enterprises versus hanging on our inbox all day, see what shows up. This is we think it's going to become part of people's job description. I mean, you start a job, either your team or your manager will already decide what kind of events you're going to be notified of and how you're going to react to it.
The second thing is once I know about something, I want to have the ability to now have context because it's one thing for me to know, oh, they pushed this deal out. But unless I have the entire record there and I can see what the history is and there's descriptions, there's commentary, history is and there's descriptions, there's commentary, so I can sort of get my head around the whole situation, right, I need to have context. Otherwise, e mail starts again. Contact is really important. The second aspect of context is like, who are the people involved?
Who do I need to talk to? Now if you're a Popsicle stand, that's easy. You just know, right? You have an enterprise with 1,000 and 1,000 of people you don't know. And knowing who the right people are, this is where we spend most of our time in our organizations, just trying to find out who to talk to.
We traverse our organizations, and we lose all this time and we waste all this time doing this. So the ability to instantly connect and collaborate in context with the right people is a very, very powerful thing. And when you have systems like ours, all you have to do is really turn this on. You don't have to buy anything extra. You be disappointed to hear that, but they have it already.
It's just use it, right? And that's what this conference is about, is to give people a sense of, look, you can do so much more. So instant notifications and instant connection and collaboration is going to a big part of ServiceNow going forward. Now as these capabilities become accepted and adopted and used, people are going to drive way more services to our platform, right? It makes sense because now these kind of capabilities are going to drive demand for everything else that we're doing.
Now the third thing is, you've heard this from other people in the marketplace as well, this temporal spectrum is becoming a big deal. In the world of service management, we have a tendency to be very reactive. Something happens, an incident, a fall and I can't get up, and then we start reacting to the incident, to the event, and we move to resolution. It's very, very after the fact oriented. We want to move away from that.
Last year, we talked specifically like we got to move to real time, right, because the whole world is now real time. It's like there was a time where we watched the stock market with 20 minute delay. Who the hell does that these days, right? It's just a ridiculous thing. But we still spend a lot of time in enterprises watching data that's not real time, that's old, right?
And it's just not that interesting. At the end of the quarter, do you think I really want to look at data that's 6 hours old or 12 hours old? Makes no sense. A lot of our CIO customers say, look, what I want is I want to have my war room, I want to plaster it with panels, and I just want to see my business in action. I see the data life changing in front of my eyes, the numbers are changing, the graphs are changing.
That's what we want, right, the very, very specific vision around what that is, right? So enabling that with a system like this is absolutely possible. So moving from reactive to real time is a good step. But of course, where we want to go is to start acting on stuff before they actually happen. And when you have data, you can do that, right, because data becomes trends, and you have an opportunity to get in front of things.
When you're data rich, you can also predict where things are going to happen, right, back to the example of the recall in the automotive markets, right? Once you have 1, chances are there's going to be 2 and 3 and 10 and so on. It's the same thing in our world, right? That's how we really have to manage. And software is going to play a really, really big role in driving more energy and more focus in a predictive sense rather than just reacting to things after the fact.
So, changing the way things work, I drew this from right to left because to really emphasize the change in the direction to really become an event driven organization that responds to very precise things that are happening in the organization and getting reacted to by the right people and collaborated on by the right people. So we sort of get out of this mode of swimming in glue all the time, sort of accidentally running into information in this communal mode, right? But this is what we want to do, right? And the better we get at this sort of thing, the more services, the more applications we'll follow on our platform just because people have an opportunity to take advantage of this kind of capability. This is not a revolution.
This is a revolution in between people's ears, but it's not a revolution in software. These are things that are already possible today with the software that we ship. So with that, I am going to change the podium turn the podium over to Mike Scarpelli. He's going to take it down from my 90,000 feet to just above ground level. So thank you.
Frank.
And okay, we are a little bit behind, but I think we'll get back on track. So what I want to talk about today is how we are built for growth. I don't know why I did that. There we go. How we're built for growth.
Last year, we talked to you guys about we had a path to $4,000,000,000 in 2020. In 2015, we put in place a lot of the investments we needed to so that we could be built for this growth. And I want to talk about those investments, and then they're going to tie into some of the presentations you're going to be having later on. So the first thing we did in 2015, it actually started at the end of Q4 'fourteen, is we realigned our sales force. We realized that a lot of our commercial accounts were going neglected because we just had our salespeople focused on big accounts.
And so we segmented our sales force into a commercial organization and an enterprise organization. That is now over a year behind us. We're actually now into our 6th quarter with this. And we actually saw Q1 of 'fifteen to Q1 of 'sixteen. We saw 100% growth in our commercial business.
So we're very pleased with that. The other thing that we did in 2015, and Frank talked a little bit about it, is when we went into a GM structure with many products, each of the GMs, they have their dedicated product management, dedicated development. And with that, they also have their sales specialists and their SEs underneath them that work with the sales organization. These people, I want to stress, are not quota carrying salespeople. Don't think of it as an overlay sales organization.
These people are there to help our reps, who our reps sell everything, make them more productive. The other thing that we did in 20 15, and this is really important, we were not in line with the ideal target of 1 to 1 sales to SEs. By the end of 2015, we're pretty much at that 1 to 1 now, and we'll continue to add reps with SEs at the same pace. That was a big investment that we made. The other thing that was going on in investments, investments that we've made, investments our partners have made, we've invested very heavily in the partner ecosystem.
And you saw some big acquisitions with our partners making further investments. You saw Accenture buy Cloud Sherpas. You saw Fruition being acquired by CSC. And there's been some other smaller M and A within our partner ecosystem as well, too, that you guys haven't heard about. And we think that will continue as well, too.
And that's one of the reasons why we lowered our PS revenue because we're not there to compete with our partners. We would actually rather have our partners do all the implementation. We really just want to do the training. And as we roll out new products, we think we need to be the experts in rolling out those newer products. And once our partners get up to speed, we'd rather they do all those implementations.
So we'll talk more about that later. The other big investment that we made in 2015, and as of today, I think we have about 40 people in this organization, this is what we call our Inspire team. This Inspire team is a nonrevenue generating team of people that's within our sales organization. And these people are going into our big customers. These are a lot of these guys are ex CIOs, ex consultants.
And they're going in, and they're not they're showing customers what you can do on ServiceNow. And it's not putting more a modern system.
It's transforming the
way people are resonating very well within our customer base. And we think that's going to be one of our big drivers for our future growth. The other thing, the new products. We talked about ITOM in the past. ITOM with ServiceWatch with our Geneva release in Q4.
That's the first time it was on the platform. But we also invested very heavily in security, and Sean's going to come up here after, and customer service with our new product there, the Dave Stevens. So we think those three products are going to be some of the key products for driving that growth. Now we're reiterating our $4,000,000,000 revenue target in 2020. I just want point out a few things.
We now actually only need 18 new logos per quarter for G2K. If you remember last year, we said 20. We actually averaged last year 24 plus per quarter. We continue to grow that ACV 4% quarter over quarter. Our ACV right now within our G2K is 906.
I want to remind you guys, we do have 2 49 customers that are paying us north of 2,100,000 a year. Most of those are Global 2,000. So a lot of our Global 2,000 are actually paying us over $2,000,000 today. We continue to see that same mix of fifty-fifty revenue from the Global 2,000. And then other.
And I want to stress that other is not just commercial. There's a lot of other enterprise customers out there as well as the public sector that is a big piece of our business. And it's something that we're very focused on. So what does this mean? This means we have to do about 32% growth over between now on average between now 2020.
And we feel pretty confident about that where we sit here today. And we'll talk a little bit more about that in a minute. We feel we're still very much in the early innings of penetration within our Global 2,000 and penetration within just number of Global 2,000. But still within our G2K base, we are probably, on average, onethree penetrated only within our Global 2,000. We've been saying that for quite some time, and we still feel that way.
And especially as we come up with more and more products, there's more opportunity within them. North America, we are a little bit more heavier being very promising for us right now is Asia Pacific. We talked about last year, we started doing some investments in China. We said that's a 2 year period before we're going to start to see anything there. But Japan, we're starting to see Japan pay off for us.
So we're very happy about the investments we've been making internationally. And we will continue to add people around the world in our sales organization. But the most the upsells is still the biggest piece of our business going forward. We have such a big installed base of customers. And you can see how the ACV growth has grown here I talked about.
Our customer base is the most important thing that we need to continue to protect. If we renew customers, they buy more. How do we know that? History. This is something we're very proud of.
And we are very different than most SaaS companies. When we land a deal, we don't license everyone in the organization. As we roll out new products, it's a new sales opportunity within our customers. What this slide is showing you from where we are today, this is our cohort analysis showing that on average since 2010, the bottom, our customers have bought 70% every year of their initial purchase. And you can see that was up from 60% in the prior year.
I don't think you can find another SaaS company who can show you this. So we're very, very proud. And this is not revenue. This is just how their ACV has grown year over year. And we're addressing a very big market.
This is just updating our market opportunity. We added about $13,000,000,000 here. And the big drivers of that are coming from customer service, dollars 4,000,000,000 I know Frank said Salesforce talks about $12,000,000,000 Just a different source. This is coming out of Gartner is where the $9,000,000,000 And the other thing, security operations, that's a $4,000,000,000 plus market. I think people really I think that could actually probably be bigger.
We don't know. It's still very much in the early innings. But the point here is we and by the way, we have product to address all of these areas today. We are addressing $60,000,000,000 market here. This is not aspirational with products that we think we're going to come out.
We have these products today. So I want to talk about our organization structure. And this is an important thing to get across because when people talk about the sales reps we're adding, they all think those sales reps are going to drive new customers, new logos. It's not that. When we add sales reps, we add them in 2 areas.
We add our sales reps into managing our existing accounts. You don't just sign a Global 2,000 account and then spend no time with them and they just renew. That's the farthest thing from the truth. You still have to continue to sell to them to make sure they're going to do the renewal but to make sure they're going to buy more. So we segment our salespeople 4 ways: new logos, commercial, enterprise existing accounts, commercial, enterprise.
That's how our sales rep structure is. And then this is how we have our GM set up right now. We have service management. Actually, Dave Stevens is going to come up and talk about well that ties in with customer service. ITOM, HR, security, GRC, service strategy, performance analytics.
Service strategy is it's a bundle of our project and portfolio financial management. There's a couple other things in there as well, too. And then the core thing here is everything sits on top of the platform. I know if some people are taking pictures. This will be posted, by the way, online right after we finish here today.
So one of the things here that I want to stress is, and Frank talked a little bit about it, you can see the shift, and it's paying off our strategy. Q1 of 'fifteen, 11% of our business was coming from other, 7% from ITOM. This is new ACV we're talking here, not revenue. A year later now, we're getting 16% from other and 16% from ITOM. That doesn't mean our service management business isn't growing.
It just means these other ones are growing faster, remember, as well, too. You can't just look at the net new ACV. You need to look at the renewal. If you look at that renewal, what we're doing, our total ACV we're signing, of course, service management is still by far the biggest. But this shift is what we were expecting, and we're very pleased with the introduction of new products and expect to see this continue.
The other really interesting thing, too, in 2016 or 'fifteen, 16 of our top 20 deals, these are our 20 largest deals we signed in the quarter, had 3 plus products that were included in there. And that's what's really driving that shift to our other businesses as we move forward. Very pleased with that. The other thing that you can see, too, is the mix of multiproduct customers is increasing. In Q1 of 'sixteen, 67% of our customers that we have have bought more than one product.
They've bought multiple products. That's up from 35% 2 years ago. And we think that will continue. And that's what I talked about. That installed base of customers is so important because once we land them, we expand them, and they expand rather quickly.
The other thing a lot of people have been asking about is and I strongly suggest when you guys are in the Partner Exhibition Hall, most of our integration partners will be down there, and you can talk to them or Jack will be up here from Accenture. People have been asking, how do you measure success within the system integrators? How do you know they're making the investments? And one of the things that we've looked at is we've seen, okay, what's the number of certified implementation partners? And you can see the number of certified implementation partners is continuing to increase.
We now have, as of the end of Q1, 1867 certified implementation people around ServiceNow. That continues to grow. That's up 40 that's 174 partners that have over almost 1900 people. That's up 46% year over year, that 174. And our average growth of top 5 partners is 64% year over year.
And that does not that's normalized for the acquisitions by CSC and Accenture. This is also the big reason why we're forecasting that shift of our PS business to our partners away from us. The other thing, and this is kind of we're still working on a little bit better metrics, but I can say that roughly this is a self reported number roughly 40% of our new business is somehow influenced by a partner. And just as a reminder, most of our business, we sell direct. Very little of our business is actually sold through the channel.
We do pay referral fees to our partners. Now we spent a lot of time looking at our longer term target, and I'm going to talk more about kind of how this is going to scale over time in a minute. But one of the things we've done is we have increased our subscription gross margin for the time being here to 84% to 86%, up from 83% to 85%. We did take our PS margin down 1% because of that business shifting more over to our partners. We're not changing the operating margin 28% to 30%.
This is our 2020 on our $4,000,000,000 But we have added right now, and this is new, free cash flow margin. As a reminder, we did do we are guiding for 22% in Q2 of 'sixteen, and our longer term is 30% to 32%. Now how do we get there? So we spent a lot of time looking at this, and there's different ways to look at it. This year, based upon our guidance, we're growing 37%.
So that puts us in the high growth. So expect that we're going to increase our operating margin 2% to 3% per year, and we're growing north of 35%. But free cash flow margin, because we're having to invest a lot back into the business, is only going to expand about 0% to 1% per year. If we have kind of that still quite substantial growth, that 30% to 35%, you can see 3% to 4% operating margin expansion year over year, another 1% to 2% increase in free cash flow margin. If for some reason we're not seeing the growth opportunity, we'll slow down our investments.
And if we're at that moderate growth, which is less than 30%, you can see we'll drop more to the operating margin and more to the free cash flow margin. But we do think, on average, we're going to kind of be in that middle bucket between now 2020. And that's how you get to our longer term target. The other thing, and this is something that we're really proud about, is if you look at our revenue growth plus our free cash flow margin and add those together, we're at 61%. We looked at all other SaaS companies out there, and we have the best combination of SaaS growth and profitability.
This is just pure play SaaS companies. There's no one close to us. And that's a pretty compelling story, we think, for ServiceNow. I know a lot of you have seen this and have kind of actually commented on this to us. This is why we kind of put this together.
And with that, I'm going to turn it back over to Dominic, and then I'll be up after for Q and A. And I did rush through this a bit so we can get back on track. We're only about 10 minutes behind now, okay?
Great. Thanks, Mike. So as I mentioned earlier, Frank and Mike will both come back at the end and do Q and A. One of the things that Mike touched on in his presentation and something that we've really been focused on during our last few earnings calls is this additional investments we're making in our partner ecosystem. So our next speaker is Jack Seppel, Group Technology Office for Accenture Operations and Senior Managing Director for Accenture Cloud.
Jack leads a team focused on helping clients plan, implement and manage cloud services, including infrastructure, platform software and business process as a service. This includes the Accenture Cloud Platform that centralizes the procurement, provisioning, management and governance of enterprise cloud resources. So Jack is going to spend about 20 minutes with you guys going through his prepared remarks, and then I'll come back up and we'll do about 10 minutes of Q and A.
Fantastic. Thank you, and good morning, and thanks for giving me the opportunity to be here. I'll spend the day kind of discussing our view on ServiceNow and how, as a partner, we're very excited about our relationship. I was here, I guess, a little over 2 years ago having a discussion about the way Accenture looked at the market. And the way that we were looking at the market at the time was we're talking about, basically an architecture around cloud that was moving to as a service and the typical plug in compatible, scale, etcetera.
2 years later, I'm very, very pleased to basically share with you that we're seeing the market turn pretty significantly towards this construct, whether that's financially or that's technically. So as we look at it as a firm, we are investing more and more. And I'll get a little bit more into that in a moment. What I'd like to talk about briefly before I get into our ServiceNow relationship is kind of how we've changed ourselves to address this. So if you look at, Accenture Operations, you can see kind of a stack of capabilities that we've put together into 1 organization from infrastructure through security to cloud to applications and business process.
And the reason why we did that was so that we could look at our customers and say, how do we drive a business outcome end to end versus being at a horizontal perspective? Our intent basically is to go to our customers and say, how can we get in with you on, I'll call it, a very small, easy way to engage, prove to you the capabilities and then expand based on the results that you're getting? As we look at this, some key things come out. 1st is around analytics. Like Frank mentioned earlier, I think analytics are key to both enabling automation, first second, to enabling prediction, so we can actually do a proactive way of actually addressing our customers' needs.
So we embed that within all of our solutions. Second thing is around automation, and it's about actually managing that automation over and over again and ensuring that we actually leverage and releverage across both our capabilities or our technology, but also our clients. All of this is supported by what I would call innovation. So one of the big shifts I've seen in the last two years is there's a lot of talk, especially around cloud at the time, about how do you save money. So how does the CIO save money, right?
That has shifted much more into how do you innovate. So how do I actually take savings out of things that I would describe as more commodity based, turning that around and saying, how do I get into a new business model? How do I create new revenue? How do I actually change processes, if you will, right, so I can have people working on new and different things? And in fact, in Accenture, we're doing that explicitly with our people.
We have about 5,000 business advisors whose work is actually up at that top level there in business process, whether that's your finance and accounting processes, whether that's your HR processes, but your procurement processes. Instead of them taking, I'll call it, forms and typing them into a spreadsheet that can be technically used later on, we're now automating that so they can become advisors. So they actually look at the analytics and describe how to better improve the process. So if you think about how the world is changing and how we're talking services now being proactive, that's what we're trying to drive to. The second thing around our people is mostly around cloud, right?
So at this point, we've got about 21,000 people who are trained and experienced in cloud solutions, including and I'll get into more detail on ServiceNow, how many of them are aligned to that. But the point is, is that we're driving that. 3rd, security. If you guys didn't see it, we've just, our security capabilities broadly across the world, whether that comes down to threat and vulnerability or it comes down to actually being SIEM, SIEM, but not SIAM, so that you can actually proactively look at your attacks and then respond to them.
So I'm going to move
on to Cloud now. If you guys aren't aware, we're a as of FY 'fifteen, we announced a $3,500,000,000 business in cloud for Accenture. Some things that we think are important as we're shifting into a more mature and I will emphasize that more mature cloud framework is, if you look at the chart, we truly believe that public cloud first
is the way that
most of our clients need to think as they get into their next generation of either development or actually looking at their legacy estate. That's not to say that everything is public cloud, but we do believe that the maturity and the capabilities have gotten to the level that you have to look at it. And in fact, if anything, I would say it's actually the fact that the processes, right, the policies, the service catalog approach is important to take from public cloud and eventually bring it back into the enterprise itself. Second thing is, around public cloud, is that security is not a technical issue any longer, right? There's been a lot of maturity in capabilities.
Our friends here at ServiceNow have obviously just gotten into the game as far as offering things, but the platform itself is also secure. The things that still prohibit us in some especially some localities is around regulations. And even there, we're seeing most providers, including ServiceNow, work with those regulators to actually get either accredited, right, or actually negotiate with them on what type of data actually can be moved into a public cloud. So again, when I talk to CIOs and CTOs, I definitely push, very much push, public cloud first, if you will, for them. 3rd area that we focus a lot of time on is private cloud.
There's been a lot of implementations of private cloud over the last few years. I would say the expectations of what private cloud would provide a lot of our customers did not get where they wanted to be. I don't think that's because necessarily a technology issue. I think that's mostly because of an operating model and implementation point of view. So again, have you implemented the policies?
Have you implemented the automation?
Have you implemented the, I'll
call it, self help capabilities for your customers as a CIO out to the rest of the organization? So we actually believe there will be a lot of work in that area over the next couple of years just because it's already sunk costs and how do you improve your operations itself. The last thing I'd like to talk about on this page is really what we call journey to cloud. As I talk to our Global 2,000 customers, very few of them, right, actually will be the exact same journey. They've got different privacy requirements.
They've got different, I'll call it, sunk costs that they've got. And actually, having a plan is extremely important. And it's not just important because of the plan of going to cloud and actually taking advantage of the newer capabilities. It's actually important as much because of the skills and the talent of the people that are actually in the operations, right? It is a new and different way of thinking.
And in fact, what's interesting is, as much as cloud is standard and has standard capabilities as standard platforms, we actually predict that we'll see more customization occurring, right, because of the PaaS platforms because you can. Now, there'll be standard customization, so you can actually control it. But the fact of the matter is we're going to look for more designers as we get into the microservices and DevOps. Okay. So let's shift gears a little bit and go into our relationship with ServiceNow and how it's matured over the last, really, almost 8, 9 years.
First thing, and I may have mentioned this 2 years ago, but Accenture was very involved in the definition of ITIL and service management. So the background that we come from is actually that definition. Cloud Sherpas, who got engaged with ServiceNow very early, around 2,009, became an early partner. I would describe the kind of 2011 is when Accenture started seeing some of our global customers showing interest in ServiceNow and actually deploying it in bigger and broader capabilities, mostly around ITSM. And at that time, we started to form the initial relationship.
From there, what I'd say is, over the next couple of years, what we really did was we actually focused on a few things, right? 1, we started scaling up our accreditations and training. 2, we started building methodologies around ServiceNow and implementations so that we could actually implement in a quality manner, in a predictable manner, if you will. And third, we actually started working on offers, so things around the ServiceNow that we thought would be almost an accelerator for our customers to say, this is how you could use this. Examples of that early on were things like adding modules around key management if you're in the IT operations area.
All of that really escalated probably in the last 2 years. We've been putting significant investments into ServiceNow and growing our overall space to the point where we decided last year to acquire Cloud Sherpas. So our view, my view, Accenture's view is that ServiceNow is a growing business that we needed to be part of that ecosystem. So the purchase of Cloud Sherpas was actually to, I would say, elevate our game, especially around technology implementation, as we look at the Global 2000. So where are we?
There's a few things I'll highlight from the slide that we're very proud of. First off is the number of projects that have been implemented to date, so 150 plus just by Accenture with ServiceNow. Second thing and I think we'll see this, I think, maybe happening at the same time, we are now the largest accredited ServiceNow provider. So as far as broadly training ourselves, if you will, we're very pleased to say we're now 1, which is what we'd like to be in this area. 3rd thing, training, training itself and providing training on ServiceNow.
We are the dominant trainer of others as far as ServiceNow. In fact, we spent the weekend I was with our team last night over at the Irish Pub after they spent the weekend training a lot of folks who were here for the conference. So very, very pleased with that. The client satisfaction at 9.0, we're very, very happy about that. And the last thing I'll point out is we actually do have 2 applications out on the Application Store.
And I'll talk a bit more about what else we're doing around improving and actually extending our offerings. So how does Accenture look at ServiceNow and how we go to market, right? First thing, we are both a professional services and consulting business, so we'll implement ServiceNow for our customers. 2nd, we're also a managed services business. So we'll operate for our customers or utilize the platform, if you will, at the same time.
We are always focused, as I mentioned earlier, on business outcomes, so getting to our customers what they want out of the implementation, 1st and foremost, right, and aligning our approach and basically our, a lot of times, our financials to make that happen. But like Frank mentioned earlier, IT Service Management is probably where we started. We spend a lot of our time there. We're seeing a lot of extensions into ITOM. A lot of our early customers are now moving into especially moving up almost, call it, the CMDB path so they can actually start doing application monitoring in a better manner.
They can start getting predictive. They can actually start seeing, I'll say, trends, if you will. It's very interesting, especially as you start looking at more and more public cloud, how the view of how to manage this in a state, in the service management, has gone from, hey, I've got a fixed something that I'm managing, and every once in a while, I have an alert that I have to take care of, to something where you actually want to know the trending and how it's used. So the one thing that I think is a huge change that's occurring beyond service management, just the fact that it's getting broader, is that, really what the management of an estate is becoming on the bottom IT side is more about capacity management and making sure that you're utilizing things in the best way that you can from a utilization perspective versus necessarily just keeping it up. And I think that's a big change in mind shift for both ourselves and for our customers.
On the right side, because I'm now part of our I'm basically GTO, which means CTO of our operations group, As we look at some of the processes that we do, which are more around F and A, around HR, around marketing, etcetera, we see that as an advantage that we have to take advantage of. So I'll talk a bit about some of the things that we are doing in HR specifically, And I'll talk about how we're actually enabling a lot of these processes internally ourselves with the platform. So a few client successes we've had over the last couple of years. First one, and I'm going to do this just like I just did, which is kind of starting with ITSM, moving to ITOM and more of a business flavor. On the left side, a global mining company.
We had the pleasure, if you will, of helping them implement a ITSM base, so problem change incident, but also enabling it with self-service portals, allowing our customers, if you will, to take care of themselves, getting executive reporting. Just like Frank mentioned earlier, how do I know what is happening within my entire estate? And again, global company. 2nd one was around legal services. This is where you start using the platform itself, actually, to start managing research.
So Frank, I like your chart with the mail and how do we use mail in the future and how we make sure that we're subscribing versus necessarily getting mail. Well, this law firm actually had been utilizing email to do significant research for cases. And as you'd imagine, that was managed in a way that you didn't know what was important or prioritized. You didn't know how important it was to a case. So we actually leveraged the ServiceNow platform to create almost a workflow, if you will, with priorities so that folks could actually say, Okay, these are the priority cases and the priority research I have to do, so people knew what to do when.
So again, very important as far as moving up that stack of being business enabled versus necessarily just technology enabled. And the last one is actually just as interesting, if not more. We're actually in the process of doing an entire HR transformation for a large global client. They are using another of the as a service platforms or SaaS platforms to actually be the I'll call it the HR engine. We're actually wrapping around that engine, ServiceNow, to do things around case management, the actual portal.
So what's the system of engagement, as you mentioned, right, versus the system of record, but again, on top of an existing SaaS platform. So this isn't over top of a legacy platform that's sitting out there. Okay. I'll change focus yet again. So Accenture is also now a customer of ServiceNow.
And we're doing this in really 3 distinct phases. First one is around enabling Accenture. So our CIO is utilizing ServiceNow, if you will, to do our IT service management and our ITOM for our 380,000 employees. It provides self-service portals. And you can imagine, with the size and breadth of our employee base, it's extremely important that we actually are engaging in a self help type of aspect versus not.
So again, we are utilizing ServiceNow itself for ourselves to be successful. 2nd, as we think of managed services and we work with our customers, whether that's around application outsourcing or infrastructure outsourcing, some of our customers have their own tools, but a lot of them now are coming to us saying, Hey, do you have an as a service model that you can utilize bringing your set of tools? And ServiceNow is actually embedded in our tool set to take to our customers. So again, taking our methods, our processes, our automations and helping from ServiceNow to ensure that that's enabled for them, our portals, if you will, so our customers can use them. So we can stand them up quickly, scale up and scale down as their businesses change as well.
Finally, about enabling our business processes ourselves. So again, I mentioned we do HR. We do marketing. We do F and A. We do procurement.
And what we found is that, again, all of those have processes. They have processes that can be automated and standardized. So what we're doing is we're actually leveraging ServiceNow to be our orchestration layer, our workflow management layer, to help our folks ensure that we have consistency and quality because, again, one of the big benefits of automation is auditability, is actually being able to go back and see what folks have done. And I can tell you, our customers appreciate that. So again, we're leveraging ServiceNow to help us drive those changes for our customers within our own offerings or Accenture's own offerings.
So again, you can see that same service management layer that Frank mentioned earlier coming across all parts of our business itself. Okay. So with that, where do we see the road ahead for Accenture and ServiceNow? We firmly believe that as a service is growing and will continue to grow at an exponential growth rate, That cloud is actually an enabler of that. The digital evolution or revolution that's occurring is going to make our customers change the way they interact with their own customers but also with the devices, the 1,000,000 and billions of devices that we expect.
We will continue to scale our talent and our methodologies. At this point, we've got over 1,000 people trained in ServiceNow. I can see that changing or, say, increasing significantly this coming year based on the pipeline that we have and what we've been doing. We'll continue to build, I'd almost call, enablers for our customers. And in fact, one of the things that you'll see in about 3 weeks is we're going to have a new offering around industry with I'll call it, a quick and quality way.
I still do have a I'll call it, a quick and quality way. I still do believe we're going to lead around ITS 7i, Tom, much like I think you've heard this morning as we're a lead. I do see a lot of shift now into ITOM, again, as cloud cloud, to me, starts putting things together. So you want to have a top to bottom and a real time capability. So I see ITOM becoming more and more important to our customers and to ourselves.
And then finally, business service management. I do expect more and more to see that whether it is the old ERP, the old CRM coming together, How do we manage this in a more end to end way? And actually, that service management blend or edge on top is going to be important for us to be successful. So that's where Accenture is going to spend our time with ServiceNow. I'm very excited, actually, about our growth rate in the past, but I'm actually more excited about our growth rate than I expect the next couple of years.
So with that.
So we're going to spend about 10 minutes doing Q and A. If you have a question for Jack, please raise your hand. We'll have mic runners come find you. I'm just going to kick off with a question while they make their way out there. So ServiceNow has built a number of very broad based applications for 3,000 plus customers.
Can you talk a little bit more about the opportunity that Accenture sees in building verticalized specific applications on top of the ServiceNow platform?
Yes. So, again, we'll announce an industry framework in about 3 weeks around retail. So we do believe that there are specifics around industries because Accenture, as a go to market broadly, is aligned to industries. So we do see the service management engagement model being more and more important per industry itself. So that's kind of the first thing I would reference.
The second is, as you look at horizontals, I do we do expect a revolution, if you will, in business process management in the future. And again, seeing the service management model of ServiceNow being the, I'll call it, the enabler of that versus having to find distinct solutions. So I think it's going to be important for us to ensure that, this is as far as Accenture. I expect us to have industry and business process enablement over the next 18, 24 months.
Great. Other questions for Jack?
Walter Pritchard from Citi. So you closed your presentation there talking about
sort
of CRM and service management coming together. And you have a large sales force practice and you have a large ServiceNow practice, I'm guessing larger sales force because they are a bigger company. So you are a strategic advisor to a company, they bring you in and ask you, Jack, do we have the Salesforce view of the world, the ServiceNow view of the world? How do you reconcile the overlap there? And what are you seeing in these early stages?
I'm imagining not that many engagements, but a few at this point.
Yes. So a few things I'll address with the answer. First is, as I mentioned kind of, as I talked about, our view on cloud. This journey to cloud is becoming more and more important. As you can imagine, all the ecosystem is coming a little bit more together, if you will.
So one of the things that we're focusing on is, obviously, as the business value driver, is ensuring we have the enterprise architects to help our customers decide which way they want to go. 2nd, you're right, I'm not seeing a lot of conflict just yet. I do expect to see some now. What's interesting is, in the HR space, it really wasn't as much conflict as you would expect. It was more wraparound.
I think, as we get into more and more of the conflict, though, I think our customers are going to have to decide based on what is it that motivates them. Sometimes, it's about capability. Sometimes, it's about speed and flexibility. And certainly, one of the advantages I do see that ServiceNow has as a platform is that speed and ease of, I almost say, customizing something to make something work quickly.
Karl Keirstead at Deutsche Bank. Jack, this question isn't so specific about ServiceNow, just more on the cloud in general. But you mentioned in your comments that you said that you think the private cloud hasn't really met expectations in your customer base and hence there's a pivot more to the public cloud. Can you elaborate on what you mean
by that? A lot of
large cap tech companies are placing a pretty big bet on private cloud. So I'd be curious what you mean.
Yes. The comment is really about have they actually changed and gotten the results, usually the savings they expected out of it. And again, a lot of that has to do with how much you're actually being policy driven, self help driven and changing your operating model to make it better. So a lot of our customers have implemented private clouds, and they haven't changed the way they actually work. So, it's actually been an update.
There's some automation. But in reality, if I think in terms of the public cloud, as I look around managed services myself as a provider, right, I don't have as many folks that have to worry about storage. I don't think I have as many people worried about a particular style of server. That becomes something that is kind of automated or commoditized. Instead, I'm spending my time up in enterprise architecture or I'm creating new capabilities.
And that's what I'm talking about. I think a lot of our customers still have a lot of folks that are still down in those, I'll call it, the weeds, that you don't need any more with automation. Again, I'm not saying that, technically private cloud can't help with that, but right now a lot is changing the organization to take advantage of it.
Thanks. Kirk Materne, Evercore ISI. Just a question on your managed service business. You mentioned that clients will either bring their own tools to you or you can offer them up to them. Where are we in terms of where the clients are in terms of moving to cloud, meaning if we're thinking about using older ITSM technologies or older ITOM technologies?
Are we even close to the halfway point in terms of those companies moving over and looking at ServiceNow? Just trying to get a sense of where you think we are in these?
Yes. My sense of where we are with this transformation is, if we want to use a baseball analogy, maybe we're in the 2nd inning at a 9. So we are at the early stages. We've got aggressive customers who want to go a certain way that are there, obviously. But I think there's a reskilling, if you will, of approach because, again, ITIL, right, again, I think works for a lot of what I almost call specific asset management.
We helped ITIL update to be around cloud. And you think in terms of real self help, and I'm going to just give you an example. If you think in terms of incident management, problem management, especially change management, are we really going to have the same change control board, look at every change that happens on a self-service portal? The answer is no. So all of that has to change your operating model.
So from an Accenture perspective, we see a lot of work now in helping coach our customers on how that model is going to change, which also impacts the private cloud too.
It's Brent Thill with UBS.
When you look
at your cloud practice, when you look at incremental new resources, where would you put ServiceNow versus the other vendors you're working with in terms of incremental resources? Are they among the top three resources going towards or
Yes.
I would say in the top, not to get too specific, but let's say the top 5 because when I talk about it top to bottom, it could be Amazon, it could be Google, it could be Salesforce, it could be ServiceNow, but top 5 across everything that we're working across, yes.
And when you look at the new products that they've launched, is there anything that's caught your eye in terms of what customers are asking that you're having to staff up? What 1 or 2 products jump out at you?
Well, certainly, the reemergence of ServiceWatch. So again, some of the CMDB stuff, I see a lot of more interest in the last especially the last year and a half. And what's interesting about that for me is that, again, if you think of cloud mentality, it actually increases, I guess, you'd say, what we're actually monitoring. And it actually makes things enabled more for automation. So a lot of them, at least in the IT space, are there.
Certainly, around business services, we're much more interested in the case management and the orchestration flow, if you will, of what's happening. This
is Keith Weiss from Morgan Stanley. Thank you very much for joining us this morning. And you just spoke a little bit about vertical frameworks that you guys are starting to build out around ServiceNow. How much are you guys utilizing the platform? You talked about 2 applications that you rolled out.
But when you are going into customer engagements, are you doing a lot of customer development for those end customers to sort of build out vertical functionality? Or does that development not take place or does it take place somewhere else? How tightly integrated into the value
I view ServiceNow as a platform as being an ability to create on top of. So those are the customizations I'm talking about. So I'm not talking in terms of you go off and code something over here and then embed it. It's more do it on the platform. So I expect that to grow in amount of work over time.
Certainly, most of it is still back in ITSM and ITOM, but I see more and more of our customers asking for extensions, if you will, and specific extensions and how we make that happen.
Thank you.
Hi, Kashuram, going to be Avindra. I was curious what has been the growth rate of your resources dedicated to ServiceNow in the past 12 months? And how do you anticipate that in the next year? And second part of the question, as you look at your pipeline of potential new business, what percentage is ITOM and Service Management? And how is that shifting versus last year?
Thank you.
So I probably can't give you explicits just because, obviously, I'll probably give you yes, they're actually growing at, I would say, faster than I see the cloud market, just to give you a broad perspective. And I see that escalating into the next year. 2nd, as far as the percentage of work, if you will, it's actually pretty close to what Frank mentioned earlier. So I'd say kind of the percentages that he's seeing broadly are sort of the percentages we're seeing. And I know he's going to kind of fifty-fifty over the next few years.
Because we're more of an industry business driven business, I may see that actually get higher over time.
We have time for one more question.
Say it again?
Cloud Industry. I'm going to defer on that one because I don't want to say something I'm not sure of.
Last question.
This is Jonathan Curtis from Franklin. Can you talk a little bit about, 1, what percentage of your partners are enabled to have a conversation with customers about ServiceNow? And then this is a category that is sort of amorphous and big. How did just walk us through the process of engaging with a client and how do you get them to ServiceNow being a part of a solution when the conversation starts and probably IT or customer service management, just how do you get them to knowing that this is a solution?
There's a couple of different ways. So first off, from an organization perspective, we have an organization called Cloud First, which basically is that 21,000 people I'm talking about, which includes basically all of our architects. So think of them as being not just the technology and the process but a sales support function. Our go to market is actually based on our OGs, which is by industry. So that's how we get in, but think of it as bringing in the expert to have the right discussion.
As far as what's the client engagement, it can go a couple of different ways. Obviously, with a CIO or a CTO, it tends to actually start more on the ITSM Itom model, right, proving out that it can work, show them how extensions can occur. And eventually, sometimes, they get asked for, hey, our customer is asking us for something. Well, how could this potentially be leveraged to provide that for them, right? So it's almost a, call it a demonstration of a demo.
It could be anything from legal, etcetera, to show them how to do it. And they'll go, Oh, okay, well, this is interesting. We can go up swim upstream, if you will. More on the business side, it's actually the opposite, right? The HRO is sitting there saying, Hey, I want HR Transformation.
What we're going to come with today is say, Hey, here's a SaaS model, but here's what we think your portal and your workflow model should be together. So we have an architecture that we built together for it. So it just depends on who the buyer is.
Great.
Thank you very much, Jack.
Thank
you. Thank you. Yes.
So our next speaker is Dave Shekelman, CIO of Oshkosh, a leading designer and builder of specialty trucks, military vehicles, truck bodies and access equipment. Dave oversees all aspects of IT and his organization is leading the shared services transformation for the entire company. So again, Dave will come up here, 20 minutes of prepared remarks and then we'll do 10 minutes of Q and A.
Thank you. Good morning. All right, let's start again. Good morning.
Good morning.
Thank you. Thank you. And thank you to the ServiceNow organization for having me. For this to work, and the reason that I'm here, I want to be very clear with everybody is I'm not a shareholder of ServiceNow, right? I am a customer.
I represent Oshkosh Corporation. And first, I want to take a quick poll. How many people think we make baby clothes? Way too many, okay? All right.
We don't make baby clothes. I'll tell you that in a minute. But first, I want to connect with you, right? Because I have a story to tell you. And I've heard that Dominic said I could have up to 4 hours to tell it.
Is that right? Yes. Okay, good. 5, whatever I want. Good.
The reason that I with other folks tomorrow, is my fanaticism, right, for connecting with people is matched by ServiceNow's fanaticism for simplicity, right? They had me. It's simple. There's an old law, a razor really, Hockam's razor. The simplest answer must be the right one, right?
And in every case where you could turn right or left, left is complex, right is simple, ServiceNow continues to on a path forward, which is very virtuous. Let's go simple. Well, simple is hard. Simple is difficult. Why?
Because people complicate things. That's our nature. And in IT, we do it all the time. That's what makes us unique, right? So when I talk to folks, I'm probably the least IT ish CIO.
Most people think I'm from HR, and that's not a bad thing. I like my friends in HR. But I came up through the ranks in IT for I've been at the same company for 21 years. I've been in my role for 5.5 as a CIO, and I've been in the business for 12 of those years. So I've been down in the nuts and bolts.
When I started at this company, there were 23 IT people in our whole entire Christmas party fit in one little dockside bungalow in Oshkosh, Wisconsin. And we are now over 700 people in IT around the globe. And I think our story is unique. We are a very professional organization of 15 companies kind of pushed together, operating in 4 segments around the world on multiple continents, and we've come probably the farthest of any company in a very, very short time. We could have been the most difficult implementation of I agree with everything that's been said this morning, but I'm very proud of what my team has done and I'm very thankful for what ServiceNow and Fruition Partners has helped us do.
So to get started, we actually make vehicles, right? We don't make baby clothes. Oshkosh Corporation is headquartered in Oshkosh, Wisconsin. We're going to celebrate our 100th anniversary next year in 2017. We actually patented the 4 wheel drive and getting very proud of that, very happy with that.
When I started, it was 1 company, dollars 400,000,000 in sales. It's now fluctuate between $6,000,000,000 and over $9,000,000,000 in sales. We just won the GLTV contract with the Department of Defense to replace the Humvees for the Army and for the Marines, which will be huge, huge for us. We're over 13,000 employees who operate around the globe. We make boons that carry people up 185 feet.
We make residential and airport fire trucks. If you go to fly to China, the fire truck that rolls out on the runway is likely ours, right, all around the world. We make a leader in compressed natural gas for fueling garbage trucks. We do an incredible amount of engineering. We have stories wonderful stories of taking patents from one industry and applying it to another.
We have a great story. Years ago, a gentleman was driving a snowplow through the Straits within the Rockies. An avalanche hit his snowplow, tumbled over 800 feet down a steep embankment. But because of the patents that we had cross applied from the military applications, the minute the gyroscopes figured that out, it cut the engine. It deflated his seat and pulled him into a cockpit formation, filled the cab.
And as he tumbled over 800 feet almost straight down a cliff, he was able to unrelease himself, get out and call his wife, right? Because we do that's just what we do. We keep it simple. And in an organization filled with engineers and IT folks, that's not easy, right? And as an IT organization working across these companies, I sat down 5 plus years ago with the new CEO at the time.
He took over the same week I did. We had a long history together, 16 years at that time. And this is what I heard on the left. This was my mission. This is what I took away for our mission.
He said, there's 2 guys talking. We've known each other forever. He said you're going to take over IT. I want to put Oshkosh together. I want one language for Oshkosh Corporation.
I'd like you to combine the IT groups across the 15 companies plus to establish shared services and be a leader for within the shared services arena. I'd like you to maturity your function and be a great example. But I had constraints, right? There a lot of constraints. And I just want to pause and say, IT in Heavy Manufacturing, I try to stay humble, but I'm pretty proud about this.
It's tough. IT in Heavy Manufacturing is tough. They don't really need us to push these big we make large vehicles that happen to have wheels on them, large industrial machines. We are not high rate production like a Chrysler, Volvo, etcetera. We make really complex things, right, huge barriers of entry into our markets.
So we as a result, all very different cultures. So I had to figure out how to bring all these groups together into one organization. And to do that, here's what we did, right? We set the tone and expectation for change. I told everybody, Get ready for change, it's coming, but not yet.
Why? Because I needed a leadership team. We didn't know how to do these things yet. It was unfair of me to ask when they didn't have the experience for the training. And frankly, I didn't either.
So I went out and hired a very seasoned team, right? And we together, we established a vision. We couldn't do it yet. We sparked hope, right, and inspired faith because I couldn't have a mass defection of all of those IT folks that had gotten us to where we were, right? And but faith without works is dead, so we had to deliver.
And we did. We made as many changes as we could. We stabilized the systems. We got everything simple. We got a common language.
We did all the things that we could, but we were still lacking the spark. We didn't have the right partner, we didn't have the right services leader, and we didn't have the right software. We tried to do ITIL on our own in a very academic sense. We chose a partner. We went down a path.
We started implementing. It just wasn't working, right? And I waited 3 years. I had a rec open for 3 years to hire a services leader. And very glad that I did.
He's here today actually on a panel of small panel of customers doing some product reviews with ServiceNow, very sharp guy. But he introduced us to Friction Partners and reawakened a review that we had done earlier, and we changed course. We went back from we stopped what we were doing, wrote off the asset, and we moved to ServiceNow. And since then, we've accomplished in 9 months what would have taken a 5 year plan. Right?
Right? Focus on the customer experience. You talked about it. And you saw it today. Evidence of this as you walk in, how many people holding signs.
How simple is that, right? It's so simple. But without it, you wouldn't know where to go. Everything is designed around the experience that you had to get in here today to get the right story told to you so you understand and access to people who can answer those questions. They think through everything to make it simple as opposed to dragging you into the past of an old style conference where it's on you to figure out where to go.
That's the old way. One global organization, scalable toolset, I got people I got an Aborigine, actually, Aboriginal from Australia who uses ServiceNow, the same way the person who's in Brazil or Tenens France, right, or Romania. I have IT people all over the world using the exact same software the exact same way, guess what, with 0 modifications. That I'm really proud of. My team has done an outstanding job of doing that.
And as a result, we were able to actually implement, starting from the basics. We started with the base core, the old style help desk, right? Whether it's Chinese, whether it's Portuguese, whether it's English, Spanish. We have a vertical integrated factory in Mexico now. All of those things started from the core, and then we worked our way out.
And the concept of ERP for IT is a great concept. There's a system of record, but it's really more of engagement. And the problem with our original partner, our original approach was that their approach to the marketplace in this system of engagement was to drag us into the past. And the anchor was, well, everything has to go back to a system of record. It really doesn't.
If it's about the customer experience, then it has to be about them. Take everything that doesn't matter and remove it, burn away the chaff. And if there's one thing I learned in all my experience, in all the years in heavy manufacturing, where we spend typically 2% max of OI on IT, whereas if you're in pharmaceutical or in high finance, you can spend up to 7% or 8%, 9% of your OI in IT. So this is really austere conditions I'm talking about in doing IT. This is not for the faint of heart, right?
But we did that. We got that. And we are the spark that has introduced the service language and the service experience into our corporation, where we've come the farthest in a very short period of time that allowed other functions to look back at us and go, what the hell just happened over there? They're completely different than they were 9 months ago. Our interaction used to be every IT group in all 15 companies, if I wanted a PC, it was a different PC or laptop, it was a different phone, the processor request was different.
Everything was different. We chose to adopt a service oriented architecture, service management model and basically applied everything I'd been taught. And I look at it this way and say, hey, look, this is not the norm for IT folks. IT folks like to take things and make them hard, right? We like messy things.
We like to clean up messes. So you come to us with a simple request and what's the answer? It will take it's impossible. No, it's not impossible to take a year. No, it's but it will take it will cost $1,000,000 And none of those are true.
I just have to figure out what it is you want, but I have to make it about you first. ServiceNow and the language that they bring to the table makes it very simple. You can't really screw it up. But the first thing you got to do is check your ego at the door as an IT professional and say, okay, it's not about me. What would you like?
How can I serve you today? All that complexity, all the stuff that I put between you and I that we can't connect with one another, put that behind me. I'm here for you. I'm not going to tell you how to do my how I do it. I'm not going to make you make a lot of complex choices.
You're going to tell me what it is you need, and I'm going to listen. And I applied this. A little over 2 years ago, we started this journey with ServiceNow. And I went back, and I did a customer sample of 1. So if my wife ever watches this, Pam, I love you, wonderful wife.
I have a wife of 16 plus 17 years. I went home and I started actually listening. It was amazing. She looked at me like I was nuts. I carried around a pencil and paper.
And when she's told me stuff that she would like, I went, oh, my God, it took me 2 months to figure out how to do this. And I would listen to her and I would write stuff down. She'd go, what are you doing? I go, I'm writing it down. Why?
I said, because I can't do it this minute, but it's important to you or you wouldn't have said it. So I'm writing it down, so I can prioritize and put on my list, so I can figure out when I can get that done. She was like dumbfounded. You write stuff down. What are you making a list of all the things you know, I don't want credit.
I'm just trying to figure out what I should do. So that on Sunday, if I want to watch the football game, right, I can get all this stuff done on Saturday, so I can sit undisturbed and we can all enjoy it as a family because that's what your expectation is. Otherwise, you wouldn't have told me. And it completely changed the dynamic of and then my kids started observing that behavior and going, well, this is how I prioritize. It's not based on what I want, it's based on what other people around me need.
And what I love about the ServiceNow mantra and the approach to the market is just that simple, right? Occam's razor, it's simple. It's not about them. They're changing the software delivery model and the IT Services Management model to be about you, right, the customer, whomever you are. How can I quickly get what you want?
So we have the first three phases for us, we did the Service Management core, all the basics across IT. 2nd was we did the analytics and very, very proud of our relationship with ServiceNow and Frutian Partners. I'll admit, not being at least IT ish CIO, I'm more about human behavior. I have blessed with high empathy and a lot of stubbornness. So So I can connect well with people, but I'm also really stubborn.
And I knew that they wouldn't embrace it unless I starve them. So I shut off investment into IT tools for 2 years. I just said, no, you're going to focus on with what you have. And they went back to pencil and paper, they went back to the basic stuff. And they said, you know what, I will take almost anything, right, to make my job better.
So I prime the pump. And as analysts, I would invite you to think about that dynamic. When you talk about sales cycles and what it looks like to me as a CIO to have you guys have to engage with a company like ServiceNow, right? You have to till the soil a bit. And the thing I would say is things speed up.
Once you get somebody a plant growing within the organization like IT, and we came the farthest of anybody, We had the worst reputation. We were not known for customer service. We've fractured across 15 companies. Everybody spoke a different language. And in 9 months, everything changed.
To do that, we had to put in a lot of time and effort. In fact, we created a portal called OSCAR, Oshkosh Service Catalog Asset Request. Everybody uses it in every company, continent, wherever you are. It's Google like, quick search, find it, you know exactly what it costs, done. Love it.
Requests doubled. Instead of people going to Best Buy or somewhere else and buying their own and not telling us Shadow IT, people came through this process because it was so easy. They loved it, right? Activity over doubled and huge reviews. And as a what we had to do though was very hard work.
We had to till the soil, not just within IT, but within the relationship with other departments. Our feed to and from HR was screwed up. It took too long to enter new employees. It took too long to terminate old employees, get assets back. We had to fix a lot of things.
We had 11,000 hours of process work by IT people that I had free up from other things to fix our processes, to make them simple and get our people to think differently, right? We did a lot of training, and a lot of it was just mindset. It wasn't software training. It was training people around that. What I loved is I didn't have to create scientists in the ITIL framework, ITSM language.
I was basically able to just break open the software, work with fruition partners and say, is how it works because they've already encoded that DNA of service, humility and direct service into their software, into their process and into their implementation cycle, which makes it a model for the next phase. So we have 3 phases behind us. We did the basics, we did discovery, we did analytics. And analytics, by the way, first I don't know if I can claim to be the 1st company to do this, but with no mods to the software whatsoever, analytics was turned on without any mods in 90 days. After 90 days of activity, we could turn on analytics and get all of it for free with no mods, no extra cost.
It can be done, right? But it takes a very different mindset within the customer and a relationship with the implementer. And but that is the intent of ServiceNow, and I believe that's as I said, there's fanatical about that as I am because anything that else that gets in the way of connecting with the customer, with each other, right, is a problem, is waste. And we want to always drive waste out. So 45, we're going to continue on our journey for IT Services Management, but other functions have kind of woken up and looked at Oscar, right?
OSCAR is our privately branded page. We just put that name out there together to generate some buzz. But they've looked at it and said, other functions are interested. So we got IT down, but HR, legal, facilities, marketing and even Finance all have these transactional related, service related things that they need to do. And it's important to them.
And they're kind of they're going, what is that? How did you do that? And I can talk about humility, leadership. I can talk about preparing the soil and all that. But without a module to plug in to support that, you just have ideas and a management philosophy without application.
Again, faith without works is dead. You need to have you need to be able to do something. And those modules are now what we're discussing with those leaders and those other functions. So there's the takeaways, I'll tear you on this just for a minute. That mission, I wasn't charged with it.
There were pretty low expectations of my function 5.5 years ago. But I chose to accept that mission because I believe that each breath we're accountable for, each interaction that we have with one another here on Earth is we're pack animals. We naturally aggregate, congregate. But we need to come together and work with each other. Anything that gets in the way of that is a shame.
And leaders are supposed to be charged with breaking that down and making it simple. And I would say there's one thing about, yes, we have in our office envelopes. Yes, we have Lotus Notes and I get 4 50 e mails a day, right? Despite all this, right? We have very old style cultures, but that's changing very fast.
And it's becoming about all about people first. And these things are going to radically transform. IT is uniquely suited now for that transformation that's happening under the next CEO that just started January 1st to be at the forefront of that revolution. I think we are well on our way using ServiceNow to accomplish our mission as I chose to accept it, and it works. And actually, it works really well.
And I don't say that about just anything. I'm not a shill. I wasn't asked it. I wasn't paid for anything to do with this. I'm just fanatical about the message that leaders, if you're doing it right, it's supposed to hurt a little bit.
And the organization, right, leadership is an honorable burden. And if you're doing it right, it's supposed to hurt. The hurt is you got to shape people's minds and get their customer ready. And the great thing about the way that ServiceNow is working with their partners to implement and kind of getting out of the implementation business and leveraging their expertise is they help us a great deal. Those implementation partners really, really help us to adapt and fit that customer experience for each of those functions, and they have interest.
So again, forward looking statement. I'm not saying we're I'm not saying what we have that we're going to buy anything more today or anytime soon. But there are lots of discussions going on within my corporation of how did you do that and how can we do And I think we're primed to get to expand that customer service culture, that experience, right? That's what we're talking about all the time now, the personal experience of how people interact. And one thing I would say, I was blessed to talk to Harvey Mackay 16 years ago.
He's the envelope magnet from Minneapolis, Mackay Envelopes. And he personally I had a private talk with him after a speech, and he said, Dave, whatever you do, keep track of everybody you meet in life, whether they're living, dead, you've changed jobs, whatever they are, but they're a point of contact. The most valuable thing you have in this life is the people you connect with. And so I've done that, and I have thousands of contacts, and I keep religious notes or dogmatically keep notes about that. And I try really hard to keep contact with all those people.
ServiceNow makes that so much easier. And I guess the last thing I would say, cutting into question and answer time is this, that don't give up on writing. One way to connect with people, what I do is write handwritten thank you notes to folks when people work all weekend, when people do extra things, go above and beyond. This helps you figure out who those people are and who to thank. And there's nothing better when you get home after a long week, 60, 70 hours, and your spouse or your significant other or your kids opened that thank you before you got there and said, Somebody that matters at work acknowledge that work.
That's what it's about. And ServiceNow removes all the chaff and helps bring to light all of those great accomplishments and contributions. So that's why I'm fanatical about it. That's why I love the mission. Come on up.
See, I gave you 3.5 hours back.
Yes. Thank you. Yes. I'm going to be a better husband when I get home based on David's messages. So thank you.
Let's so hop into some Q and A. Again, if you have questions for Dave, please raise your hand. I'll just quickly kick off with one. So you've talked about a service management transformation that's really originated in the IT department. Can you talk a little bit about the role that you as the CIO play in bringing ServiceNow and this concept of service management to other departments
company policy, departmental policy. All those things are sapped the energy and get things in the way put things in the way of people connecting with each other. So each of those other groups are starting to share services in a meaningful way. They're all struggling for a plan or an approach. And what I'm doing as an officer of the company and a leader in the company is trying to demonstrate what the work that I did early on to develop the department, the mindset and philosophy and spread that service mindset.
And now the questions are coming to say, how can I accelerate that? So just being a good example, I guess, if nothing else.
Michael Turits from Raymond James. As you adopted some of the use cases that are outside of IT, including HR and Facilities, How important were ServiceNow's applications that they developed dedicated to those in facilitating rolling those out? And then as you look forward, I know you said you're not going tell us what you're going to buy, but they have other stuff and customers external customer service, security, what's the level of value that you see or interest there?
Yes, big, right? Again, I've we're in the early stages with all the other departments. They're all trying to figure out how to do shared services, what services to offer, etcetera. So very early in that sales cycle with them. And I would say there's 2 sales cycles going on.
1 is me to convince those other leaders to say this is how you should approach shared services as a service with metrics and all of those things. That's the question that has to be asked, but then an answer can be given. And quite often on IT, we never wait for the order. We run out by software and then we inundate people and say, you have to do this. So we in IT have a really good understanding of the modules.
We're just now starting to show those departments. We're very early in that cycle. And most of it starts with just explaining the cycle to them. Again, we use interoffice envelopes.
Thank you for taking us through the story. I thought you guys are using Sirius. It's really always interesting to hear the first hand account on how these tools are being used. A couple of deep dive questions. One, how long has this whole process taken place when you're talking about Phase 1 through Phase 5?
Can you just walk us through the timeframe? 2, did you use an external implementation partner to help you through? Has there been a system that's helping you through this process? And then 3, in terms of when you embarked on this, were there any other platforms you were looking to potentially use for this type of transformation versus ServiceNow? Or is there an existing relationship that made that bake off not really occur?
Yes. I took over 5.5 years ago. We did an RFP about 4.5 years ago. That resulted not in ServiceNow ServiceNow came in second based on the security model that they had at the time. The Department of Defense, which is a big customer of 1 of our segments and a smaller customer of a couple of others, required a certain level of security ServiceNow didn't have at the time.
They've invested a lot in their product architecture. We got about 2 years into another vendor, and I had to stop it because it was basically dragging us back into the ERP system of record mindset for what should be interaction and engagement, and it wasn't working. We were 2 modules in, several $1,000,000 And when I about 2 years ago in April, I hired an IT services leader who came in who had experience with ServiceNow and a partner. And within 30 days of his hire, he convinced me to hit the button, stop altogether all investment, wrote off the asset, went to the CFO, went to the CEO, went to the Board, got approval for a new project and engaged with Fruition Partners. So we had an external integrator, and this gentleman, my services leader, walked us through a rapid implementation in 9 months what was going to take 5 years with the other partner.
And that started in May of 2 years ago. We've been live now for almost over a year.
Can you give us the name of the other partner? Could you just give us the type of vendor that it was? Was it PPM vendor?
It was BMC.
That's even better. Did that
help? Great people, just not a great fit for where we were coming from, right? Not everything had to be a system of record transaction for us. And to teach all of my people all about that would just have been just a nightmare. If I had to teach 700 people worldwide in 15 or 16 different cultures, the science behind it, so they understood that to ask for massive modifications that we've already started for 2 modules is just untenable.
Thank you very much.
I would have been fired. That's another way of saying that. Hi. Thanks for taking the question.
Kashur, I'm going to be in the mirror. What is the return on investment of your ServiceNow implementation? Secondly, what are the areas of ServiceNow products that you currently do not use that you foresee using in the future? And currently, how you see your commitment with ServiceNow growing either financial terms, percentage terms
over the next 4 to 5 years? So I think I'll remember all those. The initial return on investment of the requested application or the appropriation request was 9 months. I think we beat that for the money that we spent on the initial modules and implementation, probably more like 6 month ROI for all of that money and all of that time. And other applications that we retired, we retired many applications, probably 20 applications out of the gate, right?
On custom applications, we have probably another 200 workflow applications that are all in Lotus Domino language, plus SharePoint, plus all those other things that are all going to be eventually retired as other services come online for other departments or certainly for within IT. A lot of those things are going to fall away once Discovery is completely enabled. We have 22,000 devices connected to our network. All of those things, when they fully online, a lot of those administrative tools are here to fall away. Does that answer most of your question?
Yes. So the products we currently use that are going
to go away?
Yes. So we're talking with facilities, for example, service from again, system of record is system of record, but interaction with their customers for service requests, everybody from HR, Facilities, Legal, even Marketing are asking for the same type of Oscar request to say, I need a website. I need, I
need, I need, I need, right?
I need all these different things. How do I interact? How do I encode that interaction with my customers?
Hi, Steve Ashley, Robert Baird. I actually am going to follow right on to Kash's question. Related to ITOM, is that something that you are cognizant of? No, understand the value proposition and I realize your plate is probably pretty full right now with ITSM. But how do you think about that longer term?
And what do you just think about the value proposition of that in general?
Yes. I think honestly, we're being pulled forward whether you realize it or not. I think very long life and we're a very, very short chapter in it. And we tend to over aggrandize things that we in the moment. I love everything that Frank said and the financial agility of the company and the viability and all that.
All that is true. In truth, we're just being pulled forward to a we're getting closer and closer to one another, and IT operations management is an eventuality. I have to embrace that as well. I have about 15 or 20 years of what I like to call technology debt. We didn't invest for a very long time.
We did some ERPs in the '90s, not very well. We got kind of scared. Management backed off of a lot of investment in IT. I've got about 20 years of low investment in IT to overcome. We will get there very quickly.
We just started an enterprise operations center, for example, 7x24 monitoring all systems around the world. So, we're maturing 5 years every year right now. So, that's in our road map as well. Last question? I'm sorry.
Who's pulling? I would say our CEO and our Board is saying, I want more out of what I have, right? I don't care how you do it. I want this. They're not dictating it.
And so I turn around and look at what I have and go, how can I do it better? And the answer again goes back to Hakam's razor and their approach to the marketplace and go, simplest is best. Just keep all the interactions are very simple.
Time for one last question.
Can you talk just a little bit about how you've turned those 700 IT folks internally into evangelists into the lines of business? Because I mean, you're kind of the sales force to make that portion. How do you get your IT people to sell against packaged software from 3rd parties who want to sell niche solutions?
The appeal is to the heart, honestly. Again, it goes back to empathy and pure I'll say pure motives or virtue. Why are you here? If you're here for the right reasons, you won't care what the tool is. The decision has been made by leadership that this is the tool and it's the simplest, best way to interact with the customer.
If you have a better way to do it, there are channels to bring that forward. Humility, and this is the best way to do that. And since we keep that focus always being very humble and being very service minded, it's the simplest way. If anybody's got something better out there, I'm open to it. There's a way to talk to me.
I go around the world, talk to all of those people. I have lunch with them all the time, and they're very pleased. I have no pushback, no concerns over ServiceNow or Oscar or any of the things we've implemented. It's been very it's very smooth.
Great. Thank you very much, Dave. Thank you. Appreciate your time. Thank you.
So we're going to take a quick break. So let's go ahead and get started with the second half of our program. We're going to have 3 of our leaders from emerging products come up and give you some overview of their products and demos. The first of which is customer service. Customer service management is a product that we formally started selling in December as part of our Geneva release.
In Q4 alone, we landed 5 new customers. 1 of those customers was $1,000,000 plus new customer in the commercial space. So we're already starting to see some good traction out of it. We followed that up in Q1 with 11 new customers. So Dave Stevens is the GM of Emerging Products, which includes customer service management, service strategy and asset management.
He's been at ServiceNow for almost 3 years. Previously, he was at Oracle as SVP of the Oracle running a team of over 1200 people. And before Oracle, he was the founder and CEO of Coupa Software. Dave is going to spend 20 minutes with you, giving you an overview of the product, and then I'll come back up and we'll do 10 minutes of Q and A. Please welcome Dave Stephens.
Good morning.
Okay. I have the clicker, and I am ready to go. So customer service, we're going to talk about customer service. So Dave, this was the Dave to Dave transition. So you got 2 Daves in a row.
And did you hear the number of times that he said customer service, although he was talking about the IT organization? Did you pick up on that? So I wanted to provide some context on what we're doing here and what we're seeing. And I want to go back to one of the slides that Frank showed you, which was this. So ServiceNow at this point has become synonymous with service management.
And what we've been doing is taking this mature service model and these capabilities that we built out on the platform that works so well for IT, born out of IT. And it's spread at this point throughout the enterprise. And customer service is just the next logical extension. And it's interesting, Dom said, I've been in ServiceNow for about 3 years now. And one of the things I noticed in our customer base after I joined was how many customers were taking our service management product without core capabilities in customer service and they were applying it anyways.
They were using it for customer service. I started seeing them. It was dozens and dozens more and dozens more. And I started talking with them about why. And they felt like they weren't being served with today's CRM based solutions.
And so in many respects, one way to think about ServiceNow and customer service is we are not coming to the customer service market. Customer service market is coming to service management. Okay. So it's really customer service meets service management. And yes, we do think we're seeing the emergence of this, what Frank called the 3rd estate or what you see here, the 3rd pillar of the modern enterprise.
And it does overlap with CRM, especially in the customer service area. So you saw this slide, I think, from Mike. This is the $60,000,000,000 market opportunity that ServiceNow is pursuing. And customer service is a significant portion. It's over 15%.
And depending on the analyst report you look at, it's between a $9,000,000,000 and $12,000,000,000 market. For the last X number of years, most years, it's growing in excess of 15% as well. So it's a large investment area for enterprises today, right? And this new economy that we're in, this digitally connected service economy, is one of the reasons why. But despite all this investment in customer service, enterprises still kind of suck at delivering good customer service.
And I don't know if this rings true for you, but I bet it does. We're all infuriated by really poor customer service experiences in our day to day lives. I'm seeing nodding of the heads, yes. And usually when I talk about this afterwards, people seek me out and give me their personal stories, right? They start saying, hey, can you guys call XYZ company?
I don't want to name the companies. But even companies that believe enterprises that believe they're delivering really great customer service, when you ask their customers, they say, no, not so much. And the software has been a big reason why. Instead of helping customers deliver really great enterprises deliver really great customer service, it's impeded the enterprises' ability to deliver really great customer service. So what's the cost of delivering poor customer service?
It is huge in terms of dollars lost, right? Customers go elsewhere. And so the next logical question is, what does it take? What does it take to deliver great customer service? And it's our belief, it's our contention that it really takes 3 things.
You need to really understand the customer, right, know who they are, context, right, to that customer service interaction. Then you'd be able to diagnose what in the heck is going on. What is the problem? And finally, you need to be able to fix it. And the truth of the matter is when you look at it's a $9,000,000,000 market, but when you look at the software that's been developed for this space, okay, up till today, I don't care if it's on premise software or cloud software, it only does click.
It only does one of the 3 things that you need it to do. It's pretty good customer service software today with the CRM based approach. It's pretty good at engaging knowing who the customer is so you can engage with them. But when it comes to diagnosing and fixing issues, there's nothing there. And meanwhile, that's what service management is all about.
And the complication that makes this even more important to be able to diagnose and fix issues is this digitally connected service economy that we're in. So transitions to things like Internet of Things makes providing great customer service even harder, okay? And so here's a way that, as analysts, you can think about what we're doing in entering the customer service space, is we're taking this market leading approach that's born from IT, and we're applying it to this very large market that has been under served by traditional solutions. And theme of this conference is, we've been talking about experience, Frank talked about experience, experience. Instead of trying to convince you with words, I'm pretty good at that.
I might be able to do that, okay? But I'm going to actually show you the product. How many of you have seen ServiceNow product before, actually used it? A few of you? Okay.
So for some of you, it might be the first time you're taking a look seriously at ServiceNow's product. So it's a 3 step thing. We're pretty darn good at Engage too. And in some respects, we're actually better than our CRM cousins. So I'm going to show you Engage, Diagnose and Fix and what we're offering, what we shipped in December, what we're continuing to invest in, so that you can get a sense for why it's better and why customers are coming to us and saying, please, please, please, we want to use ServiceNow for customer service.
So first thing, let's talk about Engage. And the issue here is that, for most customer service organizations, they're swimming in tickets. You talk to a customer service leader, and they're on the ticket treadmill. The caseload is just going up, going up, going up. And sometimes it's for good reason because the company is growing, right?
They're growing, they're selling more and more products. But this is their life, right, is trying to resolve these cases. They can hire agents, but only so many without impacting gross margins. And so they never hire quite enough. And then what ends up happening is it backs up into the customer service experience.
The customer satisfaction suffers, CSAT goes down, Net Promoter Score goes down, customer churn goes up bad. Okay? So customer service management, not customer service, customer service management, how is it different? So this is a sample of one of the dashboards that you get as a customer service leader using ServiceNow. And what you see is the story is quite a bit different.
You see the case volume is actually going down. I'll tell you why. And the customer satisfaction is going up. So already, life is better with ServiceNow. Part of the reason why is this heat map on the bottom, is you're looking at the recurring cases by category.
So on a monthly basis, using ServiceNow, what customer service leaders do is they look for opportunities to automate, to make the cases go away because ServiceNow is all about reducing the reasons why customers need your help in the 1st place, okay? So we use something that all of you may have reported on for IT Service Management called the Service Catalog. It doesn't exist in CRM based customer service solutions. So using the service catalog, we can automate away this thing that's caused 129 cases, just account address changes. So if we do that and we go to this beautiful service portal, right, self-service, And the old way is you create a ticket.
The customer creates a ticket on their own. New way, customer clicks service catalog, types in the thing that they want to do for themselves, okay? There's a difference between self-service and automation. This is automation. So now they click in, they can change their account address, update not just the customer service system, but all the other ancillary systems.
And you might say, well, this is pretty this is an account address change, like what's the big deal? I talked to an online retailer out of Europe last week that has 20 people that do nothing but this. Okay. They do it manually. Okay.
So having an infrastructure to be able to automate on a continuous basis and eliminate the reasons why customers are calling in, eliminate those recurring requests is really significant. And we've done studies of this from our IT roots on what the benefit could be. And there's an IDC study that you can reference where agents have been able to reclaim 92% of their time from these recurring requests if you use the service catalog. It's a very big deal, having a service catalog. And you need service management if you want a service catalog, if you want to get that case volume down.
So the second thing that we do that's quite a bit different is moving from reactive service to proactive service. Okay, so the question is, if service gets interrupted, okay, and you're the customer service leader, somebody calls in and they need help, What can the agent see? What do they have visibility to? And all too often, this is what happens, this embarrassing conversation. Customer calls in, my service is down.
The agent can't see the service. He's the last to know. So that all he can do is apologize at this point. She wants help. He comes back and says, well, I can look into it and maybe call you back.
She's like, okay. And then the automated system asks, would you like to take a survey and tell us, please rate your customer service experience. She's like, you didn't help me at all. Well, why not? Because for the most part, these agents are not empowered.
They do not have the operational data associated with the product or service that's being delivered in the same system to look at. But with ServiceNow and a service management approach to customer service, you do. You bring that operational data in. So here's our beautiful agent console, and incoming callers come in. We have full context, okay, and this uses something called Openframe in our platform, and it works with Genesis, Avaya, all the major phone systems, right?
So single pane of glass, great for the agent, has context, can see the account and contact information right away. Now here's what here's how it's different, how you can get proactive, okay? That call comes in, service has been interrupted, click on the agent clicks on the account, and then something really interesting happens. There's a proactive alert at the top. The system already knows that service has been interrupted and it's telling the agent, hey, here's some information you need to know so that you have context and you can engage better with your customer.
And not only that, but because the operational data and the customer service data is blended in together in the same system, the system has already created the case on behalf of the customer. It knew service was interrupted. And we've already begun work to fix it, so we can fix it a lot faster. So the agents looking at the case, hey, here's the information, here's what's going on. And not only that, but we've taken the CMDB, the configuration management database, and we've repurposed it for customer service so that you can visualize the real time operational health of your customer's environment.
So the agent can click in and actually see all of the technology assets between headquarters and that customer who's receiving service and exactly what's knows exactly what's going on. That makes for a much better conversation, okay? And you're going to fix it faster, you're going to that customer is going to far less frustrated. There is no other customer service solution on the market today that blends this operational data in with the customer service system. And it is one example of how service management helps you resolve root causes and fix issues completely.
So we're going on to the fix it part. So in a typical customer service implementation, the customer service software, the customer service leader is on an island. It's super sad, right? Super sad. This is the customer service leader in case you didn't figure it out, okay?
And none of the cool kids back there, that's all the other departments in the enterprise. I don't care if it's product engineering or operations, maybe it's billing, maybe it's contracts and so on. And he's got the weight, that backpack is heavy, that's got the weight of all these customer cases that are coming in on his shoulders alone, right? But every employee needs to be in the customer service business, right, today. Like every employee needs to be in the customer service business.
So how do we get this working a whole lot better? Well, it takes a service management approach. I showed you operational data. What about product engineering data? Okay.
So old approach with a CRM based customer service solution is you throw a ticket over the wall, it becomes a bug, and maybe someday those 2 meet up. You have spreadsheet wars over email, okay? But with this solution, that same customer case, product engineering is working inside the same system as customer service. And now you can actually get visibility. Well, that's the product defect.
That's what's really going on in this database server performance issue. I can see how many customers are impacted. And as a customer service leader, if I want to work with my product engineering counterpart and put it
to the very top of
the list, all I needed to do is click the Escalate button. Done. No e mail. Okay. And finally, operations and engineering are just two examples of this very broad idea that customer service is a discipline that needs to span every department in the enterprise.
So we can take something like our Visual Task Boards, which is another platform capability, and provide a view like this for the customer service leader. And what you're looking at, every lane here, engineering, operations, finance, legal, sales, those are all the groups that need to help customer service improve the lives the life of the customer, right? There's something happening. So that there's a database server performance issue that's impacting 25 customers. For operations, there's an intermittent slow network that's impacting 66 customers.
But even legal needs to get in the game. Turns out 28 customers have called in to the customer service department because the renewal terms are confusing. Legal needs to get on that. Now imagine a customer service leader going into the CEO and saying, Hey, I know one of our goals is to improve Net Promoter Score. If we get after this list of issues right here that I can show you in a single page, it's what we can do to drive Net Promoter Score up the fastest.
It's a whole different ballgame. So this is a fundamentally different solution than what the market has been living with in customer service up to this point, okay? And so we're super excited about it. We've been talking about it on a couple of earnings calls. You'll see that market launch for us is actually tomorrow.
So a press release will hit the wires. And we shipped the initial version, as Dom mentioned, in December. We started working with initial customers, and those customers are going live now. And to give you an example, give you 3 customers here, NICE, Fiserv and Epicor. And I think you know we celebrate go lives with cakes.
That's our tradition at ServiceNow. So here's 3 great cakes for 3 great companies. I'm going to drill down on Epicor, a mid market ERP company. But just quickly, NICE is a workforce management software company based in Israel. Fiserv, you're going to hear from tomorrow.
They provide managed services, outsourced services to most of the major financial services firms. Okay, so exciting go lives happening now. We're not just launching the software, we're launching the software with these customer references in place and ready to go, and we're accelerating this business quickly. So I wanted you to hear from one of them. You're going to hear from Chris Orr.
He's VP of Support Strategy at Epicor Software, mid market ERP company, grew through acquisition, 7 different customer support systems and a real opportunity to improve their Net Promoter Scores. Let's roll that video now.
As we began our journey, we really needed to step back and figure out what did we want to do. Epicor has made a number of decisions regarding our CRM of technology. We have picked the best of breed approach for sales, for marketing and for financial operations. And now that we're beginning to look at what we want to do for customer service, the question is, does CRM make sense? Knowing we also wanted to optimize our services, deliver a higher quality solution and frankly grow and expand the customer experience, we really felt looking at the service management space just made a ton of sense for the company.
And indeed that's what we've done. We've made a decision that service management is the right approach for us and we've chosen ServiceNow as the provider that can deliver that. ServiceNow is a flexible product. It is highly regarded in the marketplace. And with the new delivery of the services for customer service, it's an ideal fit for the journey Epicor is taking.
Okay. And this is so Epicor, this was such a big deal. They had their annual conference recently, 3,000 500 people there, and this was a keynote thing. So they launched a program called Epicare based on ServiceNow. And this is their new homepage for customer service across the enterprise.
If you're engaging with Epicor, you do it via ServiceNow. So really fantastic story. So we're about to questions. I wanted to close by saying, in case you missed it, as I went through it, this is a different approach to customer service. It's based on service management.
Customers have been demanding this more sophisticated approach. They want to handle not just engage with the customers, but also diagnose and fix. And customers like Epicor and Fiserv and NICE, they help us understand our software sometimes even before we do. So they came to us. We said, well, what about the Salesforce Service Cloud?
What about Oracle? What about SAP and so on? And every single one of them has kind of come back and said, Hey, listen, sales force is for sales, ServiceNow is for service. It's not that hard, Dave. It's in the name.
And with that, I think we're ready for questions.
All right. So if you have a question for Dave, raise hands. Dave, just to kick things off, how different is the sales motion around the customer service product versus our core product? So it involves a different economic buyer. So we're selling into the
customer service leader, sometimes even up to the Chief Operating Officer. But what's really nice is our generalist sales force at ServiceNow are service management experts. It's what they know. So this story is very familiar to them. So we think we're going to get enormous leverage from our sales force at large in selling it.
We'll augment it with some sales specialists who have some background in customer service specifically, but we think it translates quite well. Raimo?
Hey, Ryan Malincher from Barclays. Dave, Sorry, I'm playing devil's advocate now. It reminds me a little bit of SAP 10 years ago when they started to compete with Cboe, because they said, look, you want to have the knowledge and look into the back end. So we are the natural place to do service compared to you who kind of deals with the customers on the front end. If you talk with customers today, how is your thinking evolving?
Because clearly Siebel and if you look at Salesforce's service cloud is having big momentum. Does that mean that they all have to change? Or is there kind of a segment of the market where they're looking into the back end systems and fixing it straight away is more important than just kind of having customer data cohesive between sales and services?
Yes. So I think that different organizations are going to value different things. So where if you look at a pattern in the early customers, you'll see a lot of B2B technology companies who maybe they're a cloud company, maybe they aspire to be a cloud company, and they actually do have a set of digitally connected devices between the customer service desk and the customer where service is being delivered. But we think that that's the future. More and more products and services are actually converging.
And so, we see more often than not these technology enabled enterprises looking for the types of things we talked about. They don't want a customer service organization to be the complaint department. They want that organization to drive continuous service improvement, which is a core tenet of service management. So we think we're in a very good position to help them in a way that they haven't been helped up till now.
Alex Zukin here with Piper Jaffray.
I wanted to ask
about the incremental complexity of dealing with the customer support request. If the easy ones get automated away and the more difficult ones get escalated and the agent now has a CMDB functionality and a view into the actual process of the customer, do you need to do these companies need to have better training for their customer support people? Do they need to rethink that whole process? And how do you help them with that?
Yes, it's interesting. I love that question because it goes back to the service model itself. And I talked to a high-tech company 2 weeks ago in the Bay Area, and they happened to use the Salesforce Service Cloud today. And they said their agent answers the phone. And if it's a real issue, then they create a ticket in ServiceNow.
Or if it's just a question or something that the agent can handle, they'll do that within Salesforce. But that doesn't make for the greatest experience because when you break up that work, you're not able to resolve the issue right away. So what we find customers asking us about, these customer service organizations, they're saying, maybe this whole idea of Level 1, Level 2, Level 3, Level 4 support is just a bad idea. What if I have in a more modern system an ability to get the work to the right resource directly without having all these intermediary layers. And so they are pursuing a different approach to how to engage the agents.
And sometimes they need different types of agents than they have before as a result. It cuts out cost. It cuts out a whole lot of time. It's way better for everyone. But it is a change for them.
Steve Ashley, Robert Baird. In terms of pulling operational data into the product, what operational data are you tapping? What vendors do you need to tap and have partnerships with? And is that something that needs to be negotiated? Is that something that needs to happen over time?
Yes.
I'm glad you asked the question. So when we are leveraging this, we're not just leveraging the CMDB, but we're leveraging everything that we've built and acquired over the years in IT Operations Management. So the way Operations Management works is you have a wide variety of different connectors that tie into an alerting and correlation and event management framework. And so we do the same things that we've been doing in this brave new world. It's just these connected devices are much more broadly distributed, but they phone home in the same way.
One way to think about it is these devices are phoning in and interacting with the IT operations management layer, which maybe eventually becomes the IoT operations management layer. And all of the technology we have to correlate and detect events and transfer those events into service management can be leveraged for these new use cases. So it's very powerful.
Thanks. Kirk Materne with Evercore. Just two quick questions. From a go to market perspective, business processes around service are very different by vertical. And it seems like you guys have started in tech.
And I'm just wondering, are there natural adjacencies beyond that or industries that make a lot of sense for you guys to start and focus on today? And then I guess second, I guess playing devil's advocate, someone on the CRM side would come back and say, well, after you service that customer, how you sell and market to them after a change an event is incredibly important. So could you, I guess, just discuss those two things in terms of your views on verticals today? And then sort of how the sale and marketing aspect comes back into this after the fact?
Yes. So on sort of the next set of enabled industries, not prepared to talk about that today, going to keep that
a little bit closer to
the vest. But there is a well thought out plan over the next couple of years on how we broaden this. And I think we'll stay true to our service management principles. So one thing to look for is these technology enabled enterprises are of interest to us. B2B is one segment, but there are other segments.
On your second question, how you interact with the customer to sell and market to them is obviously very important. And we have a lot of respect for what Salesforce has done there and prior to them, Siebel. But taking that case information, what we get asked about all the time is how do you get these cases and provide visibility to the salesperson so that when they interact with the customer next, that they have that awareness. And that's not a challenging integration. That's very sales sales force for sales force automation, you can get that visibility to in those sales situations that sales needs.
Kashifang, it will be Vemero. I'm assuming you folks have a robust API list, if I'm Salesforce or Zendesk. What prevents me from tapping into your APIs and exposing the service assets and the at least the high level issues that are afflicting the service state of affairs at the customer and having the same value to their end customer as a result? Thank you.
I think I'm not understanding your question. Yes, we have a robust framework of APIs. We're very open. There's a REST layer that encompasses everything we do. But what's the question then?
So what would prevent customer support pure play vendors from tapping into your APIs and extracting the same information that you're going to be exploiting with respect to the state of affairs of the IT infrastructure?
Yes.
And so those folks can
get They absolutely can. Yes. They would be able to do that for sure. I think we've heard our customer service organizations that have picked ServiceNow or are picking ServiceNow for customer service management is they want all this visibility together in one system. But that's quite possible.
We could be deployed for maybe Level 3 customer service and have all the digitally connected devices, and they could be using our IT operations management layer and fully integrate a CRM based customer service solution, that's possible.
And that's okay. Any other final questions for Dave?
Just following up on that. This is Abhay Lama from Mizuho. So what gives you the sustainable advantage if sales host.com can do the same thing like what you can do with your API? But a couple of years out, what gives you sustainable advantage in this space? Thank you.
Yes. So I think what for the 20 minutes or so in the prepared remarks, what's most important for you to remember is that we're bringing a service management approach to the customer service market. And our sustainable advantage, if you want to call it that, is we're all about service management. So what we've built up with incident, problem, change, config, SLAs and so forth, it is very deep what we've built in IT operations management and so And to be able to take that and leverage it into this new market, I think that's quite a bit of sustainable advantage. It is a fundamentally different approach than just running a ticketing system, which is what you'll find with the CRM based approach to customer service.
I think that all of these things are definitely possible, but I think that just given the track record of how the product has performed over the last couple of quarters, customers are saying that they want this to be all in one system that they want this to be in ServiceNow versus taking ServiceNow's ITSM or ITOM data and putting it into a different customer service product there. They want it to be in ServiceNow. For sure. Great. Thanks, Dave.
Welcome. So next up, we're going to talk about IT Operations Management. We've had ITOM products for a number of years, but we've really started to see some great traction out of this over the last year. We acquired Nebula in 2014 and fully got that replatformed at the end of last year. Itom represented 16% of our net new ACV in Q1 versus 7% of our new business in Q1 of last year.
So we're seeing some great traction in Itom and it's the 2nd leading business unit in terms of scale. So Mike Knappe, Head of Product Management for Itom is here to speak with us. He's been at ServiceNow for about 4.5 years. Before ServiceNow, he spent 16 years at Microsoft in a variety of product management and product development roles. So Mike is going to spend 20 minutes with you giving you an overview and update on iTom, and then we'll come back up for 10 minutes of Q and A.
Great. Thanks.
Thanks, Tom, and good morning, everyone. So it's great to be here to give you an update on ServiceNow's approach to the ITOM market. I thought I'd start off by setting some context. ITOM has been around for decades. It's really kind of the first discipline of IT.
It started off as the care and feeding of this expensive capitalized infrastructure and the applications on top of it. But the world's changed quite a bit in recent years, and that's driven kind of a need to update the ITOM space. It turns out ServiceNow is very well positioned to seize that opportunity. So we'll talk about that, the approach that we have. And then the bulk of this is really the click through kind of in a connected experience that shows how ITOM is extending our traditional ITSM capabilities and really producing something where the whole is greater than the sum of the parts.
And the traditional operations management workflows are able to be accomplished in a much more efficient fashion. And then I'll spend a little bit of time talking about where all this is leading in the future. So I'd like to start with this, the idea being that a picture is worth a 1,000 words. This kind of just serves to reinforce what I think we all know about and we've all experienced. This is a picture that was taken outside of the Vatican at the time that Benedict was made pope.
But what's more interesting is if you fast forward to 8 years to 2013, this is the same exact perspective outside of the Vatican, same event even at the time that Francis was made Pope. And it's pretty amazing, right, the contrast, but it serves to reinforce what we all know, which is that digital revolution is upon us, right? And the rise, the proliferation of these connected mobile devices, it's really changed society, and it's changed the way that we go about our day to day lives. Of course, the devices themselves are really just a container. They're a means to an end.
And the end are these services that we've come to rely upon for everything from reserving a table at a restaurant to getting transportation. And it's really quite phenomenal. These things have moved from kind of simple applets or craplets in some cases to very robust services. And what it's done, similar to what Frank indicated in his talk, is it's really changed the mindset. This is not just a consumer phenomenon.
It's changed the mindset of our employees and the trading partners of our customers. The bottom line is that businesses of all sizes have huge burden on them to deliver highly compelling services and services that are highly available. And this kind of pressure is what's driving a lot of the focus in the ITOM world and kind of the reinvention of traditional ITOM practices. Okay. So when we talk about ITOM at ServiceNow, what do we mean?
Well, I want you to think about what we're doing in ITOM along 2 major dimensions. The first one is pretty straightforward. It's really just connecting ServiceNow's cloud management platform with our customers' hybrid infrastructure. So we have a set of technologies, which I'll talk about, that essentially collect information about their hybrid environment, bring it into ServiceNow, correlate it into our CMDB and then ServiceNow applications and processes reason over this data and drive informed changes back into our customers' infrastructure. So pretty straightforward, right?
This is really about kind of bidirectional integration. But what's happening here is we serve as that system of record. We use ITSM processes and so forth as a kind of a governance engine. And then we put a services filter on that whole thing and optimize it's The traditional world of Itom over on the left hand side here or right hand side has concerned itself with the care and feeding of compute storage and networking devices, right, and increasingly now things like the cloud. The problem is, is there's been no correlation between that side of the house and the side that's actually consuming services that are hosted in this environment.
And so you got this tower of babble problem in most enterprises. Well, one of the things we do at ServiceNow is we bring this together. We bridge it by creating essentially a service centric CMDB. This is CMDB that in addition to having the kind of CI typical CI information around computers and network devices, it also has a service map that describes how those devices map to business services. Now this is nothing new, right?
I mean service mapping in CMDBs, it's been around since the beginning of this century. But part of the reason why CMDB was a 4 letter word back in the early days is people tried to actually implement these service models in the CMDB, and they failed because the existing technology was not up to the task. It was very manual. Typically, they're doing the mapping themselves, and then it was some poor soul's responsibility to do the care and feeding of those maps when the infrastructure changed. At ServiceNow, we've changed this, right?
We have, through the ServiceWatch acquisition, the ability to not only automate the mapping process, but once those maps are created and stored in the CMDB, they're dynamic, and they take care of maintaining themselves automatically. So this is really huge. You now have a truly reliable and authoritative CMDB and you can start to build automation around that. Okay. So what is the Icom portfolio at ServiceNow?
In the Geneva release, we Nebula acquisition in 2014, and we up leveled that name to now serve as essentially the brand for ServiceNow ICON, so what we call the ServiceWatch suite. So the products are shown on the left hand side of this diagram here. And just quickly, what we have essentially is our Discovery product. This is a very mature product. Essentially, it runs out across our customers' network, and its job in life is to go find and classify everything with an IP address and then bring it back into the CMDB.
Service mapping is a technology we acquired through ServiceWatch, and it essentially works with Discovery to build those service maps on top of that horizontal infrastructure. We then have Event Management. Event Management is our product for taking monitoring data from across our customers' infrastructure. Typical customers have anywhere from 5 to 15 different monitoring tools for looking at different parts of the stack. Event Management gives them a single place to point all that monitoring output.
ServiceNow takes care of correlating all that, deduping it and bringing it into the CMDB so we can take action on it. Orchestration is our automation tool. It's also been around for quite a while. But this is the way orchestration is the way that we drive work from ServiceNow processes to external systems and services in our customer environment. It's essentially a process automation environment.
It's essentially a process automation technology. And then finally, we have Cloud Management. Now Cloud Management started off rather modestly as a way to publish VMs, to have those VMs be automatically provisioned in Amazon or in VMware through the ServiceNow service catalog. It's now evolved quite a bit to be essentially a general purpose cloud management platform. And in addition to provisioning VMs, we can provision entire distributed services via the ServiceNow service catalog.
And in addition to that, we can provide essentially a single pane of glass for IT managers to understand utilization of various cloud providers, and that's huge. Okay. So with that as kind of setting the stage, I thought I'd talk about or show how some of these technologies are used in concert with the rest of the ServiceNow platform to deliver a what I believe is a truly revolutionary experience in the world of Operations Management. So to start off, I'm going to take the persona of this ServiceNow administrator, Kevin Murray, who happens to be my counterpart in the marketing organization. In any event, Kevin is interrupted while looking at his MTTR chart here by Farrell, who is one of his business end users.
And Farrell is saying, Hey, Kevin, it looks like the demo service is down. Can you help me out? He's getting this notification through ServiceNow Connect. So the first thing Kevin is going to do is he wants to determine whether or not this is really an issue, right? And or maybe it's just something with Farrell's machine.
So what he does is he clicks into this Service Health Dashboard, okay? Now I'm going to be talking more about this, but this what you have here essentially is a single dashboard in ServiceNow that shows you the enterprise services that you have and their relative health in red, green, yellow kind of metaphor, right? This is the pot of gold at the end of the whole ITOM rainbow, really. Being able to show this kind of thing in real time is absolutely huge. Typical operations management consoles are looking at the compute, storage and networking layers in a data center and showing you kind of graphs of relative health of those components.
This is far more meaningful. So now Kevin has ascertained that, in fact, the public demo service does appear to have a problem. So the next thing he wants to do is find out whether or not an incident has been created already for this issue. And he sees that there is one actually already. And so what he wants to do is add Farrell to the incident record.
Now this is huge for Kevin because this avoids having Kevin have to deal with Farrell all the time, ping him over e mail or text saying, Hey, what's the ETA for bringing my demo service up? Now Farrell is added to the record. Any time that record is updated, she's going to get an update as well. In this case, Farrell is going to get the update via her iPhone. So she's in the loop.
Now the next thing that Kevin wants to do is he wants to set about kind of remediating the issue, right? So now he's back at looking at all the incidents in his IT organization, and he needs to find somebody to go work this issue. Well, this isn't a very meaningful interface right here, but he can shift into a visual task board view. You saw this earlier. Now it's being applied to IT resources.
And you can see in this visual task board view that on the left hand side, there's incidents that have no assignments so far. And then he can also see who's online. In this particular case, you can see that Beth Anglin, up at the top, she appears to be online, that's shown by the green dot, and so she's available to take on work. So what Kevin's going to do is drag Beth over on top of this incident, and that signs Beth to the incident, puts it into her swim lane, and then Kevin wants to drag the incident to the top of her queue because he wants Beth to spend time on this as her first order priority.
When he
does this, he gets a notification in his Connect window and he clicks on that. And what he gets is a response from Beth saying, I've been assigned to the incident. Don't worry, I'll rock this. Stand by. Now this is a very simple concept, but it's actually huge in practice because a couple of things have happened here.
He's just assigned work to the incident. He's got a positive handoff and acknowledgment from the person doing the work. And keep in mind that not only Kevin is seeing this notification, but Farrell, who had been added earlier, also sees it. So she knows progress is being made on her problem. So now Beth, we're going to shift to Beth's point of view.
She is going to go back into that Service Health dashboard, click into the service and now you're going to see this dynamic service map built by ServiceWatch that I talked about earlier. And just through visual inspection, Beth can see that it looks like there's this Iplanet server that's got some sort of event firing on And so she wants to do a little archaeology, figure out if any changes have happened recently on that server. So she clicks on this past changes tab and she sees, in fact, there was a change. And if she goes up to the time line view at the top there, she can click into a day view, get a little bit broader perspective and see that the CI was actually changed back on May 2, and it was just about that time that things started to go south with that server. The next thing she NOC engineer to essentially automate some sort of response.
In this case, she wants to roll back that change because, obviously, it had a connection to the service going down. Now obviously, this is in a production environment. You wouldn't actually just roll back a change, right? So what she's actually doing is generating a change request that's going to go to an executive to review and approve. In this case, the executive is pretty cool, so he's running an Apple Watch.
And so he can see the change request show up on his watch. He can click into it and get context on what's being asked, and he can actually approve it right there. That happens. You'll see another notification up in the Connect window. And Kevin gets a note from Beth saying the emergency change request was approved, the server has been rolled back to the last stable version and the demo service is back in action.
Kevin can verify this. He can go to the Service dashboard and you can see everything's green. And then, Farrell, who was the original requester behind this, she can now go to her demo service and see that it's actually up and running. Okay, so what did we just see there? We saw some ITOM technologies like ServiceWatch that provided this service centric view of operations, right?
Hugely impactful. You got a single pane of glass for looking at all your enterprise services, and you can tell at a glance which ones
are having
trouble. We saw the ability to essentially connect all the stakeholders around an issue. A lot of times when a service goes down, half the time is spent just getting the crisis bridge brought up and getting the right people identified to be brought online. This thing is all done automatically. You understand in ServiceNow's environment who's responsible for the service and the relevant stakeholders that need to be pulled into it.
And you can all do it through Connect. It's very interactive in real time. And then you also saw how we connected essentially the response of the issue to ServiceNow ITSM processes, in this case, incident and change. And then lastly, we used orchestration to actually automatically roll back the issue in the data center and restore the service. So hugely efficient.
You had real time collaboration happening. You had connected processes. All of this stuff is stored in the ServiceNow system of record. You got an audit trail of everything that was done and the service was brought up and running in record time. Okay.
So back to ITOM at ServiceNow. We've actually been in the ITOM space for quite a while. The CMDB discovery and orchestration tools are very mature. They've been around for more than 5 years. I'd say we really started putting wood behind the ITOM, attacking that market with the acquisition of Nebula in 2014.
And that gave us what we believe is a service centric approach to managing infrastructure and applications. And then recently, in the past few weeks, we announced the acquisition of ITAP, and ITAP provided some capabilities around cloud management to help mature our product in that space. So out of ITAP, we got I mean, the primary motivation there was really to accelerate the evolution of our cloud management products. So they had some IP around connecting to different providers that we hadn't done yet like OpenStack and Citrix Zen. We got some engineering resources and expertise in the CMP space that have been working in this area for many years.
And then obviously, we got some valuable IP that we're going to use as a foundation for future versions of our CMP product. ITOM is a huge space. I mean, just across Cloud management and event management and so forth, there's many tens, if not hundreds of vendors. We rely a great deal on a number of the partnerships that we've built up, both direct partnerships with companies like VMware and Amazon and others as well as indirect partnerships through ServiceNow Store and ServiceNow Share. We've got a huge amount of activity in our in the ITOM space from partners that are building and delivering solutions on top of us as a platform.
And as Jack indicated, ITOM is an increasingly important part of our worldwide solution partners and the solutions they're delivering to our customers. So one such customer, we'll be talking about later on this week. We got engaged with Microsoft a little over a year ago, pretty deeply out of our Kirkland office. We were working almost every week with them. And really, it was around deepening creating an incredibly deep integration with Microsoft Azure.
But we've also provided integrations across some of the other technologies in Microsoft. But here to talk more about the partnership is Steve Guggenheimer. He's the CVP and Chief Evangelist at Microsoft.
Well, I think there's a broad conversation within the enterprise today about digital transformation and sort of how to evolve. And a key part of that is the transition to the cloud. How do we decide sort of how we take things that we might run on premises today in a client server environment and move those to the cloud? How do we build for the cloud in the future. And in that cloud conversation, that's where Azure comes to life and that's where our partnership comes to life in the beginning.
Very few enterprise or commercial entities are going to take everything, pick it all up and move it to the cloud right away. That ability to move to the cloud in a way that customers are defining it and driving it and do it in partnership with tools that they're using today and sort of driving for the future, that's really what Azure brings to the table in partnership with ServiceNow.
Great. So where's all this going? What's our strategy for the long term in the ITOM space? One of the ways to think about it is in a world increasingly the infrastructure is getting commoditized or it's getting virtualized or it's getting moved outside the firewall into the public cloud, the durable object, the thing that is most interesting to manage across all of that change is the service itself, right? So what we are setting about doing and you've already seen some of the chips on this table is automating the life cycle of services from cradle to grave, right, from defining the need for a new service using something like demand management to automating DevOps processes and deploying that service, deploying first infrastructure to host the service in a cloud somewhere, deploying that service into that infrastructure and then managing the service when it's in production, as we just saw, remediating issues when they occur and then moving the service across hosting boundaries as needed.
So we're focusing along kind of the story. It's authoritative and you can hinge all of your automation around. The other one is availability. This is kind of the first order discipline of Itom in a lot of ways. It's keep the service up and running.
So not only are we focusing on making the reaction highly efficient like we just saw, when a service goes down reducing the MTTR through very efficient interchange and automation. But we're focusing on things like predictive analytics and machine learning that allow us to essentially estimate and project predict when things might be heading south in the infrastructure, so we can enterprises, their app development teams are going up to So today, a lot of enterprises, their app development teams are going up to the cloud. They're provisioning infrastructure on the fly. They're expensing it via corporate cards, etcetera. What our customers are asking us to do is help them make constructive structured use of the cloud, of various cloud providers.
So what we are doing with our CMP product and with other things like orchestration is we're making it easy for customers to consume and utilize the cloud. And this is all about agility. It's making services be able to be deployed much more fast into the cloud and managing and automating DevOps. So lastly, I'll leave you with this. ITOM, kind of like BASF, it makes ITSM better.
ITOM, in a lot of ways, is the last mile of ITSM. We take an ITSM process, and we actually take it into the infrastructure and implement the change. It's all about the service. At this point, that's beating a dead horse. So that's a recurring theme you've seen through all these presentations.
But fundamentally, our paradigm, the thing that we're bringing to this whole thing, to the world of infrastructure and operations management is a service centric lens to that whole thing. And so transforming the CMDB to that service repository. And then finally, the time is now. Frank talked earlier about the growth that we've seen in Attach in our customer base to ITOM. So we're doubling down in ITOM.
You've seen that with the acquisitions that we've made, and we're incredibly focused on winning in the ITOM space. With that, I'm done. Thank you. Thanks, Mike.
So again, questions for Mike. Please raise your hand, Mike Verner will find you. Just to kick off, arguably the most common question that we've been receiving over the last couple of months has been around as more workloads move to public cloud and as IT costs or infrastructure costs are reduced, how does that impact your business?
Yes, absolutely. Well, it's actually a very positive thing for our business because what customers are doing is they're taking, I think Jack referred to this earlier, as a cloud first strategy. And what they're trying to do is they're finally moving from this kind of grassroots consumption of cloud resources, typically coming out of the dev teams, to a more structured strategy around cloud consumption. And they're looking to ServiceNow to help them make better use of the cloud. And the way that we do that is we allow them to carve up standardized unit of cloud infrastructure across multiple cloud providers.
They can make that available to their dev teams. So the dev teams aren't starting from scratch. They get reuse out of that. And then the dev teams themselves, by deploying with ServiceNow, they get monitoring, they get a lot of this visibility around the services for free. When they deploy into Amazon, they deploy into Azure, we record in our CMDB a lot of the metadata around that deployment, which makes it easier to support and manage that service in whatever that environment happens to be.
And then finally, you saw how there's this connected experience across not just the Iton Technologies, but ITSM. That's the value that we offer for services that are delivered into any cloud environment. And really, from our standpoint, we want to be agnostic. There's going to be a very long tail of companies that are running hybrid cloud, and we want to be able to show that single pane of glass across all of it.
Great. Questions? Sarah?
Hi. Thank you, Mike. Sarah Henley in Macquarie. Just a question for you in terms of customers mapped onto the CMDB when they're using ITOM. What is that process like?
Is that cumbersome at all? And what do you guys do to make it easier? And then if I could piggyback on to Don's question also about public cloud usage. When customers are looking at the world from a cloud first perspective, how does ServiceNow's ITOM suite help with any sort of outages on the public cloud side? Is that involved at all or with the remediation or service alerts?
Yes. Okay. Well, let me take the first one and then I'll take the second one. So the first one, the mapping process that ServiceWatch employs is pretty straightforward. Essentially, what you do is you provide ServiceWatch with some sort of entry point.
And in the case of a web based service, it's typically a URL or a URI. And then what ServiceWatch does is it burrows underneath that entry point and it looks for configuration a Now there's nothing magical here. At the end of the day, you still need credentials to access these different machines in the environment. Otherwise, I would have one hell of a hacking tool. I probably wouldn't be working at ServiceNow.
But so there is a process. And typically, what we try to do as a best practice is we get the CSO involved and we say, hey, this is how we want to go map your environment. And they kind of grease the skids for the credentials and so forth. But the real payoff is not only is the automation made easier through ServiceWatch, but the real payoff is after you've automated it, that map takes care of itself. So that you're not having to go back and constantly update the map.
So hopefully, that answered number 1. Now number 2 was around utilization of the cloud and how do we show service health. At the end of the day, if a service is deployed into the cloud, we're reliant on the cloud providers' APIs to tell us what's going on with that service. Now Amazon both Amazon and Azure through in the case of Amazon, they've got AWS Config and CloudWatch that provide data around health and the configuration of services that are in AWS. Symmetric to that, Azure Resource Manager has a commensurate kind of capability.
Well, we tap into those APIs and we extract as much health data as we can out of those clouds and we present it onto that service health dashboard that I talked about. But at the end of the day, I mean, if it's another type of cloud provider and they don't have those APIs, then we might be limited in how much detail we can show behind it. But we can still show, is the service performing well? We can do user based performance metrics on the service and figure out whether it is an issue or not. Walter Pritchard
from Citi. Just on sort of the capabilities, you showed partners being important. If we think about some of the key capabilities of your ITOM platform, you introduced the it wasn't a high speed, high scale sort of event bus that you would see out of some of the products that have been in your customers' environments for a long time like NetCool and and some of these. And then there is also kind of the deep dive down
By the
way, I am not nodding
my head agreeing with that. I am just waiting for the
Okay. So what I am trying to understand is sort of how broad do you stretch this ITOM suite? And I'm using I used 2 examples as sort of core capabilities and curious kind of what your view is on them. One is that high speed event bus and the other is that deep dive down into the like the Java code or the dot net code or the node. Js code, whatever developers need to sort of really do a root cause on an application.
And I think most people view it as a very specialized capability or something that's maybe you won't touch. But I'm curious sort of how broad do you think the platform will go over time?
Sure. Well, let me address those 2 first directly and then I'll talk more broadly about it. So on the first instance of event management, that actually is a very high throughput and dedicated event management interface that we've constructed. We've tested the thing up to 500 events per second throughput and sustained throughput of 400 events per second, which if you run the math, is a huge ingestion rate for just about anything outside of a very large geo telco perhaps. But we're talking about that that'd be the 1%.
We've also built in queuing mechanisms. So if you do get a denial of service attack, just to get a little techie for a minute, we will actually queue up all the data until the pipe drains and then reprocess that stuff. And more importantly, we've created threading on it so that you will never, in the case of a denial of service attack, impact the service of the instance, the ServiceNow instance itself. So it is very much a mission critical intended to be event management interface. So that's kind of 1.
The second one was on what you were talking about is binary injection for application performance management. And while we look at APM tools and we continue to look at APM tools and we partner with companies like AppDynamics and Dynatrace, for example. The thing that's more interesting to us is actually the user experience of that application. So, from a going forward perspective, we're probably less interested in getting into binary injection and actual instrumentation of code. We prefer to measure a user experience of the application and then collect metrics around that so that we can drive remediation.
But APM is that kind of other ITOM category, and that is a category that we've looked at in terms of our broad ITOM presence. So for right now, ITOM has got a lot of moving parts. There's a lot of different segments in it. I think what I've talked about right now is probably a good indication of where we intend to put our most of our engineering muscle over the next 2 to 3 releases. But that's not mutually exclusive with moving into other directions.
Mainframe management, it's probably safe to say, it's probably out of our purview, but other than that.
Michael Turits from Raymond James. Sort of a pile on question to Walter's and how broad, maybe how deep do you go? You talked about kicking off things like remediation where you're actually going further down in terms of touching IT operations. How far do you go in terms of doing that? For example, would you go in the direction of configuration management with Puppet Chef, Ansible?
You really operate at a high level. How far do you go down in terms of actually touching and managing operations?
Yes. So our orchestration tool can go right to the metal. I mean, we could go directly to the metal if we wanted to and impact the change. We could reboot a server. We could apply a patch.
All that's possible with orchestration. But what's more typical is a lot of our enterprise customers have already standardized on something like a Puppet or a Chef or an Ansible or a Salt. And what we do then is we talk to those environments. We talk to Puppet as like an external configuration engine. And we drive the work of Puppet essentially in that case.
So it's you can put the slider bar wherever you want on the automation. Sometimes we rely on somebody else to go to last mile, but our orchestration technology can actually go to last mile if we wanted to. Yes. Last question here.
Adam Sheppard from Arete. Just a question on the cloud management platform. Mean speaking to Atos and Clarinet, they're already using the platform to underpin cloud orchestration in their businesses. And I wonder
if you could talk a
little bit about how you see that platform evolving because clearly they had to do a lot of work themselves to make that a sort of a solution for themselves. So how quickly can the cloud management piece become a turnkey solution? What do you need to do to basically enable a broader customer base to run with it? And then I guess how quickly or to what extent do you see that market evolving? Is this going to be something just for the very largest enterprise and managed service providers?
Or do you see this as an opportunity for a broader range of enterprise customers?
I'll tackle the last question first. I think that very much to, I think, what Frank was indicating earlier, cloud management is kind of a watch this space, and we're learning a lot from our enterprise customers. What they're doing, though, is what I'm seeing is, in particular over the last 12 months even, a number of our enterprise customers, this is becoming kind of front and center for them. They're like, look, we got to get our heads wrapped around the cloud. It's obviously here to stay.
So how are we going to go do this in a structured way and in a way that we can ensure we have the right kind of visibility and control over things like compliance and cost, right? And so that's been driving our efforts. We've been focusing on making it easy for customers to understand cost and compliance. For example, you can go to Amazon directly interrogate it and find out how much you're utilizing of Amazon. But it actually takes a fair amount of development work in order to do that.
You have to understand how to tag the environment. We simplify that for our enterprise customers, and we make it easy for them to see a single dashboard of not just Amazon, but any other clouds that they have side by side so that they can make informed decisions around cloud utilization. So we think those kinds of use cases, starting with cost management, are the things that are going to drive ServiceNow as a But there's obviously a lot more to do there. But there's obviously a lot more to do there, and that was behind our ITAP acquisition. We recognize the fact that there's a lot of IP involved in these integrations.
And we're trying to simplify, simplify, simplify, make it easy to use the cloud and then understand the cloud.
So now we're going to get into our last speaker. We're going to have Sean Convery come up and talk about security operations. We formally launched this product at RSA. We started selling it in December as part of the Geneva release. In Q4, we landed 4 new customers and followed that up with another 11 customers in Q1.
Sean Convery joined ServiceNow last summer. Previously, he spent 3 years at MobileIron as Head of Product Management, an early leader in mobile security. So Sean is going to speak to you for about 20 minutes and then again we'll have 10 minutes for Q and A. Before he hops up here though, we're going to start with a quick video.
While you're sitting at your desk, a team of hackers are trying to steal your company's data. Problem is, you don't know which alerts are most important or where the attack is coming from. Finally, you find it. But it's not good news. So you fire up a crisis bridge and send frantic emails to IT trying to coordinate the response.
I'm not gonna Yeah. I know. We're working on that. What? But they need to reach someone sitting on a train, who needs to reach someone sitting on a plane, in the hopes they won't need to contact the CEO who's sitting down to dinner, who may need to inform investors who might ask for a sit down with the CEO.
All while your competitors sits calmly, stopping the same attack, not with emails, texts, spread sheets or other manual processes, but with an easy to use cloud platform that's integrated with IT. So he can quickly and effectively manage the incident and patch vulnerabilities on all systems without ever leaving his chair. There's a better way to get ahead of everyday security threats. ServiceNow,
When I entered the enterprise networking and software space, I always resigned myself to never having the possibility of having a commercial you know, things change, right? I've been in security for over 20 years. Things change, right? I've been in security for over 20 years. And I figured by this point, this whole problem would have been solved.
And the honest answer is it's simply not. And so I'm going to spend a lot of time today talking to you about the problem as we see it at ServiceNow. And then I'm going to show you a demo of actually what we've built. So let's get started. This is my favorite question to ask when I'm talking to customers, and it's actually a great beginning to a conversation when the customers that I talk to start talking amongst themselves.
They're really trying to figure out what makes security so different than the rest of my environment. If you ask a question of a network operations team, when do I need to upgrade my bandwidth based on a migration to Office 365 and a new headquarters building and the following amount of headcount growth, they ought to be able to tell you to the month when that change needs to be made. But you ask security teams, and they'll often give you kind of a mushy answer. It's like, well, I'd really like that extra headcount. I'd sure like a little bit more budget to buy the latest and greatest tool, but I think we're okay.
Even worse, sometimes you'll hear them spout off statistics about how many alerts their systems process, really which only tells you how poorly or well tuned their security systems are. So we think there's an opportunity to help organizations understand where they are and then get into the specifics on how to respond to what's happening. So let me walk through the security market. For those of you who aren't familiar with the security market, this will be an incredibly quick overview. For those of you who do know it, don't throw tomatoes at me.
I realize I'm vastly oversimplifying things, but I think it helps to understand what we see as the major pain point and how our customers have asked us to help them solve the problem. So it all started in the mid-90s with enforcement, firewalls. Everybody bought a firewall with the idea that you would protect yourselves from what was going on in the Internet by stopping bad things automatically. That was a great 25 seconds when we all believed that that was going to solve our problem. And very, very quickly, an entire new crop of technologies was born around this notion of detection.
Okay. I don't necessarily know for sure it's bad, so I can't stop it automatically. But man, you really need to know about it. So I'm going to provide some kind of an alert. So this gave birth to the intrusion detection, intrusion prevention space.
Now there's all sorts of vendors that are playing in this market. What we found over time is that organizations deployed not just one enforcement technology, but maybe 10, not just one detection technology, but maybe 6. And suddenly, they had this massive visibility problem. How do I see all of the information that's coming into me, particularly from systems that require my participation? And so that gave birth to what the security market calls security information and event management, or the SIEM space.
And so that market is fundamentally based on this notion that rather than pivoting, or swivel sharing, as we call it, from console to console, I can aggregate all this data in one place and take appropriate action. What we found is that model has some challenges. So if you talk to customers who've deployed that previous architecture of enforcement, visibility and detection, you'll hear them say a common theme, right? Many of these breaches that made the front page of the news all were based on this notion that an alert fired. There was an event to see, but the teams just couldn't they couldn't see it because it was this endless piano roll of information scrolling by all day long.
And so you can't hire enough analysts to deal with a world that's built that way. And so if you talk all the way from the Chief Information Security Officer down to the person running the vulnerability side of the house, they all have these common problems around collaboration. What's the procedure? How do I get the right person to approve what needs to happen? How do I then collaborate between the security teams and the IT teams?
These are 2 teams that have historically not worked particularly well together. And now you have IT holding the keys, the IT operations side holding the keys to all of the changes that security needs to make and security trying to get the attention of IT to respond to something when it's urgent. So this is the landscape ServiceNow found itself in as we were honestly dragged by our customers into this space. Before I joined 9 months ago, I sat down, I was being recruited and I've been doing security for 20 years. And so I'm asking obvious questions like, what's the sustainable differentiation?
Why are we in the space. And what I kept hearing is customers leveraging the ServiceNow platform were building bespoke infrastructure to do security incident management. And we think they're basically saying, please take my code, I want a commercial offering from you because the unique needs of my security team are not being met by the product as it currently exists. And so that's what we set out to do. That's what Dominik mentioned.
We've got a number of customers live in production now, and I think the demo will speak to what we've been able to provide there. But just a statistic to back up what we're saying about the challenges in security. This is a Ponemon study from 2015, and it shows that the average organization takes 2 0 6 days to spot a breach. And those of you who are doing email, 2 0 6 days to spot a breach, 69 days to contain it. Like how have we been living in this world for this long that that's the amount of time, that's the average to deal with a major breach?
We can and must do better as an industry. This is why I got so excited to come here is to leverage this platform not to enter and become a security company, but to leverage the workflow, orchestration, automation expertise we have as a company that our customer base of 11,000 here at this conference know how to do, but in the service of solving the security problem. So we think there's an opportunity for a new category of security. We call it response. You may hear others call it orchestration, automation.
There's a lot of different phrases. It's so exciting to have been in security for so long and to help define an entirely new category. We think this response is all built around the notion that you can't automatically stop everything and not all of the alerts need to have, human beings pay attention to them. But once you decide you need to take a course of action, you need a framework to have that occur. We just Mike was just talking for 20 minutes about all of the intricacies of getting operations through to actually patching systems and making changes.
Security teams don't do any of that, but they need to fit into that process and ensure that what they want to get done can easily be implemented by the IT teams. There's 2 major components of what we've launched in December and what we're enhancing now with the most recent release called Helsinki. The first is security incident response. At its core, this is leveraging the NIST best practices for how incident management should be done and actually putting it into the ServiceNow platform with isolated data protection so that the security team has their own protected enclave for dealing with all their security incidents. And then on a need to know basis, they can create tasks to the rest of the organization.
Think of an example of somebody being accused of disclosing sensitive information inside a corporation. Like think of all the downstream implications of Steve and accounting stealing company secrets. Security may have detected it. Security may need to orchestrate the response, but legal needs to be involved, right? What are my disclosure requirements?
HR needs to be involved. Can I fire this person? What are the constraints in the geography that I'm in? How quickly can I move? And then IT needs to be involved, right?
They need to recover the laptop, age out somebody's credentials, deal with all of the software assets and everything that that user has access to, to ensure we can quickly, especially in the cloud world, constrain the potential for future damage. All of this orchestration can be handled inside of this security, incident response capability. So think of that as sort of reactive to things that are happening. The second major capability is the proactive side of the house. How do we enable organizations to anticipate potential future issues and respond to them appropriately?
So those of you who know security, there's an entire category of technology called vulnerability management, number of vendors in this space. And what they do effectively is they go out and survey your environment to determine what are the vulnerable systems. 95% of all attacks are attacking existing vulnerabilities. So the theory goes, if I can understand what my exposure is, fix those vulnerabilities, I will address most of the challenges. Well, one of the key issues there is the volume of patching and discovery of these
vulnerabilities is very, very high.
And in the large So if you think about what Mike described as he was talking about Itom, if we can understand the business service and the assets as part of the CMDB that support that service and correlate that data with the scanning data, which without ServiceNow, frankly, is just a list of IP addresses and vulnerability identifiers. Now I can know, as the Chief Information Security Officer, what is my exposure on my 10 top critical business systems of critical vulnerabilities. That becomes an obvious thing getting back to are we secure and are things getting better or worse? Can I report out on a consistent basis to my CIO, to my Audit Committee that quarter over quarter, my exposure on my most critical systems to the latest vulnerabilities is going down? These are the kinds of things that you can enable with this capability from security operations here at ServiceNow.
And so the analytics capability, the ITAM capability, all of these robust platform features are just intrinsic parts of what we're offering. So again, we're not building a pure play security product. We're taking all of the security problem. It's really the connected experience we're trying to provide where we take the security tools, many different security tools, integrate them with the IT tools, the IT process and the broader organization. There's 3 major benefits that we talk to customers about that are resonating as they deploy the product.
The first is delivering efficient response. So again, people are incredibly expensive in the security market. You talk to a Chief Information Security Officer, they'll tell you they hire somebody out of school, they spend 6 to 9 months training them to be effective, and then immediately, maybe they get 3 to 6 months of productive time out of them, and then their salary doubles and they go off to the next job. What we're trying to provide is a framework where all of the security team can be efficient and effective right out of the gate. Streamline remediation is another capability that we talk a lot about.
So leveraging ITOM, if we can help that system get patched, if we can help that system quarantined automatically rather than having to have the security team, frankly, open an incident on the IT side where there is no SLA, where there is no visibility, suddenly now we have a much better story and a much quicker response. And then I already talked about visualizing your security posture. So with that, let me shift into a quick demo. So what you see here is a typical dashboard built into the product. So this could be a Chief Information Security Officer dashboard.
You can see here we've got critical incidents. We're able to look at risk versus severity. We can see some geographic breakdown. And let's, if you take a look on the critical incidents open today, let's imagine an incident just happened, right? And so let's work the incident and involve all the people that need to respond.
So if I drill in out of a Chief Information Security Officer view into an analyst view, you can see it's very, very clean, very focused on the work that that analyst needs to go after. They can dive into this critical incident and we'll see what's going on. Well, if you look at the details, it looks like this was an alert created by a security information and event management tool, in this case, Splunk, and it identified anomalous outbound communication blocked by a firewall. If we opened a security incident, every time a firewall blocked outbound traffic, we would have millions of incidents in one day. So what made this special?
Well, let's take a look. Let's drill in and see if we can figure out why the system opened this up. So I can open up the business service map, part of the capabilities of our ITOM suite and actually see, in this case, there's actually a business critical service that was affected, and this was the one behaving badly. So this particular server should never be communicating outbound on its own. And so that indicates there's got to be a problem.
What I just showed you is impossible to do any other way, right? This notion of being able to understand the presence of a security alert correlated to the business value of the asset under attack is something that we and our customers feel changes the game in terms of prioritizing how to respond. We have built in severity calculators in the platform that allow us to perform these calculations in advance. So when you have that highly paid analyst and they sit down to do some work, they're not worrying about fixing a problem with the summer picnic website, right? They're trying to figure out what's affecting my SAP Financial Reporting infrastructure.
So let's keep going through the demo. So now I'm going to actually drill in and show you how we leverage the workflow capabilities of the product to again enable a level of productivity in the organization that has been previously impossible. Security teams deal with something called runbooks all the time. Think of them like playbooks for how to deal with a particular attack. There was personally identifiable information that was consulting organization will often define these documents and they're 30, 40, 50 page PDF files that articulate what you should do.
Step 1, do this. Step 2, do that. The problem is at 3 o'clock in the morning when your phone goes off, when something is going down, that's not the time to pull out a document and decide what the next course of action is. So leveraging workflow, we're actually able to codify the best practices that an organization has and actually show them and automatically create the steps necessary to respond. So you can walk through and see, you know, blue is complete, green is what we're on right now, and you can work through the entire workflow.
So let's keep going. So let's look into the details here. And you can see that we've actually found some details that there's this Russian website that appeared to be the destination for this outbound traffic. So as I look into the specific details, now we're leveraging brand new capability that's in our Helsinki release, which adds a third critical element to the context conversation, which is indicators of compromise. There's an entire market in the security space called threat intelligence.
These are companies that have highly paid researchers that find and anticipate the latest and greatest attacks. They're out there on the dark net discovering exactly what's going on. And they'll publish lists of bad IP addresses, bad domains, bad file hashes, all those sorts of things. And organizations, again, are inundated with feeds of information telling them about all these bad things, but without having any context on what to do with them, it's very challenging. But we can automatically and build this into our severity calculation when we see an alert, understand if there's a critical asset under attack and then understand if the broader Internet at large, this threat intelligence community, views the behavior to be bad.
So if I can understand, yes, it's a critical service, yes, we saw bad behavior, and yes, it is confirmed to be a bad actor, suddenly now I feel very comfortable escalating and involving whoever I need to and using my resources, aggressively. So let's, take a look at another component sort of shifting into that proactive side that I talked to you about earlier on vulnerability and show you how we can discover additional vulnerable items. So in this case, we're able to see that while there was one web server that was compromised, a number of other servers had the same vulnerability. So now I can realize, okay, I need to go proactively fix these so that they don't become the next target of an attack. So if I keep moving through this process, one of the things that I need to do is make a change.
So security teams today struggle to figure out who owns a given IP address. So we talked about something simple like leveraging the business service map to understand what these IP addresses map to. But now we can actually understand the business owner. Again, leveraging the CMDB, I can understand who the business owner is and immediately contact them. I can't tell you how much this changes the conversation for security teams that are again living in the world of log files and alerts and IP addresses to be able to communicate with that individual.
And so what we'll actually do is leveraging our built in Connect capabilities, we can engage with that individual right away and ask for permission to push this emergency change out. So in this case, maybe a standard change window would have been when you normally would have pushed this patch out, but given that there's a live attack, you actually want to get that change to be pushed out right away. In this case, Frank's telling us to fix it real fast. And now we can switch over to the IT team. So the IT team leveraging the information that security has gleaned during their investigation is now able to very, very quickly understand what needs to be done.
So the handoff from security to IT was completely seamless. The case and the incident was automatically created by the alert. We prioritized because it was going against business critical systems. And then we were able to automatically, at the key point in the workflow, get IT involved to patch the system. So IT simply has to prioritize this particular work, move it into the doing stage.
And the fastest server patch in the world is going to occur right now, and it's done. Kind of like a cooking show, we want to pull the cake out of the oven when it's already finished. But now I can move into the final stage where I can show the last piece of differentiation that I really want to highlight, which is around visibility and audit. So I can show that the workflow is completed. And this last phase is called post incident review.
So as I close out the incident, you can see that we have an auditable record of every activity that happened related to the incident. This is our customers' favorite feature because previously this would take hours to collate all the information in paper notebooks and spreadsheets and phone calls and text messages and emails to try to provide the audit committee a record of exactly what happened. Well, we have all the information, including that Connect session that we had with the business owner in an auditable read only document that we can share not just with the audit committee, but use to feed back into our own knowledge base. So the next analyst that gets a similar incident can immediately have the context of what the previous investigator did. So that wraps up my demo and I think we can switch to a little Q and
A.
Great. So again, raise your hand if you have a question for Sean. We'll get Mike Berners out there. First question to you is, leveraging the capabilities of the ServiceNow platform, can you give the audience an idea of how we were able to stand up our security operations products so quickly?
Sure. So I mean, obviously, there's a framework for incident management built into the ServiceNow platform, but more important than that is the analytics infrastructure, the investments we've made in securing our cloud infrastructure. Role based access control and reporting and federal certifications and all the various things that every enterprise product needs to be credible in a G2000 customer base. So because I came into a mature platform, I was able to focus exclusively on features. So having a BU focused on security, where we leverage the platform's engineering efforts, I can feed them requirements that benefit all of the businesses.
But by focusing in on the specific capabilities of security, my velocity, frankly, is faster than the most well funded startup. Great.
Yes. Thanks. Matt Hedberg from RBC. Sean, I'm wondering how difficult is to build out the right sales expertise to go after these security individuals? Or is this more could this be more of a partner led sale in terms of introductions, whether it be a Splunk or a Palo Alto or an Accenture, I guess?
Sure. So what's the expertise required to sell this effectively, basically is your question? So we obviously have, as we talked about earlier, a set of specialists that work closely with the business unit, but not quota carrying, but they are effectively helping to bring that message and provide that more efficient selling motion throughout the broader organization. So we've made those investments today. We've had great success in bringing on seasoned security professionals.
And to your partner point, we do think that over time, we will have a very large and robust ecosystem that helps candidly make customers' investments in security, their existing investments more valuable. So unlike a relationship between Palo Alto and FireEye, for example, where there's some competitive tension there, right? What we're providing is we're never going to make a firewall, right? We're never going to make a security enforcement technology, right? We're in this space because we believe the interconnection of all this information and the connected experience makes operations and makes investigations far more efficient.
So it actually helps us. Everybody wants to partner with us because they're not worried about us being a direct competitor. Did I answer your question?
Keith Bachman from Bank of Montreal. Similar to the CRM market and the IT operation, what ServiceNow wants to do in security is introduce workflow to try and help solve problems. Yet at the same time, there's existing incumbents in there that have been in security for a long time. So
how do
you think about those incumbents introducing better workflow for their particular products to effectively add value and perhaps not looking at the ServiceNow for the more encompassing solution? And then more broadly, who are you guys when you're in the conversations, who are you competing against to try to get dollars out of the customer?
Sure. So who are we competing with? And then specifically, is there an opportunity for those competitors to eat away at our value prop from sort of their existing place of market success? So I would expect to see robust competition in this space, right? I'm not gearing up for an easy battle.
I think we're going to be in there fighting for every deal. What I can tell you we found and what our customers are telling us is that the sophistication of what we built is simply incredibly difficult for an organization that's coming at it from the security side to catch up. Just give you an example, we have a very large entertainment company that we closed and they were in the middle of doing an investigation and found that the request of one of our competitors was to add a custom field to an incident. And they were saying, well, maybe we can add that in a future release on our road map. We added the custom field during the demo in like 45 seconds.
So this robust capability, I don't think, to your question, it's a matter of us being this sort of more sophisticated capability that not everybody needs. I think automatically you need to work with IT because you want to be able to create that incident for the IT side of the house to respond to what security has discovered. But you also don't want just an API call, you want SLAs. Like if you're the CIO and I'm the Chief Information Security Officer, I need to know that when I give you a SEV-one vulnerability that you need to respond to that whether it's 4 hours or 8 hours or 16 hours, whatever we agree to, that I can measure and report on that. So again, I think security pure plays and there are a number of very small companies that are nibbling around the edges of the space.
IBM made an acquisition of a company called Resilient, which we're directly competing with. But I think this is the one category where we can actually help show that the IT and security split is actually really counterproductive. We think that these two teams leveraging their strengths, operating on a common platform where they can work together is the right answer.
Just carrying on to the
question because it does seem like a space that is going to have increasing competition because a lot of the security vendors are looking at security intelligence is where they need to go increasing visibility and then acting on that visibility. A lot of the vendors who are most aggressive in that space, whether it's like Splunk or IBM, have an IT operations management background. So they understand that these two vectors are coming together. And it seems to come back to the question Kurt was asking on the sales side of the equation. What's going to be dominant?
Is it the security expertise that becomes dominant or the understanding that you guys have into the IT department, into that CMDB, if you will? How do you gain comfort that going to be your side of the equation? It's going to be the CMDB that really makes you the pyramid and tool versus all the security expertise that these guys bring to the equation having been in the market and having all these prebuilt integrations and all this security intelligence?
Sure. So a couple of things. First off, we are not competing with any intelligence provider in the market at all, right? And in fact, one of the things that it's important to understand is this notion that there was a single pane of glass that you could buy from a Splunk or an IBM or any vendor in this space that aggregates all of your information has never been true. And in fact, it's even less true today than it was in the past as organizations are deploying services in the cloud, they're doing
network based analysis of traffic patterns.
And so you need to talk to So I do think though it remains to be seen what that 4th pillar of security turns out to be. I'm convinced it's not one of the 3 existing products. I don't feel like those products on their own unless they aggressively embrace partnering with all of their competitors, which I think has their own challenges from a business model standpoint. The second piece I would say to your question is having somebody like Dave from Oshkosh come up and talk to you about how passionate he is about ServiceNow, this is the CIO relationship that we leverage when we go talk to the Chief Information Security Officer. Before I joined the company 9 months ago, I think my first question out of my mouth is, how are we going to build this relationship with the security team and build credibility?
It's the NPS scores that we have with the IT organization that's actually making that far easier because they're bringing us in and introducing us to the Chief Information Security Officer. Does that answer your question?
Just to follow-up on Keith's question. It sounds like you have a great product, but I'm concerned that your sales efforts might be a little difficult given the CSO's office is just inundated with requests from security vendors. And how do you guys kind of get through and kind of be able to kind of have credibility in that office without a dedicated sales force going after that opportunity?
So what we found at least to date in these closing these early 15 customers over the last couple of quarters is what we found is again, the CIO relationship that we have is giving us that entree into the security teams. So and in fact, the fact that we're already an approved vendor, the fact that the organization is already starting to deploy ServiceNow for multiple disciplines gives us the opportunity to have a conversation. There's actually been a number of deals where we got visibility into this transaction happening in the security teams relatively late after evaluations have occurred from one of our competition. And we came along and said, we've got an offering too. And we completely stalled that sales cycle, came in, told our story and rapidly closed and moved them over.
So I don't think it's going to be easy. I think it's going to be a challenge. I think this is why we have a complete business unit focused exclusively on security. This is why ServiceNow hired me, why I'm hiring a team, or we've got a sales specialist organization that's going to work with our broader field organization. But I like our chances.
Great. Last question here, Sarah.
Hey, Sarah Helene Macquarie. I'm trying to wrap my head around and trying to understand exactly who you're selling the product to and how it's being priced. Are you trying to sell to the security operation? Or is this being sold directly into the hands of IT? How do we understand that?
Sure. Sure. So we are selling to the security organization directly to answer that question. So we leverage the relationship with the CIO with the broader organization, but it's somebody inside the Chief Information Security Officer's team that makes the purchase. Typically, it's the CISO minus 1, often some sort of VP of Information Security, the SOC manager, so that the security operations center, the team that sort of corollary to the NOC, the people responding to these alerts is a key stakeholder.
The vulnerability response team is another key stakeholder. And to your pricing point, one of the interesting things about defining a new market is you've got to figure out pricing, and you're all figuring that out at the same time. So we've seen we're flexible with customers. We've seen employee that
we're able to continue to invest. Just one
final comment here from Dave. Okay. And that we're able to continue to invest.
Just one final comment here from Dave.
Thank you.
If I could tack on to that question, I have a CISO. His name is Mike Warner. He's a former Naval Officer. Really bright guy. He's been hassling you guys for a couple of years now.
Security, cybersecurity alone. We're in the running for the Cogswell award for having a superior rating for the Department of Defense 3 years in a row, which is unheard of. And we didn't pick you 4 years ago because you didn't have the right security rating. 2 years ago, you did. And we've been pushing you guys to secure your data, to encrypt your data.
But moving beyond that, I guess I would suggest everybody else, the CISO in my organization works for me. Half of every Board meeting I go to is all about cybersecurity. I was just there last Monday and I got beat up pretty good, but answered every question and passed with flying colors because of the work they've been doing. I would suggest CSOs are going to follow the transaction. So from the inside of the customer base, follow the transactions.
I've put in FireEye, I've put in every tool you can imagine across 15 companies across 23 countries and the mountain of data that you have to sort through is immense. And the SIEM, we're constantly updating these tools every 2 or 3 years. Ultimately, I think where we're headed is not just questioning you or questioning you or encouraging you to keep investing in your platform, but eventually it's going to be follow the transaction and get as close to that customer experience as possible. You're going to see this at layers of abstraction that you're going to be uniquely suited to be able to enable the CECL to see what's happening at the top. That's what we all struggle with, right?
And I think that's what you're selling. I don't think you need a dedicated sales force necessarily. Your product is going to be pulling that through. I don't necessarily want to talk to another salesperson. I just want I'm going to end up coming to you saying, I need help with this layer of abstraction to cover these probably by then 35 different tools and a team of 30 that I'll have to make sense of.
Great. That's great perspective. Thanks, Dave.
Yes. Thank
you. Thank you very much, Sean. Appreciate it. Let's bring Frank and Mike back up here and we'll do a round of Q and A. Questions for Frank and Mike or Dom?
It's Phil Winslow of Credit Suisse. Obviously, we just heard a couple of presentations from security management, customer service management, obviously, newer areas for you guys. And I saw in the 2020 graph, obviously, been enough numbers, but you expected customer service to be potentially the bigger contributor. How do you think about just sort of the ramp of these 2? Obviously, think customer service is a bigger opportunity, but how do you think sort of the growth to 2020 from these 2 in particular?
What are the drivers?
That was your slide that had that, Brad.
I'll answer the question. So here's the thing, right? We launch new services. We don't always know how fast these things go. Some catch fire really, really fast.
We saw it on the ITOM side. And sometimes other things take longer to do, even things that you don't expect. So we don't always know, but we have the great opportunity to launch services and really watch what goes on. When things are working well, we fill in very rapidly behind it. We apply more resources and we scale quite quickly.
Sometimes, side, we've done a whole bunch of things. So, we are counting on both security and customer service to be significant contributors because we feel like we have an extremely highly differentiated offering, number 1. Number 2, the markets are very, very substantial in both these areas. Now these are all hypotheses and assumptions that we apply to the business. And we think they are going to be significant contributors in the sort of the 2020 time frame.
I can spreadsheet this out and come up with any number set of numbers, but there are a lot of your guess will be as good as ours based on what you know about our business. If I look at ITOM, ITOM was $0 5 years ago. But when we get to 2020, I mean, Itom will be approaching $1,000,000,000 in size, right? So our platform spawns and launches incredibly powerful opportunities. And we certainly think that both security and customer service management are of that order of magnitude in terms of potential.
Yes. What I would say too and what gives us the confidence that those are going to be meaningful products or new products coming out, as we talked with Dave about the CIOs are our best reference or the ones that are going to bring us in. We have a huge installed base of customers. You look at our ServiceWatch product today, which is the leading product within Itom, we're only in 6% of our customers today in that huge opportunity. Those 11 plus customers that we now have in security operations management, I believe every single one of those are an existing customer today for us.
And in the case of customer service, there was actually one that was not a I think we have 2 that were not ITSM customers. 1 actually didn't choose us for ITSM, but because they chose us for customer service, they're now going to put us in ITSM as well, too. I believe that was one of those customers that Dave put up there. So that's what gives us the confidence that those are going to be meaningful pieces of our business going forward. And whether service management or customer support is 15% or 12%, I don't know what that's going to be.
That's a long time out. But cumulatively, we have confidence in that $4,000,000,000
Yes. I think what we have told you, one of the key themes that we call out on a quarterly basis is how good the growth has been in what we call the emerging products, right? So I think we've been showing over the last couple of years that this strategy is working. And we're certainly confident and excited about having these products to sell.
And what I'll see too is actually one of company here. They were in for an EBC, and they were aiming in to talk about customer security at the time. They were an existing customer. They were looking at other things. Their IT people saw what we were doing in customer service.
I think they're one of our first customers to actually go live with our security operations management. That was Raymond James, who's here.
Hey, Mike. Kirk Materne with Evercore. Thanks. You started out your presentation talking about a lot of the investments you guys did in 2015. And with investments sometimes comes some disruption and you guys talked I think recently about some of the sales turnover we had in the back half of the year.
When you think about 20 16, you obviously already have the commercial business unit out there. So that's not a factor. But you've can you just talk about how you're thinking about sort of the turnover issues that sort of came up a little bit at the end of last year? How that's trending today, sales capacity versus what you're trying to achieve this year and sort of productivity assumptions that you guys are making? Just to give us a sense of how that's trending today in terms of in relation to your forecast?
Sure. So as we talked about before, I think we made our comp plan more rich in 20 16 versus 2015. And we did that because we wanted to, A, help with turnover B, we wanted to see a higher achievement with our sales force and kind of get people more excited. We think we have that. That is in place right now.
We have the right plan in place. We're very pleased with Q1, the attainment levels we saw in Q1 of reps versus quotas, and we're very pleased with that. And I think with all the investments we're making in our Inspire team, as I talked about before, and all the specialists within the GMs to help enable our salespeople to be more productive, has those people excited as well, too. So I feel pretty good about 2016 right now, what we're seeing. I don't really have anything else to add to
Mike Alexzuk with Piper. I wanted to ask you about the long term slide that you put out on the free cash flow margins 30% to 32% for 2020. Roughly what percent of that do you expect to come from stock based compensation?
So I actually don't have that number there. I can easily get that number and we can update it. But the problem is, is we don't really forecast stock based compensation per se as a percent going out 2020 because I have no idea what our stock price is. What we do, do when we give you is we give you what our forecast dilution is based upon shares and you guys can make your own assumptions as to what the stock price would be.
There's a slide in the appendix. It's an
updated version of the slide from last year that gives our shares, options and RSUs without treasury stock method in the appendix of this deck. It's our latest thinking around share count.
Hi, Brent Thill with GBS. Q1, you had a couple large transactions, the $10,000,000 $20,000,000 deal. And I guess in Q1, that's typically it's not usual to see those type of transactions. But when you think about sales force and their training that their ability to go on and do these enterprise license agreements, I know not both of them weren't all you can eat, but given that process to go and sell at a broader organizational level, can you walk through where you're at that evolution and maybe a little bit about that deal pipeline that you're seeing you saw in Q1?
Yes. I'll comment first on that. What you're really seeing is the constant evolution of our presence in major accounts, right? I mean, people have started out with us and you've seen these the amount of revenue we generate per customer in the Global 2000 is going up and and up. And there have been inflection points or step functions, if you will, where all of a sudden we went it used to be that $1,000,000 a year account was like an enormous deal for us, right?
And then that moved $5,000,000 $10,000,000 and the transactions are getting bigger and longer. So we're becoming more strategic to our very large customers, in part because the platform is broadening the number of services, a, that people can get from us, but also what they can use the platform for. This is what my message was about the in the back office and the front office. And the more that we achieve that positioning, the more people are going to move in with really big dollars where spending $5,000,000 $10,000,000 $15,000,000 $20,000,000 a year is actually not that big a deal. Well, it wasn't too long ago where that was almost inconceivable.
That's changing and it's changing relatively quickly. Q1, you saw some of those or we saw some of those transactions that were very significant in that regard.
But to be clear, we've been working on those transactions for some time. They didn't just pop up again quarter. We've kind of been working on those for orders.
Yes. They don't happen just like that, obviously. That's a big relationship. We're all involved in it. Customers want to really get to know you when they start committing dollars at that level.
Yes. Thanks. Justin Furby with William Blair. Frank or Mike, just wanted to hit a little bit on international. I think you're a little over half 50% penetrated in the U.
S. Just curious where you think if you look at EMEA and Asia Pac, where you think those could go over the much longer term? And then as you make sort of your 4 to 5 year targets, what are you assuming in those markets? And then from a management standpoint, I think you made some changes in EMEA earlier this year. Can you talk about some of the benefits you may be seeing there?
And are there any sort of notable changes are you expecting over the next year or so in terms of go to market in either of those? So lots of questions, sorry.
You want to start here? Sure.
You can start and then I'll jump.
So this whole Phase III transition that I talked about also has consequences for a lot of our leadership roles at the executive level and 1, 2, 3 layers below that. We're constantly looking at people and looking at ourselves like, hey, are we really Phase 3 material there? And if we don't think that you're good for the next 5 years, we are likely to go and change those roles. And we have changed roles in a lot of theaters, theaters and sub theaters, late last year. And again, that's all because, you know, we wanted to have people that we said, yeah, they were pretty good last 4 years, but pretty good last 4 years doesn't matter to us.
It's really about are they are really the people that we are going to be 100% behind all the way up to 2020. So we applied that Phase III filter to a lot of roles. We also brought on a brand new head of professional services globally and we also elevated that to a cabinet level position. Previously, it was in our sales organization. So we are making changes all over the place.
Some of the people that you saw today are all relatively new. They're new to the organization. So part of this meeting is we want to show some of these people to you. But in terms of selling, it's interesting to me that the international portion, even in the 5 years I've been with a company that hasn't budged that much. We've been sitting in that 69%, 68%, 70% being outside of North America.
Being domestic. Yes, being domestic, right. So, in part of this, we should be growing faster in these international regions. But in part, it's because our Americas people, they're kicking ass, okay? It's kind of hard to catch these guys, but I think we have tons of room up in these international theaters, big time.
We really do also, by the way, in Central and Latin America as well. So this is a lot of opportunity. When you said half penetration, that's not saturation. Just remember that, right? I mean, our saturation in these accounts is very, very small and our upsell opportunity in the Americas is huge in core products.
I'm not even talking about new products.
It's Sarah Macquarie. Two questions. The first for Mike and the second is for Frank. Mike, I was surprised looking at the $4,000,000,000 target that maybe there wasn't a little more wiggle room because of slower investment in ProServe. So I'm wondering how we should be thinking about modeling that over the duration.
And then my second question is really about your product mix. But looking at the proxy statement and the new ACV last year was pretty good actually. And first of all, congratulations on compensating yourselves on a measurable metric. We don't actually get a lot of that. But I'm wondering and I'm not asking you to disclose the new ACV for the year, what you're targeting for your compensation.
But I'm wondering what the mix of ITOM is going to be within that. If you can talk about that a little bit, it would be very helpful.
Sure. So, the first thing in terms of the $4,000,000,000 the professional services, we think that's going to be roughly 10%, but it could be somewhere between $8,000,000 to $12,000,000 As I said last year, I'll remind everyone again. We have very good visibility in kind of the next 12 months in our business. 5 years out, that's still a bit of a spreadsheet exercise. And that's why we're not giving it.
It's approximately $4,000,000,000 In terms of the way we compensate, right now, all of our employees, not just the executives and our salespeople, dollars 1 is $1 for compensation. We're not currently comping people different on ITOM versus service management versus security. That may change. We may run a spiff for the salespeople on that. But right now, it's a dollar to dollar for the executive team with our net new ACV the way we're compensated.
We're not differentiating this year. Whether that changes or not, that's up to our comp committee in the future. Yes. So in terms of the mix, what we're saying is we think in 2020, ITOM can be about 15% of our revenue. It's Frank's a little high, I think, on the $1,000,000,000 I think it's going to be that would be 25%.
Because in order to get to
On the PS point, not only do we not have great visibility into that business, but a lot of these emerging products that we're rolling out, we're actually going to be doing a lot of that PS work initially, get those products up and running and then we'll bring partners in to do that once we've got them up and running and got them trained. So again, not as much visibility, but we are going to be doing some of that PS work.
Yes, Raimo.
Raimo Linjer from Barclays.
Can I
go back to the very part of the day, Frank, when you talked about 2020 and the organization needs to constantly change? You've been through the process of Data Domain and now with ServiceNow to get you to a certain size, but even you come into kind of new territory now. Can you talk a little bit about some of the thinkings around your direct model, if you think the guys that got bigger, they used a lot more of the partners to kind of get into the sales motion, etcetera. Can you just help me understand maybe that's one example, but how are you thinking about the next step for the organization?
Yes. So thanks for pointing out the fact that you're right, we have not been here before. And because of that, we are acutely aware of the fact that we're not in a been there and done that situation, which is the reason why that Phase 3 framework is so important. I didn't want the organization to rinse and repeat and just assume that things would just hold up at infinitum and really question things. The other thing that we've done is we're bringing people into the organization selectively who do have Phase III exposure and experience and visibility.
In other words, either they've done it or they've seen it done correctly, right? So we are recruiting. I don't like to have old Phase III people because then I become like an HP IBM, which is my worst nightmare, right?
We are all wearing
blue suits,
so whichever.
Yes, I know. That's disrespectful to our investor community. But so that's really we're going at it very, very carefully. We're bringing in selective experience. Also at our Board, we brought in people that come from that have seen this transition to multibillion dollars to really inject that what is it like, right, when you're executing at that level and help see around corners.
So that's really how we're going at it. I mean, obviously, Mike laid out what our distribution model looks like, right? We have the 4 quadrants. We have existing accounts. We have new accounts.
We have commercial enterprise. In future, I am moving We don't want to bring too much change too quickly to this organization. We're already moving through this multiproduct model, right, which is, as you can see, it's a huge change for this company. So far, we're doing it quite well, but we're very, very vigilant in that regard. Verticalization, I think, can become another very powerful driver conferences within the conference room because we have a lot of big insurance customers, we have a lot of conferences within the conference room because we have a lot of big insurance customers, we have big banks, we have big pharma, we have big retail, we have
diversified industrial. Bringing those
people together is an incredibly for example, one pharma can't compare itself against another pharma in terms of, hey, how many incidents do you process per month? How do you normalize that for your the number of CIs that you have? I mean, there's so much opportunity in this business. It's super exciting. But I'm getting too far straight from your question.
But I'm just moving with a lot of caution and not with a lot of swagger because we really understand that we don't know everything there is to know yet about this.
I want to stress too, Raimo, we are investing very heavily in our GSIs and partners. It's just you don't necessarily see it in the revenue because our customers insist on going direct with us because we're hosting their data, unlike the traditional software companies that those guys would just resell it. And so we do have a as I said, I think about 40% of our deals are influenced somehow by GSI. And we'll continue to invest in those GSIs and partners to help drive more business to us because that is critical to our growth to get to that $4,000,000,000
Karl Keirstead at Deutsche Bank. Mike, I've got a pretty prosaic finance question for you. And in 2015, the gap between free cash flow margins and operating margins was about 12%. Your 2020 guide has that narrowing to just a couple. Is that just a normal convergence of Doctor and revenues and maybe your cash tax going up?
Or is there anything more complicated behind it?
Few things. One is our cash taxes do go up later on. 2, what happened is, as we're getting into, we're a little over 3 years into the initial move into our colo facilities, and you start to have the big refresh of our data centers that are starting, we kind of pushed off some of that in 2015 that resulted in better results. And I would also say, in 2015, we got a lot better at cash collections with our customers as well too that kind of skewed that a little bit that I don't expect to see that uptick as much in 'sixteen. And remember, we are adding about 1,000 plus employees a year, and that does take a lot of facilities related CapEx as well, too.
Adam Sheppard from Arete. Frank made an interesting comment there about just the massive opportunity that you have.
And I think one of
the things that comes through is just how much you guys are doing investing in ITOMs and expansion to cloud management, pushing into security. I wonder if you could just talk about how you think about that in terms of opportunity because you are driving a lot of this yourself. How you think about kind of the breadth versus depth? Because clearly, as you add more, you need to still need to deepen that. That was certainly a lot of the feedback we got from partners this year.
So if you could just perhaps just help us understand how you think about the opportunity in terms of what's more important? Is it broadening still or deepening? And then I guess associated with that about associated with that, if you could talk a little bit about the App Store, which you launched last year. We've heard very little about it. This still a very important part of the strategy?
How do you feel that's tracking?
Yes. So our platform, as I said earlier, we have a whole day on this on Thursday and a lot of you will not be here. But that's a super active area of investment for us. There's a ton of new things that we're going to talk about in show. So the platform enables and empowers everything that we do, right?
So you talk about security, but customer service, what we do on the platform helps all those areas. We had our first $1,000,000 sale through the App Store just the other week, which kind of interesting milestone for us because you typically don't see that. We have doubled the number of entries in our store. We have how many thousands of developers? I can never remember the number are now developers.
They are not customers, but they have signed on to our developer program. So the our developer community and our platform efforts, the store, which is really an opportunity to share as well as monetize for independent software developers, It's doing what we want it to do. But you got to understand, platform is not a standalone business, right? It is something that empowers the entire business, everything that we do. And the monetization that happens in terms of content there is just one vector of what's going on over there.
It's a long term thing. But we continue to invest in it because everything that we do on the platform just benefits every single part of our business. So I'm good with that. In terms of your question about depth and breadth, one thing you've got to understand about our business, everything we do is service management at its core. Yes, you heard a lot about security.
It's all service management, okay, which is what we are the world's expert at. I mean, a lot of your questions were about why you're not a security company. Well, we're just applying service management to the security domain. The same thing is true customer service, right? We're applying service management principles to that.
We're It's a single front and we sell all the products behind it, right? You heard from David earlier saying, look, the CISO reports to me. So that's exactly the same buying center as where the rest of the money comes from. So it may look broad to you. In reality, it all orbits around a very, very tight core of expertise that we have.
And we like that. The product is actually quite mature. If you see how quickly our customer service management offerings went in, how quickly they get up and running, it's kind of amazing for something that is that new. But you look closer, it really isn't that new. It's actually incredibly mature.
And that's the reason why it goes in and delivers value very quickly. And we end up with a referenceable customer. So I just wanted to bring that depth to you because you look at these slides and you're like, man, this is a mile away. Well, in reality, it's not. It all sits fairly tightly together.
Yes.
Back here. Matt Hedberg, RBC again. Follow-up to this question here on the store. I think Accenture said they had 2 soon to be 3 apps out there. Can you remind us again about the monetization for an SI to build an app on the store?
And then I guess secondarily, obviously, Fruition Partners and Cloud Sherpa have been sort of held up as the example. But to what extent can others become app factories out there? I mean, is the monetization driving that sort of behavior in other partners potentially?
Yes. I don't know whether monetization is a big factor for people like fruition. I think they got probably other fish to fry in their business, especially they're part of CSC now. Their business is changing as well, and there are considerable scope as well. I mean, CSC has incredible ambition for the Service Management business and fruition as well as a bunch of other acquisitions that they've made in space, all ServiceNow partners.
So that's all grown in leaps and bounds. But I think the store is really about creating a monetization path for people in our community that want to make a living off of software, right, versus just building software for their employers. Those are 2 different classes of people. This monetization model is like 25% Revenue share. Yes, revenue sharing, not that dissimilar from what goes on in Salesforce's App Store.
We pretty much follow a model that's fairly well established.
We actually think a lot of that is going to get transacted outside of the store. Customers are going to see the apps that partners have built. They're going to contract directly with those partners to build them custom apps. And we're okay with that. We're not going to get anything to the store, but we get the additional licenses.
So we're okay with that.
We have funded one company along with a prominent venture capital firm last year, company called Nuvolo. They're a health care clinical management company. They're in the expo, by the way, if you want to go and look and see what that's like, that they build on ServiceNow. It's this offer company, okay? We will do more of those things to help, a, we bring venture capital to it.
And we may bring some of our balance sheet to it as well to help these companies get going if we think they're promising.
Steve? Steve Ashley, Robert Baird. I'd just like to ask about the Inspire initiative. And I realize it's just 40 people, but it's kind of the tip of the spear. And I'm just wondering on a couple of things, if we could get some color.
Where do they what size organizations are they able to go into? Are they talking to new and existing? And what kind of level of access are they given when they go in to tell the story? Just
and have they had can
you see and it's early is there some pipeline impact that kind of follows that out of their engagement?
Yes. So Inspire was a personal initiative to me because I literally started having meetings with CIOs where they made specific requests of me. And I was looking over my shoulder, and I'm like, there's nobody here that can deal with that. So it became it's just they were asking for things that normally our solution consulting organization is just good at showing our product. The CIOs are not interested in product.
They're interested in outcomes, right? So they're like, show me an outcome, right? Don't show me a product. They're not interested in product oriented conversations. They want to see show me how you can transform this experience or this business process, right?
And 40 people, these are very this is a very elite consulting function. And we bring them in very, very selectively, right, because not every organization is ready for this. The leadership, usually with the CIO or the CTO, has to be very strong. Do they have the organizational fortitude to really go down this path? Because a lot of them don't, right.
And it does result in very significant, very large transformational projects. But we can only do probably a couple of dozen a year. I know Salesforce does like 100, 150 a year. We're in that order of magnitude. So we're going to look very carefully.
That said, I will tell you that our solution consulting organization, in terms of its how we operate across the board, they have to become more of an Inspire lite type of experience. They got to be able to go to customers and just very rapidly in a matter of a day and a half, it's prototype, a full blown experience on a device, go back and say, look, this is what you said. Here's what we can turn it into. This is one of the great things about ServiceNow because it is a platform. We can rapidly show people very visual sense to them.
And that's going to be a big part of our selling motion, not just for the Inspire team. The Inspire team is elite. Just remember that, right? And it's at the top of the house. We will not take that team into some low level part of an organization.
We're going to take 2 more questions.
Thanks. Michael Turits from Maven Chain. You guys are about to enter 3 new really large markets between security, customer service and doing more in ITOM. This is typically a place that people's margin expansion has stalled at times because of what's required to do that. What gives you the confidence that you can expand margins in the linear fashion you've laid out?
And is there any risk to a stall?
As I said before, there's always risk when you go out kind of 5 years. I feel very good about what I see right now. And we do feel very good about 2016. And there's always risk, but I think we've been doing this long enough that on the financial side, I think we know how to model it and forecast it.
If history held us back, we wouldn't even be in this business. And I don't mean that even in a flippant sense. When I first was interviewing with the company, just a very quick story, this looked like legacy help desk replacement, boring stuff. And then I talked to the Gartner Group and they said, oh, yes, that's the last final battle. Every 3 to 5 years, they're going to replace it.
I was ready to check out after all that because that was all a legacy point of view. You just can't go on that. You can't let the past decide what the future is going to be because then we all stay home and do nothing. I think the ITEM experience has already shown that we can develop brand new businesses and maintain the sales productivity margin profile and do that. So I wouldn't sort of jump to the conclusion that you're going to have a ton of margin pressure.
I mean, we certainly don't.
I would like to remind you, too, that so much of our free cash flow margin comes from our billings. So much of our billings is coming from our existing customers. So that gives us the confidence there. And then also, I'd like to remind you this is not a short sales cycle. So we have pretty good visibility into when deals are going to close in Q2, Q3, Q4.
That gives us the ability to forecast those deals. But then also, we're making heavy investments. If we see those deals slow down, we can stop our hiring very quickly. That has a lot with our cost. You talked about this Inspire team.
That Inspire team is costing us $15,000,000 to $20,000,000 with that. Those are expensive people. That's why we're using them sparingly, and that's all built into our model.
We had a similar go around last year, Michael, about the commercial sales organization that put the capital markets in an uproar, right? And it was one of those natural transitional things that organizations have to do. Again, conventional wisdom says, oh, it's going to be a huge upset to your sales product. In reality, that's not how they work. So I just want to caution you not to project the past on our future.
Just wait and see and let it play out
bit. Last cash.
Cash is wrong. It'll be at the Merrill. Clearly, you guys showed a lot of conviction detail, really well thought out And one observation that came across was every ACV will be compensated the same way. At least you're indifferent to where a dollar of ACV comes from today. If that's the case, how do you incentivize in the future your salespeople to pursue markets outside of core ITSM so you don't run the risk of saturating your end market too soon?
And second quick follow-up, Raimo Lynch wanted me to clarify this to you. Of course, you're not. When you said 15% of your was it 15% of your net new ACV or 50% of your net new ACV in 2020 would be ITOM. And then you said ITOM would grow 19 percent I'm sure I just want to clarify. 15%
Q4 15% of revenue in 2020 will be ITOM. And in order to get to that, that's what we're forecasting. In order to get to that, our ITOM ACV has to be roughly 19% of our net new ACV between now 2020 to get to that 15%.
It seems like
guys see
Maybe if Bank of America
would become a big customer, then we could get to there faster. So actually, I'll let Frank answer the question.
I want to answer the question about the different commission rates for different products. You got to be so careful with that, right, because your salespeople will figure out how to game that system. The customer pays full price for this low commission rate and pays discounted for a low commission rate. So usually people will run SPIFFs things that are temporary because by the time the sales organization figures out, the system gets gains, right? And a dollar is a dollar.
If you really want to have strong focus on a single product, right, you're going to have to segregate the sales force. Like you can only sell this, right? The different commission rates is something that can only work on a very, very temporary basis. I mean, we've been around the block too many times, seen this too many times. It seems like an easy, simple thing to do, and it's not, okay?
But I think it's an important thing, and we are cognizant of that becoming an issue. And that's why we have our GM focus now. We have guys like Sean who owns security, and he has the sales specialist and the SE specialists around that. If those guys aren't driving business, guess what? They're going to be looking for another job or be told to go find another.
So they're very motivated to make sure we're driving business and getting the sales guys to get them in front of opportunities.
The biggest competition for ServiceNow product lines is going to be other ServiceNow product lines. That's going to happen here. Okay? And it's just fine. Those 2 guys over there, they look really good friends.
They will be very
Good. So we've got to move Frank to his next session. We wanted to thank you very much for attending here in person. Just a couple of quick housekeeping items. The speakers from today's events are going to go over to the grab and go lunch area.
It's in Mesquite 1. If you go out the double set of doors all the way down the hall to your right, you can ask more questions during the lunch break. And then if you'd like to attend, we're opening our partner hall early for attendees at Financial Analyst Day from 4 to 5:30 today over at the Expo Hall Center in the Mandalay Bay Convention Center. You guys can get a sneak peek and talk to all of our partners and GSIs, etcetera. Thank you
all for attending today and making the effort to come here.
Thank you.
Thanks a lot.