Delighted to be at the conference. We are very fortunate to have COO, CJ Desai, with us. Thank you, CJ, for joining us.
Delighted to be here.
I'm Brad Sills, Senior Analyst on large cap software, and looking forward, CJ, to grab a seat.
Yep. Be the last
Always, always the best-dressed software executive.
Thank you.
Hands down.
Thanks.
Yeah, always looking good.
Thank you.
Thanks, thanks for joining us, CJ.
Yeah.
Start out with some kind of high-level thoughts on coming out of the conference, I guess three and a half weeks ago now. It seems like yesterday, but there was a lot announced. Are there any announcements here that you'd really like to highlight that you're excited about?
Yeah, I would say our Knowledge 24 conference, we do this once a year. It's our annual user conference, which was in first week of May. First of all, it was oversubscribed, which is always a great sign for interest from our customers and prospects in ServiceNow. So when we see packed rooms. Just highlighting their solution. Overall, the energy, enthusiasm for ServiceNow and its platform were very, very high. So that's number one. About how specifically AI is in service of our use cases. How does it work end-to-end for our products, including we announced the roadmap for the next one? Roadmap We shipped our first set of products in September of 2023, last year.
Yeah.
Consistently showed what else is coming. In terms of Bill's keynote and my keynote, we showed how customers are leveraging the platform overall at the enterprise level including endorsement of partnership, both on how our co-pilots work with each other including Jensen saying that, "Hey, ServiceNow is the first full AI stack enterprise software company “end-to-end, of course, built on NVIDIA.” The final thing is that when I saw the initial pipeline numbers, which is of course we care about because we highlight innovations. They look very well built at the conference.
That's great. That's exciting. And a couple of announcements struck me, some of the new applications you announced. You have Manufacturing Commercial Operations, Finance and Supply Chain Workflows. This is extending into the back office, middle office, if you will. Front office just seems to me like you're just going deeper into the back office. So if you just wanna outline kind of the thinking for launching these two applications, and where's the opportunity?
Yeah. So we announced two specific applications, actually three, at our financial analyst. Sales and Order Management is the first time we announced it for our investors and for all of you. This is a net new TAM expansion where there is still a lot of mid-office, back-office workflows in the line of revenue. So we have always done things. We are ServiceNow in the line of service, as in Customer Service B2B service, partner service. When you look at revenue workflows, there are still a lot of things that happen in mid-office and back office that are manual, pricing quotes going back and forth, quantities being changed, talking to the back office to create something new.
Brand-new product that we launched in Washington, D.C. Release, which was in March of this year. So that's number one. On Manufacturing Commercial Operations industries, no matter what you manufacture, when you have post-sales support, right? When you have post-sales support for whatever you are manufacturing, say, a distributor calls you back, a warehouse says consumer says, "We didn't receive this," the lines are blurry between the revenue operations and the service. ServiceNow is perfectly positioned. We have some of the iconic names who already use us in that capacity at a consumer products company
Mm-hmm
for Manufacturing Commercial Operations.
Mm-hmm.
The second and last thing is we are very excited about Operational Technology.
Mm-hmm.
That's a huge opportunity for ServiceNow, not to confuse with IoT.
Mm-hmm.
IoT is a whole different thing.
Mm-hmm.
Operational technologies, think about consumer products, good company, at automotive company-
Mm-hmm
including oil and gas.
Mm-hmm.
The number of OT assets are typically 3x of IT is trying to digitize because of security concerns, critical infrastructure concerns.
Mm-hmm.
What we did for IT, we can do for OT now. Those were in terms of new products and new growth vectors for ServiceNow.
Very exciting. Look forward to seeing how those unfold. You know, on that topic, you know, when you think of ServiceNow at its core, it's a map for automation, and you can take it any number of ways. You've executed really well over the years on expanding that into employee, customer, financial, and back office, increasingly. How do you think kind of where you take the platform next? Obviously, these are a couple of big installments here and a leap forward there.
So one of the things that's lost on ServiceNow over the years because of that our founder and the founding team, they always had this vision that this platform, ServiceNow platform, was created as a platform company about 19 years ago. ServiceNow, it can help solve workflow problems across any department in the enterprise.
Mm-hmm.
With that simple principle, this party is created, and it should have full API access to be able to integrate with any systems-
Mm-hmm
that could exist in an enterprise
Mm-hmm
It is 100% born in the cloud.
Mm-hmm.
Literally, those were the simple use cases-
Mm-hmm
Once you build on it using ServiceNow.
Mm-hmm.
Fred created the company in such a manner in 2004.
Mm-hmm.
I would say ITSM, of course, it's our biggest product line. ITSM was the first killer use case-
Mm-hmm.
that we started on in 2005.
Mm-hmm.
As you said, Brad, we have expanded to HR service.
Mm.
We have also done things in the areas of anybody can build an app in a low-code way on our platform for the processes.
Mm-hmm
that we have not productized. With that design principle, that you should be able to workflow anything for any department, and you can integrate with any system or any cloud.
Mm-hmm.
That is what has allowed us to grow. We are $2.52 billion, growing at 25%-
Mm-hmm
-all done organically-
Mm-hmm
on subscription revenue.
Mm-hmm.
That is only possible because how the platform was created.
Mm-hmm. Exciting. Great. Thank you so much, CJ. Why don't we address the macro question that's on everybody's mind?
Okay.
After the last couple of weeks, we've seen some weaker results out of some big application vendors. You've been very consistent. Macro environment has been pretty consistent quarter to quarter, really since Q2 of 2022.
Mm-hmm.
And we saw across the industry some headwinds from, generally softening macro at that time, and since then, I think you're saying-
Yeah
Things haven't changed. So just would love to get an update from you on the demand environment. What are you seeing out there? Any color on that?
Yeah, I would say, Brad, you stated perfectly, 22 Q2, we have seen, and I think it was, Bill McDermott, first time said it on CNBC, that, "Hey, we are seeing elongated long-" Despite all of that, ServiceNow has always done outcome-based selling. We provide value in the service of efficiency, automation.
Mm.
Of course, now leveraging AI, you can have in … So from our perspective, nothing has changed.
Mm-hmm.
We are still consistent. We guided for the year in April. I think Gina also raised sub-revenue guidance when we posted our earnings, and I'm not seeing where ServiceNow sits, right? Even you talked about 2022 and 2023, we have grown for revenue-
Mm-hmm
way ahead of IT budgets.
Mm.
That is because we are in service of digitization.
Mm-hmm
And automation via efficiency. I mean, that's literally it. So we... macro backdrop since the Q2 of 2022.
Mm-hmm.
We continue to do that. We consolidate point solutions.
Mm-hmm.
Many of our larger deals, even in Q1 of this year-
Mm-hmm
were solution providers because we are a platform company.
Mm-hmm.
That remains the same. I'm not seeing anything different, Brad.
Wonderful. Thanks, CJ. Why don't we shift to AI? Big, big topic, paradigm shift. How is AI embedded into the platform here? Maybe we could just start with, how did ServiceNow start here with data and AI? What are the beginnings of it? When did you see the right here with AI? Where have been the efforts and the focuses for the company, and, you know, you can talk a little bit about Pro Plus and, and
Yeah
roadmap there as well, please.
Absolutely. So I would say it was around 2017, January, so now 7+ years ago. We started with our first technology acquisition in machine learning space, and it was on 2017. And then over 2017, 2018, we consistently were working on really good, based on the technologies available at that time in machine, that can benefit ServiceNow use cases like ITSM or Customer Service or HR service, and we monetize that via ITSM Pro-
Mm-hmm
Customer Service Pro in 20-
Mm-hmm.
Our journey, first of all, has been since 2017, based on whatever the technologies were available-
Mm-hmm
At that point in time.
Mm-hmm.
Then in 2022, with Generative AI, we were very fortunate because in 2020 fall, we got a call for this amazing team in Montreal, Canada.
Mm-hmm
that was only where, you know, somewhere around 175+ great engineers, data scientists, researchers.
Mm-hmm.
This was during COVID, so we pretty much did that entire transaction over... for the first time.
Mm.
That team, Brad, has been our unfair advantage-
Mm-hmm
Because they have been showing us, not only they have written some seminal papers on generative AI, how generative AI can benefit ServiceNow platform.
Mm-hmm.
That has allowed us to stay on the forefront of AI.
Mm-hmm.
That's why we were able to release the Pro Plus-
Mm-hmm
-features for ITSM, CSM, Creator, in 3 September.
Mm-hmm.
This is not just, hey, there is a connection-
Mm-hmm
to OpenAI or connection to somebody else in a hyperscaler.
Mm-hmm.
We infused AI into our use cases. Our architecture is for our customers. They get their own instance or own environment. So say a large bank, like Bank of America, is there on ServiceNow, they get their own environment, which environment.
Mm-hmm.
Customers' data is protected, and we just run small language models.
Mm-hmm.
That's because of the innovation from this team-
Mm-hmm
that runs in our cloud. The data doesn't leave premises, short model-
Mm-hmm
Customers start seeing the benefit right away.
You mentioned small language models. That's something we're hearing increasingly, and I remember talking with you after the analyst session four weeks ago about this concept, can only do so much. The fidelity isn't as high as it would be in a small language model. Can you just articulate a little bit more on what, what you're getting out there? And maybe it would also be helpful, I think, to just peel back a little bit and just help give us a... for data and AI in, in the platform, and yeah.
Yeah. So if we just start with, say, a bank, right? Heavily regulated industries, typically, most of the banks, globally speaking, when they use ServiceNow, most of the banks do use ServiceNow. Their data is in ServiceNow cloud.
Mm-hmm.
Their data is not in some multi-tenant environment. They get their own instance, what we call it. We are a multi-instance architecture, not multi-tenant architecture. Every bank gets their own instance-
Mm-hmm
with their own data.
Mm-hmm.
Of confidence and, you know, every single bank has gone through security, privacy, regulatory concerns before, and including data sovereignty, before they sign up with ServiceNow. So that has gone really well. Most of the banks, if not all of them, at least the large ones, use ServiceNow. So one is you have all the data in ServiceNow.
Mm-hmm.
Now, you run small language model. That's why it matters, okay? The reason it matters is if you have a large language model that can help, true story, my son do his history homework
I mean, that's interesting, of ServiceNow.
Mm-hmm.
So because of this team from Element AI and our engineering team, what we said is, "Okay, the bank has all this data. Workflow data, we have asset repository, all the things. How about if we run a small model that is performant, it is trained for the type of data like ITSM use case and the data types. When you run a small model, not only it runs fast, because sometimes these larger models they run slow. When you type in something, it takes a while for them to give the answer back.
That's not a great experience w hen you have smaller models, it runs fast. It is definitely cost effective for us to run, even though Jensen and the NVIDIA team would like us to continue to buy bigger GPUs on A100s. Sometimes we may wanna run faster, so we may run it on H100s. But our effectiveness of running that, which helps our gross margin and that's why Gina guided to the number. The demand for Pro Plus is smaller models, better experience for end users. Smaller model better gross margins for ServiceNow.
Mm-hmm.
Smaller models are fine-tuned for the data and the data type.
So, is that essentially what you...? That makes a lot of sense.
Yeah.
Essentially, is what you're saying is that there's a model for each module? Is that fair to-
That's... Sometimes we use couple of models.
Okay.
Last 18 months, is that models is not a competitive advantage, okay? Model is not a competitive advantage. I can tell you and Brad, we tried this model, that model, use case versus that use case. What we realized is we take the open source models, so that we don't have to pay anyone. We take the open source models, foundational models, train them on our data and data type. Sometimes for a multitude of use cases, we may run same model. Or sometimes for a use case that is complex, we may run couple of models. But they're always smaller models.
Understood. That's great. You've alluded cycle has been tracking ahead of where you were this time, in the Pro cycle.
Yeah.
So, I think it'd be helpful to kinda draw the analogy here even a little bit finer. You know, what did look like in the first couple of quarters, 2, 3 quarters for Pro? And, you know, what are some of the metrics you're pointing to, to say: "Well, this is it. You're actually tracking ahead of where we were at this time in the Pro cycle?
First of all, for all ServiceNow products, we are very obsessed in making sure that whatever technology that we are gonna price, right, whatever technology we are gonna price, customers must get value.
Mm-hmm.
And that's why you talked about the macro environment. Macro environment was even tough last year, and we still sold Pro Plus-
Mm-hmm
... in the first quarter, which was our Q4.
Mm-hmm.
So it is still outcome-based selling with a very clear ROIC-
Mm-hmm
... on if you buy ProPlus, here is what you would get for these type of users, from productivity gains, efficiency-
Mm-hmm
... or Customer Service, or whatever the case might be.
Mm-hmm.
I'll do that, that we only charge if we feel that customers are gonna get value out of Pro Plus.
Mm-hmm.
Now, you asked a couple set. We released our Pro offerings in September 2018, and that was our standard offering. We said the price lift on Pro-
Mm-hmm
... would be 50%. Has been Now in market for 5.5 years.
Mm-hmm.
5.5 years. In 5.5 years, we have seen consistently 25% uplift, because once you We mainly work with Global 2000, Fortune 500, so there is always enterprise discounts. So we have gotten 25% uplift-
Mm-hmm
... on Pro.
Mm-hmm.
Okay? Over the last five years.
Mm-hmm.
45% of our migrated from standard to either Pro or a higher offering called Enterprise.
Mm-hmm.
Okay, so that's where you need to level set in terms of our Pro history.
Yeah.
Plus was in 2023, and we have been in market now for 2 quarters and 2 months.
Mm-hmm.
In those two quarters and two months, Gina shared that, first of all, the price uplift is 30%. This is an uplift on top of Pro.
Mm-hmm.
You get a 25% uplift on Pro-
Mm-hmm
... and then you get another 30% uplift via Pro Plus.
Mm-hmm.
That's number one.
Mm-hmm.
Number two, we call speed to value on Pro Plus, is very fast. We have some of the largest companies going live on Pro Plus-
Mm-hmm
... within 2-4 weeks, and that's not an exaggeration. Some of... Says: "Okay, I turned it on," which was one of the design principles from engineering, that Pro Plus should not require a long implementation, because I wanted our customers to get to value much faster.
Mm-hmm.
You asked, so if I compare Pro trajectory from September 18 through May 29, so basically you look at those eight months-
Mm-hmm
... versus September, May 2024-
Mm-hmm
... Pro Plus, from a dollar volume perspective-
Mm-hmm
... is still higher than Pro... but we are still always going to be cautious-
Mm-hmm.
that, we want to make sure that this is consistent as the year progresses.
Mm-hmm.
How Pro progressed over 5 years.
Sure.
But the only thing that is encouraging, you may say, "Okay, CJ, that's fine, but in last five years,
Mm.
So duh, that makes sense that you have higher dollars on Pro Plus versus Pro.
Mm.
The difference, though, is that when we launched applicable to the entire installed base-
Mm-hmm.
-versus when we launched Pro Plus, it was only applicable to 42%-43% of installed base.
Mm-hmm.
So that's why-
Mm
... when you look at that economics, it's still better than Pro Plus.
Yeah. And maybe just on that topic, when you think about pricing here, how are you thinking philosophically about pricing for value here? Are you thinking that you know, if a firm generates X dollars of Plus, we're gonna extract a certain percentage of that? Maybe-
I'm still in the... On behalf of ServiceNow, we are still in the 10%-20% range.
Okay.
That we should charge 10%-20% price.
Okay.
To get dollar productivity gain, we can charge 10%-15%. Most of the times, Brad, if not all the times-
Mm-hmm
... those are the conversations we are having in the sales. This is how, because then if customers are not gonna get the value-
Mm-hmm.
We'll have another problem on our hands. So
Yeah
... that's how we are charging.
Understood. Thank you for that. Why don't we pivot to industry solutions and verticals, in particular, recently, telco, healthcare in particular. Can you just help us understand what's changing here, if anything, in terms of your strategy, your go-to-market, you're becoming more verticalized, more specialized for these verticals? And are there any one or two that you'd point out that, well, these are kind of up-and-comers that we're really gaining our traction in?
Yeah. So I would say, just in general, we feel that if we create... I'll start with the products first.
Mm.
If we create vertical products, we can get higher ASP, okay? So we can create vertical products, we can get higher ASP.
Mm-hmm.
We started that journey in 2018-
Mm-hmm
... to say we are gonna focus on a couple of verticals initially.
Mm-hmm.
One was tech, and the second one at that point in time was manufacturing.
Mm-hmm.
So those were the two verticals we started in 2018, that if we create vertical products, we get higher ASP, also expands our TAM at the end of the day, because then we can show them-
Mm-hmm
... on what and why it matters to our customers.
Mm-hmm.
When we say vertical products, it is not some UX layer. We go actually pretty deep.
Mm-hmm.
You have vertical data model, so say for telco industry. You may have vertical workflows-
Mm-hmm
... for telco, and the telco industry, the integrations that matter.
Mm-hmm.
So when we say we are creating a vertical product-
Mm-hmm
... we go pretty deep-
Mm-hmm
... in that vertical. So we are very careful-
Mm-hmm
... about saying that we are gonna invest in this. It started in 2018-
Mm-hmm
... towards the late part of 2018.
Mm-hmm.
And then we, over time, started shipping products.
Mm-hmm.
I would say right now, one of the biggest open question that I'll just outline: We are a very diverse business, right? We are not dependent on any vertical-
Mm-hmm
... in a disproportionate-
Mm-hmm
... percent of total. TMT or CMT, whatever you wanna call it, so TMT is one vertical.
Mm-hmm.
Financial services, of course, your manufacturing, healthcare, life sciences-
Mm-hmm
... and then you have Global Public Sector. These five verticals are. Then we are emerging in retail.
Mm-hmm.
Travel and entertainment types of things is after that, but these five-
Mm-hmm
... pretty diverse portfolio. And then when you look at subverticals, I mean, one particular subvertical.
Mm-hmm.
Like even in Global Public Sector, we have disclosed to all of you that we have done and continue to do well-
Mm-hmm
... with U.S. Federal, U.K. Federal. We are strong in Australia Federal.
Mm-hmm.
We are strong in state, we are strong in local.
Mm-hmm.
We are strong in provinces in Canada.
Mm.
It's a very diverse-
Mm-hmm
... base. So I would say public sector-
Mm-hmm
... are definitely the shining stars. We have not only created products-
Mm
... but we have very specific go-to-market motion-
Mm-hmm, mm-hmm
... for those verticals.
Mm-hmm.
And, Paul, create that focus-
Mm-hmm
... in large geographies-
Mm-hmm
... where it's industry organized.
Mm-hmm.
that all the top telcos are served by people with telco experience, all top healthcare.
Thank you, CJ. Why don't we dig in a little bit more on the federal vertical?
Yep.
You, you called out-
U.S. federal
U.S., U.S. Federal.
Okay.
It's been an area of strength over the last, you know, few quarters, really, the last year and a half. What's behind the momentum there? And do you feel like you're getting to that kind of critical mass now in the federal vertical with that referenceable account base that, you know, more deals are coming? Just, you know, you've been very-
So I do wanna give credit to some of the early, both go-to-market and product team members who said: "We are going to focus on U.S. subsector or sector-
Mm-hmm
... among the global public sector," and started investing both in go-to-market-
Mm-hmm
... and certification, and engineering investment. There are a lot of things you need to do-
Mm-hmm
... to sell to United States federal government. So this work has been going on since, I wanna say, 2012.
Yeah
... in terms of having the right sales team-
Mm-hmm
... with the DoD background, number one.
Yeah.
We continue to stay on the forefront of all the certifications that are required-
Mm
... to sell into United States Federal. It's not something you can just show up and buy it.
Right. Right.
I know you know that, but that's one thing I do want to outline. Even our Federal Forum that we just did this year, we had massive attendance in D.C.
Mm-hmm
... because many of them cannot come to our Las Vegas event that we just talked about, that you were at in May, Brad.
Mm-hmm.
Overall, we have created Government Cloud for our U.S. Federal.
Mm-hmm.
Most of our customers run in Government Cloud.
Mm-hmm.
But ServiceNow, because of its Multi-instance architecture-
Mm-hmm
you can on-prem fashion.
Mm-hmm.
Think about certain scenarios for certain customers, where you may want to run ServiceNow on-prem.
Mm-hmm.
We can do that and put ServiceNow in a box-
Mm-hmm
or a CD out, and they run it themselves.
Mm-hmm.
That advantage has allowed us to grow-
Mm-hmm
-significantly-
Mm-hmm
across our U.S. Federal business.
Mm-hmm.
We are mission-critical the way our platform is designed. If you think about a federal agency that does processes-
Mm-hmm
... there is no off-the-shelf software. You don't need a CRM or HCM for that.
Mm-hmm.
You need ServiceNow-
Mm-hmm
for all those complex workflows on import approvals. That has allowed us to be the mission-critical platform, because you can modify ServiceNow platform, coming back to our founder, for any use case you want.
Mm-hmm
-in DoD-
Mm-hmm
or federal government. Digitization in U.S. federal government, that is something that was focus of the previous administration, the current administration. We don't expect that to change.
Mm-hmm.
We still have a lot of runway.
Mm-hmm.
Best federal civilian market.
Mm-hmm
... U.S. Federal DoD-
Mm-hmm
U.S. intelligence community because of our architectural advantages.
Mm-hmm.
I would say, I know that Steve Walters was there, outlined it pretty well, that we are nowhere near done, but we are also very well positioned-
Mm-hmm
-to capture more and more digitization effort as well as security effort.
Wonderful. Why don't we shift to kind of go-to-market focus?
Yeah.
Paul Smith at the analyst session, he talked about the focus on marquee accounts-
Mm-hmm
As an increasing focus, since he's been there, I think, two years?
Yeah, two years. Two years as a Chief Revenue Officer.
Right.
You're correct.
Right.
Correct.
It seems like it's been a big focus for him.
Yeah.
And at the Analyst Day, he mentioned 55 accounts that have greater than $20 million ACV, and he's identified there. So maybe just to start on kind of what's behind that effort, what does it take for a customer to get to that level of spend, and how are you helping customers kind of move along, that next cohort of customers to move along into that level?
I think it was Paul who created, I want to say about now, a year and a half or maybe close to 2 years ago, what we call. Some folks in our space call it strategic accounts. We, top 250 accounts, where we feel that the size of the price is north of $50 million ACV.
Mm-hmm.
I just want you to think about that, that size ACV. Why do we believe that? So we have now a telecommunications company that spends north of $60 million for us. We have a hardware company that spends north of $75 million a year with us. We have a payer in healthcare-
Mm-hmm
-company that spends north of $35 million with us. Flagship corporations, very big names, who have gone wall to wall on ServiceNow, started with maybe ITSM, moved to Customer Service, did some ending set. So what we have seen is our TAM-
Mm-hmm
-in the top 100 telcos, or even if you pick top 15 telcos or top 25 telcos-
Mm-hmm
is still immense.
Mm-hmm.
It's immense based on what we have seen in a couple of years.
Mm-hmm.
Same thing with some public sector customers, some hardware companies, software companies, some manufacturing companies.
Mm-hmm
are north of $50 million ACV for great logos like.
Mm-hmm.
If you then say, "Okay, what were the recipe of success-
Mm-hmm
for the customer using our products?
Mm-hmm.
For us to sell them those products, how can we now replicate that other team?
Mm-hmm.
“What would it take?” That's where our focus is, that here is what a great telecommunications company, global company, that uses ServiceNow and currently spend a year.
Mm-hmm.
How can we get the other... Even if you take the
Mm-hmm
remaining nine telecommunications company we know they can spend the same based on the use cases we have. So Paul, this marquee accounts, top 250. There is an immense focus on how we serve them how we sell to them how we are strategic with them. How do we even nurture relationship at C-level?
Mm-hmm
-to provide-
Sure
-efficiency automation.
Sure.
But it is a big focus, and we are seeing as we revealed in our Q1, when you see that our $5 million deals, $10 million deals-
Mm-hmm
are to go up, including in our Q4, we had some very impressive numbers, is because of those reasons.
Mm-hmm. And how much of this is a result of also the focus that you've... Global SIs, have been an increased focus here. I think that, you know, seven of the top 10 you've talked about, I think multi-billion dollar pipeline at this point. So how instrumental are they in this effort to spend and identify, you know, the next areas to go for ServiceNow?
I had one of the SIs tell me, Brad, at our knowledge conference, that the opportunity, because we do infrastructure and IT, always, and now ERP-related workflow around finance and supply chain-
Mm-hmm
... They are like CJ. The opportunity we see for ServiceNow as the enterprise-wide workflow platform, whether it's for me, whether it's for a large public sector customer, say, in Australia-
Mm-hmm
You have the early signs of becoming the next Microsoft, given how pervasive this platform is.
Mm-hmm.
So SIs play a big role. We do less than 6%-7% of our own implementations. 93% of implementations-
Mm-hmm
-are done by our SI ServiceNow. Think about it, it's very simple, that if we are growing at 25%-
Mm-hmm
... they are all looking for growth.
Mm-hmm.
When we sell $1 of license, they can get $3, $4, sometimes $5.
Mm-hmm.
ServiceNow is definitely growing organically on a single platform, very clean story.
Mm-hmm.
Once you understand how to implement one product, you know how to implement other products as well.
Mm-hmm.
That is absolutely helping.
That's great. That's exciting. Thanks, CJ. Why don't we, I guess, while we're on the topic of go-to-market and partner channel, I know international has been an increased focus-
Yeah
-as well, under Paul. What are you excited about in kind of the international geography?
Yeah. So, if I start at the core of it, ServiceNow is still... And we are—when we say number of customers, it's customers headquarters. So we don't count a subsidiary-
Mm-hmm.
or wholly owned entity. All that rolls up to-
Mm-hmm
one headquarters, and we'll just count that.
Mm-hmm.
We have 8,000+ customers, and our strike zone or comfort level, where it is worth selling to-
Mm-hmm
We have very simple parameters. So one, we do not do business internationally, but we don't do business in China.
Mm-hmm.
Number 2, we go after customers that are at least $100 million in revenue-
Mm-hmm
-and 1,000 employees.
Mm-hmm.
Once you put that $100 million in revenue, 1,000 employees-
Mm-hmm
... our TAM is somewhere around 30,000 customers.
Mm-hmm.
We are currently in 8,000 plus. First of all, we have trust that can still become ServiceNow customers for the first time.
Mm-hmm.
If you look at our cohort analysis, our IR team does a great job.
Mm-hmm.
Once we get a customer, whether we get it for $130K, $150K, $200K, very nicely, and you will see that on our IR presentation consistently.
Mm-hmm. Mm-hmm.
So when you think about those numbers, 30,000, 8,000, not only we have opportunity for new logos internationally as well as still in Americas, including Canada and Latin America-
Mm-hmm
... we still have enough white space-
Mm-hmm
to go after new logos.
Yeah.
Paul has spent a lot of efforts, which he touched on a little bit in the Financial Analyst Day, to get higher number of new logos.
Okay.
Then second, our international accounts, yeah, we do have some accounts in Europe, in north of $25 million now. So how can we, coming back to the marquee point, in internationally, there are a lot more 10 million plus accounts in the United States-
Mm-hmm
than versus, say, Australia.
Mm-hmm.
So we want to replicate that same rhythm we had in the United States for the last 10 years-
Mm-hmm
now also in Europe as well as in Australia. So we have been investing in our go-to-market and international.
That's great. Why don't we pivot to customer and employee?
Yeah.
As you've expanded the platform outside of IT, we've seen the net new ACV as a percentage for kind of, of the new. Why don't we just talk about just the key growth drivers? It's... Those two categories are so broad, and you've added so many different modules and applications over the years. Can you just help... Where are you seeing areas of strength within customer? And then we could maybe dive into employee as well.
Yeah. So I would say, ServiceNow, we have four key workflows by which we report to the community.
Mm-hmm.
Which is Technology Workflows, Employee Workflows, Customer Workflows, and Creator Workflows. The good news, not grow at 25% on this, is that growing in double digits.
Mm-hmm.
That is a great problem to have for somebody like me, who decides with my team on where to invest in R&D-
Mm-hmm
and where we still see the TAM.
Mm-hmm.
I don't have this issue. Brad, you're very familiar with it.
Mm-hmm.
Oh, this particular thing has become a cash cow.
Mm-hmm.
Let me take out R&D dollars and put in here. All four workflows can do fantastic.
Mm-hmm.
Our technology workflow is still our core of the core. That's where we started with ITSM.
Mm-hmm.
Crossed billion many years ago.
Mm-hmm.
Still growing.
Mm-hmm.
Still growing in double digits.
Mm-hmm.
Customer Service, we announced it last year.
Mm-hmm.
That crossed billion. We announced Creator crossed billion.
Mm-hmm.
If you think about that, this organic innovation that has... Our Customer Service product line in 2016 was $10 million ARR.
Mm-hmm.
In 2023, it crossed $1 billion. In own product line-
Mm-hmm
with a very focused go-to-market that we had to build to sell to Chief Customer Officer
Mm-hmm. Mm-hmm
in a competitive space.
Mm-hmm.
Yes, it has a large TAM-
Mm-hmm
but multiple orders of magnitude
Mm-hmm
and still growing in double digits.
Mm-hmm.
The story of innovation and execution across these workflows is great.
Mm-hmm.
My point is, we are definitely seeing heavy traction in TMT, so telco, media, tech. We are on the business to business side. We are on business to consumer side.
Yeah.
We have started now breaking into insurance in the claims process, underwriting process, where our workflows can be used for Customer Service.
Mm-hmm.
Field Service product is growing incredibly fast.
Mm-hmm.
And it's not about a telco-
Mm-hmm
technician or your home cable, and somebody comes in.
Mm-hmm
to fix your cable services, but even in healthcare, in manufacturing, Field Service, even in retail-
Mm-hmm
Some of the customers. We have created vertical flavors for our Customer Service product in Global Public Sector.
Mm-hmm.
Some of the large states in the United States, there is one ... has crossed $30 million of ACV with ServiceNow. Like, imagine if we can do that even with 15 states here, right?
Mm-hmm. Mm-hmm.
There are some states which are already north of ten-
Mm-hmm
for besides IT. So one is U.S. federal-
Mm-hmm
But there are 50 plus states.
Mm-hmm.
You look at Canada provinces, Australia states, and so on in U.K.
Mm-hmm.
That's where we see massive opportunity for customer. Employee, we are the System of Action. We work with all the HCMs that are out there. When we created that product line, a lot of people said, "HCM is not gonna allow you.
Mm-hmm.
And we said, "That's fine, but we have a great System of Engagement layer, and we do a lot of workflows-
Mm-hmm
because HCM, at the end of the day, is a system of record.
Mm-hmm
not System of Action.
Mm-hmm.
Multi-hundred-million-dollar business just alongside of HCM providers.
Mm-hmm.
Still growing that business, HCM, what we call our HR Service Delivery.
Mm-hmm.
HR service-
Mm-hmm
then all the HCM vendors
Mm-hmm
and much faster than the entire HCM market.
That's-
Because of the value we add.
That's great. Well, maybe last one, since we haven't touched on Creator.
Sure.
If you wanna elaborate on the opportunity there with some of the new offerings?
Yeah. I would say Creator and finance and supply chain workflow, we put in one bucket. Creator, just a low-code platform that allows you to create any apps.
Mm-hmm.
CIO.
Mm-hmm.
We don't say: I'm gonna go to a department, and you can create your own little app, and this and that. We are more on governance-
Mm-hmm
and providing a low-code platform. I will never say no code. Low-code platform to Creator, we have published our numbers.
Mm-hmm.
Strong double-digit growth on our Creator business, north of $1 billion-
Mm-hmm
and continue to grow.
Mm-hmm.
On our Finance and Supply Chain Workflow, it's a smaller product that we just released 2 years. Specifically, case management-
Mm-hmm
Procurement Operations, supply, Supplier Lifecycle Management . We just released Accounts Payable Operations. So now we are trying to sell to the Chief Operating Officer and Chief Procurement Officer. That product line is growing in triple digits. A bit small numbers But I am confident that someday that also will become a billion-dollar product line.
CJ, thank you so much
Thank you for joining us. Great discussion, as always.
Thank you.
Yeah.
Appreciate it, Brad.