There we go. Our President and CEO to come and say a few words about Mike's departure.
Well, thank you, Lisa. As Lisa mentioned, you saw last week, Mike announced he was going to be moving on, and I just wanted to say a couple things up front. First and foremost, I want to thank Mike. What many of you may not know is when I was considering joining ServiceNow, I asked to meet with Mike because I knew from my prior experience how important that CEO-CFO relationship was. Mike and I met in Menlo Park, down at the J. Jasper Ridge offices, and Mike said to me, "You know, John, my passion is taking small companies and growing them. ServiceNow is the largest company I've ever worked for at this stage, but if you'll have me, I'm all in to partner with you during the transition and during the succession." I wouldn't have joined ServiceNow without that.
Over the last couple of years, Mike has been phenomenal with me, but even more importantly, over the last, how many years, Mike?
Eight years.
Eight years. Eight years, he is a world-class CFO who has produced results that I think are almost unmatched. Someone was just out there saying that it's 12 times increase since the company went public. Mike, I want you to know, I deeply appreciate everything you've done for ServiceNow over the eight years, and for me personally, over two years. By Mike staying, it allowed me to spend more time with customers and more time with our employees, which I think has been a win-win. We're going to miss you terribly. Mike last year said to me, "You know what, John?
Let's begin to think about over the next year or two, I want to get back to doing what I love." When he came a couple of weeks ago and said, "I've got this opportunity to rejoin Frank at Snowflake," my first question was, "Can I invest?" We'll miss you. I just want to ask all of you to join me in just recognizing Mike for what he's done. For those of you that don't know Mike well, he hates attention. Seriously, you've been phenomenal. Just three quick things. This is going to be an orderly transition. We have the luxury, Mike, as Lisa mentioned, will stay through the summer. I will do an external search.
I'm highly confident we can get a world-class successor to Mike, who is as excited about the next stage of our growth as Mike's been about the stage to date. The other thing most of you may not know is Mike has built a world-class team. Lisa Banks is one of our top finance executives. She was the head of FP&A. She has worked closely with every one of our senior leaders over the last several years in setting budgets. Now through our rotation program, she'll be our head of investor relations. Don Phillips, who you know is our head of investor relations, is now head of FP&A. Many of you may not have met Andrew Casey. Is Andrew here somewhere? Andrew's here, part of Mike's team, runs all of sales operations and pricing and so many other things working with Dave.
Fay Sien, who many of you may not have met, is just coming off of a rotation in Europe, where she'll be our chief accounting officer. In addition to being a great CFO, Mike's built a really strong finance team underneath him and having the characteristics of strength that we're rotating their positions and growing several future CFOs. The other thing I want to say is, for the rest of the team, there's no change. Dave Schneider's not going anywhere. He's all in. He'll talk to you about that. Kevin Haverty, and our senior sales team, CJ, Dan Rogers. For everyone else, it's business as usual and making sure that we're driving forward and taking advantage of this opportunity.
The last thing I'll just say is our goal for today, then for those of you that can stay this week, is to share that opportunity. To be honest, it's one of the biggest opportunities I've seen in my business career, the opportunity ServiceNow has. I think we've got the right team and the right plan. We clearly have some strong momentum. You should know day in, day out, everybody is focused on execution. Lisa will go through the agenda. You're going to get a great chance to hear from several of our leaders. Then Mike and I and Dave and CJ will be back up the end. We'll take any or all of your questions. With that, Lisa, why don't you tell us about the rest of the agenda?
ServiceNow put your workflows in the cloud, huh?
Your employees must love you.
Thank you.
You could say that.
I love you. ServiceNow works for you. Could you hand me those files?
Yeah, of course.
What is going on, guys?
Oh, hey. ServiceNow frees us up to do the work we want to do, so we're digging out from all the work we don't want to do.
Getting rid of so much paperwork. Oh.
Doug.
I didn't know you still worked here.
I called for help, and no one came.
Classic Doug.
Classic Doug.
Okay. Carry on.
Yep.
Can you call my wife? Thanks.
ServiceNow works for you.
I've just shared with you two of my favorite commercials from our recent brand campaign. I laugh every time I watch them. I am left with a feeling that work is fun, that as an executive using ServiceNow, I can make my employees' lives better by allowing them to focus on more meaningful work. In my 20-year career, and yes, I'm dating myself, I have never been so close to a launch of a new brand campaign. I'm very excited to see the impact it will have on ServiceNow. As we've shared with you, this investment is important for two reasons. One, elevating our story to the C-suite. The second is retaining and attracting talent. It's early days, but we've received positive feedback from our employees and many of our customers.
Several employees have shared with me that they have an enhanced sense of pride knowing that our brand and our product will become well-known. Our brand investment is one of many investments that are critical to our growth. Today, we want you to walk away with an understanding of our strategic priorities, our key growth drivers, and our investments that will take us to our next phase of growth. CJ Desai, our Chief Product Officer, will kick it off. CJ is going to share our product investment strategy, as well as his thoughts around product innovation. David Schneider, our newly appointed President, Global Customer Operations, is going to talk through some of the steps we're taking to continue to unlock the large market opportunity ahead of us. We have the pleasure of Andrew Wilson, the Chief Information Officer at Accenture, joining us today.
Dave and Andrew are going to have a conversation about how ServiceNow's strategic platform is enabling CIOs around the world to run their business. After the break, Mike Scarpelli, our CFO, will talk about our key financial priorities, some of our key growth drivers, as well as share with you how we are thinking about the financial model. Finally, John will close it out. He will give an update on what he's hearing from customers and the progress we're making against our strategic priorities. We will end the session with executive Q&A. With that, an exciting part of the agenda, I'm going to share with you something you already know. We may make forward-looking statements. These statements may include risks, uncertainties, and assumptions. Information on factors that could affect our financial results can be found in our most recent 10-Q.
We will also be posting this deck on our investor relations website at the close of the program. With that, I would like to bring up CJ Desai, our Chief Product Officer. It's been a great pleasure working with CJ for the last couple of years. He is a great leader. He builds outstanding products. Something you may not know about CJ is he's incredibly funny. Please welcome our world-class Chief Product Officer, CJ Desai. Thank you.
How are you guys doing?
Amazing.
Awesome. When we look at the different dimensions we have, and just looking across the industry, we see that we are very relevant, whether it's financial services firms, IT firms, consumer staples, and others. The important thing is, in all of these industries, we have barely scratched the surface. Even if we are in seven out of top 10 financial services firms, we are probably starting out in some of them. In some of them, they may have multiple products, and in some of them, it may have a couple of our products. The point here is that we are winning as a platform in the largest of the largest institutions and finding our way as ServiceNow becomes an enterprise platform. From an investment strategy standpoint, it's a very simple investment strategy when it comes to R&D. For current products and platform.
Can you guys hear me? Okay. For current products and platform is where most of our investment is going. When we think about future technologies such as machine learning, chatbot, and others, as well as some upcoming products, that's where we have close to 30% investment. The future bets or future technologies is the 10% investment. This is a Geoffrey Moore framework, Horizon one, two, and three. I discussed this even last year, and we are following the exact same principle. Our goal by end of 2020 is to get to 70/20/10, right? We need to execute on our current product platform. Can you hear in the back? Yes? No?
Give him a mic.
All right. That's our investment philosophy. From priority standpoint, it's very simple. Our Chief Strategy Officer, Lara, she comes up with our strategic framework.
Is the mic working?
Sometimes others don't, but we know they actually do.
That works. You want me to hold it?
Can you hear me?
Turn that up.
How about now?
There we go.
Yes. Woo.
That was not part of being funny agenda. Just worked out that way. Thank you, John. All right. The strategic priorities on the markets we play and the adjacencies we look at, we have just two highest priorities for us as an organization in products. One is continue to innovate in Now Platform. Okay? This is super critical for us that we'll continue to innovate in the Now Platform. Number 2, make sure that our product innovation is moving at a very rapid pace. Those are our two priorities. That's how we decide the investments, and that's how we inform our roadmap by working with our customers and partners. Now Platform. Here's what I'll tell you. This is truly a privilege that we are a single platform company. Okay? It's a single code base with a single data model used by all of our products.
This is definitely very rare for the size that we are at, for the growth that we are driving in our customers' environments, to have a single cloud-based platform with a single data model. This data model acts as a single source of truth for our customers, for their assets, for their knowledge base, and for their services. This is the reason Dave's team, which does a phenomenal job in working with our customers, are able to sell additional products on top of the initial win, because it makes it easier when you have just a single platform with single data model for all of the products.
Our customers understand that, they leverage this data model, what it makes it easier for us in the product teams is that when the products or the workflows have to work with each other, or you may have an enterprise-wide workflow, having that single data model across all our products makes it easier for our customers to consume our products. What you see here over the last three quarters in the IR deck, you've seen this consistently, that the number of customers who are leveraging multiple products from us continue to rise. This is a cause and effect. Because it's a single data model, it's easier for them to absorb our products. Most importantly, there are use cases that we are focused on which are interdependent with each other.
That's the reason we continue to have traction with some of our largest customers when they use multiple products from us. This platform, this single platform that we have powers all of our workflows. Even though these workflows are interdependent, we have just grouped them in three buckets: the IT workflow bucket, the employee workflow bucket, and customer workflow bucket. The reason we have bucketed them in this manner is these are the key stakeholders that we are serving for that specific workflow. What that means is, if we think about the IT products here, whether it's IT Service Management or IT Business Management and others, we first think of which stakeholders this product serve, which is the IT department, and we ensure that we are making life easier for the IT department, both from a productivity standpoint and their experiences standpoint.
That's why we have bucketed our products in three classes and our solutions that span across these products, because, as I said, we have a single data model. The other thing we are seeing, you saw that our customers are adopting multiple products from us. What happens is when they are looking at ServiceNow, not just for IT, right? IT is something that people understand, hey, ServiceNow plays really well in IT. It is our core competency for most of the IT source of truth or IT system of record. ServiceNow is typically the answer for all of our customers. Most importantly, ServiceNow is now used more and more for enterprise-wide platform. It is used more and more for enterprise-wide platform, that is across the silos.
I just met with a federal prospect a couple of hours ago, they said, even though it's a large federal agency, that they still have multiple systems just within IT. But they are also thinking of how to make life easier for their agents and their end customers, currently considering ServiceNow to be that enterprise-wide platform. We work across silos, we work across systems of record. We are the system of record for IT, but we are also becoming an enterprise-wide platform. The other thing we do, if our customers are using Microsoft Teams or G Suite or whatever the case might be, we provide integration both in this chart on the top at the bottom. It is our goal. This is an ongoing thing. We invest a lot in it.
We want to make sure that we have best-in-class integration with, say, SAP SuccessFactors, or we have best-in-class integration with a collaboration software in a particular case. Our goal is to continue. If we are going to be an enterprise platform, which we are becoming, integration becomes a critical priority, and we do a lot of investment in integration technologies. When I visit customers, it is really interesting to see the kind of applications that they develop on ServiceNow platform. Besides the applications or the products that we ship, I will find some amazing examples. Some people are doing time and expense management. Some people will be doing visitor registration, sales proposal, mobile usage, and things of that nature. Customers are using the ServiceNow platform to create really, really cool applications.
What this does is that we are now investing even more to make it an enterprise-wide platform on which you can build applications easily. Right? Because customer says, "Hey, this platform is really powerful for workflows that cuts across the enterprise. CJ, can you give us tools so that we can have distributed environment, distributed development, and we can build great products on top of it?" The most important thing that we have heard from our customers is we need to invest a lot more in user experiences. We need to make it very easy if a customer is defining a service, regardless of the stakeholder it serves, it could serve their employees, it could serve their IT department, or it could potentially serve their customers, make it easy for us to build great products on ServiceNow.
We have invested heavily in the past two years. In October of 2017, we bought a company called SkyGiraffe, which was a mobile studio to create an enterprise app. What we did is for next year and a half, all the way through March 2019, we made that entire technology native in our platform. Now what happens is if you want to create a native mobile app, whether it's on Android or iOS, you can build it on ServiceNow platform. This is truly groundbreaking. It is a huge competitive advantage. We are at the beginning of the mobile journey in enterprise. What I said earlier, that making these technologies native in our platform, this code, really sharp engineers, was written in C#, and we asked them to change their religion. Don't worry.
It was from C# to Java, and they wrote the entire code in Java so that it can leverage all the ServiceNow platform data structures and objects. Our customers benefit from it. That's number one. We have mobile studio in ServiceNow where you can create enterprise class apps that are native on iOS and Android for any objects, any application, any custom application, available in Madrid, which was released two months ago. Second thing is service portal and workspace to deliver consumerized experiences for knowledge workers. We continue to evolve our technologies on browsers and making sure that for knowledge workers, they can get done things really, really fast. That's the second investment area. The third investment area from a UX standpoint, where we are investing significantly, industry may call it chatbots, they may call it virtual agents.
The idea is you can define the conversations in ServiceNow platform. We have a conversational designer, then via mobile, you can have very easy-to-understand chat language that can interact with ServiceNow platform. You can drive any platform action from mobile using ServiceNow platform. This is truly an area that we have invested significantly, and you will continue to see in tomorrow's keynote and rest of the day, many, many cool innovations that we are going to deliver using our UX technologies. There is definitely a lot of talk about artificial intelligence. Artificial intelligence is an overloaded term. Everybody interprets it differently. From my standpoint, there are four areas that we are focused on. Area number 1 is machine learning, what we call it supervised machine learning. We have all this data of our largest customers.
Can we use that data to create models and make it easy for our customers to get their job done? Okay. That's number 1. Number 2, I would say when it comes to virtual agents or chatbots and natural language understanding, which will be a third category, we again want to make it easy from a self-service standpoint for our customers to just take advantage of these capabilities without calling it a dead scientist's name or some fancy other name, just don't want to do that. We want to make it easy, and this applied artificial intelligence should be used daily by our customers, and we don't want to make a big deal out of it. What we have done is we have made predictions easier, recommendations easier, categorization easier, and we will continue to do more and more in this area.
In the New York release that is upcoming in the next three months, you will see significant advances across these technologies. Where it makes sense, we will partner with Google or Microsoft or Amazon to leverage their technologies. I spoke about integration a little bit. One of the technologies that we have invested heavily, and it's our currently focus, is making sure that whether it's standard software or a proprietary software, it is easy to integrate with ServiceNow. This is specifically integration with ServiceNow. In today's world, you cannot create a digital workflow or a process without integrating with a particular system in customer's environment.
What customers are asking us is saying, "Hey, CJ and the team, please give us low-code integration tools so that we can start creating integration for digital workflows." As I said earlier, this is a huge area of investment. We will continue to provide integration for the standard software when you look at collaboration software and other. By end of this year, we will have 400+ integrations for standard software used by our customers as just part of the product. The other thing that Dave Schneider and the team ask us is about our geographic footprint and our coverage model. We continue to expand in the territories. We just introduced Germany data centers. We will be launching Japan, sometimes in middle of this year, around June timeframe.
We continue to expand our footprint globally for whatever data sovereignty or other requirements our customers may have, which gives us full global coverage from Santa Clara all the way to Sydney. Our uptime has been truly world-class so far, I jinx myself sometimes, but we have done a really good job to making sure our cloud is always up and running and secure. Now we have close to 100,000 instances under our management across test, dev, and production. In terms of just the volume that ServiceNow Platform is transacting is that production instances, so this is specifically our production customers, it is going up as fast as Dave and the team sell to our new customers, is 8,500. We have daily active users close to 3 million, and most importantly, billions of customer transactions per month.
We have actually close to 300 million users registered in ServiceNow Platform, and 3 million unique active daily users. That was a wrap on the platform. Just again, a single platform with single data model and technologies like mobile, chatbots, machine learning, all in the foundational layer so that all the products can take advantage of that platform. Let's talk about products. We have been busy hiring, Mike allows us to hire to keep up or stay ahead of the innovation curve. Over the last two years, our engineering team have scaled significantly across our engineering centers. Talent is a topmost priority for all of us, we go wherever we can find great talent, especially in the products organization. Second is in terms of products and program managers.
As we expanding the feature set or creating new products, we continue to invest heavily in our product management bench and program management. The most important one, when I talked about user experience, our UX engineering or design engineering and the design teams, we had not invested heavily around 2017, we have now invested significantly from an R&D standpoint in UX engineering. Just to tell you, if I need to round it off, currently from an R&D capacity standpoint, 20% of the R&D capacity is on UX engineering and UX design teams. That's how much serious we have taken to make it easier for our customers to deploy our products and use our products. Our roadmap continues to be every six months we do these releases. We have two releases per year. Beginning this year, we have actually started something very new.
We are now making interim releases available via our store. If you decide, if our customers decide, "Hey, CJ, I cannot wait." We have customers who are on the other extreme, where they say, "Even two releases a lot, just give us one major release a year because it requires us to do a lot of change management. We want to test. We are rolling it out to 400,000 employees," or whatever the case might be. On the other extreme, we have some customers who would say, for emerging products, "Can you start shipping it?" Technically, we can do this all day long. There is no technical reason why we cannot ship the products on a daily basis. We are a SaaS company.
To minimize the change management on our customer side, we have currently, after doing an extensive survey of our install base, agreed on two releases per year, and for certain emerging products, we are doing much more frequent releases to see if our customers can absorb them. In terms of the roadmap, every six months, every single product line continues to innovate based on the features or the functions that we deliver via the platform. If it's ITSM, we want to provide as much automation as possible, as much self-service as possible, and we will continue to raise the bar on self-service by providing things like chatbot, things like machine learning. Because in our mind, the best IT service is a fully automated service. It's that simple. The best IT service, if you are doing self-service, that's great.
If you're running a cloud, it should be lights out clouds operations. The best IT service is a fully automated service, and we continue to invest in our roadmap, both in the platform and the products, so it's easier for our customers to absorb the services. HR is a product that we launched a few years ago. We have seen phenomenal success, as you have heard from John and Mike. Again, we want to make it easier and easier for employees to have self-service options when they deal with their HR department. During the most important transition moments or critical moments, we want to help them out, including things such as onboarding without pain. Customer Service Management. This product was launched about three years ago.
We have now close to 900 enterprise customers on our CSM product, because customer service is a team sport, and just taking the calls or taking the inbound request is not enough. Without employees and the operations department behind the scene working together to proactively resolve the customer issues is becoming critical. Us being a great workflow company, we are able to tie the inbound customer escalations or request with the back-end processes by integrating with the right set of technologies in customers' environment so that customers get a great experience. You will see our investment. This is just three example investments. Our investments continue to accelerate in each of our key product lines, and we'll do that for every single release. Last year, when I was here, I announced a product that we are working on, which is called DevOps.
Our viewpoint on DevOps is we are in the enterprise DevOps space. You have developers who are constantly creating many products. They may use a planning software, they may use a configuration management software, and few other software. You have multiple DevOps projects going on. The DevOps tool chain is extremely fragmented, and ServiceNow provides that visibility layer across your DevOps tool chain by right set of integrations into the DevOps technologies, so that you have better control over change management and release management. What I hear from customers, some of the largest banks, some of the e-commerce companies and others, is that we want to leverage service management concepts, which ServiceNow is really, really good at, to ensure that when we propagate the change, if we have a e-commerce website, we want to propagate the change.
We want to make sure that ServiceNow provides us the visibility and the control required, so that our website is always up and running in the case of e-commerce. We have launched this product this year. We are currently released it via store in April. As you see that this idea here is we will integrate across the tool chain, DevOps tool chain, and make it easier for banks, e-commerce companies, retail and others, so that they can still take advantage of DevOps flexibility, but ensuring that things don't break when they propagate change. Second thing, last year, this is an internal code name. Last year, we created a unit, we call it NowX internally. The idea behind NowX is we have so many incoming requests that are coming in to build products on our platform.
This is the area where customer may have created a product, and they say, "CJ, this was a good use case on your platform. You and your team should build a commercially viable product, hire the domain experts," and so on. Similarly, when we use ServiceNow internally, we also get a lot of requests, "Hey, we are using ServiceNow for this legal application or for this finance application." We created this unit in beginning of 2018, and the goal was that beginning 2019, we will ship at least one or two products. We get lots and lots of ideas. We will validate some of those ideas. We will then work with some of the design partners, which is our customers, who are willing to address that pain point using ServiceNow.
This team, which is led by Karel van der Poel, who has been with ServiceNow for a while, his company was acquired a few years ago. They have done a nice job taking care of that pipeline of the ideas that come in. They come from employees, sometimes they come from customers, sometimes they come from partners. The four areas that I feel comfortable sharing here is one, around finance, which I'll touch in a second. Second is around enterprise risk management. This is around business continuity, disaster recovery, and how ServiceNow can help automate a lot of processes. Third is smart maintenance and IoT. Fourth, industry verticals. We are looking at couple of industry verticals, working with Dave Schneider's team.
They have prioritized couple of verticals, then we said, "Okay, can we create product for those areas that we can continue to deliver through NowX?" You know what I'm really pleased to announce is that in New York release, which is the next release in September, from NowX, that we formed last year, we are for the first time announcing a product that is for the finance organization. Monthly close process in every finance department is still error-prone. There is still a lot of manual work that goes on. Just to be very clear, we work with system of record. We have no aspirations to be system of record in finance. Okay? I was on the Oracle financials team many, many years ago, that's a lot of work.
Our goal is still to be system of action, working with the best-in-class system of record, like an Oracle or SAP, and provide that system of action or a workflow tool so that it makes it easier to roll out financial close. Financial close happens every month. With this product, you can have a reliable financial close process, you increase the team satisfaction, and accelerate the process. Our new leader, Amir Jafari, comes with a finance background, and he's running that product line. Really pleased that we will be launching this tomorrow in front of our customers. One of our design partners was PayPal, and we worked with both PayPal and Deloitte to ensure that this is a pain point that PayPal wanted to solve using ServiceNow, and they did and got really, really good outcomes.
Similarly, this was the use case that our finance department, Mike Scarpelli and the team, used it internally, ServiceNow, to particularly solve this pain point. Really excited about NowX and the product innovation pipeline on which we will be delivering every year, one or two new products. The last thing I would say is that I feel pretty good about our portfolio. When we look at the industry analysts and look at on the left side, we continue to be a market leader in the Magic Quadrant for IT service management, IRM, which is our GRC product line, and our enterprise PaaS. Even for the newly shipped products, so Software Asset Management was shipped in 2017, and CSM was shipped in 2016.
Even though these products have been relatively new, the industry analysts have recognized and said that ServiceNow is a true visionary when it comes to these two product lines. Overall, I feel pretty good about our product portfolio. We continue to drive innovation in our platform. Having a single platform with a single data model for all of our products is a competitive advantage for us, and our product teams are working really hard to make sure that our customers can absorb our innovations. We want to make their life easier by giving them great experiences and making them productive. Thank you. I would like to introduce my partner in crime. We sit next to each other every day in solving for our customers, Dave Schneider.
Thank you. Thanks, CJ. He's actually quite accurate. We actually do sit in the office right next to each other, and we solve customer opportunities on a daily basis. A great day for me is actually partnering with the executive team at ServiceNow, making sure that we're planning for the future, and engaging with customers on a regular basis. There's no one better to strategize on that than CJ Desai. What I want to do today is give you a perspective on how we're going to capture the opportunity in front of us. I want to make sure that people understand my unique perspective. I've been with the company eight years. It was actually at Knowledge in 2011 when Fred invited me to come to the event, and I fell in love with the opportunity and the customers.
It was at that time where I was sitting at a little round table, and it was a group of customers from Atlanta. They started telling me that they were using the platform far outside a narrow IT service management opportunity. It was also at the time where I recognized that they truly were appreciative of the opportunity that stood in front of them by using the platform. We've had a little bit of growth in that time, and one of the things that I try to do is look around the corners. Think out three years about what we need to do to make sure that we're partnering with our customers so that we earn their business at every phase of the journey.
Obviously one of the things that I think has everybody's attention is the number of large relationships that we've been able to drive in the last few years, moving from 20 or fewer than 20 to over $675 million customers. That is an outcome of doing the right thing by our customers. What you've seen from our investor deck in the past is it is super important for us on that first experience with a client, that we listen really carefully to the business problems that they have. Whatever and wherever we start with them, that we deliver real business outcomes and value from those initial projects. When we make our customers successful, that drives everything else.
I know some people ask, "What's your initial deal size?" "How long is the sales cycle?" It is about getting in there and proving value, making sure that no matter if the time is three months or eight years, and we just closed a deal that had an eight-year sales cycle, they're going to be a customer for 20-plus years with ServiceNow. The million-dollar customers have grown 160% just since 2015. Again, we sometimes will land a million-dollar customer. People often ask which products are responsible for those million-dollar sales. I'll say all of them. One nice thing about customer service in the commercial segment, we are doing big, giant land deals in commercial. They can be a customer of less than 5,000 people. That's our definition of commercial.
A customer service project may be double, three times the size of an IT service management project in those environments. It's a really good place for customer service to land in that space. It's also an incredibly well-suited product at the large enterprise and very large enterprise space. Another thing is the $5 million customers. That relationship has grown. Last year, we talked about our investment in customer success. That investment in customer success is what's driving these larger relationships. Historically, we used to show up just like we did with regional accounts. A big account in a region, we'd have one salesperson on five, 10, 20 accounts. Now you'll see us go to market where we have one rep on a single account with a whole team of people surrounding that opportunity to make sure that we're having the strategic conversations with them.
The more time we spend in these large accounts, the more opportunity we continue to find. We'll talk about that more as we talk about vertical markets and our interest in going after them. I am probably sharing a little bit too much with our potential competitors or people that want to follow what we do at ServiceNow. The secret to our success is, in fact, our journey that we take customers on. Sure, we want to get somebody excited about using ServiceNow, and this event at Knowledge with 20-plus thousand people is a great way to get people excited. Really what we're trying to do is make sure that they're ready, and they understand the transformation that they need to drive.
This is where our partner community comes in so important to us, and our doubling down or expansion to our partner network is so important. We will actually tell customers, "You're not ready yet." Because it's so important for us for them to be successful. We'll sign an initial contract and begin the financial relationship with them, focusing on getting them to some value right away. I want to highlight the importance of value selling in this process. When we work with a client or a prospect, we're trying to understand what the potential business value is of the technology investment they're going to make. Why do we want to do that? They've got to go ask for money from somebody inside that organization. They're being asked about a business justification.
If they have an ROI, it's more likely that it's going to get approved by somebody like a Mike Scarpelli. We're being held accountable to deliver on that ROI. When we do, we open up the aperture of other business opportunities for us within the relationship. It's this value selling. Again, if you're going to have long-term relationships with organizations in a SaaS model, super important for us to continue to practice, and we're always just looking for a fair exchange of value with a client to make sure that we're creating an opportunity for mutual success. The final piece here is we're keeping them engaged. Again, this event, absolutely about keeping our customers and our prospects aware of all the innovation that's going on so that they're ready to take the next step with us.
I just want to highlight, it's possible in a large account that there's many of these cycles running all at once. Okay? For all you startup companies that are out there watching, just do this, and you too could have that kind of success. I have to be a teacher as part of my journey. The other thing that we have recognized is the importance of the partner community in that process. Our business partners, the Accentures, the Deloittes, they're involved with customers at different levels and having different kinds of conversations than we are. We're actively engaged with our global business partners to build really robust relationships to support our customers. We hired David Parsons just a few months ago, or about two quarters ago, out of VMware, who had built many of these relationships in the past.
All of the global partners have joint business plans, joint investment plans. We are holding each other accountable. We have quarterly top-to-top meetings, and the investments are massive that are going on. You will hear from Andrew Wilson at Accenture in a little bit. Additionally, we took that base of relationships, and we are adding to it on a global basis. There is a group of other organizations that we are now managing to build great relationships with, and these range from focused on IT products to customer service or the whole umbrella of opportunity. The 1 thing I always have to answer is, why is the services line not increasing faster? It is really purposeful. 1, we want to create an opportunity for our business partners to be profitable and have great success.
It is not as accretive to the business as the subscription revenue, so it is mutually beneficial. The services revenue will continue to grow, and 1 of the things that we continue to look at is: what is our role and relationship in a customer environment? ServiceNow provides the innovation and the expert services with our services personnel in lockstep with the partner community. We want to be doing joint deployments rather than we lead and nobody else from a partner community there. The reason is our partners are really good at business process transformation and change management. That is not our expertise. We want to make sure we are leveraging them in support of the customer. There are times where the customers will do a little bit more of each of these things, but absolutely critical to our success is their sponsorship. This is really important.
John and I spent a lot of time with C-level people, making sure they understand their role and responsibility in driving success. With all of this growth, it creates another opportunity. We are creating thousands and thousands of jobs, but we need to educate and train thousands and thousands of people to be competent in the ServiceNow environment. We just had our first class of 24 newly certified minted senior-level architects graduate. These are the top of the tops. These are the ones that customers love to have. We are going to be investing even more at the very top end of the pyramid of skills, as well as adding depth to it. 1 of the areas, again, you will ask about is why are your margins down in PS?
Part of that is the amount of money we are spending to create this ecosystem, and that has a very big benefit to us and our customers in the future. We looked at how are we going to market from an investment perspective. We focus our attention in a primary 8-market basis, so 8 critical markets and a 50-city strategy. We think about these 8 markets. This is our path to $10 billion. We know that if we do the right things in these markets, we can secure our future. Additionally, there are 50 cities where there is a lot of excitement going on and a lot of corporate headquarters, and we want to be there with marketing events and support events and partner education. We are continuing to do that. We are doubling down our investment in Japan and also in Germany, where we had underinvested in past years.
That's a big spike of investment for us. You'll see things from us in those markets, as well as evaluating new markets all the time for entry. This year, we will start to experiment with South Korea. South Korea was a market we did not have local data centers nor local personnel or localized language support. This is a market that we think has huge opportunity for us in the future, but we wanted to be cautious until we were ready and had enough skill set to apply to the problem. The next question people often ask is, what about China? Not in China. We have zero exposure to China, which may be good news given geopolitical events from day to day. We have made a decision based on cloud governance models, geopolitical risk, to not focus on China.
It would be a distraction for us right now. Vertical opportunity is a massive opportunity for ServiceNow. A few years ago, actually many years ago, we started our federal vertical practice. This was taking a horizontal product and adding vertical security needs and controls to allow us to do business with that sector. Over this past quarter, you saw some of the great results we had in our U.S. federal market, and that's still early innings for us. Some of that expertise that we're building in U.S. federal, we're going to apply to those other eight key markets so that we can go after that market. Additional is not just about the U.S. federal. We've organized ourselves in the U.S. to handle state and local government, so all government automation. Another massive opportunity well-suited for our platform.
The medical provider space, the people that have hospitals or beds where they're doing service. That sublanguage of conversation for my go-to-market sellers, even with a horizontal product, we're seeing good lift in doing. Now unlocking the future opportunity, thinking about not just organizing our sellers, but building products with a specific vertical focus. In financial services, which will be one of our first markets, we're really talking about large banks. We're identifying a number of what we call mid-office workflow activities, where we could get significant ROI for our customers. These are things that stand between various silos of products that exist today that repeat from one bank to another bank to another bank. Whether it's onboarding new big clients or managing security risks specific for that sector. These are all things that lend itself to a ServiceNow environment.
Additionally, in the communications, telecommunications companies, they're going through a massive change. Whether it's distributing new 5G devices and the Internet of Things and the explosion of IP addresses that they're going to have to manage, to the new software-defined networks. The tools of yesterday are not the appropriate tools for tomorrow. Our platform is well-suited to meet the needs in those customers. We think that there's huge potential. We are going to be very cautious about organizing our sellers too fast until we have products. There's nothing worse than moving around too many sellers at once to create non-productive experiences. Again, patience. We've been through this. I've led these types of organizations through change here at ServiceNow and other places. We see the opportunity, and when it's right, we'll take full advantage of it. Okay. I think I need chairs. Sorry.
As these nice gentlemen are doing the chairs, I want to give a little background for our next speaker. I get the opportunity to travel extensively and meet with customers. I hate to say it, I stack rank them all, not just on how much money they spend with us, but how advanced their use is of the technology, and how much I'm learning from them on a daily basis. Our best customers are our best teachers, and there's probably no better teacher than I've had over the last few years, and a better customer who's implemented our products than Andrew Wilson, the CIO of Accenture. With that
Hi, sir.
Hey, Andrew.
I'm hoping for a hug.
Oh, wait. I would hug, but I don't want to have a microphone problem.
It's a bit of a wardrobe malfunction.
If you thought our commercials weren't telling the truth, it's not uncommon when we get together, the first thing we do is hug one another, and celebrate success. I appreciate that.
I'd like to claim rights on the advert that we saw earlier. I thought that was a good commercial.
You can claim it. Andrew, what people may not know is what is the role of a CIO at Accenture? What's your remit? Give us some perspective on you.
Well, a CIO is responsible for running the technology of a business. Accenture happens to be a technology business with over 500,000 people all over the world, serving clients in every industry, in every geography. We have our own technology needs, my number one job is to provide a technology base which can keep 500,000 digital workers and five key businesses across five key industry areas working hyper productively all the time in a very happy way. Of course, because I'm a technology business, it's really important that I can demonstrate that our technology posture actually is what we practice with our clients in market. I need to be out there.
I need to be in cloud, I need to be powered by platforms, I need to be seen to be practicing the characteristics that we believe are characteristic of modern digital IT.
I'm sure with those 500,000 people, none of them have a strong opinion about what great looks like.
They all want to be the CIO. There's a long line. No, I mean, CJ's diagram I think said it well. The modern IT posture is cloud first, and it's powered by platforms. I happen to run the largest implementation of Microsoft on the planet. I run S/4HANA from SAP. I run Adobe. I run Salesforce. Of course, I run ServiceNow. My IT posture has to be reflective of what modern IT is. I'm 95% in the cloud. I run on the three cloud providers. I can point to what modern IT is, so my main job is to be that practitioner. Along the way, of course, I've grown very close to you guys because ServiceNow plays a critical role in that platform posture, both as that platform of action and experience, but also integrating and coexisting with the other platforms.
As I think one of the other slides showed very effectively, the platforms exist, and yes, you commercially construct and contract with them, but then they coexist in the modern IT posture. A job of a CIO now is to constantly ideate and to use agile techniques and sprints to bring new experiences, new actions to bear, to empower business, and to attract and retain employees.
You've been CIO in the current role for six years?
Six years.
I'm always-
I've known you for longer.
I know. Yeah. Well, we met when you were running the outsource business for Accenture, when I was trying to earn that business, which we did. One of the interesting things is you talk about platforms versus products. How do you see the differentiation between a platform and a product?
Well, a product is a set of SKUs, it's licenses, it's inputs, and you're left to have to navigate, build services, design build run, and create IT very much in the old way. I think that's where our relationship started. I've been pleased to see the ServiceNow platform mature. You're no longer a software provider, you're a platform provider. There's a huge amount under that to unpack. A platform is a set of robust integrated services. A platform is something you trust for high availability. A platform is something that, as CJ said, can a consumer with half a million people take two releases or more a year? Absolutely, yes. I would challenge that scale is not a barrier to pace with good automated test models. We take every release of ServiceNow, and I do that to prove that it's possible as an organization.
I also do it because there's richness and functionality there. When you take a platform, you get all of the benefits of the innovation that this company is building into that platform, which I could never build. Across all of those platforms, all of those roadmaps, there's no way a single IT shop could ever invest that much. I'm riding the wave of platforms, enjoying the innovation that comes along, and then I choose how to deliver that with my particular business.
One of the things that I'm highly aware of in an organization that's as fluid as yours, you're 500,000 people, but it's different group of 500,000 over a couple of years, onboarding, changing that out. One of the things that I always remember is you said your role isn't really just a CIO, it's much more than that. It includes experiences. Why don't you talk about that a little bit, and our role potentially as one of the platforms that helps you to drive those experiences?
I think that being a chief experience officer, although I'm not allowed to use the acronym, I don't know why. I think that's what modern IT is all about. I'm orchestrating and brokering and delivering experiences and outcomes that aren't a function of an individual corporate function. They aren't associated with a single data silo or a platform. I think have to think about experiences for the employee, whether that's joining a company, whether that's leaving a company. We have 50,000 people that temporarily leave Accenture every year. Why do I want to make that process so great? Well, that requires touching almost every corporate function in the back office. I don't want an employee to have to think like that. I want a great experience. I want a single destination. I want a great outcome for them. They'll come back, and that's what we see.
Employees have to have a rich, sticky experience, very much like consumer. We all know pervasive IT in consumer life is setting the bar very high as to what a technology experience is. A CIO has to deliver that in the enterprise. It's not just about employee experience, it's the experience of the business. The business has to be very effective as well. Whether that's contracting and contract set up, whether that's invoicing and automated invoicing. When CJ said, "Don't think about where the data is and the system of record. Think about the system of action, the platform of action," he's absolutely right. We will have complex workflow that's elegantly delivered for business functions that then ultimately just update the platform of record underneath. That's very much the structure I see it working every day.
If it wasn't clear to you, they use ServiceNow as that platform of action to help move the things through Accenture.
Action and experience.
Action and experience.
The ServiceNow platform, I think, avoids stereotypical typecasting. I think you come from an ITSM background, very effective. You've moved through, and our consumption reflects it. Destination, single destination for action and self-service portals. Now into things like asset and change and security, and then ultimately these experience and outcomes. Breadth of relevance across the enterprise, and not aligned as certain platforms are to a specific transformation area or business function.
Like I get a chance to talk to a lot of customers. One of your roles at Accenture is to highlight the innovation you're making internally and then the interface externally. What are the major topic areas you're seeing the CIOs have the most interest in that you're interfacing with?
Can a platform provider be trusted with my IT service? If so, how? The days of owning the data center and the network have gone. Cloud and the internet have replaced all of the assets we used to use. You look at a platform provider differently to someone selling you software licenses. Will that high availability be there? What is the culture of leadership in the organization? This isn't a transaction. How does that organization deliver innovation? How are they looking after my interests, and are they clear on where they exist in the ecosystem, and also where they compete in the ecosystem? These platforms don't fit together perfectly, but they fit together far more than they compete.
A platform organization that can help the CIO navigate that and is open and authentic about that will have more relevance when it comes to delivering services. Is there evidence of innovation? Can I consume more service? CIOs aren't making a single transaction decision. They're making a decision around this platform is going to be here for years, as you said. Can I consume it, and will it coexist and coexist coherently with other platforms? ServiceNow does.
One of the other elements, again, we've been on a journey together. We've made a lot of investments in our customer-facing organization and customer success. Are we on the right path with you and in the marketplace, the reputation we have with your customers?
I think you are. I'm excited because I consume you as a customer, but I have two other key relationships with ServiceNow, which I'm delighted because I think it helps the overall agenda for us. We put ServiceNow into the heart of some Accenture products. Some of our services are powered by ServiceNow that feed out to market. We're your largest partner out in the market, and we're proud to be that. We're proud to be more than double the size of the next one. Thousands of trained and certified ServiceNow professionals that can drive that change agenda. I see huge relevance in the market, a market that needs maturity of platform, a market that needs to see a platform that can bring increasingly, I think, industry alignment and industry specification. Accenture's business, which is primarily structured around industry verticals.
I think with compliance regimes, with the different characteristics of repeatable processes that you see in different industry areas, what better platform that can bring pre-configured compliance and regulation and outcome-based experiences in government, financial services, consumer goods, and that pattern's there as well, I think.
Yeah, I think, again, one of the benefits we see is these embedded offerings. Your team goes to market with solutions to business problems. Having ServiceNow inside of that, sometimes the customers don't even know. When they are a customer of ours, they're like, "Oh, of course. That makes even more sense." There's nice leverage. Again, when we look at the vertical market opportunity, we see doing it with partners like Accenture is a massive accelerator to us. We appreciate the partnership there. I want to switch a little bit to the external-facing world. Accenture as a provider of services to your customers. Give us a perception on the practice growth levels, how it compares to some of the other things in the portfolio you've had experience with.
Accenture, like the ecosystem, is structured largely around platforms. My own IT posture, where we see Microsoft and SAP and Oracle and others, we have go-to-market that's structured in the same way, and we're typically the largest integration partner in many of those cases. We see a history of what it takes to get to a billion-dollar business and beyond. My belief is that ServiceNow, that's not yet at that level, can get there in half the speed, in half the time. Why do I think that? Because I see a lot of the good bedrock characteristics that the market needs, which not all platforms have brought to bear as quickly as I think you have it here. I'm not just saying it's true. We've heard it here today.
Single code base, single data model, speed and agility with which change can be consumed by the organization, high availability, clear distinct fit with ecosystem and alignment with certain platforms, preexisting integration with platforms. That's what the market needs. When you add in that industry relevance as well, the practice that I represent can be out there, and it's not a cold sell. It's, here's it's working, here's an industry it's working in. How can you, CIO or business C-suite, move at the speed of new IT? You need to bring platforms.
And-
That message is working.
Well, to be fair, the thing I've enjoyed is your investment in the business has both been organic and non-organic. You've acquired certain companies to kickstart different practice areas, but the amount of training you're doing in different markets has been phenomenal. In our investment in that training resource, what's that meant to Accenture?
I think some of the things I've just listed about something that can move at the speed of IT, those new architects that you've mentioned, that isn't going to drop the ball when you arrive at a client in a fast-moving situation, when you need to deploy more than one, the best team available. You need that scale. CIOs are searching out there in industry to be relevant to their board at a time when all of the tool sets changed. So they're searching for what success is. They need to be able to trust an organization that isn't going to be operating on cynical old sales values, on old licensing approaches. We've done something recently, which I think is really exciting, and I think we're a little bit ahead. The way we buy from you.
You did us a favor. You taught us a few things.
Well, at times these guys can be a little bit complicated to buy from, and we've seen that because the range of products, and then you add in our scale. I think we've got the solution to it because we've reimagined and reevaluated how we contract and consume services from ServiceNow. It's simpler, and it's more elegant, and it's encouraging a different behavior in me as the customer. Now, rather than being concerned with license volumes and cost of ownership, I'm actually encouraged to experiment and innovate, particularly before production, because these guys want me to prove the wider breadth of the platform's capabilities and to test and then to see whether it happens at scale. Because if it can happen in my IT shop, it's pretty likely we can make it happen anywhere. You don't want me hiding behind old-fashioned commercials.
I think we've been ideating together, and why would I hold that as an example publicly here? It's an illustration of the depth of the maturity of the relationship. If you can look at a platform provider in that lens, then you can look alongside other platform providers which are probably not rotating into the new as fast as that. Our relationship with ServiceNow has got a maturity and a growing scale that is at least as mature as some of our most mature partnerships and is growing faster than some of our more scaled partnerships have grown in the past. It has a characteristic of newness about it that I think will mean we've got continued momentum.
Yeah. One of the things I know that this community of people is aware of is our pricing reflects all the different products we've ever distributed. There are probably 24 different pricing meters that exist around our products, and we're simplifying those down to really three primary meters and then creating agreements with customers who are interested in being able to experiment, to be able to do a bigger volume transformation work with our clients. We still find that customers who are brand new to ServiceNow as a product category want to buy for a specific use case, but quickly the light bulbs start going on, and they want to take us on the journey. The partnership with Accenture goes beyond just implementation. They were one of the design partners for our new pricing thought process with Andrew Casey and our team and Rocky Bonecutter.
They have a person on their team, actually, his name is Rocky Bonecutter, and he negotiates contracts. If you want to know what it's like to work with Accenture, go meet Rocky.
We're hoping to eventually employ someone with a name that's suitable to every role on the leadership team. Perhaps some way to go.
I'm interested in your perspective, and I'll ask a question that's probably dangerous. What should we do better?
I think you have to improve, I think, keep going on industry specialization. I think the role of the platform in relation to artificial intelligence and cloud orchestration, I think you've got some bold steps to come there. Because a CIO that's fully in the cloud and only in the cloud, the game changes on where your compute is that's outside of software as a service. The old role of ITOM and operations management changes completely when you've got Now alongside the cloud. I think you're going to have to bring more to bear there. You've got a stronger message, I think, to come, and you're well-placed for that. The curation of intelligence. If I'm the chief HR officer for the non-human workforce with tens of thousands of full-time equivalents of automation, how do I look after them?
How do I give them an employee ID? How do I give them a performance appraisal? When do they get promoted? Are they allowed to work on more than one client arrangement at once? When should they retire? They are AI. By the way, AI, you can't code, put on the shelf, and it will run for 40 years like a reservation system. It changes and learns. You have to revisit everything every year. By the way, the half-life of services in the cloud is reducing every month. Things that we created as brand new three years ago are now seen as legacy. The orchestration, brokering, asset management, and intelligence capture that as a potential is there, you've got your huge opportunity, and that's the next 20 releases of ServiceNow, I'm sure.
Great. Again, thank you. Thank you, Andrew, for being here. Appreciate it very much. Truly incredible partnership, we really appreciate you.
Thank you.
Thank you.
We appreciate you. Thank you. Thank you.
I think we're taking a break?
Yeah.
Okay, we're going to take a short break. Be back shortly. How long do you want them back here?
Ladies and gentlemen, we'll take a short 15-minute break. We'll see you back here a little after 2:30.
The audio video will be working. Two, two. One, two. One, two. Check. Two, two.
I move my hands to the tempo. I move my head, I move my hands to the tempo. Shake your bootay. Is it good day. Shake your bootay. Is it good day. I move my head, I move my hands to the tempo. Shake your bootay. Is it good day. I move my head, I move my hands to the tempo.
Ladies and gentlemen, if you could make your way back into the room, the program will begin shortly.
Here we go again. Gotta get on point. Oh, yeah. Oh.
Please welcome back Vice President Investor Relations from ServiceNow, Lisa Banks.
Thank you, John. Okay, welcome back, everybody. I'd like now to introduce you to the man you've all been waiting to hear from, Mike Scarpelli, our CFO. I've had the pleasure of working with Mike over the last four years, and I'm very lucky to say that I had the opportunity to learn from one of the best CFOs out there. Mike, we will miss your leadership, your transparency, and your dedication to our customers. Without further ado, Mike Scarpelli.
Good afternoon, everyone. This is my seventh Analyst Day for ServiceNow. It's hard to believe that time has flown by so fast. I remember back when we were first going out with our first Analyst Day, people were still really questioning the market opportunity for ServiceNow. If people remember back when we were going public, you had Gartner saying it was a $1.4-$1.6. Back in 2013, we threw out a market size, I think at that time we were only saying it was like $10 billion or something, and everyone still shit all over us and didn't believe that it was that big. We're going to update that a little bit today. We're going to talk about market size because people have started talking about that. It's really going to talk about investing for growth.
I have to tell you, nothing has really changed at ServiceNow. There's been a few new things since John came on board, we're calling it something different, but it really hasn't changed at ServiceNow. It's all about for some reason, this slide is not working, this page here. I don't know why. I won't look at it. I may look here, I can see what slides are there. It's all about consistent execution. That was the number one thing when we were looking at taking ServiceNow public, our board, and Frank, it was all about if you feel confident that you can consistently execute, that's the time to go out. We've been pretty consistent quarter after quarter with our execution. It's all about maintaining high growth. If you look at most of the people in here, you guys are growth investors.
That's first and foremost. Growth was always our number one focus, it still is. It's not growth at all costs. It's growth with making efficient investments in your business so you can sustain that growth. We've continued to deliver very high subscription revenue growth, even at this scale. You can see last year we grew at 39%. You have the guidance out there. I'm not going to put the guidance for 2019, but clearly, we're growing in the high 30s. That's pretty unheard of, especially when it's really been, as CJ talked about, one platform, one product. This has really been organic growth for this company. It's pretty unique. It's not just about that growth. It's also about free cash flow, operating margins, leverage in the business. We've been demonstrating free cash flow expansion.
We're going to continue to demonstrate our operating margin expansion and free cash flow that we're going to give. Our free cash flow, actually, last year grew faster than our revenue growth. We're going to do about $1 billion in free cash flow this year, and that will continue. I guarantee this model is a very profitable model. That will continue. Billings. Everyone wants to talk about billings. non-GAAP billings is an indicator of high growth. I got to tell you, it's not all, and I'll talk a little bit more about that. Subscription billings, it's at 30% plus growth. I think this will continue for some time. There's a lot of problems with billings.
I know you guys look at billings, and I got to be honest, the only reason why we started guiding to billings, there was one analyst that probably some of you guys know was way out in left field with his numbers. We had to rein people in so people could understand what they're going to be. There's real limitations using that as a performance measure. The first one is contract start dates. This is the unique thing about our business. We sign a lot of contracts in a quarter, but they actually don't start until the day one of the next quarter. You don't actually see that in billings in the current quarter. Q4 is a prime example of that.
In Q4, many of our contracts start in January 1, and because of the January 1 billing date that goes out, you see that in Q1. That's one of the reasons why the seasonality for our billings is very different. We'll have a high Q4 billings, yes, but there's not that dramatic drop in Q1 billings. You see that in our numbers. The other thing is duration. Duration can really cause variability in billings. As an example, you saw Dave was up here, and he was talking about investing in our customers and our customer journey. We land a customer, and they continually buy more and more. Many of our customers, they want to co-term their billings. Many of those, we don't get as much visibility into the co-terming of billings, but we do get visibility into the contract size.
If you focus too much on billings, you kind of miss out on that. Then I talked about that seasonality. What is a better measure? RPO. We do think RPO is a better measure of our business. We're not guiding to RPO right now. We're going to continue. We've been very consistent as a company. We usually set metrics at the beginning of a year when we start out a year in January when we're giving guidance. We started with billings. We'll continue with billings. I would say next year, I want people to start thinking about RPO. You'll get our RPO when you see our Q. We just filed our Q on Friday. You can get the actual numbers inside there, and we'll continue giving that. In 2020, obviously, there's a new CFO coming on board.
I think Lisa and others were looking at we will most likely start to guide to an RPO versus a billings going forward. The big benefit of that, it really aligns with the bookings period, so you don't have that gross down. It neutralizes for duration. It's a little bit more consistent and predictable. You can see, too, with our RPO, well, you'll see in a minute, that you have that hockey stick in Q4 all the time of every year. That's more traditional for an enterprise software company. If you look at our RPO, you can see how it's been tracking here. I know people have said, too, that just giving to 1 decimal point isn't as meaningful when you look at growth rates. We're going to look at that over time.
For the purpose of this, we're just giving you 1 decimal place. You can see our RPO has been growing 33%. The non-current has been growing 33%, pretty consistent. We're pretty proud of this with that 5.1. The problem with this, though, that I will say that you need to understand, too, is these numbers are much bigger than the revenue and billings number. Remember, about a third of our business is in foreign currencies. You have FX movements. It can impact quite a bit that RPO growth rates when you look at that. You do need to neutralize for FX. The other thing, what it doesn't capture, RPO, is self-hosted. Roughly 4%-5%, I think it is, of our revenue is self-hosted revenue, where you're recognizing the revenue up front. You have certain quarters where the self-hosted can be higher.
Like last quarter, I think it was close to 11%, because we did some big federal deals. That you won't capture in an RPO, but it would've showed up in the billings. Just remember that. We'll try to normalize for that as well, too. Market size. We've been spending a lot of time internally looking at our 3 different workflows, our IT workflows, our employee workflows, and our customer workflows, and looking at all the products inside there, looking at Gartner and other things. We think that this market opportunity is growing to north of $165 billion. Don't focus on the $165 billion. My point is, it is still a massive market opportunity we're going after. That is what gives us the confidence that 1 day we will be a $10 billion company. I can't stress that enough. You heard CJ.
He talked about we're going to be increasing two new products a year by adding two new products. He talked about DevOps and Finance Ops. Actually, I should restate what CJ said. I think he said one to two. Last year, John committed them to two. He needs to deliver two, and hopefully he's going to continue with that, too. That will also continue to drive our market size over time. You have to remember, today, about 90% of what we're doing is generally replacing a legacy software vendor. What quickly happens once we land in a customer, they see what they can do on ServiceNow, and then we start going after that white space that's not necessarily defined in a TAM. That's why we think this market is going to continue to grow for us. It's rare that we really start in the white space.
It's almost always replacing a legacy vendor, and we think that will continue. There is massive amounts of white space in organizations. I will say financial close management probably has the biggest white space. As being a CFO, there is so much stuff done in a finance organization that is done through Excel spreadsheets with tracking things, emails, voicemails, whatever, and that is ripe for a product like ServiceNow. I'm very passionate about that, and I'm excited to see what that's going to do. I may even be a customer of ServiceNow at my next financial close. What's driving this growth is really the emerging products. You can see how our emerging products have transformed. If you go back, non-IT right now represents 41% of our bookings, and it's up from 11%. That's pretty dramatic growth when you look at that, and that's just going to continue.
I still think when we're at $10 billion, IT is going to be a major piece. Is it going to be 50%? Is it going to be 40%? I think it's going to probably be somewhere between 40%-50% of our business. It is the key. It's generally why customers buy us initially. I would almost say it's our Trojan horse because predominantly it is still a weak legacy market that we're replacing. There really has been no innovation. Many of you have asked us about Atlassian and others, we really don't see them in the enterprise space. They're more in the commercial space. 80% of our business is coming from the enterprise space. Only 20% comes from that commercial space.
As Dave and John said earlier, or I guess it was Dave, sorry, the commercial customers we go after tend to be more in that 3,000-5,000. The key thing is these are fast growth customers that are going to eventually grow into the enterprise space. The other point I want to make, too, is you know we took away the whole Global 2000 metric that we were giving. The reason we did that is because it's large enterprises we're focused on. Yes, Global 2000 continues to be 50% of our revenue, we talked about in the last call, public sector. Public sector is a massive opportunity for ServiceNow, and not just within the U.S. market, globally. We're going to be very selective in what public sector markets we go after globally.
There is a massive market just within the U.S. with federal, state, and local, and that is the same in every country around the world. What's important? Landing new customers is probably the most important thing to us, because you need to land new customers to grow these customer relationships. In the eight years that I've been with ServiceNow, the sales cycles really haven't changed for landing new customers. It's on average nine months, nine and a half months, something like that. And some of our Global 2000 back then were taking five years to add. On average, it's probably two to three years to land a Global 2000. That hasn't changed. And most customers still today, when we land a new customer, they don't start out as million-dollar ACV. Yes, we do some.
On average, they start out somewhere in the $2,000-$300,000 on average for an enterprise customer. What's so important about those? Once they buy, they buy more. You look at 2018, 81% of our net new ACV is coming from our installed base of customers. You can see how that's been growing, and that will continue to grow. Do I think it's ever going to be 100%? No, it's never going to be 100%, and if it is, there's a problem. That means we've stopped landing customers. I can see it getting to the mid to high 80s one day because our installed base is getting so big, and we are so focused on building larger customer relationships. Why is it that we want to build these larger customer relationships? They are inherently more profitable.
The other metric that we're starting to introduce this year that we will start to guide to in the future is net expansion rate. People have been asking us what our net expansion rate is. Well, our dollar-based net expansion rate in 2018 was just slightly north of 130%. That's another metric that we're starting to track. That's capturing our upsells and it's capturing our renewal rates with our customers. It's something a number of other SaaS companies look at, and you guys have been asking, we're disclosing that for the first time, and we'll start talking about that more so guiding in 2020 is what we're planning on doing. Why are these customer relationships so important? First of all, Dave talked about that we have, I think he said 675 customers paying north of $1 million annually.
You can see the growth rate from 2014 to 2018. We now have three customers that pay us north of $20 million a year. There was zero in 2014. We have 15 customers that pay us between $10 million and $20 million a year. There was zero in 2014. How are these going to trend over time? We see on our path to $10 billion that the only way we're going to get to $10 billion is we have to invest in these large customer relationships. We need to have 2,000, roughly, customers paying us north of $1 million a year. We have to have 30 customers that are paying us north of $20 million, 100 customers in that $10 million to $20 million, and you can see the numbers there. We feel pretty confident at the rate we've been growing that we can get there.
It's just a matter of when. Why is that important? Is those big customers are so much more profitable, and because they're so profitable, they enable us to continue to invest in our business so we can deliver to all of our customers. We looked at a sample of four of our customers. In the retail space, we pulled one that was paying north of $20 million a year. For every dollar we invest in that customer in terms of the cloud subscription costs, the sales, our estimate of direct R&D for that customer, and G&A that gets allocated, we get $5.7 in profit from that customer on that. You can see a $1 million customer, this is an energy customer, it's $1.8.
Why this is so important, if we can build these bigger customer relationships, it's going to drive more profitability, which is going to enable us to invest more in R&D and other areas, which is going to enable us to continue to grow as a company. Our long-term growth opportunity, it requires these investments. We talked about these when John first came up two years ago. This is John's third investor day. If you recall back two years ago, we talked about we're going to invest in product and platform. CJ, that's been his number 1 priority. He talked about the whole platform and the whole user experience he's been really focusing the R&D dollars on. Customer success. Dave owns customer success.
We have been spending a lot of money on customer success, and included in that is that whole professional service and how we engage with our customers. Brand. Lisa showed you some of the new ads we're doing, but it's beyond those ads. We're investing in a lot of branding, and it's not about product branding. It's about potential customer awareness of ServiceNow, helping with recruiting. We are seeing the benefit on the recruiting side. I can't tell you enough, talent. We've been investing so heavily in talent in this organization to make it a competitive place. A lot of investors have asked me over the years, "What is the number 1 risk of ServiceNow?" I keep saying it's not the legacy software vendors out there. We haven't seen anything innovative out of them.
Our biggest risk is retaining the talented people we have in ServiceNow and continuing to attract talented people to ServiceNow. That is why it is one of our biggest priorities. This doesn't mean we're not going to be disciplined. A number of you have asked me, "Oh, with you leaving, what does that mean? Is John going to spend more money?" As I said to some, John's not an idiot. I did say that. I told John that. John is very focused on disciplined investing, and the whole management team is very focused on disciplined investing. We will continue to invest in the business, but it has to be the right investments.
You will see there are companies out there I know when they come up and they're going to be $10 million more profitable one quarter when they're getting towards the end, and they just spend that money so that they don't give that through to the street. I can tell you, we do not do that at ServiceNow. That's why you see quarters that we beat, and we just say it's timing, and we're going to roll it to the next quarter. This company will continue to do those types of things. What does this mean? It's not fair to give a long-term operating margin for a company when the CFO is leaving. It's not right for me to sign up for someone else who's coming in.
I do feel very confident in 2020, our revenues, same as what we said, we laid this out, by the way, in 2015. We will be north of $4 billion, and that will be $4 billion in subscription. We will be there. You can see where we're exiting this year with just the guidance we gave. Subscription gross margin is 84%-86%. We are at 86% today, and people may say, "Well, why are you saying 84%-86%?" We're spending a lot of time looking at public cloud, and maybe we need to start delivering some things through public cloud to leverage some of the things, especially around security, that public cloud offers going into new markets. We're going to keep it at that 84%-86%. We're still going to continue to give approximately 100 basis points margin expansion going forward.
Annual free cash flow we think is going to be greater than zero basis points. It's not going to go down. In absolute dollars, obviously, it's going to go up because our revenue is going up so much. Our non-GAAP tax rate, we're updating that. 18%-20% is what we're seeing based upon the whole tax reform we started telling people last quarter. Our annual dilution increase is going to be less than 3%, what we've been telling people. This is excluding the impact of any warrants associated with our convertible debt. I'm going to call John back up here, and I'm going to call CJ and Dave. Oh, sorry, John, you're up first before Q&A. Sorry. I'm jumping the gun. Thank you.
To some extent, I've got the CEO dream job and the CEO's dream analyst day. I almost have nothing additional to say that wasn't said by CJ, Dave, and Mike. I think they've laid out very much the opportunity we have in front of us, how we're focused on it, and how we're capitalizing on it. I thought what I might do is just share a little bit about what I hear from customers, because I spend probably 60%-70% of my time with customers, traveling all over the world. I'm in Europe four times a year, Asia two to three times a year, on the road constantly with customers, because that's the fun part. What I hear from customers is stunningly consistent all over the world. It's very consistent with what you heard from Andrew Wilson. I'll use the words I hear from them.
They're all focused on digital transformation, right? I swear to God, there's not a company on Earth that doesn't have digital transformation being one of their top priorities. Two years ago, maybe that was a business buzzword. That's no longer a business buzzword. Whether it's the CEO, the CFO, or the CIO, digital transformation matters to their competitiveness. If they cannot embrace technology in a way that allows them to digitally connect with their customers, build a better digital experience for their employees, and use digital technology to drive the productivity and efficiency that's possible, so that they can invest their scarce talent, capital, and resources on innovating for their customers, and not on getting stuck in running a global enterprise. That's real, and they feel it, and they're trying to figure out how to do it. Everybody's embracing cloud. There is a nice cloud tailwind.
Cloud is a once-in-a-generation technology that allows you to get significant improvements in user experience, in speed and agility, in efficiency, productivity, and compliance. They can all go in the same direction. I would argue we're still in the early days of the cloud tailwind. People ask me. I had the chance in my prior life to have a front row seat to the consumer mobile revolution. The iPhone came out in 2007. I would say mobile really took over in 2009. It's been a 10-year run since then in our consumer lives. Cloud today feels to me like mobile felt in 2012, about a third of the way in to this.
When they embrace cloud, they centralize their data, their infrastructure, figuring out their data center strategy with public cloud, hybrid cloud, private cloud, then on the software layer, increasingly, it's almost across the board, they're embracing what I would call the modern tech stack. 4 to 6 strategic software platforms, typically almost increasingly without fail. It's Salesforce, Workday, ServiceNow, Adobe for marketing analytics, Office 365, SAP if they have a supply chain. They want to go from a world where they have thousands of tools and applications and complexity and on-premise-based world, to a world of platforms, and they want to put as much as they can on these platforms, and they want it out of the box so they can ride our innovation curve and focus their energy on innovating for their customers. Incredibly consistent across the board. You heard that from Andrew.
Andrew Wilson, that's what Accenture's doing. A year ago, you heard Deloitte say the same thing, that's what they're telling their clients to do. That's largely fueling the core growth of all those companies. Within that, however, ServiceNow is increasingly playing a distinct, and I would argue, somewhat unique role. It's not just IT. You heard Andrew Wilson talk about us being the connective tissue around the other platforms. Increasingly, that awareness is very broad and very wide. Many people would call Rob Carter one of the most respected CIOs in the world. He's the CIO of FedEx. He's been the CIO of FedEx for 17 years, and he plays both the chief technology and CIO role. FedEx is a very technology-savvy company.
I was saying in a meeting of other CIOs that what I hear from them is they want one plus one plus one to equal five. They want those platforms to add up and work effectively together to add up to be more than the sum of the parts, like Andrew Wilson was saying. Rob interrupted me and he said, "No, John, that's not how I see it." He said, "At FedEx, we want one plus one plus one plus one times ServiceNow to equal 10 times." He said, "At FedEx, we have Salesforce plus Workday, plus Adobe, plus Oracle's our financial ERP. We don't consider ServiceNow, we don't just add it to that equation. You're the multiplier.
You're times ServiceNow because you do both IT, but you also do the workflow around the other platforms, and that is what enables us to get 10 times improvement in user experience and 10 times improvement in productivity." As I travel around, Dave travels around, CJ travels around talking with our customers, we now have access in the C-suite, and the C-suite is saying, "ServiceNow, you are one of our most important strategic software platforms." That's the opportunity we have, the opportunities to capitalize on that. To be honest, the next sentence they say is, "We need you to completely behave like a strategic partner and make the transition from being a vendor to being a partner." That's what's driving our priorities. Our customers are leaning in with us. The opportunity for us is right in front of us.
As Mike said, about 40% of our work and our business is customers using software where software was not being used before. That's the white space. That's the opportunity. Our investments remain the same. Mike described them. Product and platform, we are a technology company. We are not going to take our foot off the gas on organic innovation. CJ is doing an outstanding job of leading that team, and he's deepened his team. He's built talent. Growing our go-to-market organization so it's not a pre-sales motion and then it show up at renewal. It's the whole customer life cycle.
As Mike said, if 80% or 80-plus% of our growth is going to be from these large companies that want to lean in and want us to be a strategic partner where we can grow a relationship from $1 million to $5 million, $5 million to $10 million, $10 million to $20 million, we need to provide an end-to-end customer coverage. Dave is doing an incredible job of doing what I don't think anyone in the industry has done well yet, which is to build that and build it around with a real focus on customer outcomes, customer value, customer results. You heard Dave talk about that. We have a simple mindset. If you spend $1 on ServiceNow and you get $5 of productivity, odds are you'll spend $2 if you get $10, $3 if you get $15.
We believe our platform, in fact, there's plenty of evidence our platform can provide those kinds of returns. We'll continue to invest in the areas Dave talked about. Talent, we're growing our talent, breadth and depth globally. Company brand. We spent nothing on company brand. You see us spend some this year. We'll look at the tracker. Our unaided and aided brand awareness is going up. We'll just try to manage that as effectively as we can. We have three of our, I should introduce three of our board members here in the second row, Paul Chamberlain, our newest board member, Teresa Briggs, and Jonathan Chadwick. We spent our entire October board retreat, our annual strategy retreat last year, talking about our path to $10 billion.
The management team went through a process last year where we embraced the path to $10 billion. We spent a day and a half, 2 days, with our board on that. I would say all of us walk out very confident that we have an opportunity to in fact achieve $10 billion, and that is our focus. Our challenge is not opportunity. We don't need to spin something here or tell some great big story. Our opportunity is to take advantage of the opportunity in front of us by focusing on executing and continuing to innovate and building our organization. That's what we're doing. That's what we're doing. I hope you got a sense of that today from what you heard from Dave, CJ, and Mike. Last thing I'll say, I'll echo what Mike said.
Believe it or not, Mike is not the only reason that our margins are where we are. I've seen a lot of organizations in my career, and I said this last year. This organization has a lot of discipline up and down. We have the risk of under-investing, not over-investing. I'm not signaling that we need to invest more. In fact, we couldn't spend more this year and do it intelligently. All I can say is that next year, we said we'll give another point of margin. The paradigm we have in our mindset is we want to invest to capitalize on this opportunity. We'll only invest intelligently. If ever we see an opportunity to invest more that we think will accelerate growth, we'll tell you that. We'll be very transparent. There'll be no surprises on that front.
For now, we think we can take the growth we've got, continue to invest in the areas we're investing in, generate positive growth, and give 100 basis points of margin. Let me stop there. I don't think anything I said was different than what you've heard all day. Hopefully, it reinforces it a little bit with the voice of the customer behind it. I want to now invite Dave, CJ, and Mike up to the stage. We've got plenty of time for your questions. Okay. All right, we'll start working away this way. How about we start over there, and we'll work our way and work our way back.
Hi. Thank you. Keith Bachman from Bank of Montreal. I wanted to just ask a question about the new financial solution. If there's any metrics or any kind of points you should help us think about as investors, when might that gain traction? Is that a next year kind of dollar impact, or when does it show up on the metrics that you give on the slide decks of when customers should be thinking about it? Even more broadly than that, Mike, we've talked in the past too about you thought it was going to be a pretty big market opportunity for you. Any more granularity on how we should be thinking about the financial solution that you've introduced?
Sure. I'll take it first, and I'll let Dave. Obviously, when we roll out any new product, as CJ announced, we have controlled availability that is starting right now. We do expect that we will start to sign some customers up, but it's not going to be meaningful this year. Realistically, I think it's going to be more of a 2021 before you see any real impact from a revenue standpoint. We do think that product, as we said, any new product we roll out, we have to believe that it has the ability to do $100 million in revenue from 3-5 years from being released and have a billion-dollar opportunity. Doesn't mean we'll get there. You really won't see until 2021, and it's really 2022 more where you'll get that. You will see, as I said, I will evaluate depends on what pricing.
I actually told Dave, I said, "Dave, you can sell it to me directly, but you're going to discount the commission because you're not going to get paid commission. Don't give me a sales rep." He didn't respond.
Let me just build. Mike's been saying something since I joined that I think is true, that this is potentially a very strategic product in the following sense, that this is our first entrée to the world of CFO, where the CFO can see firsthand what the ServiceNow platform can do in workflow within finance. CFOs understand that spend $1, get two back, that's a good thing. I think it's going to both help build our brand awareness with the CFO that will go beyond what the CFO spends on ServiceNow. The increasingly is, as we become a larger ticket in these companies, CFOs have more oversight. At some point, we may have an economic downturn, in which case CFOs are going to start focusing a lot on software spend.
If we're the people that they're confident that provide productivity in return, in a world of tighter spend, we're going to be the ones that benefit disproportionately. I think there's a strategic value for us of this product, and that's why CJ highlighted that NowX is going to continue to work on additional finance workflows as a real, I think, both strategic and economic opportunity for us.
The other thing I would just say that having an established route to market when you launch a new product is really important to me. Building on the relationships we have with our global SIs, in this case, Deloitte being our launch partner with this, is super important for us. They have a very strong SAP practice, and they're trying to work on the digital transformation for the office of the CFO. This product is exciting for them to bring to market, so it's going to accelerate us into the space. We don't have huge plans for it this year because it would be silly to base this year on that product. As we learn more, we'll lean in further, and we'll update you going into next year.
Hi. Over here. Brad Zelnick with Credit Suisse. Thank you so much for hosting us today. Mike, congrats on a great run.
Thank you.
It's been a great couple of years working with you. I have one question for John and one for Mike. John, last year, I think we came away from this event thinking that you've opened the door to more substantive M&A. Was hoping that you can give us an update on how you're thinking about corporate development. For Mike, with federal such a huge opportunity, which I think I heard a couple of times in the presentations today. Just the question, what are you baking into your model in terms of the self-hosted revenue? Also along the lines of the comments around RPO, is it fair for us to look at a revenue plus sequential change in RPO for a bookings type calculation as a proxy for the performance of the business? Thanks.
On the M&A front, I would echo what I said a minute ago and Mike said as well, which is, we think we have enormous organic growth opportunity. We think we can get to $10 billion with organic growth. The way we think about M&A is really in 2 categories. The first is where we can buy technologies, talent that can accelerate that. We call these acquihires or a lot of the kind of tuck-ins we've been doing, and we want to continue to do. CJ and his team are constantly evaluating and monitoring those, and we're going to target doing 4 to 8 a year. Like the mobile capabilities you'll see us release tomorrow, were largely built on an acquisition that CJ and team made 18 months ago, a company called SkyGiraffe, Israeli company that rebuilt native mobile capabilities. We'll continue to do those.
Then we'll look selectively. If we think there's another growth engine that we can add side by side to ServiceNow, we'll do that on an opportunistic basis. We can do that from a position of strength. We can be patient and thoughtful about it. If we see one, we'll come to you and say, "Hey, we think this is a great opportunity and we're going to do it." It's not out of necessity. We don't sit down with our board and say, "We must do a large acquisition this year." It is another tool in our toolkit, and if you were to ask me by the time we get to $10 billion, I bet we've done one or two of those.
To your question on RPO, change in current RPO plus revenue would be a pretty good proxy for bookings. With the exception or with the caveat that FX movements, because RPO is a big number, can swing that quite a bit as well too. You need to normalize for FX. Your question on the federal segment and in particular, self-hosted. Roughly half of our federal customers are self-hosted because they can't get around security concerns, or we don't have the FedRAMP certification 5, 6 that some require. We are working on getting a higher FedRAMP certification now. We probably will never get to 6 because of the cost. I don't want to say never, but it's unlikely. One of the things I mentioned is we are looking at public cloud vendors to partner with to offer potentially the required FedRAMP for like Microsoft.
Azure has one, I believe Amazon does too, and we are exploring that right now. If we can meet some of the demands of those customers to deliver that way so it is not self-hosted. If they just host themselves in those data centers, then it would still be self-hosted revenue to us. At the end of the day, on an annual basis, it is only causing quarterly fluctuation, not annually, because we only do annual contracts anyway, so it would've been recognized through that year anyways, even if it was under the old subscription model.
Great. Thanks. Kirk Materne of Evercore ISI. Dave, I wanted to follow up on your comments around industry, I think Andrew actually brought it up as well, maybe CJ, you can talk about it from a product perspective. When you think of where you need to go over the next however many years to get to $10 billion, what do you think is the right recipe in terms of letting partners build out some of the vertical business process logic on top of your platform versus you doing it? If you look at Salesforce, at their scale, they're roughly 40% vertically oriented from a go-to-market model today. Is that somewhere where you'd like to see that get? Just talk about that in a little bit more detail about how you see that unfolding over the next couple of years. Thanks.
I think we're still in the early innings of understanding the full impact. One of the things that I'm looking at with David Parsons is the question of IP ownership and how we want to think about that. There are certain things that we see repeating across many of our customers. We may partner with one of the large SIs and actually pay for them to help us develop something, to accelerate development with CJ's team as an extension of our team, but then want to own the IP. Other situations, we're going to be encouraging them to do it. I think Salesforce actually had a very similar strategy. They took on some of that and then really worked with partners to build others.
I'll just add one thing, maybe a couple of things. For a specific vertical, say, financial services, we have to go through the entire, all the way from data center platform to actually use cases we support, and ensure that we are adding value by creating products or content that is something that supports the use cases that are reputable, there is a large enough TAM, like John spoke about our Financial Services Operations product. There is a large enough TAM in that specific verticals. We will indicate we are David Parsons' team, that we are playing, and we may take SI's help in that. We have come up with a very simple framework, no-fly zone, turbulent zone, and freedom to fly everywhere with working with our partners, where we will play and where they should develop their own IP for certain vertical use cases.
Hi, guys. Thanks for everything. Mike, of course, great run. Been wonderful. Michael Turits from Raymond James. Two questions, one for CJ and one for Dave. CJ, you talked about the single platform, single data model. Is there some limit to that? At some point, do you need another platform? For Dave, as you've gone through selling more into the white space, that's more difficult than selling non-white space. What's been your strategy, and what's kept that from having turbulence?
All right. I will address for the current use cases that we support, we are pretty disciplined about single platform and single data model. However, behind the scene, we are constantly evaluating our technologies as our customers are adopting multiple products to make sure that we can scale with those customers. We will refactor, some people may call it re-platform, whatever term you want to use. We will re-platform that to support our use cases gracefully. As customers grow in size with multiple products, our platform can grow as well. Our platform is suited for the current use cases really, really well.
Now, when it starts coming to lots of machines generating lots of data, we currently, in our operations management space, which Andrew was hinting at, do things at the events level, but we would not go at the logs level and, for example, some of those logs, traces, alerts, and so on. What I'm trying to say is that for currently supported use cases, we are maniacally focused on can the platform scale gracefully as customers scale and as Dave's team continues to sell more products? When we get to are we going to expand in other use cases, we'll figure out what to do with the platform.
On the question of the white space, every once in a while, we'll be Or not every once in a while. CJ and I and John are out talking to customers all the time. At times, what looks like white space becomes a product. The security incident vulnerability product came out of a set of conversations we had with a group of customers. Very quickly, we realized there was a significant opportunity for us to go build something around. The other thing I'd point out is a lot of the white space, we're weaponizing 22,000 people this week. That's our sales force on the white space, because they're going back into their companies looking to solve problems. Every one of those people, including people that aren't here, are looking to add value, and they use ServiceNow to do so.
Hey, Raimo Lenschow from Barclays. All the best, Mike, as well from me. Can we talk a little bit about the dollar net retention? With that, I want to talk about the penetration per account, because at your scale, to still do 130+ is like a crazy good number. Maybe a question now in terms of for Dave is can you talk a little bit about what you see in terms of penetration, even of core products within customers? Because if we talk to customers, a lot of the time it's they have ITSM, but they haven't rolled it out actually properly. They have some ITOM, but not rolled out properly. Can you talk a little bit about that? Over to Mike a little bit, how does that feed to 130%? Because that's a crazy good number. Thank you.
I wish we could always land at full capacity everywhere, and people could take full advantage of something right away. It is not uncommon in a large enterprise, we're starting with a department or a group to solve a very specific problem. So where that we get unnatural expansion is you take a $50,000 or $100,000 initial project or pilot, and it then goes to multiple millions. So we benefit significantly from that. On the ITOM space, we're just scratching the surface of the opportunity.
The 130, it's pretty simple math. It is what it is. We just continue. It ties into what Dave said, and it's what I said earlier. We land customers, doesn't matter how big they are. On average, they land at two to $300,000. We find in four to five years, those guys are spending a $1 million+ with us. Because they start out, unlike most other SaaS companies where they go in and license all the employees or license all the salespeople, we usually start with a geography or a division, and we quickly grow. That's why we've said before, too, there's still a massive opportunity within our existing installed base on our core ITSM product today. That's why that product continues to grow. It's really the bulk of our revenue comes from our IT, and it will for quite some time.
Well, CJ and his team delivered a product called ITSM Pro. That has a ton of innovation value for our customer base and gives us an upsell capability into the base to take advantage of the new features and technology that CJ and the team are building.
Hey, guys, over here. Alex Zukin from Piper Jaffray. Maybe same topic, but two different questions. On the road to $10 billion, what are some of the big go-to-market changes that you're going to need to have to make over the next few years that could potentially be disruptive? Number 2, as you think about these customers that you were highlighting that are paying you $10 million-$20 million, $20 million-plus, and you think about the set of competitors, not co-opetition that you have with the Salesforce and the Workday and the SAP and these other guys. To what extent, when a company's paying you $20 million-plus for some of that white space functionality, and they're also a giant customer for these other vendors, can you maybe talk about how you're navigating some of those relationships on that trajectory?
Do you want to do the navigation?
Either way. Why don't you do it first?
On the go-to-market side, I think we're already on the journey of segmenting our customers and providing much better account coverage on the very large enterprise. That's been ongoing for the last few years. What we've seen is a direct benefit of that coverage model. We're going to continue to lean in. I think there's much more we can do to differentiate ourselves as a strategic provider and transformation provider. The investment that John and the team are allowing us to make around customer success and the type of strategic architects that we're providing those accounts is a We're seeing direct benefit from that spend. As far as navigating the landscape, it is always a question when things are a white space, how one goes after it.
Customers usually speak up and tell us or the partner or the other companies where they think we're well-suited. The good news for us is our platform has lent itself to be an easy adaptation to do that, and they find integration with our platform to be very straightforward.
I think one of the hidden things, there's so many things in this company that may not be obvious. One of the things that Dave and Kevin Haverty and others have really built into our sales team is the focus on business value. They cannot get a deal approved unless there's a business value case, even if the customer's not asking for it. Every time one of us get a briefing before we visit a customer, the business value case has to be on the front page. I think at the end of the day, those greater than $20 million customers, I can do two of them off my head, top of my head. One has an $8 billion IT budget, and I think one has a $9 billion IT budget. $20 million is not a large portion of their IT budget.
The question is, if they're spending $20 on us, are they getting value? Because there's an awful lot of that $8 billion they're not getting value on. If we can stand out on demonstrating business value, it just changes the paradigm. It's like, all right, I can trust these guys to invest more in them, and I'll get return. Dave and his team, that really inculcates that in that whole go-to-market team in a way that is cultural almost, and I think quite powerful.
Hi, over here. Karl Keirstead at Deutsche Bank. Question for you, John. John, you were on stage here a year ago, telling us that you're going to put some energy into evaluating ServiceNow's pricing model. I'd like to ask you the progress you've made in the last year. It seems to me that you've gone through a period of price discovery with all the modules, and I'd love to hear where you ended up. Is there an effort to better standardize the different pricing metrics? Is there an effort to bundle a la ITSM Pro? Thanks for any update.
Sure. One of the first things we would do is to diagnose. All right, where is the noise on pricing? The noise, I would say, was 80% complexity, 20% price levels. On price complexity, Dave talked about it. We discovered ourselves, because of the organic way our products have grown, we had, what was it?
24 meters
24 different meters that we priced against. Because a lot of our customers bought at the individual product level, they would, after buying four, five, six, seven products, they had all these meters. What we did, the first thing we did is we formed a strategic pricing group. Alex, right here, we hired Alex, who's run strategic pricing, how many places?
Three.
Three different places, formed a strategic pricing group that works with Dave's team and Andrew Casey's team. We picked half a dozen customers, Accenture being one of the visible ones, and said, "What would a pricing arrangement look like from your eyes that aligned both of our incentives to accomplish what we both want around usage of our platform and getting business value out of it. You heard Dave and Andrew talk about that. Dave and Andrew Wilson talk about that on stage, how I think we feel increasingly comfortable and confident we're coming to some principles really, where we can have for those customers that want to have a strategic pricing relationship, we understand what some of the foundational elements are.
I think that there will be certain customers that only want, when they first engage with us, they only value one specific element of our product. We'll have to maintain some of those historical mechanisms, but as they expand presence with us, having consistent measures and meters and the ability to experiment with new technology the way that Andrew Wilson was talking about at Accenture is really core to getting rid of any kind of objection handling, because the contractor is more adept to handle that.
I'd say, I don't know, we're maybe a third of the way through or quarter of the way. We feel like we've got the right direction and principles, now we'll start expanding out to what we said, what, 30, 40 more customers, sitting down with them, and we'll learn as we go. One of the nice things about this organization is our ears are bigger than our mouths. One of the things that I think ServiceNow has done so well, really since Fred Luddy founded it, but it's deeply ingrained in this company, is to listen to the customers and continue to listen and learn and not feel like at any point we have it all figured out. I don't know, a third of the way through on our pricing journey? Maybe a quarter.
Hi, Jen Lowe from UBS. John, in your remarks, you talked about four to six different vendors that are forming the modern enterprise stack. If you look at the list of companies there, some of them are ones that you've publicly announced partnerships with. Adobe was a recent one. Some of those are ones that may seem like they may, at least at certain points, be a little bit more in competition with you. Thinking of Salesforce as maybe that specific example. There was also the discussion around coexistence, from Accenture, that there's a need for these platforms to coexist. When you think about what coexistence means and, as those vendors come together, do you see more need to do more go-to-market partnerships or formulate more formal partnerships with those companies to be successful in that enterprise stack?
Is Open APIs enough that you can just pass data back and forth? How do you see that going, and how important is technical partnership to your success?
I very much come from what I hear from customers, right? Very much look at not an industry outlook, but a customer look in. The customers, especially the strong customers, are unequivocal. I mentioned one plus one plus one equaling 5 or Times ServiceNow equaling 10. They do not want these platforms to start competing with one another. They want to get the value from the collective bundle. Yes, there's 5%-10% overlap. We take that quite seriously. You heard Andrew talk about that. I do believe, I also come from the consumer world, where Amazon and Google and Facebook, you could say, "Oh, are those three advertising platforms so they compete with each other?" I suppose, but boy, I would love to have the growth they've had in the last decade. All three were winners.
I believe that all those companies we mentioned can be winners in a cloud world. Our focus is how do we work as effectively as possible, understanding where we're adding value and where we're not, and how do we connect and integrate as effectively as possible with those other platforms. I don't think it's a go-to-market thing. I actually think we're all large enough where our scale is pretty good at going to market, and our brand awareness, and the customers want to do business directly with us by and large. I do think it's a technical integration and almost a mindset. Almost a mindset that if a customer calls us in and says to CJ, "I'm using Salesforce's product here, or Microsoft Dynamics here, or Adobe here.
Can I ingest that data along with the ServiceNow data?" That's where we're focusing our attention on how do we work effectively with them. I think that is the real need and opportunity in the eyes of the customers more than a go-to-market piece. Wouldn't you agree?
Yeah. I think it makes sense for us to communicate as go-to-market teams, and there are times where the power of two of us or three of us together provides a much better solution to a customer. One of the large projects we're working on has Workday and ServiceNow and a large global SI. They host a meeting every week where the three of us, with the customer, are solving problems. That's the ideal situation. We're all in it together, focusing on the right outcomes for the client.
The go-to-market piece, where I do think there's opportunity, and Dave talked about this earlier, is with the SIs. We announced a significant partnership with Deloitte today or yesterday. We spent time with the senior leadership at Deloitte, feeling like the combination of their process redesign, change management, their relationships, and our technology can accelerate both of our businesses tied around customer outcomes. You heard Dave talk about with Andrew Wilson. We're working more closely with Accenture than ever before, more closely with KPMG, DXC. I think that with the global SIs, there is a more of a go-to-market acceleration opportunity.
Okay. Over here.
Sterling Auty from JP Morgan. As I listen to the comments around your investment and spending into the future of the business, I.
Thinking back to a year ago, I'm curious from your standpoint, do you think the philosophy that you've got towards that investment and spend is exactly the same as we heard a year ago? What portion of it has evolved, and how?
I kind of have a simple mindset. Could we have spent any more money this year intelligently? The answer is no. At the end of the budget year, CJ said, "I can't spend more intelligently." Dave said, "I can't spend more intelligently." This is the point I made earlier. The discipline in this company across the leadership teams as strong as I've ever seen. I wish it was as easy that we could just spend more money and go faster. The real world, management, leadership, and execution bandwidth, and then customer capacity to absorb, those are more the limiting variables. We feel like we have a really high-quality opportunity in front of us. We want to invest to take advantage of it, but to do it in a disciplined and intelligent way.
The only thing I can say is each year we'll revisit it. We'll be transparent in our thinking. We feel like the investments we're making around product, customer success, talent, and brand, same four categories. We feel like they're smart. We feel like we can demonstrate return from those, and we'll continue to do that.
Hi. Walter Pritchard from Citi. First, Mike, I'll remind you that even though my billings numbers were way too high, you ended up beating them. Just on profitability. You put up that slide showing $20-million customer, $1-million customer, the sort of benefits you get on a customer basis. It feels like that would actually drive more leverage than you're talking about of 100 basis points a year. I'm wondering how much of it has to do with you sort of reserving some room over time to invest downmarket with customers that are much smaller than your current commercial base. I know there's a lot of venture investment and so forth going after those customers. It feels like you could get maybe eaten from below if you're not careful there, and I'm curious how much you're looking at investing there.
I'll let you.
I'm going to just make the point. When Mike Scarpelli talked about the profitability of those big accounts, I'm actually trying to invest more into those bigger accounts because, one, they deserve it, and two, there's even more opportunity there. In the short term, we may actually spend more to serve at the top end of the pyramid, because I think the return is going to be there for the organization over time.
I don't think we're really spending a lot more downmarket. The commercial segment is important. As I said, it's about 20% of our revenue, and we'll continue to grow our reps down there. The bulk of our go-to-market spend is at the enterprise level.
We've got just one more here, and then we'll conclude.
Thanks, guys. Matt Hedberg, RBC. Question for CJ. DevOps management, this is a huge category, and there's lots of little things within DevOps. Can you put a little bit more granularity on what this product will do? Maybe how do we think about the competitive landscape there? I think in the Financial Services Operations, we have a pretty good idea, but maybe a little bit more color on where that product is initially, where it goes, and some of the other functionality that could come into that product.
Sure. DevOps is an incredibly fragmented tool chain with both the open source and commercially available products at the highest level. The engineers with the new technologies and as the infrastructure and dev environments continue to change, they continue to adopt new technologies. We believe that right now, for us, the priority and focus is an enterprise DevOps. Not at the DevOps tool chain level where you're doing planning, configuration management, and those kind of things. At the higher level where you have many DevOps projects, you need visibility across those projects and making sure that the change management or release management that needs to be done for a large bank or for a large organization is done using ServiceNow. We would consider ourselves as an enterprise workflow on top, like a system of action, what I said earlier, on top of systems of record.
If you think of systems of record analogy, you will have planning software, configuration management software, and other software. We build integration into ServiceNow, and ServiceNow executes that will I execute a particular change based on config management level at this level. There is no real good compare right now. All I will tell you is that whether it's financial services, healthcare, and other places, or even retail, there are so many DevOps products/projects going on. Our value is to give visibility into the DevOps pipeline and help execute changes successfully using service management concepts.
We have time for one more question.
Okay. Hi, guys. Gregg Moskowitz from Mizuho. Just two questions for Dave. You spoke about building out dedicated industry verticals. Specifically, you referenced financials and telecom. How should we think about the timetable of those? Secondly, I realize it's early, but are there any sort of early takeaways that you have around the new global accounts management structure, and how should we expect that to evolve over time? Thanks.
I'll start with the second question on the takeaways from global account management structure. We started to segment what we call select accounts. We started with 10 last year, and then we've added from that. We're seeing a direct benefit both in net promoter scores from customers as well as increased pipeline creation from that focus. Continuing down that path. There is some added expense in our sales model that wasn't there before, but that we've been planning for that. It's built into the model that you see. As far as vertical revenue, again, it's not in this year's plan for us from a new product introduction. We have vertical coverage already, and the horizontal products are present in all of those spaces, and there's huge opportunity in those spaces for the existing products. C.J.
and I are partnering together to figure out which are the first use cases that we want to productize, and that will be not this year.
Okay. I think we're out of time. I'm sure we're happy to be up here afterwards if any of you have any remaining burning questions. Thank you for taking the time to join us today. I hope what you walk away with is clarity on three or four fronts. It's what I've opened up with. The opportunity is as good as I've seen in my business career, and you heard that from Andrew Wilson. It's coming from what customers are demanding and saying, not from our marketing materials. I think we've got the right priorities, and I believe we've got the right team. I hope you see that with, obviously, extraordinary leaders like Dave and C.J. and Mike. What you don't get to see every day is we've got Russell Elmer, our General Counsel, Alan Marks, our Chief Brand and Communications Officer, Lara Caimi, who runs strategy and alliances.
Dan Rogers, who's putting on this whole conference, our Chief Marketing Officer. Chris Bedi, our CIO, plays a really important role in our company because he is tough medicine, right, in terms of being a user of our products. Pat Wadors, our Chief Talent Officer. We have a very strong team, a team I am enormously proud of, one of the strongest teams I've ever worked with, and they are building their teams underneath. Right priorities, right team. We've got good momentum and an awful lot of what we need to be doing over the next year is execution, and we're going to keep at that day in and day out. Thank you very much for coming with us on this journey. I hope many of you stay for at least the first part of our Knowledge Conference. We welcome your feedback at any time.
Thanks very much.