Welcome to ServiceNow's Financial Analyst Day 2023. Thank you for joining us. As you can see, we have a great agenda today. Before we begin, I want to remind everyone that today's event will be webcast and recorded for future playback. Information pertaining to our forward-looking statements and a recon of our GAAP and non-GAAP results are available on our IR website at investors.servicenow.com.
Please welcome ServiceNow's Chief Executive Officer, Bill McDermott.
Hey, everybody. How you doing? I hope you're enjoying our Knowledge event so far. We've had the biggest showing ever for ServiceNow. You having a good time? Yeah. Good. I'm so excited to represent this incredible company, this incredible growth story. Today you've got the management team of ServiceNow from CJ to Gina. We've got a great lineup of innovators behind them. I think it's gonna be an incredible Knowledge session where you really get to see where we're going with the company. The future of ServiceNow could not possibly be brighter. ServiceNow is at the center of what I call the great reprioritization. This has been happening in the enterprise for some time now. It's hitting a hypercycle. Today, I want you to walk away from this knowing that ServiceNow is the intelligent platform for end-to-end digital transformation.
Why that is so important is that companies are changing very rapidly in terms of how they think about technology and how they think about ServiceNow. They know they have to take costs out of the business, and they have to improve productivity. At the same time, they have to evolve these business models. 40% of the CEOs out there today say, "If I don't change course, I will not have a viable company in the next 10 years." Digital transformation's at the top of their agenda. The tech landscape is consolidating quite quickly. As you know, point solutions have really gone out of favor. Platforms now, especially if they're cloud-based, are ruling the day. 93% of the execs out there are consolidating point solutions and tech that doesn't matter into cloud-based platforms that do.
Finally, we see a complete generational shift going on now with generative AI and the opinion of the CIOs and the C-level executives realizing this is a big movement in the tech industry, maybe the biggest one in the last 50 years. I'm giving you the big picture. This is the digital transformation company of this generation. That's why when I came here, I came here with a dream to make it the defining enterprise software company of the 21st century, and I've never felt more strongly that we're on the doorstep of getting that done. Thank you very much for coming. Every person here matters to us. We are so grateful for you to think of ServiceNow as a priority in your agenda. There's lots of places you could be, so let's let the show begin. We can go to the next slide, please.
There's a few things about ServiceNow that are worth mentioning. One is our trajectory remains best in class among scale peers. I say peers because we're the only one that does what we do the way we do it. It's not we compete with these companies, it's just that they're very successful, and they've had very successful histories. No company has gotten to $7 billion of organic innovation faster than ServiceNow. We did it in 28 quarters. It took the other very fine companies longer than that. The other thing is, we're performing at a rule above 50, and none of the others are. When we think about our category of digital transformation, our brand, and our future, we're very pleased that it builds on a very strong foundation of terrific execution. We're a platform company.
We believe organic growth is delicious. We're gonna stay on that path. Our market leading performance is well-known. I think you know it better than anybody. We recognize that we're operating in a complex environment. We're leaning into it. As I think about the company right now, I think about a few things. One is unbelievable customer satisfaction and loyalty, best retention rates in the industry, soaring adoption of the Now Platform, and soaring big deals above $1 million across the global economy. Most importantly, I think right now to have a culture that is thriving, no layoffs, growth culture, innovation-driven culture, customer-obsessed culture, and our people are happy. They are recognized as happy by Glassdoor, and we're obviously Fortune's, or certainly one of Fortune's Most Admired Companies.
On all accounts, I can tell you the sustained value creation is there, and we're feeling stronger than ever. The best-in-class execution is a representation of the great management team and the great employee base that we have in the company. All credit to our great innovators, you'll see them today. Obviously, I'm so proud of this culture and the way this culture is responding. You know, I told them, everybody was talking about where are we working? We working from home, we working from offices. Main thing is we're working. We're back, and we're connecting with customers, we're connecting with life. I told them, to keep that sustained growth rate going, keep the shareholder satisfaction proper, you're gonna have to give extreme effort, and the culture's responded beautifully. Today, CEOs are engaging with us more than ever.
I mean, it is incredible how we're getting market pull now from CEOs, where just a few short years ago, they were trying to figure out what it is that ServiceNow does. They knew we were good because their IT personnel told them, they really didn't understand the platform. Now they understand they don't want silos in their companies. They want end-to-end digital transformation. They want collaboration. They want integration. Why do they want integration? Because only 19% of the digital investments they've made pay off with return on invested capital because of one big problem, integration. We solve that problem. With AI, we're very convinced that the IT strategy is the business strategy. As I think about Fortune 500 CEOs, I'll just tell you a little story. This is consistent, by the way. Usually, we meet them.
They tell me, "I've heard great things from my people. I don't know exactly what you do." I ask them, "What's on your mind?" They say, "I made promises to the capital markets to improve my margins. I might have had to address headcount. My growth is not once what it was, but I know that digital transformation, productivity, efficiency is on the scorecard because I gotta make my company perform like a best-in-class company." Okay. You can say yes to that with ServiceNow.
The other thing that they say is, "I have to create new growth opportunities because what got me from there to here isn't gonna get me from here to there." Then we get into the employee experience, improving motivation, retention rates, how you service the customer from the front, mid, and back office, how the creators can build net new applications, net new innovation, net new ideas. Before you know it, the CEO is saying, "Well, why didn't I know all this? Well, who's keeping this a secret?" Nobody, and that's the beauty.
We have the CEO, we have the technical community, and we have the line of business executives saying, "How do we coalesce on this common platform for intelligent automation and really driving end-to-end digital transformation?" I think generative AI gives us a major bull case, and you'll see that in a few minutes. We have a lot of growth engines going on here at ServiceNow. They're giving us unparalleled momentum. The state of the pipeline, the state of the business has never been stronger. We're going into major globalization. We're focusing not just on Americas and EMEA and APJ, but we're really now going into markets that we know we can achieve greatness in. One example is Japan, which is a young market for us.
We hired a terrific leader, and we know it's basically a country that has to get to the cloud, get there fast, and make all those prior investments work. We're seeing big growth in the global footprint all over the globe. We have focused on industries. You see the five that you know well that we're in, and we're expanding across all industries and all domains. In customer segmentation, you'll hear from Paul today and others, we're focused on marquee accounts, the top 250 in the world, bring in everything we have to them. Enterprise, obviously 85% of the Fortune 500 run ServiceNow now. We're focused on the Fortune 2000. Execution, very good.
In commercial, where we're going from 1,000 employees and up, excellent execution using a lot of very interesting sales techniques to have a low-cost, partner-driven model to get more share. Today, we made an announcement that ServiceNow is playing in the big leagues with nonprofits because they got big problems, and those problems are tied to the world's problems. To be a brand that wants the world to work with it, we need to be there, and I'm excited about the potential. I'm very excited and proud of the partnerships that we have. The ecosystem is building out quickly. You see these wonderful brands. It's certainly not limited to them, but they're among our biggest and best, and obviously, RiseUp with ServiceNow. We made a commitment to train and certify 1 million technologists in the global economy on the ServiceNow platform.
We're not gonna hire 1 million people, but our ecosystem and our customers and us in combination, we will. That is expanding our platform, our brand, and most importantly, it's given these companies the digital skills they need to expand the digital transformation they need to conduct to make their companies winners. This is super cool. What I do wanna make mention of, in geography, we have Suzuki San in Japan. In all these industries, we have great leaders. One that I just wanna call out in the public sector, Raj Iyer led the biggest digital transformation effort in the history of the United States Army. He did his service to the country. He served the time in his agreement with the Army, and he chose to come here because the transformation was on the ServiceNow platform.
In customer segments, it's incredible what we're doing with these marquee accounts in the top 250. We have great leaders like Paul Phipps, who came from Under Armour. I had the pleasure of being on that board for 15 years, getting to know Paul really well. He's doing a great job here. Erica Volini, who came in from Deloitte, is really expanding our ecosystem. Obviously, Amy Regan Morehouse came in from Salesforce and has done this before, but wants to do it in an even more incredible way with ServiceNow. upscaling 1 million RiseUp, all these leaders are absolutely fantastic and have my total trust. They're doing a great job. What am I communicating today? We have a dream, and that dream to be the defining enterprise software company of the 21st century is well-founded. The 20th-century architectures are very important.
They do important things for the enterprise. What we're doing is building great products to solve today's challenges, to make sure that today's users get a consumer-grade experience in the enterprise, that the promise of integration can finally come true, and that we can go end to end and really drive organizational performance for our customers. We're telling a great story. The world works with ServiceNow today. You saw great brands like PepsiCo and State Farm on stage with our excellent, Chief Digital Information Officer, Chris Bedi. We're very proud of that. We want literally thousands and thousands and thousands of companies around the global economy to tell their story, and we will help them amplify it. We're delivering truly amazing experiences. You're gonna see some of them today.
You know, might have been prescient when we did Element AI quite a while ago, and AI wasn't on everyone's radar screen at that time, but it was on ours. We always knew that if we could take the Now Platform end to end and power it with generative AI and really take business cases and bring it to that integrated platform with all the governance and the security that enterprise customers are gonna count on, we could change the world. I think you'll see consumer-grade with next-generation experiences today. Very, very proud that we're building a movement. That movement does include no layoffs. The trust, the culture, the passion is amazing. We're hiring nines and tens, not eight and a half's or eights, 'cause we don't have to, and we're building great partnerships.
I do believe the extended ecosystem is gonna be part of this major movement at ServiceNow. Obviously, customer trust is at the core. I want you to know we have liftoff, and this is my message to you and our great Chief Financial Officer, Gina, will tell you more about this. You'll see our incredible innovator, CJ, our great go-to-market leader, Paul. They'll all tell you different pieces of this story regarding our liftoff. Here's what I wanted to communicate. I see a $20 billion-plus company in the not-too-distant future. With that, I also see a situation where you need to believe in ServiceNow the way I and the management team and 22,000 employees believe in ServiceNow. We wanna make sure you understand your success is also at the top of our list of important things to make sure of.
For that reason, we're putting a major focus on sustained, exceptional shareholder value. One of the things I wanted you to know, the board of directors of ServiceNow has approved a $1.5 billion share repurchase program. Gina will give you more of the details on that. The management team and the board is very committed to driving not only the great operational performance that you've seen, but also this kind of an initiative that proactively just says, "We're growing fast. We're accumulating a lot of free cash flow.
We have lots of our own ideas to continue to innovate and grow on top of. It's time where we can provide a buyback that really will be viewed as shareholder-friendly and proactive. This is something we will continue to keep a close eye on because as we grow, you know how it goes with the cash position in the company over the next several years, especially as we see a $20 billion company in our future. This is a generational growth story. You've been a part of it, in many cases, from the beginning. We're really in your debt. We appreciate all the support. You can count on us to be the defining one.
I'm super excited to come back on stage after you hear the executive presentations, so we can take your questions and give you transparent answers, so you know everything that we know about the bright future of ServiceNow. Thank you so much for your time and attention. It's an honor to present to you. Thank you so much. You will now get-
The next presenter, who will be introduced, I believe, by the voice of God. Right, Darren? Okay.
Please welcome ServiceNow's President and Chief Operating Officer, CJ Desai.
Good afternoon, everyone. It's wonderful to see you all. I always start all my slides or any presentation because Fred created this as a platform company. That's really, really important. It was not an IT company. I get asked sometimes by customers, "Hey, you're IT and expanding into other areas." I say, "Timeout. No." We are a platform company. IT was one of the first use cases that we monetize. Our engineering teams have done a wonderful job to stay true to its core of us being a platform company and building products on top of the platform company. That's innovation at scale.
At the same time, the foundation, which is the platform, they have continued to also reinvent the platform technologies such as user experience, such as search, and many other factors, including automation, integration, and so on, so that we can deliver value for our customers. Our go-to market teams are also unbelievable. We collaborate so well, and this is, you know, I worked with many B2B software companies, and this is the best in class, whether it's a new product introduction where we are trying to figure out product market fit. Once we determine a product market fit, how can we hit an escape velocity on a use case? Our go-to market teams are the best of the best. That has allowed us to scale from some of the products that were just single digit millions.
Gina will share with you how much progress we have made on those products over the last few years. The results, they speak for themselves. $200 million a quarter in subscription revenue, just under eight years, growing to $2 billion in Q1 of this year. 10x growth, organic, is just phenomenal on how our engineering and go-to-market teams work well with each other to scale our product lines and our platforms usage in enterprise. At the same time, this growth, and Bill touched on this, very responsible growth while improving our operating margin and free cash flow metrics over the same period. This is how we always do portfolio planning. We look at the numbers, we say, "Okay, this particular product line, where is it gonna grow? What does it mean?
What does it mean for all of you, our shareholders?" I get asked the question from many customers, "CJ, the previous company came in, and they said they're a platform company too. The company before also said they're a platform company. What does it really mean? What does it really mean to be a platform company? Why is ServiceNow a unique platform company?" The answer is pretty simple. This is a logical grouping, not a physical, logical grouping of the architecture. What you see at the top are the technologies that our platform engineering team has built in the platform. Workflow automation, which you're familiar with, but user experience, process mining, service portal, integration. You know, we could have taken an easy route and say, "Oh, let's, you know, do something around any-to-any integration." No, no.
We wanted to, for ServiceNow use cases, build integration in the platform. Machine learning, virtual agent, and so on. All of these technologies are the foundation of what was known many years ago called PAS. Fred already did this before even PAS became a term. Okay? When you have this technology, you obviously need a persistent layer, which is where you store all the data, which is classic, our data model, a single data model. We have evolved it to industry data model. You see CMDB, which I'll touch on in a second, and of course, the security of the platform. The bottommost layer is the infrastructure as a service. This is compute networking storage, and we operate globally through ServiceNow Cloud 24/7, 365 with one of the highest availability metrics that are out there in enterprise B2B software.
This is what it means to be a platform company. Everything in one architecture, one code base, one data model, so that our engineers can build great products on top of it, but our customers can also build products on top of the same platform that we use internally here. When you look at this portfolio, if you're looking this five years ago, as Bill said, more than half of these products would have not been here. The portfolio has evolved in the depth as well as breadth on the exact same platform that you see at the bottom. Right? That is the foundation. For some products, we may turn on certain things, for some products, we may turn off certain things, but the on-off switching and toggling is what our application developers decide when they create this portfolio. This portfolio, this is how we monetize our platform, right?
This is how we have programmatized a particular use case and monetized it. What are the advantages of being a platform company, the single platform company? What are the advantages? What is in it for you? What is in it for our customers? I would say it's three simple things. I'm gonna give you a very specific example. It's around innovation velocity, R&D unit economics, and operating leverage, and what does this mean for our customers? Three simple things, okay? Let's look at the first one. Higher innovation velocity.
When we decide in a team that this particular use case is worth going after, which is a very important decision, our customers, partners, everybody gives us feedback, "CJ, you should build something in this area." I would say, "Why?" The most important question I always ask, "Okay, I understand the problem we are solving for, but what is the size of the price? What is the size of the price if we decide to build this use case?" Right? Once we have conviction that this one can hit escape velocity, we start building the first version of the product using the platform technologies that you just saw. The global public sector, Bill mentioned a little bit about public sector, direct to citizen services. The first version was created in six months.
In Q1, we signed a large deal with one of the 50 states in the United States, where they are gonna provide direct to citizen services for licensing, permitting, and others on this product. That was a multi-million dollar deal per year, okay? We had conviction that this is something Now Platform can serve really, really well. The second product, Hardware Asset Management, it took us 15 months, pretty complicated data model, to create this product. You know, employees were taking monitors home or any type of hardware asset you have in an organization, how can you create a product around it so that you can manage basically the asset life cycle? SAM, which we introduced in 2017, Software Asset Management. Am I using the licensing properly of a particular software vendor? That was the fastest-growing product when we launched it.
My team said, "Okay, we are going to launch HAM." HAM became even faster-growing product than SAM, okay? As a vegetarian, that offended me. I didn't want to say HAM is my favorite, but HAM did its job, and it is still growing very, very nicely, and it just took us 15 months on this platform to create the product. Second is R&D and operating economics. Same public sector product that I talked about, which a particular state decided to deploy and a few other states are considering it right now. There's only seven R&D personnel in a combination of United States and India. The platform provides all the underlying technologies, you can create that product. 11 for HAM, right? The reason we have very high gross margin is that because of the single code base, as we expand globally, our infrastructure that supports this code base is standardized.
Our CTO and cloud operations team have done a phenomenal job to make sure we solve for performance, we solve for reliability, availability, security, so that we can deliver this kind of gross margin. You have the R&D effectiveness and the operating effectiveness. Third, why is this good for our customers who expands the platform in a particular domain? ITSM, I just spoke to a company last week, they have 425,000 employees, and they finally bought ITSM last year. They kicked it off within six to nine months, depending on how you figured out where is the start line. They rolled out ITSM to 425,000 employees.
The CIO told me, "CJ, this worked great, but now we want to offer this as a service to our customers because we know that we can not only scale our own company," and then he said, "We have other areas we wanna expand on." How long the implementation will take? Once ITSM is rolled out, most of the other products, because our customers develop competency of ServiceNow platform that you saw, sometimes it's few months, sometimes it's six to seven months, even at a large corporation. The last one is a very large automobile corporation, and they rolled out our brand-new workflow around supply chain in 16 weeks, and this is as complex of an organization as you can think of. Two on the lower end, eigh weeks. A pharmaceutical company rolled us out in 12 weeks. Why was this platform created?
If you ask Fred, he'll say, "Hey, this was all about routing the work or a digital workflow or a digital automation," even though those words didn't exist at the time. He wanted workflow automation platform for the enterprise, not just a department, for the enterprise. Three areas where you can think about how we have evolved. Let's look at the first one. I have to use A, B, C because I already used one, two, three, bear with me. The first one is 2011 is when we hit the escape velocity on ITSM. That's the first use case, and for those of you who forgot, it's actually the first demo built on the platform that really stuck with our customers.
2015, overnight, the CEO at the time made the switch and said, "We are gonna go after security, customer service, and HR department for workflows." Just for workflows, right? Now when you look at it, we have expanded, when you saw that portfolio, across multiple buying centers. In addition, what happened, which is point number B, is our buying altitude has gone at a C-suite level. You look at our journey on the left, where we started with VP of IT, SVP of IT, doesn't matter what titles they use, but they call it IT of service management or operations management or service operations, and elevated to CIO. You looked at CHRO, CISO, chief customer officer, CTO, chief legal officer, chief risk officer, chief sustainability officer, chief procurement, chief facilities officer, and the CFO.
This, Bill can tell you this, but all of us, all the time are having conversations with these people. These pictures are real. These pictures are people who are in the role at ServiceNow, because we have to first prove it out to them before we can go to somebody else, because they will ask, "Hey, CJ, that's cool, but is your CISO using this product?" These are our people who use our product, give us great feedback. We call it Now on Now, and that's how we learn on the initial product market fit. This is how we have expanded on the altitude of ServiceNow's TAM and going after this buying center, which is non-trivial, because you have to go and learn their language, sell it to them in their own industry, and that's never easy.
In 2018 December, I was having conversation with our Chief Revenue Officer, Kevin Haverty. One of our conviction was that if we create data model, workflows, and integration specific to an industry, our customers will buy that product over a horizontal product. We can't do that for all of them, but we can do that for a few of them. We started with telco and financial services, the thesis was, if we create products in this area, and again, this is not a veneer or a screen where I change the prompt to call from a customer to a client. It is actually going in, figuring out the industry-compliant data model, what are the workflows required, and most importantly, what integrations are required in that specific industry. That was our thesis. We got busy in 2019.
We funded a few product teams. The results have been extraordinary. They actually surpassed TAM in terms of ACV that we have gotten in last 11 quarters across these five verticals. What are our growth vectors now in terms of where we are going? First, I'm gonna start with the portfolio. Listen, there are many TAM numbers out there. We believe we have enough TAM. We have an amazing go-to-market team. We have productized very specific use cases that deliver value to our customers. When you add these numbers, this is for 2025, $220 billion TAM. Our sources for TAM come from industry analysts and others, so we are very careful in not putting out very big numbers here. We really systematically look at it, okay, overall are our markets growing?
Even if they are not growing, do we have opportunity to create better leverage by technology investments? That is the more important thesis around the use case versus how big the market is. Of course, the market is big, we are gonna go after it. $220 billion TAM. I'm gonna spend a couple of minutes. I flashed this slide early on. If you look at our technology workflows, when I started here, there were two or three products. Pablo Stern and the team have systematically gone after CIO, chief digital officer, CTO, buying centers, figured out where the pain points are, create the 1.0 of product.
Gina will share some amazing numbers on how much we have grown across some of these products in creating multi-hundred million dollar businesses organically with the kind of R&D operating economics that I just showed you. Okay? Employee workflow, it was $10-ish million when I started. It was still unclear, can we get to a CHRO? Why would CHRO invest? They have invested in systems of record, totally fine. We provide system of action. We added workplace service delivery, legal service delivery, and we are continue to enhance this particular offering. Customer service, we were in a board meeting in 2018, and one of the questions that was asked by one of our board members is, "Hey, CJ, okay, you are competing in this area. There is already an incumbent.
what's the unique advantage and why would somebody buy ServiceNow?" It was my deep conviction that this is a large enough market. It doesn't have to be just one company or the other company. This is a large enough market. There are enough homegrown systems, and what we provide, which is the mid-office, back-office workflows that are driven through customer engagement, can really create a sustainable business that can continue to grow on behalf of ServiceNow for its customers. This business has shown the growth, which is just unbelievable at the scale and growing faster than the market growth. creator workflow. I shared with you know, low code, no code, like 31 flavors of Baskin-Robbins.
Our goal always had been to sell to the CIO a low-code platform that they can put governance around because you do not want bunch of low-code applications all over multiple departments. This is not a departmental selling. We want departments to build on ServiceNow with the right governance. In today's times, around data privacy and others, governance is more important than anything else. Then Josh Kahn will talk about our new workflow finance and supply chain. We have bucketed that right now under creator workflows, and he'll discuss what's going on there. Again, built on the same platform. Our North Star, our ultimate North Star is, this is just a sample, a current live customer in telco industry that has taken our horizontal products like ITSM, that has taken our telco-specific product. This is what they are using us, right?
CMDB, discovering assets in public clouds, managing the network inventory, cell towers, cables, and all of that stuff. When they launch a new service, a telco service, or shut down a service, how to deal with the CISO uses ServiceNow for risk and vulnerabilities, improving employee productivity, observability, full stack observability. You know, we started with traces, we added metrics, and we are now adding logs this summer. Full cloud observability stack is what they're gonna deploy. They just bought it recently. Streamline order management, so you can decompose the order and get in the path to revenue. Of course, our core, IT and Customer Service operation. This is what a North Star looks like.
If we have the top 250 customers of ServiceNow use us enterprise-wide, this is what that picture will look like, and they will describe, "Here is how we use ServiceNow, not just another help desk." ServiceNow platform AI. First of all, Bill touched on it briefly. We have been on this journey for the past six years, and we have been extremely intentional either to get tech or to get specific people when we acquired these companies. Some of them had 12 engineers, some had 20. Element AI, which was amazing research team, data scientist team, Yoshua Bengio, who is a Turing Award winner and wrote a seminal paper with another employee who's now at ServiceNow in 2014. That paper got cited in 2017 by Google on LLMs. Those are the kind of people we got through our Element AI acquisition in 2020.
I'm so proud they're here because they have been looking at LLMs since 2018. They started really getting traction in 2019. When they became part of ServiceNow, one of the first things this one of the scientists told me, "Hey, CJ, can we get some data, ServiceNow data, code data that your engineering teams write because we can do this text to code thing?" I'm like, "Wow, okay, that does sound like a scientific experiment, and you're a scientist, so it makes sense." That's how ahead they were in terms of what could happen with large language models. Because we have been doing this, we launched our ITSM Pro, those of you who remember, in 2018, September. I remember. 2018, September.
If you look at the journey, we have now 40% on ProPlus across ITSM, CSM, HR, where 40% of our customer base is on ProPlus, and we have gotten 25% ASP uplift. I mean, it's just phenomenal on how our customers have looked at the AI that was built in the platform, whether it's virtual agent or supervised machine learning and many other use cases that we have been delivering through our Pro offerings that they have taken. The other important thing, as I talked about Element AI, we have a phenomenal AI leadership team, right? When Google launched Smart Reply, which was just three boxes in Gmail at the bottom, that most likely this will be a response, and you can pick one of the boxes.
They enhanced that in 2019, 2018, 2019, and the experience on Smart Compose, where it finishes the email for you, most likely what you will say. You know, a bunch of other email providers do that. Amy Lokey was part of that design experience team. Jon Sigler, John Ball, these are folks with pedigree at LinkedIn, Microsoft, Apple, search-related expertise, engineering expertise, experience expertise, and platform expertise. That's why we are very fortunate to have a team with amazing engineers and scientists driving our AI roadmap. I want to address the first question that many of you asked on the earnings call a few weeks ago, and what is my conviction around gen AI. I'm not gonna spell out the whole thing, but gen AI. What does it mean for ServiceNow? Specifically, what kind of impact will it have?
I 100% believe that Gen AI is a catalyst for our Now Platform. It's an augmentation of our Now Platform. You can deliver better workflow results using Gen AI. We fundamentally believe with the work that all the teams that I just described have done, that this is goodness for our customers. It has an impact on a multitude of our workflows. You say, "Okay, CJ, can you give us specifics?" I think one of the reports came out last week and said, "Hey, we want to understand the specifics on what workflows." This is a sample. This is just a sample of how Gen AI can impact our workflows in a positive context, okay? Where our customers can get higher productivity, higher efficiency or a higher value. Okay? For some reason, the most important slide is not showing, but now it's showing.
Higher deflection, security incidents team at a large bank, when they are looking at kind of an advisory on a vulnerability in Java. I don't know if you ever try to read those. They're pretty complicated stuff. Gen AI can summarize for you in a nice way. Regulatory controls and risk, it can summarize for you. It can then activate a particular workflow based on that summarization. When there is a long-running incident, you cannot reset your password because something else happened and you are not matched in another system, whatever the case might be, help you do a better root cause analysis to drive automation. I can go on and on, but the overall theme is higher productivity, higher efficiency and more value for our customers. This is just a sample.
On our platform, which just today launched a connector to general purpose AI on search, intent understanding and a few other things, is live today. We are going to brand this. We're still working with the branding team. It's working very, very fast, called NowAssist. Copilot was used by everyone, so we didn't want to do that. NowAssist and then automated code generation. I'll bring this to life when we show you the demos. We believe that gen AI will have positive impact, and it's an augmentation to ServiceNow Platform. Period. Full stop. Okay? What is our strategy? Our strategy is two-pronged. Number one, currently we just launched today our connector Integration Hub to OpenAI. You can sign up, you can go to store.servicenow.com. We'll approve it. We feel that, okay, you're trying to do the right thing, and that's available today.
We will learn with you, customers. We are working with Microsoft and others to make sure that this general purpose AI can be used if a customer wants to try out for a few use case on better intent understanding or summarization and so on. We are exploring others, because once we did that, other hyperscalers reached out, said, "Hey, what about my model?" I said, "Sure, bring your own model." If customer wants to say, our customers have full freedom, "Hey, we want to bring our own model because we have partnership with Microsoft or we have partnership with Google," great. We will provide you connector and it will be an augmentation to ServiceNow. This is a very simple point that BYOL, right? Bring your own LLM.
We want to enable you to bring your own LLM, and we will provide connectors and integration like we've always done with systems of record. This is just yet another technology. However, the value for our customers is domain-specific LLMs. What does that mean? For our workflows and for our use cases, if we can train the models that we can take open source model like from Hugging Face that we announced last week. You will hear more about NVIDIA tomorrow morning. You know, NVIDIA shared that we cannot release it today because we are working with them. You'll hear from Jensen tomorrow morning on what we are doing with them.
That's a domain-specific LLM for ITSM use case or a CSM use case, customer service use case, or a procurement use case, where customer's data plus that LLM equals goodness while following trustworthy AI guidelines and governance to make sure that our customers get the value and trust with domain-specific LLM that ServiceNow will ship. ServiceNow, think about it, will take open source LLM through these partners, train it for ServiceNow specific data, launch it in ServiceNow cloud, and then customers get value because it is trained for our use cases, our workflow with customers' data. That's the game. That's the game that leads to higher accuracy, lower hallucination. That's the game that we need to play. You'll ask me, "Okay, CJ, that's all great. Strategy sounds great. What does this mean for monetization?" Okay.
I would say, first of all, I'm gonna address this very specifically because some of you asked this question on our earnings call. Number one, the value that gets delivered to our customers is higher on the right side, which is domain-specific versus general purpose LLM. Okay? The value our customers get through gen AI will be higher on the right side. It will be there on the left side as well, but right side is higher. That's number one. We can capture this value, and we are gonna price for it. We are 100% gonna price for it. You'll say, "Okay, CJ, how are you gonna price for it?" When we launch ITSM Pro. That was the number one question asked for the folks who were here on 2019 Investor Day. I know many of you were.
They said, "Wow, what about seat compression? Wow, seat compression, ITSM, what's gonna happen?" Seat compression and what's gonna happen. You look at our ITSM results, not only customers because they got value, they have continued to expand ITSM Pro, but they have also expanded our seats on ITSM Pro, and we have four years of history with that. We have the same conviction here, that the value we deliver, we will be able to price for it, and that price could be it's P times Q, right? You can either have a higher price via add-on SKU with some kind of meters around AI that, okay, you use this many API calls, this is how much you pay. You have an add-on for something like an ITSM Pro.
As we enable more ServiceNow developers through our creator workflow, it can be Q, as in quantity, and we can have higher level of quantity of our products sold because now we will have more developers who are using App Engine to create gen AI as a text to X, text to code, text to workflow, text to app someday. That's our conviction, that it is P times Q, and you can charge higher pricing on some meter. It's most likely gonna be the API calls. If we can show accuracy, which we are seeing today on the right side, we know that. One of the other points that I wanted to explicitly call out on the questions around seats is our ITSM pricing is pretty flexible, so is CSM. We have moved to unrestricted user licensing.
There are many customers who have moved to unrestricted user licensing, so it's an employee count versus the help desk count. Help desk count is still a traditional model. Do you know what % typically our customers spend? Say that help desk is 5,000 customer service agents. You'll see one of them tomorrow. 5,000 customer service agent. Our cost, as in ServiceNow cost versus the people cost, what % is that of the total cost of ownership? Most people will guess, "Okay, maybe CJ, it's 15, 20, this, that, whatever %." When we look at the preliminary data across our install base on whatever information we find from our customers, it is less than 5%, 2-3%, maybe 4%.
In my own shop, so our own IT help desk, I run our own customer service organization, it is less than 1%. I spend 99% of that cost on people and 1%. If we can make people more productive, where you may not need someday more customer service agent, I still feel this is an augmentation, not a replacement. If that goes 2%, hey, that's great, right? That is enough in itself to capture the value that I'm not gonna worry about seat compression because we believe the value that we'll deliver on the right side is so high that even if you marginally go, you know, there is an MIT Stanford paper, double-digit, 14% gain, this and that, pick your number, and we believe we can deliver higher value. That's it. Monetization strategy, we are absolutely gonna monetize.
It's P times Q. It's either average selling price or a premium SKU or higher quantity we sell because we enable the use cases, and these numbers were not included in the TAM, okay? Those are the benefits for ServiceNow: ASP uplift, TAM expansion, and competitive differentiation. We are on Utah release, so we just launched it today that you can bring your own LLM. Our Vancouver release comes in September, where we are going to productize, which is literally less than four months away. We go in early access in July, which is two months away. As you look at Washington, D.C. plus, this is our roadmap, similar to ITSM Pro. Super excited. We have clarity of strategy, clarity of use cases. Bring your own LLM versus domain-specific LLMs. P times Q. We absolutely believe this is a catalyst for ServiceNow, and it's an augmentation of ServiceNow platform.
We wanted to show you, rather than just words, on what does that mean in the context of ServiceNow use cases, and just show you a roadmap. John Sigler, who has worked at Microsoft, Apple, and a few other companies, and runs our platform team, and Joe Davis, who runs our platform engineering team. John runs platform product, and then Amy will show you the vision of gen AI. Please welcome on stage Jon Sigler and Joe Davis.
Thank you, CJ. Good afternoon. Thanks for your time. We're gonna talk about generative AI, but we're gonna talk about it in the context of the ServiceNow Platform. When we think about generative AI plus the Now Platform, there are three things that we look at. The productivity of our users, it's going to massively increase when we bring GenAI to the Now Platform. Time to value is going to shrink massively for our customers. The experiences for our users are gonna significantly change, but they're gonna change for the better. What can this GenAI do for the ServiceNow Platform? Well, there are really three things it does extremely well. Intent and understanding, knowledge synthesis and summarization, and then language generation. Today, as CJ said, what I wanna do is show you in the context of ServiceNow experience these three things. The intent and understanding.
When I ask it something, does it understand what I want, what I need? Next, the ability to summarize, to synthesize. Can we send information from our instance, from our customer's data, send it off to GenAI and get a summary back? Then the third thing is this language generation. We really want that to show empathy and really good tone. It's like a really nice person's on the other end. To show you, I'm gonna go over to my phone. Which unbelievably somebody called, not a great time. Here we are, and the scenario is this: this is a ServiceNow portal. It is a Coffee Corner customer service site. This morning, I ordered a coffee at Caesars, but I really wanted to pick it up here.
I'm going to this site to see whether it can fix my problem, and I'm gonna use the bot to see if it can help me. Okay. The very first thing we talked about was the intent. When the bot comes up, here it comes. We're gonna ask it a question. We're gonna tell it the situation that we were in. I ordered a coffee at the wrong location. What are my options? Okay. Now what's happening is we're sending this back to GenAI. We're inside of the virtual assistant, and we're sending this back to GenAI, and the first thing that we wanna see is, did it get it right? Does it know that I ordered my coffee from the wrong location? A lot of stuff just happened. Let's scroll back up to that first interaction.
You see here it says, "Powered by Now Assist," meaning that's coming from a back-end LLM, a generative AI. The first thing we're looking for, the intent. Well, it knows what I wanted 'cause it says, "You can either get a refund or you can have your coffee transferred." Not only that, it's very nice to me, right? It's saying, "No problem at all. We can fix your problem." This is the ultimate in self-service, but let's see if we can do it without involving another human being. As we scroll down, we see that the order information is there in the chat. Now, that's ServiceNow. We're going off and saying, "Please get the most recent order for John Sigler and put it into the chat." 'Cause this is helpful, right? Tells me what my coffee was, where I ordered it.
Not only that, we go on and the bot is saying, "Okay, what do you wanna do? Do you want a refund or you want your coffee?" Of course, I want my coffee. This is where the power of the workflow platform that is ServiceNow kicks in. We're gonna transfer our order, but we need to know where John is. Well, John's in The Venetian now, so let's pick a Coffee Corner that's in The Venetian. Now there's a workflow, a process, that's gonna cancel my order at Caesars, it's gonna relocate it over here at The Venetian, and it knows the coffee that I want, and he knows that it's from me. Problem solved. This is an absolute game changer when it comes to self-service. We call it deflection. That's not all.
We have a really smart bot here. We've told it, "Look, if the person's not signed up for the rewards program, ask them if they wanna join." Okay? In this case, we've actually seen a really good job of intent and its ability to know what I'm asking for. It actually did a really good job with the generation of language. Now we're gonna ask it to summarize, right? I'm gonna tell it, "Please summarize the rewards program." This is a little bit different because now we're gonna send off everything that we have at Coffee Corner back to GenAI, and we're gonna tell it, "Summarize all that information for John and bring it back into the chat window." Here we go. Again, it's a very nice interaction that I'm having here, it summarized all that information.
I don't have to go and read about the rewards program, and I can make a decision as to whether I wanna join the rewards program or not. If we scroll down here, it asks me, "Hey, you've learned a bit about this. Do you want to join the rewards program?" Again, now this is solely the ServiceNow Platform and the power of the Platform. When we say yes, a process is kicked off. We go and we talk to the system that is the rewards program system, and we add Jon Sigler. Again, this is a game changer for multiple reasons. One is self-service and deflection. It's a different type of robot interaction. Two, we can take additional actions that were outside of the context of the first conversation. We went from, "I lost my coffee," to, "I'm joining the rewards program." That's not all.
We talked about the impact on all users. I feel like Mr. Rogers here. I'm gonna put my jacket down. I am gonna change gears, switch gears. I am now an agent at Coffee Corner. See, I'm an agent, and I rock. What I wanna do now is see the power and the impact that gen AI has when you plug it in to an agent. It actually makes the agent a super agent. Let's take a look. Now, as an agent, I do a lot of things, like we ship the wrong beans to a customer, so I fix that problem. Somebody can't spend their rewards points, so we fix that problem. Another one is we ship the merchandise, and there's something wrong with it. Let's take a look at the damaged mug exchange case.
Right off the bat, we're gonna see something is very different in the experience for the agent. It used to be that I would come in here, and we would have this activity stream. That's this section right here. I would scroll through this, and I would start to say, "Okay, I gotta read all these chats to figure out where I am with this case. What did Bonnie want? What was I saying? What were the other agents saying?" No, when I come into this case now, we wrap all of that up, and we send it off to gen AI, and we say, "Summarize this chat." Something that would take me 15 or 20 minutes yesterday, I'm done in 1 minute. I read the summary. I know where the case is at. That's not all.
If you look on the right side of the screen, you'll see recommended actions. This is where the real power of gen AI plus ServiceNow comes into play. We take all of the information in the case, the chat, everything that's happened here, plus knowledge articles on returns, plus cases that were like this that were already solved, and we wrap all of that up, and we send it off to gen AI. We don't ask it to summarize this time. We say, "Give me the steps I need to take to resolve this case." It did it right here on the right. One, two, three, four, five. I'm two minutes into this case, and I'm about to close the case. That's just the gen AI side.
The ServiceNow side understands that what gen AI is telling us to do is add stars to this person's profile because of the trouble they went through or send out the replacement items. We have processes for that, workflows for that. The agent can just come in here and say, "Oh, I need to add stars." I don't have to leave ServiceNow. We can just go talk to that system and add those stars. The real kicker here is when you're sending out a replacement item, you have to talk to multiple different departments within your organization, across the enterprise, front office, mid-office, back office, because we're sending something out for free, and we're sending it out with free shipping. We have a process for that, and the agent only has to click on the initiate. Now we go across the enterprise.
We do what we do really well. Okay. Workflow. This is great, right? This is very, very good stuff. This live demo is talking to ChatGPT-3.5. Every time I'm interacting, it's going out, talking to that, and bringing back the results. Fantastic. As CJ said, there's real value and power in creating our own LLMs inside of ServiceNow for very specific platform things. We have many LLMs internally, and we have one that's directed at increasing the productivity of developers. What I wanna do now is bring on Joe Davis, our Senior Vice President of Engineering, and he's gonna show us the productivity increases we can get through these LLMs.
Thanks, John.
Appreciate it.
Okay, I'm here because I'm a developer, and I wanna show you how gen AI is gonna basically transform the development experience and really increase efficiency, productivity for all of our developers. We're really excited about it. I actually lead the engineering team here at ServiceNow, we can't be more excited to bring this to our customer base. I wanna show you how this works. Up on the screen here, I'm a developer. I'm in a code editor, I can now use natural language to interact with our own ServiceNow domain-specific generative AI model. A common question might be to ask to validate an email. You can see here it's interpreting the question that I have, and it's gonna come back with, ideally, a high-quality code response that answers this question.
You can see here, I didn't have to type any code, and it's a pretty sophisticated piece of code that it just generated in terms of just validating an email. That saved me a lot of time. I'm gonna give you another example here. As a developer, as you're programming, our model is just sitting here waiting to give you code responses to the questions that you're typing in. Again, I'm not writing any code. You can see at the very top here, all I'm asking is a few simple questions, and it's dynamically generating really high-quality code that I can use in my application. I'm gonna go ahead and just accept this here.
What you just saw was me using really simple natural language to generate code on ServiceNow's platform using our own LLM, our own generative AI model. What I wanna say is I'm really excited about the power of this technology. I think it's gonna open up developing on the platform to millions of new developers. They're gonna onboard faster, they're all gonna be more productive, and ultimately that's gonna drive innovation and better business results for not only ServiceNow, but for all of our customers as well.
Awesome.
Okay, thanks. I'm gonna exit this way.
This is very powerful stuff, but it can be very, very scary for our customers, for their users. We want a very trustworthy and human-centered approach to how we deploy this stuff. CJ talked about it. We do controlled go-to-markets, but we also internally have a central governance team that's from all over the company. We meet once a week to make sure that we're doing the right things. We already had a very secure platform. What that means is, if I'm a user of the ServiceNow Platform, I can't send information that I'm not allowed to look at off to a large language model, only the things that I have privy to. That's true today, and it'll be true tomorrow.
We really look at the UX and the experience of the users, 'cause we wanna make sure that when we start to apply gen AI, that they have the very best experience. Lastly, as CJ said, we will roll this stuff out over time, and it might be a little different than our usual releases. They're controlled phase releases. The reason we do that is we work very closely with our customer base, and we wanna make sure that it's all good and right before we do general availability across our customer base. The point here is we will remain the number one trusted platform in the world. The future is extremely bright, and we have a lot of fun thinking about what this is gonna be like in the future.
What I wanna do now is bring out my trusted partner and my very good friend, Amy Lokey, to show you that future. Amy?
It's fantastic to be here today with you and see this exciting launch of generative AI working live inside of our products. The team just did a fantastic job with that. I have the privilege of showing you the future. What is the future of ServiceNow and generative AI? Simply put, gen AI, as you've seen, makes our platform better than ever. Now Assist will accelerate everything that people need to do with our platform. Developers will leverage Now Assist to build applications faster on our platform and also customize our out-of-the-box experiences. Admins will deliver faster time to value, shipping products quickly to get into the hands of users.
Customer support, like you just saw, will be empathetic and personalized, and employees will have incredible experiences, including creating brand-new applications with no code at all. Now Assist is going to help every single person who touches our platform. The first thing every customer needs to do with our products is customize these out-of-the-box experiences with some light configuration. They need to tailor the experience with their very own workflows. Eric is a developer at our global coffee retailer called Coffee Corner, and he builds digital solutions like IT Service Management for their global employees. 400,000 employees use these products. Let's see how Eric uses Now Assist to customize our Service Operations Workspace. Eric opens the Service Operations Workspace here in UI Builder. This is a tool that he uses to customize our experiences.
This time, instead of having to go into these configuration panels and spend hours figuring this out, he can open Now Assist in this right-hand panel. Eric needs to add a new chart that's important to his IT service delivery team. They wanna know when a very specific kind of service change creates a priority one incident. Now Assist quickly generates three different options for Eric to choose from. He can even shorten the timeframe shown in the chart just using the chat interface. When he finds the one that he likes, he can go ahead, and he can drag and drop it right on to the application. The next thing he needs to do is create one of those tailored workflows that I talked about. He wants the team to be notified by email every time these P one incidents happen.
Now Assist can create that flow for him, and it can also take him to Flow Designer, where he can take a look at it. Eric can see Now Assist build the flow for him, creating that email notification right here for those tier two agents, just like he described. Now Assist can even suggest a better idea that he didn't think of, which is posting a message to those agents in Teams. Eric can add the Teams notification, activate the flow, and then go ahead and jump back into UI Builder to give this application one last look. Everything looks great. He's just finished all the configuration in a number of minutes, and so he can let the admin know that it's ready to deploy. Right here in the chat. This used to take developers often hours or even days of work.
He just got that done in minutes. We know that our customers need to accelerate their time to value with ServiceNow, and they need to get these applications in the hands of users quickly. Each of our applications has a lot of specific requirements, and so admins have to take some time, typically, to research this, read a lot of product documentation, and figure this out. Let's see how Now Assist helps our admin, Nick, launch this experience. Nick uses the ServiceNow platform to do our work, and as you may know, the platform is themeable and he loves that he could use this application right in Coffee Corner's brands. He goes to his admin center homepage, and this tells him that the service operation workspace is ready to deploy.
He opens Now Assist as well. He immediately gets help in the flow of his work. Nick can ask Now Assist what steps does he need to take to deploy this application. Now Assist can summarize ServiceNow product documentation right in the admin experience, right in the flow of his work, giving him step-by-step guidance on how to do this. Now Assist, when it starts to help him out, it starts to recommend that he run the automatic test framework to ensure that this app runs really well across the instance. Now you'll see leveraging our workflow engine, Nick not only gets help on how to do this, he can kick it off right here in the conversational experience. Now Assist gets this test running. Nick can start to monitor the progress right here on the admin center homepage.
Next, Now Assist recommends provisioning the application to the right users. This can also get completed right here in the conversation, thanks to this power of a workflow. Nick specifies that the app should go to tier two agents, and Now Assist gets it done. Not only that, Now Assist recommends getting a message to notify the users when they have access to this application. Nick's pretty happy to not have to write this, so he can just go ahead and preview the message, and he can also decide to shorten it. Now the message looks great. One more thing done. Nick tells Now Assist, "Go ahead and send that message once this app is ready." He's ticked another item off of his list that used to take him quite a lot of time.
While he worked through that, the automatic testing is finished running and everything is working well, and the app is ready to deploy. He can click Go Live. That's it. A new application just got launched to users in a couple minutes versus days or weeks. All that help was summarized and brought to Nick right in the experience, thanks to Now Assist. This makes Nick exceptionally productive, and it delivers value to our customers in rapid time. I'm gonna show you one more example that we're really excited about. We've seen how Now Assist can help developers and admins, and we've also seen how it helps the agent experience. I'm gonna show you how Now Assist can help everyone using our platform. We can see how every employee can easily create apps with no code at all using Now Assist.
Employees frequently need ways to digitize their team's workflows, but usually, they have to go to IT, make a request. Frequently, IT teams are just swamped. They can't support the demands. Hillary is a brand manager at Coffee Corner, and she needs a way to manage inbound requests from salespeople and executives who want a corporate branded headshot. Right now, she does not have an easy way to manage this, and she can't schedule all the requests herself, and she's handling it in spreadsheets, and frankly, things are falling through the cracks. Let's see how she solves that problem with Now Assist. Hillary goes to her beautiful Employee Center homepage here, and she's recently completed a little bit of training, so she's familiar with this new product called Creator Studio. She knows that she can build applications on the Employee Center.
She doesn't quite remember how to get started, so she goes to the Now Assist search box right here at the top of her page. She puts in a pretty complex question and asks how to create a form to manage these headshot requests. Now Assist knows exactly what she needs to do. She's directed to Creator Studio, where she can start building her application. Now Assist takes Hillary to Creator Studio, and this is where she learned how to build these custom applications. Now Assist can continue the conversation, asking her for a little bit more information. Hillary describes what she needs. She wants to create an intake form, get some basic information in that like name and email. Now Assist, based on other apps like this, can suggest creating a date picker for scheduling.
Hillary remembers she's also gotta get their permission and get people's consent, she adds that in too. At this point, Now Assist has all the basic requirements it needs to generate an application. Now Assist gets to work creating this intake form, and Hillary sees the form get built right in front of her like magic. She can continue to refine it right here in the conversation. She goes in and she says, "You know, I'd like to have an additional form field added, and I'd like to have that come in right below the email address." She needs to collect their job titles as well. She can see that get added right to the form from that conversational input.
She's also thinking this form looks a little stark. She'd like to add an illustration at the top, but she wants to make sure it fits within the company's brand. It's gonna tie in with that portal. She goes ahead and asks for the image that she'd like to have created. I can see a few options here that she can choose from. She'll go through the options. Then she decides she likes the one best with the camera. That one's a little too generic. There's the camera. She can add that to the form. It's looking great to her. She can go ahead and preview what it looks like on the Coffee Corner portal website. Looks awesome. Then she can also check and see how it looks on mobile. Scales beautifully. Looks great there.
While she's doing that, she sees that Now Assist has also generated a workspace for her. This is where she goes, and she can manage all the inbound requests that she's gonna get. She goes ahead and takes a look at that. She previews her workspace, and it's perfect. It's got the calendar there. She can see when these requests are scheduled. She can manage the flow of the inbound requests and see how that's trending. This is now where she can get her work done. She's super excited now, so she previews it one last time on the portal page, makes sure it all looks good, and then she submits it to her IT team for review. She's super excited. She's created her very first app on the Now Platform. The next time she goes to her portal, she gets a notification.
The app has been published. She can see it live. The power of the platform now has been extended by Hillary using Now Assist to build her first no-code application end-to-end. Now Assist is built into our platform, and it accelerates our customers' productivity across all of our products. It makes developers and admins more productive, improving time to value. It makes agents, employees, and customers more productive with personalized, efficient experiences. It enables everybody to deliver value on the platform through no-code applications. Now Assist is truly our next horizon, and we're thrilled to get it into the hands of our users. Next, I'd like to welcome Josh Kahn to the stage.
Josh and I partnered really closely on that text-to-app experience that you just saw, and he and I are also really excited to partner together as we build finance and supply chain workflows. Thank you all very much.
Thanks, Ingrid. All right. In 2021, we saw a lot of ServiceNow customers buying creator workflows and building custom applications in finance and supply chain departments. As we dug in with those customers, we noticed an intense amount of customer pain and an opportunity to expand our TAM with new products. I wanna start the discussion with an overview of that customer pain. In these finance and supply chain departments, they have a lot of business-critical processes. I mean, they are the heart and soul of a lot of these organizations. Those processes are very manual. That means they're workflowed around in email and Slack and Teams and phone calls and meetings. They're tracked in spreadsheets. As a result of that, they have lower productivity than they should.
They have slower execution than they should, and there's a lot of hidden risk of something going wrong in one of these processes and nobody having any idea that happened. The processes are a result of the underlying technology landscape. That landscape centers around ERP. ERP is the core data and core logic for finance and supply chain departments. It lacks automation, and it lacks workflow. It has a user experience that is really designed for power users, people who live in these systems day in and day out. When these processes involve customers and partners and all the employees, as they inevitably do, it's very difficult for those people to actually participate in the process.
One example, we had a customer who all of their employees were supposed to enter timecard information, and they were supposed to do it directly in the ERP system. They found it so difficult that the company built a 200 person team to work out of a shared mailbox, taking emails, opening them up, and pulling the timecard information out of an Excel spreadsheet to enter it. A 200 person team. That's not an isolated example. There are hundreds and even thousands of those processes at these customers. There's also a lot of point solutions that are necessary to be involved in these end-to-end processes and for finance and supply chain to be completed. That has business users screaming for transformation. They wanna digitize right now so they can improve their productivity, lower their cost, and get a hold of that risk.
The reality for those business users is they're probably gonna wait 5-10 years for that transformation. That's because IT is so focused on ERP consolidation and migration. To give you a sense of why, I'll explain one customer scenario. They have 20 different ERP instances from the same vendor. They have millions of lines of custom code. They have over 7,000 developers that maintain that code every day. That's where they're coming from. Now, their dream is what a lot of people would call a clean core ERP. It's to get to a more standardized version of the ERP system with all those customizations abstracted into custom apps or packaged software. They wanna transform their process while they get to that clean core ERP.
The reality, though, is a lot of them are gonna end up just doing a lift and shift from the legacy to the cloud platform without transforming process, without satisfying those business users. The customer that I described a second ago, they started their plan in 2017. Their goal is now to complete this in 2028, and when they get there, they will have spent $1 billion, and they will not have transformed their process. With ServiceNow, we're helping our customers transform immediately while supporting that vision of a clean core ERP and reducing ERP migration risk. We're doing it in three ways. The first is with Automation Engine. Automation Engine is pre-built integrations to all those ERP systems and the point solutions around them.
It's robotic process automation because in some of these cases, APIs aren't available, so you need another way to integrate. With Automation Engine, we have an abstraction layer on top of that technology landscape. Everything we do in ServiceNow works equally well on the legacy version as well as on the modern version. That frees the customers up to innovate today without worrying about tech debt. The second thing that's happening is customers are building custom apps with App Engine. It allows them to transform their process today while supporting that vision of a clean core ERP.
Customization mining is a way to look inside of an ECC environment, a SAP ECC environment, the legacy environment, find those millions of lines of custom code, find those tens of thousands of custom objects, and figure out which ones they can abstract out of there to clean the legacy environment before the migration. With the data access layer, we're making it easier to get access to the data in SAP. SAP tables are incredibly cryptic. The fields within them are cryptic, and you have to be a real power user to know where to look for what data. We've provided a more human readable interface. That, combined with our low-code tools, allow any ServiceNow developer and really even power users in the finance department to build applications that involve SAP data that help transform processes on and around SAP.
With these App Engine use cases, our customers really are doing two things. One is simplifying the legacy. They can abstract customizations, simplify it, make it easier to move. The other is they're transforming by building new apps today that don't increase tech debt, satisfying those business users and allowing their journey to a clean core ERP to move forward. We're also helping our customers by building product. Sourcing and Procurement Operations allows them to transform their sourcing and procurement operations today, getting hard dollar savings and productivity gains. In there's three products. The Sourcing and Procurement Operations product helps procurement teams allow employees to get all the things they need to get their job done. It improves the productivity of the procurement team, and it puts more dollars on the best contract, so it reduces the overall procurement spend.
Supplier lifecycle operations allows them to manage their suppliers, the suppliers that provide the employees the things they need, chairs, tables, laptops, phones, also the suppliers that power their supply chains with raw materials. By using supplier operations, they're managing their supply chain at a lower cost, they're shifting more time to ESG goals, which are a higher and higher priority in a lot of supply chain teams today. Finally, with accounts payable operations, which GAs in September, we're helping our customers ingest, process, and match invoices so that they can more effectively work through that backlog, reducing late payment penalties and taking advantage of prepayment penalties and optimizing their cash flow. We shipped the first product in Q1 of last year. We shipped the second product in Q3 of last year.
In that first year, we've acquired over 70 customers, including eight in the Global 100. Many of them are already live. The average deployment timeframe is about 12-16 weeks, and it's early in their value realization, but some of their business cases they put forward to justify this investment have some astounding numbers in them. One of our procurement customers estimated a $1 billion in procurement savings by 2025. One of our supplier customers estimated a 300% ROI in managing their 20,000+ suppliers, and a lot of that's gonna come from consolidation of legacy systems. It's also important to realize we did this without establishing a new go-to-market team. We did it by leveraging existing success in these accounts and getting into an adjacent buyer. Now let me go ahead and show you what these products are.
We're gonna start today with Shirley. Shirley's our employee, and she's going to Knowledge, and she's done a great job deploying ServiceNow. She's gonna be on the big stage, and she wants to put her best foot forward. She lands here on the employee service center. This is where Shirley gets everything she needs to do her job. She can get things from HR, IT, and even procurement. As she clicks into procurement, she gets all the information she needs. Some hot topics up above. She sees articles here that give her the information she needs. She can interact with procurement by submitting things to them. Today, she's gonna start in the shopping hub.
The shopping hub is a modern consumer-like experience that allows the employees to find the things they need, it represents all the best contracts that the company has, the procurement spend is optimized. She's had a great experience with BrightCarbon in the past, she'll go into BrightCarbon. She's gonna look through for some training. Here's what we're looking for. She can go ahead and request to buy this. For Shirley, it was a great experience to shop, it's also defaulting a lot of the information that is needed and which is super helpful for her, makes it faster, easier. I know the one for me that always kills me in anything like this is my cost center. I never have any idea what my cost center is. Great news. Shirley's is defaulted for.
She's gonna hit K23 and go ahead and submit the request. Perfect. Her request is there. In the old days, it went into a black hole. For Shirley, because they're using sourcing and procurement operations, she's got a view of the status right here. Next, let's go check in with Warren, who is our procurement specialist. Warren has a workspace. This is Warren's workspace. This is his one-stop shop for all of the purchase reqs, cases, tasks that Warren has to do. This is replacing a shared mailbox and a bunch of other disparate systems that Warren and the procurement team used to work out of. When that happened, he never could get a consolidated view of anything. In this case, he sees Shirley's request right here. He can go in and check it out.
Shirley's authorized for this expenditure, so he's just gonna create the purchase order. What you just saw is an integration between the ServiceNow sourcing and procurement operations and the ERP system of record. That purchase order was created in the ERP system, but the entire experience for Warren and for Shirley is delightful and easy and automated and workflowed because it happened in ServiceNow before sending that data over. Next, let's check out our supplier manager, Alejandro. Alejandro also has a workspace. Alejandro's workspace is where he sees all of his supplier information, his cases that he's working on related to suppliers, and even tasks that he's asked suppliers to complete on his behalf. Here's where I wanna show you a really important concept in all of this, and it's called a playbook.
A lot of these processes run across multiple departments and teams, and they have different steps in each of those teams. When you onboard a supplier, you need the legal team to do an NDA and put some contracting in place. You need the risk team to do a supplier risk assessment. You might need another governance team to do an ESG check. Through all of these steps in the past, you'd had no idea where things were. You'd had to call or email the legal team and ask them what was going on. Here, with a playbook, all the steps are laid out. A lot of these would be completely automated, but some of them might be a manual step in a different department. Alejandro can simply look here and know exactly what's going on.
With these products, we're helping our suppliers and our employees get the things they need in a delightful, easy-to-use way, and we're helping the people who deliver those, the supplier managers, the procurement specialists, and the accounts payable specialists to do it in a more productive way. We're innovating here at an incredibly rapid pace. We had this vision two years ago, and in that time, we've delivered a complete suite. If you look at the time from hands-on keyboard to GA, it's actually accelerating. There's no other enterprise software company today that's able to access new TAM with entirely new products at that pace. CJ talked a little bit about it before with some of our other products. The reason is the platform.
We have a lot of pre-built objects in the platform, things like portals that have catalogs and a knowledge base, a workspace that you saw a couple different flavors of, one for Warren, one for Alejandro. All we have to do to build these new products is adapt those to the specific use case and persona and add content. By content, I mean things like supplier cases, onboarding. What are the best practices in onboarding? Well, good news. We've seen it with a lot of our early adopter customers, and we can build that out. it's the Now Platform, which is totally low code. Our customers can configure and extend it, making it their own and adding their own content in a structured way, so they get more value over time.
One thing I wanna be 100% clear on, we are not replacing ERP. We are building a force multiplier to ERP. ERP is the core data and system of record for finance and supply chain teams. ServiceNow is transformation across the enterprise, an accelerant to everything that happens in the company. When you add ServiceNow to ERP, you get hard dollar savings, you get better productivity to put more time into strategic tasks, and you get less risk on your ERP migration. With this source-to-pay suite, we've added $11 billion to our TAM. There's a lot more opportunity and a lot of innovation in the pipeline that will dramatically expand that TAM in the years coming forward.
We're executing incredibly well on the innovation front, the customer access front. This is relevant to every ServiceNow customer we have today and our customers for the future. Super excited to share future updates with you. We are executing well in a great market. Now I'd like to bring back to the stage CJ Desai.
What you saw with... First of all, the team did a great job, Josh, Sean, Joe, and Amy. When you saw Jon Sigler do the demo for Coffee Corner from his mobile phone, which was a live demo, that went to general purpose LLM, which was specifically, in that case, OpenAI. Then when Joe did the demo on text to code, that was a domain-specific LLM that ServiceNow have developed, and we just showed you live on what we have done in incredible amount of short time to show the productivity that developers, self-service areas, as well as customer service agents can get. I'm gonna quickly wrap up with our go-to-market strategy before we break. First of all, fundamentally, we still believe, and Bill touched on this a little bit. That we have untapped opportunity across many regions.
United States still remains when I look at every workflow, penetration in every single customer, and how much can we expand our platform enterprise-wide, like that slide I showed you, including public sector, for United States, state, local, as well as federal. Canada and then LatAm. These are the three areas where we are very bullish on the opportunity. Similarly in Europe, Central Europe, Germany, UK, across public and private sector, and France. I look at Asia Pacific and Japan, Australia, Japan, as well as India, where we have new leadership in place, and there is plenty of opportunities, both across public and private sector. Our team, our cloud team, engineering team, have continued to expand our footprint, including the certifications required to operate in these countries.
You know, our public sector success in U.S. Federal is not a coincidence. We have been investing systematically on what it requires from, you know, whether it's IL4, FedRAMP High, IL5, and so on, including IRAP in Australia, and few other certification that are required for us to capture the public sector TAM. Gina will share with you some numbers around those. Our global footprint is pretty wide, and now we are also looking at regions like Saudi Arabia and others to see what we can do to expand in terms of ServiceNow presence as we try to capture new logos. Our opportunity Bill touched on these five industries. Our TAM penetration in these five industries is fairly low. IT in certain areas we have done.
Nice job maybe with ITSM, there is still opportunity for Pro, Enterprise, as well as lot of opportunities for new logos, including CSM and line of business expansion. Paul Smith, who runs our go-to-market teams, he will be here after the break to speak to a couple of our customers. We are absolutely focused, Gina will cover, on getting leverage from our go-to-market teams. First, Bill touched on this, marquee program, strategic customers, how can we orchestrate end-to-end where we are focused on serving this largest of the largest customers and governments in a organized fashion, where we are serving them at the highest levels, both from go-to-market standpoint, but also deployment and getting value out of the product. Number two, we have tried to simplify the coverage model.
Our one of the first verticalization happened in U.S. Federal, then it was state and local, then it was medical field, as in providers, hospital systems, and now financial services, manufacturing, healthcare and life sciences. We have continued to verticalize our go-to-market teams by industry and where we see opportunity, including using our digital sales team to help us with one priority focus, land new logos. Okay? Customer success, very important that customers get value out of it. We meet them where they are and figure out how we can share with them best practices to really capture the value of ServiceNow Platform. Bill touched on this ecosystem. Listen, we need friends. I mean, we can only scale so much.
With our partners, co-selling, co-delivering, and accelerating customer value, we work with all the global system integrators, but also regional partners across the board so that, and many of them are here, so that we can capture truly the value of ServiceNow Platform in this global economy. On partnerships, you know, this is an pretty important point. We have select technology partners. This is not just a logo collection, but we put significant engineering personnel, when you see what on the top left, to get those integrations done.
This is not like, "Hey, I entered a partnership program, signed a document, and these guys are our partners." This is actual R&D work that happens between us and the companies that are listed on the left to figure out how we can drive innovation relentlessly so that our customers get higher value from our platform and the platform of our partners. Strategic SI partners, you see them here. Standards and controls I talked about in terms of certifications. Integrations, this is one of those things you're never done. You have to keep up all the integrations, whether it's systems of record, whether it's hyperscalers, whether it's a point solution because somebody's trying to consolidate AIOps solution on ServiceNow. Store, where we provided the OpenAI connectors today.
We have 1,200 plus partner-developed apps, at least 95% of the customers have used our store once for a specific integration to deliver the value. You heard from Bill on the Rise Up program. Every single customer says, "CJ, we cannot find enough ServiceNow personnel." On one hand, text to code, as Joe said, will help us accelerate anybody who can code. Specifically what Joe showed was the ServiceNow code, not just a Java code or a JavaScript code, but it is in the context of ServiceNow table or a context of ServiceNow business rule. We believe that generative AI will definitely be an accelerant as we expand the ecosystem of personnel who uses ServiceNow. With that, we'll have 10 minutes break, and then Paul Smith will talk to our two distinguished customers. We'll be back in 10.
Counting all different ideas drifting away. Past and present, they don't matter now the future's sorted out. Watch her moving in elliptical patterns. Think it's not what you say, what you say is way too complicated. For a minute thought I couldn't tell how to fall out. Oh. It's 20 seconds 'til the last call. Callin' hey. A liar now, you know it's easy. Like when it ain't over till I move. I'll be anything you ask and more. Callin' hey. It's not a miracle we needed. No, I wouldn't let you think so. Fallen, fallen, fallen. Fallen, fallen, fallen. Girlfriend, know your girlfriend's drifting away. Past time, present 1855 90-01. Watch them build up a material tower. Think it's not gonna stay anyway, think it's overrated. For a minute thought I couldn't tell how to fall out. Oh.
It's 20 seconds 'til the last call. Callin' hey. A liar now, you know it's easy. Like when it ain't over till I move. I'll be anything you ask and more. Callin' hey. It's not a miracle we needed. No, I wouldn't let you think so. Fallen, fallen, fallen. Fallen, fallen, fallen. Fallen, fallen, fallen. Fallen, fallen, fallen. I just wanna shine like the sun when it comes up. Run the city from the rooftops. 'Cause today's gonna be my day, it's gonna be my day, day, day. Good night's rest, see you in the morning. I don't gotta guess, you're always there for me. In them seats of doubt. I think you like seeing me freak out. Good night's rest, see you in the morning. I wake up, I get out of bed. Stay up, stay out of my head.
'Cause it's dangerous, and I don't wanna lose my mind, no. I just wanna shine like the sun when it comes up. Run the city from the rooftops. 'Cause today's gonna be my day. I just wanna climb to the top of a mountain. Let it call when I'm howlin'. Today is gonna be my day. Woah, oh-oh-oh. Oh-oh-oh, oh-oh-oh. Woah, oh-oh-oh. Oh-oh-oh, oh-oh-oh. I used to lay low, hiding in the shadows. Don't give me doctors, I already had those. I'm just tryna figure out how to be myself right now. I don't wanna lay low, hiding in the shadows. I wake up, I get out of bed. Stay up, stay out of my head. 'Cause it's dangerous, and I don't wanna lose my mind, no. I just wanna shine like the sun when it comes up. Run the city from the rooftops.
'Cause today's gonna be my day. I just wanna climb to the top of a mountain.
Please take your seats. The program will resume in five minutes.
Woah, oh-oh-oh. Oh-oh-oh, oh-oh-oh. Woah, oh-oh-oh. Oh-oh-oh, oh-oh-oh. Wake up and I stay up 'cause I'm stronger. Things are up and I get out of my way. I just wanna shine like the sun when it comes up. Run the city from the rooftops. 'Cause today's gonna be my day. I just wanna climb.
I took an arrow to the heart. I never kissed a mouth that tastes like yours. Strawberries and just something more. Ooh yeah, I want it all. Lipstick on my guitar. Ooh. Fill up the engine, we can drive real far. Go dancing underneath the stars. Ooh yeah, I want it all. Got me feeling like. I wanna be that guy. I wanna kiss your eyes. I wanna drink that smile. I wanna feel like I. Like my soul's on fire. I wanna stay up all day and all night. Yeah, you got me singing like. Ooh, I love it when you do it like that. When you're close up, give me the shivers. Oh baby, you wanna dance 'til the sunlight cracks. When they say the party's over, then we'll bring it right back.
We'll say, ooh, I love it when you do it like that. When you're close up, give me the shivers. Oh baby, you wanna dance 'til the sunlight cracks. When they say the party's over, we'll bring it right back. Into the car. On the backseat in the moonlit dark. Wrap me up between your legs and arms. Ooh, I can't get enough. You know you could tear me apart. Put me back together and take my heart. I never thought that I could love this hard. Ooh, I can't get enough. You got me feeling like. I wanna be that guy. I wanna kiss your eyes. I wanna drink that smile. I wanna feel like I. Like my soul's on fire. I wanna stay up all day and all night. Yeah, you got me singing like.
Ooh, I love it when you do it like that. When you're close up, give me the shivers. Oh baby, you wanna dance 'til the sunlight cracks. When they say the party's over, then we'll bring it right back. We'll say, ooh, I love it when you do it like that. When you're close up, give me the shivers. Oh baby, you wanna dance 'til the sunlight cracks. When they say the party's over, then we'll bring it right back. Baby, you burn so hot. You make me shiver with the fire you got. This thing we started, I don't want it to stop. You know you make me shiver. Baby, you burn so hot. You make me shiver with the fire you got. This thing we started, I don't want it to stop. You know you make me shiver.
Yeah, you got me singing like. Ooh, I love it when you do it like that. When you're close up, give me the shivers. Oh baby, you wanna dance 'til the sunlight cracks. When they say the party's over, then we'll bring it right back. We'll say, ooh, I love it when you do it like that. When you're close up, give me the shivers. Oh baby, you wanna dance 'til the sunlight cracks. When they say the party's over, then we'll bring it right back. Hey.
If you wanna run away with me, I know a galaxy and I can take you for a ride. I had a premonition that we fell into a rhythm where the music don't stop for life. Glitter in the sky, glitter in my eyes. Shining just the way I like. If you're feeling like you need a little bit of company, you met me at the perfect time. You want me. I want you, baby. My sugarboo. I'm levitating. The Milky Way. We're renegading. Yeah, yeah, yeah. I got you. Moonlight, you're my starlight. I need you. All night, come on, dance with me. I'm levitating. You. Moonlight, you're my starlight. I need you. All night, come on, dance with me. I'm levitating. I believe it's just for me, I feel it in our energy. I see us written in the stars.
We can go wherever, let's do it now or never, baby, nothing's ever-
Please take your seats and silence your mobile devices. The program is about to begin.
I feel like we're forever every time we get together. Whatever, let's arrest all time. You want me. I want you, baby. My sugarboo. I'm levitating. The Milky Way. We're renegading. Yeah, yeah, yeah. I got you. Moonlight, you're my starlight. I need you. All night, come on, dance with me. I'm levitating. You. Moonlight, you're my starlight. I need you. All night, come on, dance with me. I'm levitating. You can fly away with me tonight. You can fly away with me tonight. Baby, let me take you for a ride. Yeah, yeah, yeah. I'm levitating. You can fly away with me tonight. You can fly away with me tonight. Baby, let me take you for a ride. Yeah, yeah, yeah. Oh, my love is like a rocket, watch it blast off.
Said I'm feeling so electric. Even if I wanted to, I can't stop. Yeah, yeah, yeah. My love is like a rocket, watch it blast off. I'm feeling so electric, watch my eyes go. Even if I wanted to, I can't stop. Yeah, yeah, yeah. You want me. I want you, baby. My sugar boo. I'm levitating. The Milky Way. We're renegading. I got you. Moonlight. You're my starlight. I need you.
Please take your seats and silence your mobile devices. The program is about to begin.
You can fly away with me tonight. You can fly away with me tonight. Baby, let me take you far.
Please welcome ServiceNow's Chief Commercial Officer, Paul Smith.
Thank you. Good afternoon. Thank you, everybody. I spend the majority of my time in the field meeting with our customers, our partners, and with our field organization. One thing that struck me very, very profoundly over the last few months is just the thing that just comes out loud and clear is the digital transformation imperative just hasn't gone anywhere. In fact, it's probably more profound than ever before. What's interesting talking to our customers, and I get to hear every single day the challenges that they are wrestling with and how they're using ServiceNow to solve business problems. The number one thing I'm hearing is it's become an "and" conversation.
There's a lot of focus on cost reduction, on how do I reduce my labor costs, how do I reduce my cost to serve, how do I increase productivity, operational efficiency, and how do I get all of the benefits of digital transformation in terms of improved customer service, enhanced employee experiences, a more resilient digital-first organization. Customers are absolutely looking for both of these things in effect simultaneously. I firmly believe that ServiceNow is best place of any enterprise technology organization to enable companies to be able to say "yes" to all of these competing priorities. Now is a perfect time to hear directly from some of our customers.
I'm delighted today to be joined by two amazing leaders who are working in industries that are going through some of the most profound transformation that's out there right now in terms of energy and healthcare. We have two fantastic leaders. We have Stefan, CIO of Siemens Healthineers, Kayor, VP, Information and Digital Engineering at Shell. Please give them a very warm welcome. Kayor and Stefan, come join me. Well, thank you both, first of all, for being here. Really appreciate you investing this time with ServiceNow, and thank you for being such great customers of ours over the years.
Look, everyone knows Shell and Siemens and Siemens Healthineers. Perhaps we can start this conversation by you just giving us a little bit of extra color in terms of what you're wrestling with as organizations right now and, you know, your role within the organization. Kayor, can I start with you, please?
Absolutely. Thanks, Paul, it's great to be here with our ServiceNow colleagues. Kayor Gajarawala, VP for Information and Digital Engineering. I basically head all IT project delivery globally for Shell. We deliver to 80 countries globally. Maybe I'll start with a few metrics that I think might be interesting to you. From a mobility perspective, we have 46,000 service stations throughout the globe, and we are visited by 32 million customers per day. My own team is roughly 11,000 people that deliver 5,000 plus projects on an annual basis over those 80 countries. ServiceNow has been integral for us to be able to allocate resources, allocate value to those various projects and overall deliver across the globe.
It also gives us incredible insights in which we need to hone our project delivery and then where we also need to drive DevOps practices to deliver the maximum value for our customers.
I'm always just struck by the scale of Shell, so we're gonna come back to that in a moment in terms of some of the challenges you're wrestling with there. Stefan, perhaps the same, please, for Siemens Healthineers.
Thank you. Thank you, Paul, for, let's say, inviting me to this convention. It's a great pleasure to be here. I'm Bernd Montag. I'm the CEO of Siemens Healthineers. ServiceNow is one of the strategic platforms which we have set up right at the beginning of our IPO in 2018. We, Siemens Healthineers, are a pure med tech player. We have our businesses in oncology, cancer therapy. We have it in diagnostic imaging and in lab diagnostics. We are serving 70 countries, and we are the partner of the majority of the leading hospitals. I think 99 of the leading 100 hospitals in the world are using our equipment in order to serve the patient and to serve the patient on an ongoing basis. That means we are, let's say, serving them throughout their life cycle.
Energy transition and healthcare evolution. We've got two fairly profoundly important things going on here. Stefan, in terms of your journey with ServiceNow, you've been a customer of ServiceNow for seven years.
Yeah.
Thank you for that. Can you just perhaps articulate, for the folks here in terms of where that journey has gone from and where it is now?
The journey started, I think, with like the majority of the ServiceNow customers, with the IT Service Management. We had very, let's say, domain, IT domain-specific, change request tools which you need to have, and we wanna standardize as a company on our own, as a stock-listed company, because we needed to have that transparency in order to drive, let's say, the efficiency, but also to drive the innovation across the different technology platforms. We started with ServiceNow in 2016, we identified, wow, the platform is really, let's say, holding what it's promising. It's everything built in, all the features you need to do professional Service Management for the IT area.
I had a meeting with our head of customer service, we sit together and thought, okay, if we have the platform which is built for service, we as the global market leader in the med tech industry, we have service as one of our key domain which differentiates us from everyone else and our customers. The healthcare providers are trusting us that we can serve them. Why don't we bring the two together? Our customer service experience and the platform which is built for service. We started then rolling out ServiceNow also in our customer service operations. In this customer service operations, all the different processes in the company need to be linked together. They need to be closely tied together.
It worked out, and it's quite logical if you look at from an analyst perspective. You have everything built in the platform. You have the incident management. You have the problem management. You can build it to the asset management. You have the knowledge management. All the features are really built, not just for the internal service, they are also there to be used for the external service. With that, now in the last five years, we brought together all our headquarters processes, and we are now looking forward to engage with the customer directly, starting on our journey, bringing the customer into our ecosystem, so there's no more boundary, there's no more difference between our service operations and the customer who is part of our service fulfillment.
Your customer in this case is a clinician, is a hospital environment.
Are exactly.
Yeah. Yeah.
The med techs in the radiology department, the med techs in the laboratory department.
Yeah.
It's really to say in the clinical operations.
You've extended that customer service into field service as well.
Exactly.
Yeah.
Exactly. This is now where we are, we are now approaching together with ServiceNow, bringing in the field service management, which is to say really the first mile to our customers, and even going beyond, let's say, bringing the customer in terms of, let's say, program management, when we build, let's say, new facilities together with the customer, bringing him in as a party in our environment, transforming the way healthcare is provided today to the patients.
Oh, it's a fantastic journey and vision. Thank you, Stefan. We'll come back to some of the most recent things you're doing in a moment. Then Kayor, again, I said this earlier, Shell, like the complexity of both the breadth of the operations, the geographical complexity, the size, how are you using ServiceNow to manage some of these challenges?
Yeah. Much the same way, Stefan is doing it, but maybe I can add a little more color. Energy transition is one of the biggest challenges the world faces today. Energy companies are having to transform in an unbelievable way. In fact, we're gonna have to employ many different business models to be successful, particularly around things like renewables and also customers. ServiceNow is actually a key catalyst to help us do that. It gets us the data we need to make the right decisions around allocation of resources, for example, how we interact with our customers, and how we drive value. One of the things we do capture in ServiceNow is actually value data for all 5,000 of those projects.
At any time, I can go and assess which projects look like they're in trouble versus which ones are actually performing really well. Instead of actually having to go and coalesce through a bunch of spreadsheets and things of that nature.
Yeah.
ServiceNow gives us insights on demand once the data is actually in there.
Yeah. Which is again, it's the only way you can deal with that size and complexity. You're also acquiring a whole ton of companies.
Yes
on your new journey as well, and I'm assuming this allows you to plug those in very effectively.
Absolutely. In fact, ServiceNow is actually also quite key to us gaining a single view of the customer, because many of the companies we are purchasing, we actually already do business with today.
Yeah.
Actually aggregating that data into a single view of the customer is super important.
Fantastic. Fantastic. When you first started on this journey with ServiceNow, what were your considerations? What made you choose ServiceNow at the start of this process?
A lot of it dealt with strategy. I think one of the things that was key was any type of internal parity processes that don't drive differentiation at the customer interface, we have a market standard unless strategy.
Yeah.
We really looked at a number of platforms. I think we spent a year doing due diligence, and we felt that ServiceNow was going to be the de facto market standard in this space. I'm really proud to say that I think it's really panned out that way during the years of our work together.
During the years of work together, I think we built a close partnership as well between the product organization, your organization. I think we've done the same with Siemens. Tell me, how is that in terms of that co-innovation piece?
Yeah. I really feel like ServiceNow is a very strong partner. I would say it is arguably our strongest partner in the SaaS space. I'll give you an example. There was some innovation, especially when you have 11,000 plus resources and the large number of projects that we have, it's not easy to match projects to resources and skills. All of those have to actually come together. ServiceNow worked closely with us to create an automated AI ML-based matching mechanism to give us a head start on matching resources to the projects. It greatly improved our efficiency, and I'm really happy to say that we continue to work on many different innovations together.
Yeah
to actually take us further in this space.
No, that's awesome. We're 12 minutes in, and we haven't mentioned generative AI yet.
Mm-hmm.
I'm gonna do that now, because that's one of the areas we're gonna be looking at together as well, right? Because again, it's in the platform.
On generative AI, let's talk about that a little bit. I, you know, I don't think in the short term, it's gonna actually replace people, but I think it's gonna really help individuals become more productive. A great example of that is if you're looking, for example, a resource or you're looking for customer data on the last interaction a customer may have had with you, instead of coalescing through lots of data, what you can do is ask a question and get some answers with some level of intelligence built in. I think that's a great helper in terms of productivity, and it also gives the customers the impression that we have a great deal of intimacy with them.
No, that's awesome. Thank you. Again, if we get time, I'm gonna come back to you for one more question. First, Stefan. One of the areas that we've been co-innovating together on are some of the healthcare specific use cases that you can solve using ServiceNow in your particular space. Most recently, you started using the healthcare service management module within ServiceNow. Tell us a little bit about, you know, the thinking behind that and again, how we're gonna be innovating together there.
Okay. Well, great question. Our thinking behind is that we wanna have, as Caio already mentioned, we wanna have this kind of customer 360 view. The customer 360 view will, let's say, be dependent on all data we have in our customer interactions over the lifetime, over the lifetime of our service interactions, how the system is living at the customer side until it goes to a, to a renewal. As part of this, we are looking now into this kind of Field Service Management, getting the customer involved. When I look at the innovations which are coming now over from ServiceNow for the healthcare industry, the healthcare industry is, let's say, a very digital industry. The MRI, the diagnostic, even in the surgery department.
Nevertheless, the patient flows over the different departments. There's a lot what ServiceNow can also do. There's a huge potential supporting the workflow of a patient throughout the different disciplines, let's call them clinical disciplines. For us, it would give us the ability in order to connect directly to the customer in a seamless fashion. For us, this brings together the customer world and our world. We will speak the same technical language and can easily exchange the data. This will be then, I would call it, the cream on the cake or the addition to the customer 360. Just to build on what you just mentioned, yeah, generative AI, huge promise in technology. Now we have all data around our customer service, how we service customer, what requests our customer have in one database in ServiceNow.
With generative AI, we see two use cases. The one is customer calls, and we get at the point of demand, a full picture of what's the current customer situation. You don't need to ask for what reasons, what matter, what is the overall situation. One hospital has many different customer faces for us because we serve many different departments in the hospital. The other part is from time to time, also with our leading-edge equipment, there are downtime situations. Downtime situations are always critical. There is a patient waiting for a surgery. There's a patient waiting for a diagnosis, be it in the shock room, as we call it, so in the emergency room, or be it just in a, let's say, a rural area where there are not five, six systems in parallel.
It's not everywhere. It's a big city destiny of our system. Time matters. If we can give all the learnings out of all cases we have in our systems, in the ServiceNow, at point of care, let's call it point of care for our engineers who are at the customer side, what are the specifics and how does they fit to cases we already had? We can really limit the downtime. We can the customer get much faster back to operations, and this will also improve the quality of life because we can bring patients faster back in the healthcare treatment. This is what we think about what, let's say, the technology built in ServiceNow will bring to the future.
Yeah.
I'm very much looking forward to that.
That's a fantastic vision, Stefan. What I love is whenever we have a conversation.
Yes.
we're talking about the customer. The customer is effectively a very significant healthcare professional that's ultimately working on something that, you know, affects our healthcare. Whatever we can do to keep driving positive outcomes there, you've got our full support. Caio, just kind of talking a little bit more broadly in terms of, again, we've had a long partnership. Where else, what next do you think in terms of what you're looking for ServiceNow to do and to help with the many challenges that you've got in your business? We were talking earlier, we were talking about refineries. We were talking about OT, drones, detecting methane leaks and so forth. It's a fairly complex field out there.
Yeah. You know, one of the things I love about ServiceNow is that the platform has grown with us.
Yes.
And I'm looking forward to that continuing. I think the next great frontier is gonna be the generative AI machine learning frontier. Also really ramping up our customer intimacy, particularly around some of our retail and mobility businesses. I think with the data being in one place and the integrations being in one place with the Now Platform, it's a great foundation to leapfrog into the next stage, which I think is machine learning and AI.
Go fast together, right?
Go fast together.
Yeah. Absolutely. Well, look, I am really looking forward to collaborating with you on this. Stefan, the same. Thank you both very, very much for the partnership that we forged over the years. Thank you for being here today with our audience. Please, everyone give a very, very warm round of applause to Caio and Stefan. Thank you so much for your insights and contribution today. Thank you. Thank you.
Thank you.
Thank you, Stefan. Okay. You've heard from Bill, CJ, our product organization, some fantastic insights from two great leaders in our customer organization. I know you're all waiting to hear from Gina and what this all means in terms of the numbers going forward. Look, without further ado, please let me introduce best CFO on the planet, Gina Mastantuono. Gina, please come on up.
Thank you, Paul. Oh, my goodness, I hope you guys are not too tired yet. Okay? A little bit longer. We're almost done. It's great to be back in Las Vegas with all of you today. Clearly, our customers are excited to be with us, which makes us really excited to have you explore and see firsthand all that we're sharing. I hope you take advantage of that. Taking a step back and pulling everything together that we've seen and heard today, I stand here proud of what we've accomplished and what's in store for our future. Let's take a look. At the end of today's presentation, my goal is that you'll walk away with three key takeaways. One, our innovation continues to expand our addressable market, driving durable growth and tremendous opportunity.
two, the strength of our platform model delivers inherent leverage and value at scale. three, ServiceNow has consistently demonstrated strong execution despite the changing and complex global economy. There's a lot of noise in the market today. Let's cut through that, review our results, and talk about why we believe we are in a unique position to seize the opportunities in front of us. Our growth rate remains impressive over the past four years. From 2018 to 2022, we grew at a CAGR of 31% in constant currency. We're sustaining strong organic growth at unprecedented scale. We added another $1.3 billion in revenue last year alone. Let me repeat that. $1.3 billion in organic revenue. Incredible. The durability of our top line strength is validated by our robust remaining performance obligations.
Essentially our total backlog, which provides further visibility into our future growth. We have $14 billion in RPO, with half of that current, providing us a strong base of future revenue to build from. We grew RPO at a CAGR of 31% from 2018 to 2022. That includes 22% year-over-year growth in 2022, despite a challenging macro environment. With a track record like that, you can trust the Now Platform to deliver. Because of our success, we remain as hungry as ever to increase our customer base and feed the top of our funnel for future growth. We will not rest on our laurels. We have plenty of runway still to land new logos. Over the past four years, you've seen us sharpen our focus, not just to land new logos, but the right new logos. Not all customers are created equal.
We're looking for customers that can grow and expand with us over the long term. In that time period, we've seen 40% growth in new logos with over $250,000 in ACV. We're continuing to see larger and larger deals with new customers. From 2018 to 2022, we saw more than a 60% increase in the average first year ACV from new customers. What's driving these larger deals? As you heard today, we are the intelligent platform for end-to-end digital transformation that drives proven value for our customers. New customers that come to ServiceNow are looking to orchestrate work across silos to accelerate innovation, increase efficiency, and reduce costs. They're not looking for point solutions to solve a single problem.
From 2016 to 2020, we saw a 30% increase in the number of products we were landing with our new logos. In 2021, we saw that same 30% increase in just one year. In 2022, we saw another 30% increase. As you know, more products in each of our deals translates into larger ACV. Once landed, customers continue to show strong growth with us. In 2022, our net expansion rate remained strong at about 125%. Perhaps more telling of how much our customers love us, two-thirds of our existing customers spent incremental dollars with ServiceNow despite the tougher macro. Why? Because in challenging times and good times, our platform consistently delivers value. This fierce customer loyalty drives predictability in our business model, as over 85% of our new business comes from existing customers.
As a result, we have great visibility into the customer journey. Thanks to the innovation that CJ and his incredible team talked about earlier today, even our older cohorts of customers continue to drive strong growth as they adopt new products and SKUs across the portfolio. A customer that spent $100,000 with us in 2010 is spending over $2.6 million with us today. That's 26 times where they started, representing annual growth of 191%. Wow! I just think that's great. Yes. Thank you. Claps. I like it. The Better Together story is really resonating clearly across our entire customer base, and as a result, you're seeing more multi-product deals universally. 97% of our net new ACV was from multi-product deals in 2022.
77% of which was deals with more than five products, which is up from 44% in 2018. These bigger multi-product deals are showing in the growth of our customer sizes. We now have 1,641 customers paying us over $1 million annually, which represents about 20% of our total base. Our largest customers are growing even faster. We now have 327 customers paying us over $5 million annually. This is a 4x increase since 2018. The average spend of our $5 million-plus customers continues to grow. It's up over 40% in the past four years. Clearly, the relationships with our customers are deepening and becoming more strategic than ever before. I've just shared we have a strong track record of successfully driving strong organic growth.
Now let me double-click into the untapped potential still in front of us. Our rapidly expanding product portfolio and platform innovation continue to extend ServiceNow's relevancy across the C-suite, creating a massive opportunity. Within our 7,700 global enterprise customers, we've identified over 200 that we've designated marquee accounts. These are our most strategic customers with high total addressable market and where we have the potential to drive the most incremental value. As of the end of 2022, these customers' ACV was approximately $3 billion. If we assume cross-selling just our existing product portfolio into these customers, appropriately reflecting their size and real market pricing, the potential ACV for these customers is estimated to be $20 billion+, 7x their current ACV. I get this question all the time, where's that expansion coming from?
While some think that our technology workflows are mature and that the cross-sell opportunity lies solely with our emerging workflows, we see plenty of opportunities still within our core. We are the dominant platform for IT, and we're uniquely positioned for even stronger growth. Our emerging tech products are still demonstrating tremendous momentum with a CAGR north of 50% over the past four years. Even with that strong growth, there remains a lot of potential. The penetration of security, risk, and ITOM products are still all below 20%. ServiceNow also has plenty of extensibility beyond IT. We have the opportunity to cross-sell our non-IT workflows into 80% of our customer base, and we're going after it. As a reminder, only about 10% of our customers are using all four workflows today.
With that massive cross-sell opportunity, it's clear that there's a lot of upside with our newer workflows, you're seeing it with more than 30% or more ACV growth in 2022 across our Customer, Employee, and Creator Workflows, putting both Customer and Creator well on their way to becoming $1 billion businesses in the next year. In addition to the horizontal cross-selling opportunity across workflows, we've also increased value to our customers through our premium SKUs, which introduced the AI experiences that the team talked about earlier today. As you heard, ITSM, about 40% of the customer base is now on ITSM Pro, it's continuing to carry a 25% realized price uplift. Approximately 60% of our new customers are all opting for the premium SKUs.
As you think about the opportunity for generative AI, we've already demonstrated our ability to monetize AI-powered experiences successfully. Our industry solutions are also helping to drive accelerated penetration within verticals, and we're seeing great early success. With our telco solution, we've now penetrated 65% of the top 20 G2K telco companies and about 30% of our installed telco base. In 2022, we saw approximately 30% realized price uplift from existing customers expanding with the telco solution. Our financial services solution is also seeing great traction. It's now in 25% of the top 20 G2K banking companies, and there's plenty of runway left as we've only penetrated about 10% of our long list of existing banking customers. In 2022, we saw a 40% price uplift from existing customers expanding with our financial services solution.
As many of you know, the public sector remains a tremendous opportunity for us as well. Led by significant momentum in the U.S. federal business, in the last 4 years, we've seen a CAGR of over 35% in public sector with 30% growth in 2022 alone. We recently launched a public services solution that saw great success in state and local governments in Q1. The solution presents the opportunity to drive even more growth in what is already a very strong vertical that exceeds $1 billion in ACV. You've seen our growth vectors. Now we're gonna turn to the runway we have in profitability. CJ talked about what it means to be a platform company from an innovation perspective. Now I'm gonna talk about what it means from a financial perspective.
Our single code base, single architecture, single data model allows us to be much more efficient in product development. For example, we have products like Risk, which was built by only 12 engineers and has scaled to be more than a $250 million business in 2022. That team is largely based in India, and we've seen an over 50% increase in R&D efficiency from 2019 to 2022. Since the majority of our business comes from existing customers, we also see strong sales and marketing leverage from enterprises that expand with ServiceNow. With the one platform model, it's easy for customers to add additional capabilities built on the same architecture. As such, there's less friction in the selling process, enabling a more productive expansion sales motion over time. Earlier, I shared the compounding revenue growth from our customer cohorts.
If you compare that with the sales and marketing expense for a typical enterprise customer, you can see that the expected revenue per dollar spent expands to 4.5x by year 10. Together, these efficiencies are generating further operational leverage. We grew operating profit at a CAGR of 37% from 2018 to 2022, driven by 600 basis points of margin expansion. In that same four-year period, we've seen free cash flow grow at a CAGR of 31%. In 2022, we generated nearly $2.2 billion of free cash flow and were able to maintain 30% free cash flow margins despite the macro and FX headwinds. ServiceNow generates a powerful combination of growth and profitability, organically at massive scale. It's remarkable when you think about a company operating near the rule of 60 at our size.
You can trust that we will continue to focus on delivering a balance of growth and profitability going forward. This is our defining moment. We've demonstrated our ability to execute and deliver consistent results. In 2023, this translates to durable demand despite a challenging environment. With subscription revenue growth of 23.5% at the high end of our guidance range, along with Q2 CRPO growth of 23%, paired with strong free cash flow generation of over $2.6 billion, driven by a 30% free cash flow margin. Turning to our long-term trajectory. I'm sure none of you have been waiting for this part. Right. All right. The world has changed a lot since our last Analyst Day. At that time, our targets were based on FX rates as from the end of 2021.
We've seen FX headwinds as high as over $550 million for our 2024 target and $900 million for our 2026 target. While that has slightly rebounded, sizable headwinds remain. Although our demand has been durable, we're not immune to the macro challenges. As a result, our growth trajectory has been stretched out a bit to the right. To be clear, we still expect to hit those top-line targets we laid out. It'll just take a little bit longer. We're talking quarters, not years. You've also heard we've seen some interesting opportunities emerge. We're in the early stages of a generational shift to AI-enabled applications. As you heard from John and Amy and the team earlier, generative AI presents a meaningful tailwind for ServiceNow as we create a massive productivity catalyst and unmatched experiences for our customers.
As we talked about today, our underlying business remains very healthy, and we're very confident in our trajectory. In 2024, we expect subscription revenues of approximately $10.4 billion. Carrying forward the FX and macro headwinds, our $16 billion threshold gets stretched out a bit into 2027, so our 2026 milestone gets adjusted to $15 billion plus. We expect to achieve this with continued operating and free cash flow margin expansion. Speaking of margins, we're raising our 2024 non-GAAP operating margin target to 28%, up 200 basis points year-over-year. With regard to free cash flow, we expect to deliver 100 basis points of expansion in 2024 to a 31% margin despite an incremental 100 basis points headwind from cash taxes.
Beyond 2024, we expect continued operating margin expansion driven by the inherent business model leverage we showed earlier. For free cash flow in 2025, we expect to maintain flat margins despite 200 basis points in incremental tax headwinds. Thereafter, we'll strive for modest expansion as we continue to offset an incremental one point per year of cash taxes. Longer term, we remain laser-focused on delivering a balance of growth and profitability. You've seen our execution in the past. I just showed it to you. Our approach going forward will be just as disciplined. We're also initiating a new stock-based compensation expense target. We expect our stock-based compensation as a percentage of revenue to decline below 15% by 2026 on its way to a longer-term goal of under 10%.
You heard Bill mention earlier today, we announced that our board has authorized a share repurchase program of up to $1.5 billion. While investments in innovation to drive strong organic growth remain our priority, with our strong and growing cash position, we're using some of our free cash flow to manage employee dilution. We're also reducing our target employee dilution per year to less than 1.5%, down from less than 2% previously, and that's before any share buybacks. While this growth and profitability trajectory is very important, equally important is getting there the right way. As you've heard me say before, purpose and profit are not mutually exclusive. We at ServiceNow continue to operate with an ESG mindset, a business imperative that promotes long-term growth and value creation for all of our stakeholders.
Today, I'm excited to announce the publication of our third annual ServiceNow Global Impact Report. I'm so proud of what we've already accomplished across the three pillars of our strategy. In the environmental pillar, we're moving forward with our near-term SBTI targets and really looking forward to our commitment to deliver net zero by 2030. In the social pillar, we've achieved gains across the board in our diverse hiring across all five of our DE&I metrics, including women in leadership and underrepresented groups. In 2022, we increased our women in leadership to over 32% globally. In governance, since we know AI is the future, we've developed a responsible AI steering committee to ensure we're continuing to build trust with ethical and transparent business practices.
Let's not forget that this is all supported by the Now Platform, which is the force multiplier for our customers on their ESG journeys. As the intelligent platform for end-to-end digital transformation, we enable our customers to meet their purpose and profit goals. It's why our platform is suited for companies that are looking to action ESG intent into impact. Let me end with where I started. I'm so proud and humbled to be with you here all today. Why? Three reasons. one, our innovation is second to none and drives durable growth and tremendous opportunity. Two, the strength of our platform model delivers proven value for customers and inherent leverage. three, ServiceNow consistently demonstrates remarkable execution. Our purpose of making the world work for everyone isn't just words on paper for us.
It's how we show up every day in service to our customers, our partners, our employees, and all of our stakeholders. We will become the defining enterprise software company of the 21st century. Thank you for sharing your time today. With that, I'm going to call up the rest of the team back up to the stage for Q&A. Thanks, everyone.
To ask a question, please raise your hand for our mic runners.
Yep.
Please state your name and firm before asking your question. Thank you.
Come on.
Hey, Raimo Lenschak from Barclays. Thank you for this great event. First question, no surprises on AI. CJ, the one conception that I hear from investors a lot of the time is, "Oh, ServiceNow is a seat-based model, and now with AI, I need less seats." This is gonna be, like, a very interesting future. Maybe you explained a lot already today during the sessions, and we learned a lot there, but maybe you can just address it one more time, and then we kind of settle that, hopefully. Thank you.
Wow. I think I addressed it, but I'm gonna repeat myself. No problem. Thanks for asking. First of all, I would say that currently the spend you have, the spend you have for any customer on ServiceNow versus people for whether it's customer service or IT, we are below 5%, our technology spend. We are gonna increase the value by gen AI, and that value is what we are gonna charge for. We are gonna deliver significant value, as you saw in the demos. These were live demos, both on domain specific and generic AI. When you get that price uplift, even if there is somewhat compression, which we have not seen with ITSM Pro, it makes up for more than whatever concerns are. Gina just showed you that even new customers, 60% of them have gone with ITSM Pro.
I feel very confident in our strategy on how this augmentation on the productivity that our customers will get. For that value they will get, we are going to just capture tiny portion through the price uplift. That price uplift, even if the quantity goes a little lower, if it does, it hasn't with ITSM Pro in our 4.5 years journey or a CSM Pro, I feel very confident that this is still a catalyst on the top line and not others. We have changed our model in some cases to unrestricted user for companies that wanted to leverage all of the Now Platform. We worked on workforce optimization. Same question was asked.
I feel very, very good in our strategy that it'll deliver value, it'll capture the price, and ServiceNow investment is always a smaller number of total cost of ownership between the people and the platform. Did I address it?
Yes.
Okay. Thank you.
Hey, Arjun Bhatia with William Blair. Thanks for having us here. CJ, maybe for you as well. You said that ServiceNow is not an IT workflow company that's expanding into other workflows, that part of the portfolio is rapidly expanding. As you think about the future, do you think there's a potential future state where the other workflows, non-IT workflows, surpass your IT portfolio?
Here is what I would say. IT is our core. Gina addressed it that we have innovated significantly for chief technology officer, chief digital officer or chief information officer. That will be core of the core. For the guidelines and the timeframe Gina provided, I would say IT will still be the core piece of the overall number. I do not see the other workflows. Like, I'm very optimistic on finance and supply chain workflow that Josh talked about, and we are gonna invest to win. We have now figured out the product market fit, but IT will still be core. Because we are, like Gina showed you, the risk portfolio that's under-penetrated, security, under-penetrated in our existing IT customer base. ITOM, most folks use Discovery, but don't use AIOps and other technologies we have. I can go Cloud Observability step by step.
Thank you.
Great. Thanks very much. Brad Zelnick with Deutsche Bank. Nice to see you all. My question is about partner leverage. Bill, it's been a fantastic part of your success to date. If I look out on the show floor, all these GSIs, they're having a real party. If we think about what's left, how much more there is to do, can you help maybe frame for us, you know, your optimism for the continued investment and maybe specifically around generative AI, how it's impacting their businesses, the conversations that you're having with them about generative AI, and why ServiceNow is a partner of choice in this category? Thank you.
Yeah, sure. Brad, first of all, thank you very much for you being here, thank you for the question. We have a very open ecosystem philosophy. The first slide I showed today was about the great reprioritization. A lot of the partners are now starting to hit a wall where they're burning down the backlog in some of the 20th century lift and shift techniques, they need to find new growth stories. We are one of the biggest global partners now, among the top five partners that you would recognize very swiftly. Number 1, I think the partners are pulling us now, and they have multi-billion dreams with ServiceNow. We're not having to push as hard as we were four years ago, which is a really good thing.
In terms of the platfozm and generative AI, I was just at a meeting where there was probably 125 CEOs. Everyone's talking about it, and it's all the rage. You'll hear stories like, you know, "I can become Abraham Lincoln and give the Gettysburg Address." They're really, like, playing with it on a consumer level. In the enterprise, where the partners and ServiceNow come together is on that platform. I always go back to the intelligent platform for end-to-end digital transformation. As CJ said very appropriately, and his great team, great team of engineers that work with CJ every single day, all those use cases are gonna be built into that platform. That's Fort Knox. How we partner with the partners, and Paul can build on this, is globally.
There's a tremendous focus on the global economy, markets like Japan, which I mentioned earlier. I call out Japan. Paul did a great job in hiring a senior executive there. We're gonna grow tremendously. We team up with partners, basically they say, "Okay, these are the use cases on the platform. These are now the new layers of innovation, for example, generative AI, and we divide and conquer based upon honest, open, transparent, go-to-market plans, and we build businesses together. Think about geo, think about industry, think about sub-industry vertical, think about use cases. You know, this whole thing on the pricing, I wanna just touch on this too. CJ called it out. This is not only a seat-based pricing company. You have transactional-based pricing opportunities. You have value sharing and co-innovation-based pricing opportunities.
All of these things, including scenarios where customers might be in a tight timeframe right now for cash, and they could be working with a partner, and they could be working with ServiceNow, where we can even engineer new financial models, consumption-based models. Different things to get the customer started, not only with generative AI, but all kinds of opportunities on that platform. Paul, do you wanna add anything?
Yeah, I think, again, let's start with the pricing thing, and then I'll go to the partner thing. I think on the pricing piece, you know, we already have customers today very happily coexisting where they've got ServiceNow for a number of core services. I'm thinking of, you know, one of the world's largest banks in particular, and that is on a traditional per-seat model. They also have transactional pricing today for some very specific services that are very high volume, but with maybe a smaller number of users involved. Those two models do coexist very happily with some of our larger organizations today. I don't think this presents us necessarily with any new set of challenges. I think on the partner side of things, I had a lot of partner meetings today, before coming here, right?
What I'm always saying to them is, "It's all good." Like, literally, like, if we just did nothing, the partner evolution is good. They've got billion-dollar dreams, like you said, Bill. You know, they're all building, and I think seeing more success than ever before on the Now Platform. I think the two things that electrify it, I think one is getting very, very industry-focused. You're gonna start seeing us doing more industry bets with partners, where it's like partner X in industry Y, how do we go to market together and capture value together around some very, very specific use cases in, let's say, healthcare or automotive, whatever it might be. I think the other is there are some countries where we have scale with our partners.
You know, the U.K., United States, and others where we've got a very rich partner landscape, but it can still be quite fragmented. I'm thinking of Asia, I'm thinking of Japan and places like that. There is a massive opportunity for us to kind of go deep with certain partners there and grow their business tremendously. I'm excited about where the partner ecosystem goes. We are still at the start of the hockey stick there.
Yes. Wow.
Sanjit Singh, Keith Weiss from Morgan Stanley. Thank you guys for the presentation. Really a lot of great information. Question for Gina. On the opposite end of the generative AI, investors are concerned about the cost of providing these large language models and running these large language models. How should we think about the potential for gross margin impacts of running up all these large language models? Then if I could follow on with that, one thing that we did talk about pressuring gross margins this year was the ServiceNow Impact initiative that you have. You talked about a 200 basis point gross margin impact. We didn't talk about that a lot today, maybe we can update on the ServiceNow Impact initiative with the penetration and the uplift that you're seeing in customers from that ServiceNow Impact initiative. Thank you.
Perfect. Yeah, great question. Listen, I think there's lots of questions out there today about the impact of generative AI, generative AI and LLM on margins. What I would say is we're still working through all of what that looks like. What you will see from us, as you have always seen, is a balance of, if there is some margin compression there, how do we offset that with the inherent leverage that we have throughout the model that I really tried to show you in broad detail, whether it's R&D leverage, sales and marketing leverage. We remain very committed to continuing to accrete bottom line profitability and free cash flow measures, even if there might be some compression on the gross margins, which I'm not convinced yet.
I think there's a lot of opportunity to optimize as we continue to invest there. That's the first question. Your second question, we did see some gross margin compression this year, as you note, which we offset at the bottom line as well through efficiencies. It wasn't two points as a result of Impact, there was a couple of different things impacting the margin. We had, the change in depreciation life that we expected. We had some inflation in there, we had a little bit of an impact from Impact. What I can tell you about Impact is that we very specifically invested in that area to really help drive customer adoption, right?
What we're seeing very clearly is fantastic results from those customers that are adopting Impact, real success stories, real happiness with the product, we'll continue to invest, but at the same time, always making sure that we're balancing both top line gross margin as well as bottom line.
If I may just, one, building on this, Brad, you know, Impact is now reporting into CJ Desai. I think, we know how he handles his business in terms of innovation and doing things at a profitable level. That will include, you know, exactly how we build it, how we price for it, how we blend it into the overall revenue streams of the company. I have a feeling that not only will we get great customer adoption and the loyalty effect and same account revenue growth with those stunning results that Gina Mastantuono put up there, it was so inspiring. Also now we have this as a product. It's not a heavy take the bus with a bunch of consultants and do a one-month study. This is like on your iPhone, and it's gonna transform business.
I think as you look at RiseUp with ServiceNow, and the idea of getting a million people in the ecosystem adopted on the platform, and then you put Impact up to and including on an iPhone to radically simplify business and show that ROI in real time. I have a feeling no matter what the minor gross margin impact will be, we'll get it on the top line, and Gina will manage the efficiencies on the bottom line. I really am excited about what's going on now. You might wanna talk about this, CJ, also, the new hire that you brought into the company who's outstanding.
Yes. Keith, thanks for the question. you know, one of the things that is always the value proposition around Impact was more geared towards the actual product and how you can have best practices, value that we can deliver to our customers on your iPhone. Leverage Jon Sigler, who runs our platform product, with Tony Colon, who is now running that team, we call it customer success. That's our number one focus, on how to ensure that the value comes a lot more from the product, and when you need platform architects and those kind of people, transparently, we can provide that guidance for these large, very large customers who do need our help as they expand from IT to employee to customer service and others. Very conscious.
Gina and I work really well together, even in terms of long range plan, in terms of, I mean, we just raised the operating margin number for next year, and we are taking into account all the levers that we need to tune so that every single time we are keeping the best in class gross margin on behalf of our investors.
Keith, I see over here, it seems like you have to have been at Morgan Stanley or working at Morgan Stanley to sit in this section. I see Paul Chamberlain and everything. That's awesome. Our great board member and Teresa and Larry is here somewhere. I just wanted to give a shout-out to the board. I think it's super cool that you have board of director members that participated in this whole event with our customers and with you, so we can bring that empathy back into the boardroom. Thank you for your question, Keith, but also, you know, thank you for everything Morgan Stanley has done in covering the company for a long period of time.
Yeah. Thanks. Kirk Materne with Evercore ISI. Appreciate you all having us here.
Sure.
CJ, I was wondering if you could talk a little bit about the data strategy as part of AI. I think we've all heard, you know, without data and sort of proprietary data, some degree or first party data, you know, AI is only as good as the data that goes into it. Can you just talk about the advantage ServiceNow has as being sort of a workflow engine and touching a lot of pieces of data within an organization in terms of creating AI that's differentiated? Can you just also as part of that talk about where are customers in terms of their preparation with data to take advantage of AI once you deliver the solutions? Thanks.
Absolutely. It's a very good question, and I would say, you know, folks have said this in the past, that data is the fuel for AI, right? Without data, nothing matters. The good news for us is, one, we are in multi-instance architecture. For those of you who have covered us, you know that every single customer gets their own slice of their database instance. We never mix customers' data. When we create a model for, you know, we had Shell here, right? Shell talked about how they use machine learning with ServiceNow. That model is specific to Shell. Where we add value is once so that data does not get shared from Shell with anybody.
That's why there is still some hesitation, whether you look at Fortune 500 or Global 2000, to send that data to a general purpose AI because they are like, "Hey, is this gonna become like a business to consumer thing that I was worried about me as a person, my data being shared, and I'm the product?" Hence the domain-specific LLM strategy, where your data privacy, trustworthiness guidelines that we have rolled out, and making sure that the models are specific to Shell, and I'm just using Shell because Shell is here. Shell or Siemens Healthineers, that is the end game, and that's where you leverage the data. Right now I can tell you, if you speak to any of these customers outside, they are gonna tell you the same thing. They're worried about privacy.
They're worried about, you know, people not commingling that data so that the models can learn better. We want to learn for Shell, for ServiceNow use cases, give them peace of mind with trust and privacy, and develop amazing models that we are gonna monetize and just... We are gonna monetize so that they get value out of it, and that's it, right? Multi-instance architecture allows us to do that, and that has always given us architectural advantages from noisy neighbor problems and others, but it also gives us advantage where customers have peace of mind. This is their data.
Peter Weed from Bernstein. You know, I think one of the things that we've been really excited about is the expanding partner ecosystem, and I think you emphasized earlier today the reach that it provides as you try to get beyond the Global 2,000. You know, I think one aspect of that that might get benefit is the marketplace. You know, I don't think there was a lot of conversation around that. How big of an opportunity do you see that over the longer term, or do you anticipate it might be less important in your business than maybe some other companies we've seen in the past that have taken advantage of this?
Yeah. Peter, thank you. Great question. I think the From a marketplace perspective, I'm a big, big fan and a big supporter of that, right? If we're looking at, for example, the app marketplace where organizations can go and take value-added applications and services from ServiceNow, then if you go and, like, walk the exhibitor floor, there's tons of great examples there. I think the future of that business is very, very strong. I think it's something we're gonna continue to support, and is gonna continue to give us leverage. I think as well, when we start moving into new geographies as well, like Japan and like APAC and India, where there are gonna be some very, very specific entrants, then I think it's gonna help us there as well.
It's not something that you've necessarily seen up in lights as much as RiseUp or as much as ServiceNow.org, but it's still absolutely something that's very much part of our strategy.
Yep.
Hello. Kash Rangan of Goldman Sachs. Thanks for hosting us at this amazing conference. Gino, you did your best to drop that rocket by about $1 billion in revenue or so, and Bill had $20 billion plus. My understanding is that as rockets move up, they grow, they actually accelerate, right? What is the timeline to get to $20 billion plus, Bill? Are we looking at acceleration beyond the 15 plus?
I'm gonna take this.
Okay.
He gets nervous. He's like, "Bill will end up taking me to 30 before we leave the conference.
You dropped it by $1 billion.
I did.
I wanna hear that.
I-
Then the 20 plus, I wanna hear that as well. The other question, more serious question is the P times Q, CJ, you talked about. I think the worry that I don't share this, but that a lot of our clients have is that the Q is gonna go down more than the P is gonna go up. You just saw these demos, which were breathtakingly impressive. Great work here, right? What is? If this is what you can accomplish in such a short span of time, a year from now are we gonna be looking at even more automation, and this you don't even need a human to do all this stuff. Help us understand or give us comfort that the Q is not gonna go down a lot more.
Maybe it's not down 50%-60%, maybe it's down 5% or 10%, the P is gonna be up 20%-30%. That's a concern that some of our clients have, which may be unfounded, but I wanna get your views on that. Thank you.
That's the real question. Why don't you take that first?
Again, this question comes up. Clearly I've not done a great job explaining this thing. I put that on me. Listen, Kash, when we rolled out ITSM Pro in 2018, for those of you, many of you have covered us for a long time, but those of you who are new, you know that we only had one product called ITSM Standard. Just one product called ITSM. For our largest business, that was the only business that was north of $1 billion, and we called it ITSM Standard, right? We said, "Okay, we are gonna do ITSM Pro." They said, "Okay, what is in it?" "KPI, analytics, virtual agent that does incident deflection," right? And tomorrow with some of...
couple of our customers, you'll see that they have used our machine learning that we have already built in ITSM Pro to deflect as many incidents as it can. A lot of times, because we are a workflow, and for ITSM specifically or IT products or even for CSM. We are the system of record because of CMDB. A lot of folks forget that we are the system of record. Whatever is easy from an engagement layer perspective that can be deflected, that you bought a point solution, you took Microsoft's chatbot that is generic. People already did that. ServiceNow was at the heart of mid-office, back-office, complex L2, L3 incidents, where an agent truly has to work on complex incidents or complex cases to figure out how to solve the end employee or an end customer.
That's where we have played. When we released ITSM Pro, I remember very specifically it was Mike Scarpelli and I were here in 2019 and said, "Oh, this will cause seat compression," or, "You may get the higher ASP, but P times Q will be lower." Well, I have news for you that P times Q actually became 2x for ITSM Pro. 2x.
Yep.
Okay? P was way ahead of whatever deterioration happened in Q. As I said, when we look at the renewal and others as companies have grown, they have added actually more agents, both for ITSM and CSM. You know, Alex asked me earlier, we just signed with a very large insurance company for their 7,000 agents to do their insurance claim processing. When I asked them, "Hey, how do you think about this whole thing with ServiceNow?" They said, "Oh, we use Guidewire here, this, that, and you become the system of action." Given our ITSM experience, given the value we deliver, and given that P times Q is a small % of total spend, I have, saying for the 5th time on the record, strong conviction that P uplift will be higher.
Yeah.
than Q.
CJ, can I say it for a sixth time just to give you-.
Yeah.
-because I'm thinking of three real-world examples right now, all of which have been in the press in terms of, you know, where we are seeing a genuine restriction in the number of users in those organizations. In every single case, their level of spend with ServiceNow is increasing because the value that they are getting from the remaining Q is significant. The P is accelerating much faster. I see it happening in front of me, and CJ is right.
Perfect. Kash, to your other question. Yes, we took $16 billion down to $15 billion+. We talked about the fact that FX headwinds were up to about $900 million, if you think about that. We can offset that in the current macro, but we will hit $16 billion in a matter of quarters, not years, quarters after that. What you've seen is consistent execution despite a challenging and complex macro environment. What Bill was talking about, I'll let him speak, about the $20 billion, is that we see the opportunity unfolding with our business, with the incremental innovation, with the incremental product portfolio to become a $20 billion business with the innovation and the organic beauty of this company today.
I won't speak for Bill, but we're not giving a timeline for that number, but we feel very confident in our trajectory with that rocket ship to 20.
I actually couldn't have said it better. High five.
Thank you, Bill.
Hi, thank you. Karl Keirsted at UBS. Gina, this question is for you. Your stock is very often valued on free cash flow, so I wouldn't mind pressing a little bit on your outlook. What I find interesting is that historically, free cash flow margins ran about 6-8 points higher than your operating margins. Your guidance suggests those two metrics are actually converging potentially over the next few years.
Mm-hmm.
I'd love to understand, like, wzat's happening in the business to cause that. Like, why wouldn't the terrific EBIT margin expansion convert?
Mm-hmm.
-higher free cash flow? If you could elaborate.
Sure. Yeah. One of the issues is cash taxes, right? R&D capitalization rules that have gone into effect mean that we are eating into our NOLs a bit quicker. Cash taxes are in the U.S. especially, are a big piece of that differential. Also inherent in the model, what you've historically seen is that billings and collections, because we bill up front, right, but we recognize revenue over the year, that has been a big increase in the relationship between free cash flow and operating margins. In the current environment, as growth has slowed a bit, that's also compressing more. You add that to the cash tax headwinds that we've seen, and that's what you've been seeing.
I feel really strongly about the fact that even with the FX and macro headwinds that we had in 2022, we still remained above 30% margins. We're increasing that margin guidance again in 2024. While it'll flatten for a year, we will absolutely continue to see margin expansion over time, as you've known us to do.
Hey, Michael Turrin, Wells Fargo. Thank you very much for hosting. Gina, I wanna go back to the long-term targets. You laid out three things that you mentioned at the beginning in the onset there. You've talked about currency a little bit, but just in terms of what you're assuming from an environment perspective.
Mm-hmm.
A lot of moving pieces. Is it a similar deal environment to what you're seeing today for the foreseeable future?
The tailwind that was added was generative AI. Is it fair to assume that would be incremental in terms of monetization and uplift, or how you're thinking about that in terms of the overall context?
Yeah. I've definitely built in, similar to what you saw us do in Q1, a bit more prudent guidance in the near term, given the current macro. Absolutely that is built into these targets as well. Generative AI and the opportunity that that continues to evolve towards could absolutely be incremental. It's why also I'm being a little bit cautious on the margin guidance as well, because we will continue. We're a growth company first and foremost, we will continue to invest in areas where we think we can accelerate growth on the top line, and generative AI is clearly one of those areas. Absolutely we think that that could be potential upside.
Hey, guys. Alex Zukin here from Wolfe Research. Congrats on a great day, great show, great conference. I wanna ask the same question at a higher altitude. I think it's good to hear and see the confidence interval and the vector about we're gonna monetize this. It's not, you know, it's not table stakes. It's not free. I think one of the issues everybody's struggling with is what does that mean in the sense that if it's more people going to ITSM Pro from the starting point, makes sense. If it's people within ITSM Pro that you can add this on top of, also makes sense.
The bigger picture is this is such a transition, such a foundational change, and it kinda hearkens back to what I think you guys were talking about at the main keynote, where the entire company was built around this premise of injecting efficiency and automation. It's a system of record for workflows. When you make those workflows better, that unlocks tremendous value for the customer. The amount of value that you can unlock for a customer seems to be a lot more than taking them to ITSM Pro. If in the future, whether it's IBM or Goldman or others saying that we're gonna have 30% less white-collar jobs, and everybody's in ITSM Pro, what's next after ITSM Pro?
Any kinda more, I would say, very specific tactical color on the longer arc of both monetization, but also how much does a kinda customer accept where it feels like this is more of a UX than a new feature, and you haven't seen as much customer willingness to pay for UX transformations?
Is that for me?
Well, I think we can all have a piece of this one.
Yeah. All right. Alex, first of all, as last year, as Financial Analyst Day, we have for every product line, including industry product where Gina shared the ASP uplift we are getting, you have Standard, Pro, and Enterprise. There is an Enterprise offering as well in addition to Pro. When given a choice, a lot of customers that Gina showed in the numbers try to go with Pro, especially our new customers. Existing customers at the renewal time, we'll take them to ITSM Pro. Let's just talk about ITSM for a second. We are the market leader in terms of R&D investments in that specific product and the platform by which, whether it's the largest banks, manufacturing companies or governments, Bill mentioned United States Army and a few others, they all run on ServiceNow.
It is a platform play, not looking at a point solution that is cheaper, this and that, because there is so much R&D. The incident management, change management, problem management, I'm gonna get specifics on ITSM or request management, that in itself is an automation, but at an enterprise-wide level. That's what we have been selling since we said, "Hey, this is ITSM specific use case on standard." Then we said, "Okay, ITSM Pro is a 50% uplift on the price from a list price perspective. Then ITSM Enterprise is another 50% uplift to ITSM Pro." We have been running that play.
If you want to go to ITSM Enterprise, you have to go through that path of ITSM Pro, unless you're a new customer who may just go with ITSM Enterprise, and you'll hear from one of them tomorrow on how they are leveraging our workforce optimization and other. We have constantly focused on the optimization and automation angle. Now with GenAI, specifically, if all of a sudden there is 60%-80% value uplift, as you call out, I feel very comfortable because they are getting the value, charging X% of that like we did with ITSM Pro. That will be a add-on. Right now, that's what we are thinking. We are launching it in Vancouver release, which is in September, four months from now.
It will be an add-on SKU that you can use it with Pro, or you can use it with Enterprise, or you can use it with Standard, and that will take off that acceleration in terms of that. Now, what does that do to current Pro trajectory, current Enterprise trajectory? Of course, we have models in place, but I feel pretty good about we won't be giving you this long range plans. As Gina told Kash, it was related to the currency and other things more than the underlying business and just few quarters out. I feel pretty comfortable on how that mechanics between Standard, Pro and Enterprise, whether it's ITSM or CSM or HR, will work out. That's where I have conviction because I have consistently, almost obsessively, noticed it in 2019, 2020, 2021, 2022, and Q1 of 2023.
Last data point, even with GenAI out and everything, in Q1 of 2023, when you look at ITSM business that we generated in Q1, which was very decent, Bill talked about a number of deals ITSM was in. When you combine Pro plus Enterprise, that as a % of total of ITSM was the highest in Q1 of 2023.
Thank you. Tyler Radke from Citi. AI question. Just kidding. wanted to actually ask you about the buyback, because obviously, you know, it's the first buyback for the company. Oftentimes that's something companies do as they approach a more mature growth stage, but obviously $20 billion, you still have big growth aspirations. Can you just talk about how we should view the buyback, what it means for M&A, and then any type of long-term framework you're thinking about in terms of capital return, upping the buyback as a % of free cash flow or operating cash flow?
Perfect. Yeah. I'm not surprised at all at this question. No, I'm kidding. Listen, I think we have consistently and always been really focused on driving exceptional shareholder returns, right? We've done that historically through incredible organic innovation and investment. We've done that through selective amazing M&A, smaller tuck-ins, but pretty incredible M&A. Look at what we've done with AI already. As well as really just how we think about and how we run the business inherently from a leverage perspective. You will continue to see us always focused on driving exceptional shareholder return. With our growing cash and free cash flow generation, it seemed like the right time now because we have plenty of cash to continue to invest in that incredible organic innovation to utilize share buybacks as another lever in driving shareholder growth and shareholder returns.
How we think about M&A will not change. We will absolutely consider and can still do M&A with our cash balances. We will absolutely think about always driving pretty incredible shareholder returns. Capital allocation is, as a CFO, one of my main jobs that I'm always looking at really driving. If you're asking me also what the long-term strategy is for buybacks, we're not committing to anything else long term at this point in time. For us, it's really about maintaining the flexibility to drive organic and inorganic investment as we've always done, while at the same time really utilizing all the levers we have to drive exceptional shareholder returns and shareholder value. You'll continue to see us look at capital allocation always on a regular basis to help drive the best share returns. We're a growth company first and foremost.
That's who we are. That's always gonna be our first priority for investment.
Thank you. Mark Murphy with JPMorgan. In recent quarters, you've announced a number of very large observability wins, I believe with Fortune 500 type companies, often you've been replacing an incumbent. Can you speak to the size of those transactions? I'm trying to understand if you're getting the entire account or just kind of wedging a toe in the door. What is it that is getting those across the finish line? That's an area where you do actually have modern incumbents that have been, you know, working for a long time on solving all those problems around monitoring and metrics and traces and logs.
Mark, looking forward to seeing you next week as well. First question I'll address is, after Q4, Bill and Gina announced that we won in Fortune 103 specific large deals, Fortune, related to observability. The team started with tracing, then they added metrics, and then they are adding logs, which will go live from a cloud observability standpoint in late summer timeframe, around July, August is what we are looking at. That's number 1. Initial wins have been in cloud-native companies. When ServiceNow started, you know, selling this observability solution that went into ServiceNow install base, and we are in the early innings.
A lot of times they were new use cases, but just recently, as Paul will share you, that we have competed with all the observability solutions and one UK firm, just recently a US firm, where we are displacing an incumbent and using LightStep Observability from ServiceNow Cloud Observability. Once logging is part of the platform and we have metrics, tracing and logging, then Paul and the go-to-market team have a systematic plan to scale that business over the next 2-3 years. Initially it was net new cloud-native workload. Recently, we have displaced a couple of incumbents. Over time, we are gonna go for higher ASP.
The, the deals are definitely material. I'm not gonna share the exact numbers, but as someone who scrutinizes the deals very obsessively, they're material. Active displacements. An active compete against an incumbent where we've displaced them. Typically we've displaced them because the organization that we're selling to buys into the Better Together ServiceNow strategy. Ultimately, they wanna start seeing everything that CJ just described from a product roadmap perspective, intimately linked into a system of action and a system of engagement in terms of it's great that you've got all this data, but what are you then doing to action it once something shows up in terms of the cascade that follows from that.
You know, we've got very, very clear models around propensity to buy, and we know where our sweet spot is. The sweet spot isn't necessarily just in cloud native, you know, with a green space. It's in, we feel confident about displacing some organizations where we are cross-selling from a strong ServiceNow base already.
Thanks for taking my question. Derek Wood at TD Cowen. I had a chance to talk to a lot of partners on the floor, and one thing that came up pretty frequently was customer workflows and CSM, and really surprised to hear how often people were talking about it and how strategic it was in connecting back office with front office, and really being the critical piece of industry workflows and really in helping engage at the business level, not just the IT level. It really seems to be a strategic piece of the portfolio, I'm curious, are companies starting to look at you guys as more transformational in the front office? If so, how does that help amplify wallet share and kind of competitive positioning?
It's very gratifying to hear that, so thank you. I'm really glad that the partners are saying that because it's exactly what I see in the field every single day. If you just look at the data, whether it's new logos or incremental ACV in our existing accounts, a very significant proportion of that is now customer workflows and customer success management. Whether it's traditional case management or some of the B to B to C examples that, CJ, you're gonna be sharing and that we've already talked about, you know, in other forums. It's very, very significant for us, and I think you heard that from the likes of Siemens Healthineers today, right? One of the world's largest global brands.
That journey where we already have a very, very strong position in terms of IT, in terms of service management, and then continuing that steel thread through in terms of how do I then use that to manage my customers and my wider ecosystem, is a motion that we see in many, many other customers in addition to Siemens. What is also very, very gratifying is the number of new logo lands that we also see where customers land directly with ServiceNow for customer success management, either as a replacement of an existing technology in that space or because they're now solving the problems in a more sophisticated way than they have before. It's something that you're gonna see a lot more of, and I'm hoping the partners are gonna be raving about it even more in the future.
you heard me say earlier that it'll be a billion-dollar business in the next year, so clearly becoming much more strategic with our customers.
When you talk about these little tactics on pricing in certain aspects, you have to seriously offset that with the fact that we're playing at the C-level across companies now. This isn't just like a land and expand. We're playing at the C-level across all the personas and all the geos and all the industries with all the partners with the biggest brands in the world. I think the challenge for everybody, it was our challenge with the customer, is to get them to open their mind as to the true potential of this platform. When you see what we're doing, not just in the ITSM category, but the employee experience, Customer Service Management, ERP modernization, the creative workflow, the platform itself. The TAM CJ put up there is $220 billion.
I mean, you don't have to stretch your imagination too far. If the customers that do business with you love you, they're likely to consolidate some of those point solutions because they want you to win. We're seeing in Customer Service Management, in particular, the talent we brought into this company is quite amazing on the engineering and the go-to-market level. I think you should feel very confident that that is a hockey stick.
Hi. Joel Fishbein from Truist. Gina, thank you so much for giving us the look at, you know, there's a 7x opportunity in your top 200, you know, plus, you know, accounts-
Yes.
Which is really good. I guess the question is more for Paul. Where's the money coming from? 'Cause obviously that's not net new spend, I know you're talking about consolidating vendors. Can you be a little more specific and give us some more granular?
Yeah.
about where those dollars are gonna be coming from? Thank you.
Absolutely. It's a great question. Thank you. It is because I think we see in those customers, often those customers could be, again, you know, we saw two perfect examples, you know, earlier today in terms of they might have seen tremendous success in core service management, IT Service Management, then expanding that into IT Operations Management, so it's now, you know, AI-driven service ops. We may not yet have really, truly landed meaningfully for them in terms of their customer workflows. We might be being the system of engagement and system of interaction sitting atop their systems of record in HR, and now they're using ServiceNow across that piece. There is in every single one of the 200 plus marquee accounts that we've got, there is a very meaningful conversation still to be had.
They might be doing ITSM and IT Operations Management, how do we extend that into Customer Service Management? How do we extend that into HR service delivery? There are so many different paths, thanks to the organic innovation that's in the platform, that we can take in that customer base. I have 0 doubt about the TAM that is in those 200 marquee accounts. For me, the challenge is all about focus and marshaling the right resources in our go-to-market organization, which is why we created the marquee business in the first place, to bring together the best and the brightest within ServiceNow from a solution consulting and engineering and go-to-market perspective to make sure that we appropriately address that TAM 'cause it's absolutely there.
Thank you, everybody. We have time for one final question.
Great. Thanks. Brad Sills from BofA Securities. When you think about the possibilities for ServiceNow platform, it's just, it's limitless. I mean, you started with ITSM, then you went into, you know, HR onboarding and field service management. There just, there's so many possibilities. How do you guys evaluate where to go next? I mean, asset management is the latest. Procurement's another one. What's the evaluation process as to kind of how you guys point your resources in launching some of these packaged applications? Obviously, there's Creator so the partners can build some of this themselves. Maybe that's where this is coming from, but curious to get your perspective on that process. Thank you.
Absolutely. It's a great question, and something that we take very seriously, which is about portfolio and personnel allocation, because there are never enough engineers to build any product. As I was sharing in my remarks, one of the things we look at is typically our customers have taken our platform there. They have tried to do something in the ERP space, or they were the one who did HR helpdesk on ServiceNow back in 2013, 2014. Or they use ServiceNow in the B2B context for customer service. We see, okay, you're using ServiceNow platform in this creative way. Is this something we should productize? We will get this inbound request that, okay, these are 20 things that we can productize. My framework has been pretty simple and consistent. Is what problems we are solving for our customers.
We understand that, say, a procurement operations, as you saw. What is the size of the price and why now? Then we put that side by side because Pablo can even invest more in ITOM or Cloud Observability, whereas John Ball, who is a pioneer in customer service, says, "Hey, CJ, I can create vertical specific solution for healthcare for direct to patient." Then we say, "Hey, what is the size of the price? Is this a $100 billion business in three years or a $1 billion in five years?" If we believe that we have conviction and the pain point is large enough, that's when we invest. Sometimes we don't invest so that we take out all the risk. We make bets. If the bets don't work out, that's okay, but there are enough other bets in play that it works out.
This portfolio allocation, we do summer strategy at every single product level, including the long-range plan. Paul does it at go-to-market level, and Gina puts all the things together between sales, marketing, and products. Then we say, "Here is how we are gonna plan for the enterprise for the next three years.
Thank you. I think that's it.
Yep.
Thank you everyone so much for joining us. We'll see you in a bit.
For those of you with additional questions, please join our leaders at SUSHI SAMBA for a reception immediately following today's program. Thank you.