Please welcome from ServiceNow, Finance and Investor Relations, Jimmy Sexton.
Good afternoon, everyone. My name is Jimmy Sexton. I work in investor relations here at ServiceNow. We're super excited to have you guys here at our Annual Financial Analyst Day and Knowledge18. We think we have a great show in store for you today. Really, the theme around today's event revolves around this concept of building an enduring company. You've heard us mention this term quite frequently over the last year or so. We're excited to dig in a little bit and show you exactly what we mean. Couple of housekeeping items before we get started. First, we may make forward-looking statements. These statements may include risks, uncertainties, and assumptions. All of these risks, uncertainties, and assumptions can be found in our most recent 10-K. Secondly, we'll be posting this deck on our investor relations website following the close of the program.
Now let's jump to the agenda. First, we have the opportunity to hear from our President and Chief Executive Officer, John Donahoe. He'll discuss purpose, strategy, and culture. His priorities going forward to build ServiceNow into an enduring company. Second, you'll hear from our Chief Product Officer, CJ Desai. CJ runs product, technology, and operations for us. He'll give you a look inside the product organization and how we're innovating and how he's viewing roadmap and development going forward. We'll take a quick 20-minute break. After the break, we have the opportunity to hear from a great customer and partner, Deloitte. From Deloitte, we have Mr. Dan Slocar, Partner and Global ServiceNow Alliance Lead, and Deloitte's Chief Information Officer, Mr. Steven Mansfield. This will be a fireside chat moderated by our Chief Revenue Officer, Mr. David Schneider.
We get to hear from our Chief Financial Officer, Mr. Michael Scarpelli. He'll come up, talk about our recent performance, how we're viewing the market opportunity going forward. The initiatives that we're investing in to drive sustainable growth, and how these initiatives are impacting our financial model. Lastly, we'll invite the executives back on stage to host a Q&A session to close out the day. Quick reminder, following that Q&A, you can stick around for cocktails for about an hour. We'll be mingling and answering any questions you may have. With that, I'd like to invite up our President and Chief Executive Officer, Mr. John Donahoe.
Great. Thanks, Frank.
Thanks.
Good afternoon, everyone, and thanks for coming out today and for those that are going to stay for the week, coming out for the week. I'm about 13 months in to ServiceNow. I think I stood here last year with my mindset, "Don't screw it up." As I said last year, this company had such positive momentum that it was a real honor to be able to join it. Over the last year, as I've said to you in various settings, I've been doing a lot of listening and a lot of learning, primarily to our customers, but to everyone around the ecosystem. We've also taken a lot of action and actually gotten a fair amount done this year.
Some of which show up in this year's results, but a lot of which I view as putting the foundation in to get ready for several years of growth and success. I thought I'd just start. We have three members of our board of directors here, Paul Chamberlain, Sue Bostrom, and Ron Codd. Please raise your hands. How about giving them an applause? They're our board of directors. They represent our shareholders. I thought I'd just start with the slide I used with our board when I interviewed for this job. It was the first slide. I'd gotten to know Frank and Fred and a couple board members, and I was coming to interview. This was the first slide I used.
I said, "This would be my aspiration for ServiceNow if I were to join, and I want to make sure that it's what you, the board, want. My aspiration would be that we have an opportunity to build a great enduring company, a built-to-last company. That we have the opportunity to be not just a leader in IT software, but the clear leader in enterprise software and be part of the generation of companies that redefine what enterprise software is. I know we're talking about $4 billion, but I'd want to have the ambition that we get to $15 billion in revenue. I know we're talking about we were $15 billion of market cap at the time. We want to talk about doubling it, but really our aspiration would be to be a $100 billion market cap company.
If we're going to be a great enduring company, we need to be widely respected and admired by our customers, by our employees, by our alumni, by the communities in which we operate, and we have to be a great place to work." I said simply to the board, "If your aspiration is just to sell the company, please don't hire me, because that's not why I would join. That's your right, responsibility. Obviously, if you get an incredible offer for the company, we'd have to respond. If your aspiration is this, I am all in." I will tell you, Fred Luddy, starting with Fred and Frank and the entire board are all in for this aspiration. We have the ambition to build a great company.
A great company in the tradition of many other great enterprise companies, but not a lot of new ones created over the last 10 years. With that aspiration, as I've mentioned, I've met with over 500, probably about 600 customers now around the world over the last year. It's been awesome. I've sat down with CIOs and chief technology officers and chief financial officers, and I've asked them about, what are your priorities? How are we doing as a company? What are we doing well? Where do we need to get better? It's been wonderful. I will tell you what I've been surprised at, however, is the stunning consistency of what I hear. Let me just summarize briefly. Every company in the world, I swear to God, 95% of the companies have declared they're doing a digital transformation.
Simply put, software is disrupting every company in every industry, in every geography. I can be in Japan or Germany or New Jersey. I hear the same thing. CEOs are saying, "I'm being disrupted by software, so instead of being on defense, I need to go on offense, and I need to more digitally connect with my customers. I need to digitally connect with my employees, provide a better digital experience, and I need to use digital technology to transform how we operate. So I take all the complexity of running a global enterprise out and invest our scarce capital, our scarce resources, our scarce talent on innovating for our customers, not on dealing with the complexity of running a global company." All across I hear the digital transformation, and what's clear, even in the year, I would say, it's gone from being a buzzword to a necessity.
Chief executives understand it's a necessity. Second thing, as a result of that, everybody's embracing cloud. You can't drive a digital transformation without embracing cloud, because simply put, you can't drive great customer experiences, great digital experiences, and drive the kind of productivity that's possible without cloud. They're embracing cloud at the infrastructure level, either public cloud, hybrid cloud, private cloud, and they're embracing cloud at the software level. That leads to the third thing I've heard. ServiceNow is rapidly becoming one of their core strategic cloud-based software platforms. Here's the kind of things I'm hearing over and over. "We started using you for IT and for ITSM and for ticketing, but man, your platform is quite powerful, and we're now using your platform across the enterprise. Your platform is sort of the connective tissue.
The platform of platforms that allow us to drive workflows across the enterprise. You're becoming more and more strategic to what we do, both within IT and how we run our business." That message has been coming through loud and clear and quite consistently. Now, if that's what I've heard, let me just give you a little editorial on top. What do I think after a year? One is the cloud tailwind is powerful, and it's in its early days. It reminds me a little bit of, you remember when the internet came out? This kind of new thing, and the internet was the thing that kept on giving and giving. I was at eBay, right? I was running eBay when the iPhone came out, and in the first couple of years, we thought our eBay mobile apps and PayPal mobile apps were awesome.
Well, it turned out this mobile thing was a very powerful force. Mobile has been a transformational thing that's driven tremendous growth in the consumer world. Cloud reminds me of mobile. I think cloud is the next mobile, and I think we're still in the early days. I see even the later industries adopting cloud, right? Early on, out of necessity, media had to do it, tech had to do it, consumer products had to do it. Now financial services have thought, "Oh, I can't do it for compliance reasons," now realize cloud's safer. Governments are embracing cloud aggressively. Utilities are embracing cloud. Oil and gas is embracing cloud. I think cloud is still in its early days, and I'm quite cognizant that we're enjoying a nice tailwind, and I think that tailwind's going to be here for a while. We have to capitalize on it.
Which leads me to the second observation. Our opportunity is enormous. One of the things I like about our opportunity is it sort of defies convention a little bit. Mike's going to show you later that a third of our growth is using software where software wasn't being used before. Probably the best way to define our market is just workflow inside the company. Mike and I asked one of the banks to do an analysis that said, "Can you create the TAM of all workflow in an enterprise? All manual workflow, all unstructured workflow. How big would that be?" What was it, Mike? It was like half a trillion dollars. Great, we'll cut that by half. What's happening, and it's happening organically with our platform, is our platform's getting pulled in places to automate workflow. Often it's unstructured workflow.
Great example of that CJ will probably touch on, is the onboarding experience. Onboarding is a classic, unstructured, multifunctional workflow. You put ServiceNow technology on it, and you're connecting various departments, you're connecting multiple systems, right? You're connecting ADP and Workday and Concur and all the financial systems and legal systems, and making it one seamless experience for the employee. Our opportunity is enormous. We feel that from our customers, and we see that ourselves. The third thing is, we confront that we are committed to trying to build an enduring company, a company that sustains and drives great success for customers for many years to come. Develops great employees and leaders for many years to come, and drives the kind of returns for shareholders that you can count on for the long term.
Let me spend a little time on this last point of building a great company. I've been a student of this for most of my career. At Bain, I used to watch what great companies were. At eBay, it's sort of what we tried to do, build an enduring company. My observation is that enduring companies have four characteristics. One, they're purpose-driven. Think of almost every great company you know, it's purpose-driven. Two, they innovate and they execute. The media writes about innovation, but if you ask what makes Nike extraordinary, Starbucks extraordinary, Southwest Airlines extraordinary, Amazon extraordinary, Apple extraordinary, I'd say their execution is outstanding. Third, they invest in talent. They don't treat their employees as fungible resources. They invest in talent. They build their teams. All those companies I just mentioned have amazing continuity of leadership. They attract and develop leaders.
Last, they exhibit the will to fight, the will to win. This is a Jim Collins phrase. Jim's the one that described this, who's obviously written about "Built to Last" companies, that they aren't afraid of adversity, and they understand that it's one thing when everything's going up and to the right, where you become great. It's when you confront adversity. With these four characteristics, I think all companies need to answer three simple questions. I call them the why, the what, and the how. The why questions are the fundamental ones. Why do we exist? Why should someone want to work here? Why should someone go the extra mile and care? That's about purpose. The what questions are, what are my products and services? What are the target customer segments I'm trying to serve? What is our business model? That's strategy.
The how questions are, how are we going to behave? How are we going to operate as an organization, as a team? How are we going to bring our purpose and our culture to life? That's about culture. I would argue great companies, highly successful companies, have real clarity in these three things. I want to spend a few minutes talking about how we're embracing purpose, strategy, and culture. Let's start with purpose. I happen to sit on the Nike board. Nike is a purpose-driven company. Their purpose, quite clearly, is to bring inspiration and innovation to every athlete, asterisk, in the world. The asterisk is, if you have a body, you are an athlete. Now, you note this is not just do it. It's not the marketing campaign. It's fundamental to who they are and what they believe.
It gives them that ongoing clarity and inspiration and commitment to innovate continuously. Some of the new companies have embraced purpose in a fundamental way. This is Airbnb. To make people around the world feel like they belong anywhere. As we thought about our purpose as a company, the good news is our founder, Fred Luddy, gave us a wonderful starting point. This is a quote that Fred gave when he first founded the company. "When I started ServiceNow in 2004, my vision was to build a cloud-based platform that would enable regular people to route work effectively through an enterprise." Note regular people, and he founded an enterprise-wide platform. He put IT on after he founded the company. I think most of you know the history is Fred created a platform that he viewed to be enterprise-wide, workflows enterprise-wide.
Turns out it was really hard to sell a platform back then. He said, "Oh, I got to put an application on." Because he had previously worked at Peregrine Systems, he picked ITSM. Boom, the company took off. We sort of became known as the IT company or ITSM company, when in fact, our origins were as a platform company. Over the past several months, we've been engaging in, all right, how do we bring our purpose into today's world? The more we've sort of talked to our customers and people around the company about it, the more interesting it becomes because we are right at the core of some of the fundamental issues of our era. Namely, the future of work. Right?
You're reading a lot about the future of work. I would assert that technology is going to change the experience at work more in the next 3-5 years than it has in the last 20. Our platform's right at the center of enabling the future of work. You can call it consumerize the enterprise, or you can call it unleash the organization. We're also right at the center of some of the fundamental dilemmas and debates around automation. Right? There are a lot of people out there saying, "Is the goal of automation to eliminate all the jobs and get rid of all the humans?" I think some people believe that. Or is the role of automation to enhance the quality of our lives? As a company, we felt like, you know what?
We strongly embrace being in helping to drive the future of work. We will face up to some of the dilemmas and controversies around it. We want to put a stake in the ground. We created a series of statements, beliefs. We call this our internal manifesto. It's as follows. We believe that work matters. It's where we spend a third of our lives. It shapes who we are, how we feel, and how we interact with the world. We must create great work experiences. Experiences that bring out the very best in us, because when we're at our best, we make everything and everyone around us better. Our jobs, our coworkers, and our employers benefit. Our lives benefit even more. Making the world of work work better for people, we make the world work better too.
With that set of statements, we've simplified a simple purpose statement for ServiceNow, and that's, we make the world of work better for people. In saying this, there's two statements in here. One, the world of work is about the future of work and a belief and a commitment that we can help drive and enable the future of work. I would argue our platform will have a bigger impact on the future of work than any other software platform out there because we're not functional software. We're, by definition, workflow software across the enterprise. Work better for people is a value statement. Those of you that have met Fred Luddy knows the regular people. We believe it's technology and service of people. Yeah, we make automation software, but our automation software is not there to eliminate all the jobs.
Our automation software is there to take the 30%-40% of what all of us do in our jobs that's redundant, administrative, repetitive, frustrating, and automate that so that you can spend the other 60% and turn that 60 to 100 on leveraging your creativity and doing more value-added things. That's our purpose. You see that purpose reflected in our brand expression, a more human-centric brand expression. Now some of you may think, "Well, purpose is this airy-fairy stuff. It's fluffy." I don't believe that. I had the privilege of sitting on Intel's board. Intel's a pretty kickass company. It's a purpose-driven company. I'm on Nike's board. It's a purpose-driven company. I think if you look at the top-performing companies, they have a clear sense of purpose, and purpose is why many of their employees join there and stay there.
We're making a statement and investment in our purpose. It's one piece of our equation. All right. That's a little bit about why. I will tell you, actually, we've rolled this purpose out across the company. Employees are resonating enormously. When I talk to customers about the purpose, I was having a conversation with the CIO of one of the top 20 Fortune companies. We were having a nice conversation. They're a customer. I talk about our aspiration to build a great company, and I talk about our purpose. He lights up. He says, "Oh, yeah, we're a purpose-driven company," as almost every one of the top companies are. "The fact that you intend to be here for the long term and are purpose-driven makes me think about you a little bit differently.
To be honest, I've been sort of thinking about you as you're just one more software vendor that'll probably sell yourself to somewhere down the road. You're short-term in your focus. Now that I hear this aspiration, you're the kind of company we want to partner with." I think this purpose is not irrelevant to the outside world. Let's talk about the what our strategy is. In simplest terms, strategy's about priorities, and we've got 4 priorities that fall directly out of our customer conversations. First priority, build great products and platform. That's the foundation of what we do. It's our number one investment priority, and we are not going to lose sight around our products, our platform, and innovation. I'll come back to that, and then CJ will talk more about it. Two, build customer success.
I view customer success as the next natural extension of our world-class go-to-market motion. Third, grow our talent. We need to expand our talent into different areas, grow it globally around the world, and build an organization and a culture where we're growing the skills we need for the next step and the next step. When you're fast growth, you're always trying to stay ahead of the curve of the skill sets and capabilities required to get to the next stage. Last but not least, establishing our company brand. Our products are well-known by the decision-makers who decide, but I would argue our company is one of the best-kept secrets out there. Let me just touch briefly on each of these. Let's start with our products and our platform. CJ will go through this in more detail.
As I've mentioned on a couple earnings calls, last summer, CJ and I were both sort of new to the company. He had joined two or three months before me. We both had a little bit of the same reaction, which is, "Okay, we got this $4 billion goal that's out there. Can we get there with our existing products, or do we have a big gap?" CJ led a process with each of our product managers where they built three-year plans, three-year strategies, if you will. It was a very useful exercise. I will tell you that it is a reasonable assumption that we can get to $4 billion with our existing product set. Frankly, I think all of us, CJ, me, Dave, Mike, we all were a little surprised on that.
Doesn't mean we don't want to develop new products, relative to other businesses I've seen, this company, this platform, has wonderful organic growth opportunity. CJ will go in more detail around what we're doing, but my top priority is to invest as much as I can in our platform and in our products. In fact, the dialogue CJ and I are having is how do we expand our capacity to innovate more and invest more? A small example CJ will talk about is in addition to investing in our platform, in addition to investing in our products, we've created this NowX, which is simply an incubator, which is a formal place where we develop the next applications.
What's happening is we're getting hundreds of ideas of where we should build our next applications from our customers who are saying, "Hey, could you build a facilities product?" Or, "Could you build a legal product?" Or, "Man, financial closed the books. Could you build an IoT product?" The NowX, their job is to take all those ideas and get us into a motion where we're launching one to two new products a year, starting in 2019 and beyond. This is our top investment priority. CJ will demonstrate or share with you some of our approach and our progress in a minute. Go-to-market. I think one of the real historical strengths of this company is how we've evolved our go-to-market motion. Dave Schneider and Kevin Haverty and our team deserve enormous credit for this. Today everyone sees, wow, you've got a world-class go-to-market team, sales team.
As Dave points out to me frequently, that it wasn't always that way. We had account reps, then we added SCs, then when we added Inspire to become a lot more strategic, then we added product line specialists when we added the various products, then we added some vertical people. This is what's enabled our go-to-market team to be able to sell more and more effectively, more senior and more broadly. Customer success comes out of the top area I hear our customers asking us to raise our game. What they're basically saying is, "I love your product. I love your platform. Can you just make it easier for us to get the value out of it?" They're saying, "You're now a strategic platform, so I want to know your best practices. What are the best practices? Be more prescriptive to us.
Don't be a passive software supplier. Be a prescriptive partner in telling us how to get maximum value out of ServiceNow. Can you help us stay more current, stay on the upgrades?" They're asking for us to play a more strategic role with them. Customer success, when you hear us investing in customer success, is to do just that. It's to work with our partners and of having a certified ecosystem of trained ServiceNow professionals in the partner ecosystem, at an Accenture, at a Deloitte, at a KPMG, at a DXC, at an IBM. One of the top issues when I travel around the world is they're not enough trained ServiceNow professionals in the partner ecosystem. How do we provide better capabilities to identify our best practices and share them effectively with our customers and make upgrades easier and faster?
This is an important investment area. In that same 3-year plan we did last year, one of the things that was clear is 80% of our growth is going to come from expanding existing relationships. I view customer success is the go-to-market motion to help expand customer relationships. An important area of investment, an important area of opportunity for us to build the kind of scale strategic relationships we think we can get. A note, one quick note that's kind of interesting. We are appropriately proud when we show how many million-dollar customers we have or how many $5 million customers we have, or even a $20 million customer. 80% of those are spending two, three, four, $5 billion in IT.
If we in fact are one of their strategic platforms, strategic partner, if we deliver for them, if our platform and products help them drive economic value, which I believe we do, growing the size of our relationships is something that I believe is very possible and can happen in a natural, healthy, and sustainable way. That's what this is about. We want to be the trusted technology partner for our customers, one of the few trusted technology partners. Talent. Let me just touch on talent for a minute. I'm blessed and thrilled with a strong leadership team. In many ways, this reflects what's going on inside of our company today. You'll note that we have people who have long and strong experience at ServiceNow. Mike, who's been here for what, Mike, six, seven years? Since the company went public.
Dave Schneider, Rob Specker, Dave Wright, people that have known this company, been part of building it, and are excited about its future. We have a group of people that are deeply grounded in enterprise software and reasonably new to the company. CJ. CJ's been here now, what, 15 months? Dan Rogers, our Chief Marketing Officer, strong enterprise. Man, is that guy a strong enterprise CMO. Chris Bedi, our CIO, who's a very strategic CIO. We're adding a group of people who have been to growing scale companies, but maybe bring a consumer genetic to the company. I put myself in that category. Our new Chief Talent Officer, Pat Wadors, our new Chief Communications and Brand Officer. All the brand work you're seeing here, that's Alan Marks. He's worked at Nike. I recruited him out of Nike, and he was with me for a decade at eBay.
What we're working to do is provide the alchemy of skills and capabilities necessary so that we can achieve that vision. Under the surface, we're investing heavily in ensuring we get the right talent in the right places. We build the kind of development and training programs that are going to be necessary, and we retain that talent and grow it. Which I've learned in my career, the one thing you can't overcome is not having the right talent. We have to have great engineering, product, and design talent. We have to have great sales talent, and we have to have strong talent across the organization. Strong commitment to that. Last but not least, company brand. I want to be very clear and specific here. Product brand is what decision-makers focus on. What are the product attributes? We're strong at that.
Certainly, IT knows about ServiceNow and increasingly HR, customer support, security. Company brand is more focused on employees. It's more focused on recruits. In our case, it's focused on C-suite air cover. If you think about it, take a company like Cisco. Everyone's heard of Cisco, but most people have no idea what they make. Right? I think Marc's done a nice job at Salesforce, Benioff. Everyone's heard of Salesforce. It stands for something. Most people actually don't know what their software does. In the talent wars and then getting C-suite coverage, having a company brand matters, and it's just never been an area of investment or priority for ServiceNow. It starts with having a clear purpose. Company brands are often purpose-driven. What does the company stand for? When you watch TV, that's what you see.
We now, with the purpose, we see us having a new brand identity, and we'll begin to invest in our company brand. We're not going to be doing anything bold or rash. We're not going to be building buildings or sports arenas or sponsoring great big things, but we're just going to begin to thoughtfully test and learn a way into elevating our company brand a little bit, right? Actually, our customers are asking for it. Our employees are definitely asking for it. It helps inside the C-suite. Those are the areas that we are prioritizing and investing. Our product and our platform, customer success as our go-to-market motion, our talent, and our company brand. We feel like we have an opportunity of wherever we can invest intelligently, we want to do it because the opportunity is so significant for us.
Let me just wrap up by talking a little bit about the phases and how we're thinking about them. I don't know, Mike, if we talked about phase 1, phase 2, phase 3, phase 4, and this in the past. I learned this from Frank, the first time I met Frank. Okay. Frank talked about phase 1, 0 to $100 million. It's all about product market fit. You try to find the lightning in a bottle. Very few companies achieve that. It's often founder-driven, product-driven, and you're looking for that product market fit. For the very few enterprise software companies, phase 2 is when you've got product market fit and you want to scale it while that window's open. As Frank said so eloquently, it's a different kind of leadership style. It's about execution and discipline and focus.
You want to scale it while that opportunity's there. Don't get distracted. For the very few enterprise software companies that get to $1 billion, phase 3 is $1 billion-$5 billion, $4 billion-$5 billion. That's as different from phase 2 as phase 1 is from phase 2. Phase 3 is how do you go from one product to multi-products? How do you go from being one geography to going global? How do you expand your talent so you've got the skills to grow sustainably? How do you begin to establish company brand? Frank did an extraordinary job of taking ServiceNow through phase 1 and phase 2 and setting us up into phase 3. I and our team are very focused on executing during phase 3 to get to our $4 billion goal. We're increasingly confident we can get to our $4 billion goal.
The investments we're making, we believe will enable us to do that, we're also crystal clear we have a lot of execution to do, this is a company that executes well, we want to keep executing well. 99% of our organizational energy is on executing on the opportunity in front of us. Increasingly, me, Mike, CJ, Dave, our board, we're beginning to look at beyond phase 3. We're looking beyond $4 billion. We're looking to $10 billion. Phase 4. How can we be doing the things now that enable us to get to $10 billion?
I am crystal clear, we keep saying to our organization, "You can't get to $10 until you get to $4." The investments we're making and the focus on our products and our platform with our existing products and platform, executing on customer success, building our team, and beginning to build our brand are the right things for phase 3 to get to $4 billion, but they also set us up for phase 4. Now we're beginning to ask some of these questions. Lara Caimi, who's right here. Lara, raise your hand. I've hired Lara, who is from Bain. She is now our Chief Strategy Officer. By the way, she is another one of the people that came in in that third bucket, along with Alan and Pat. First time we've ever had a strategy function.
Lara spent her career in enterprise software, covering enterprise software, serving enterprise software. She's leading a process with the senior team, with the board. We're beginning to look beyond $4 billion around how are customer needs going to evolve? In a machine learning, AI-centric world, how will work be done differently? We have all this organic opportunity in our platform. How do we think about what products we add next and how we extend our platform? We have a number of adjacent markets. Which adjacent markets do we want to prioritize? How should we leverage M&A? I think I've been pretty clear that we believe in the next 12 to 18 to 24 months, we have enough organic growth opportunity, job 1, 2, and 3 is to execute on that organic growth. We'll make tuck-in acquisitions.
When you begin thinking about how you get to $10 billion, you begin to say, "Well, we're going to have to be able to use M&A at some point to add additional engines for growth, complementary engines for growth." No active plans in the short term, but I just want you to know we're beginning to think about that when we think in a 3-5-7-year time horizon. How do we continue to attract the same talent? The reason I put this up is I would tell you that over the next 6, 12, 18 months, I intend to be spending 10%, 20%, 30% of my time, along with Mike and our board, on these topics to ensure we get there, while the rest of our organization's focused on executing on the opportunity in front of us.
Just to sum up before I turn it over to CJ. Our aspiration is to build an enduring company. I actually think that aspiration matters. We want to be a purpose-driven company. We have clarity in our purpose. We have a strong cloud tailwind behind us. The organic growth opportunity is as good as I've seen in my career. We need to live up to becoming a strategic partner for our customers and not just a software supplier. We're committed to doing that. We're investing in the areas that we want to invest in, that we believe will drive us to $4 billion. To be honest, we will want to continue to invest as much as we think we can in a healthy and responsible way while this opportunity is open. We're setting our sights at $4 billion and beyond.
We'll continue to be as transparent as we can about what we're learning along the way. I'm sure we'll make mistakes. There'll be new discoveries and new learnings. I believe I will just wrap up by saying I pinch myself a little bit, because I joined this company I wasn't sure a year ago. A year ago, I thought, "This seems like a great opportunity. It seems like an opportunity to take a business that has extraordinary potential and build it to the next level." A year in, I will tell you, I've enjoyed the last year as much or more than any year in my career. I feel with even more conviction today that the opportunity we have is real.
It gets me out of bed every morning to take advantage of that, to try to get up, work with one of the most enjoyable teams I've ever been part of, to take advantage of that and capitalize on it. With that, I'm going to ask the brains of our operation, the guy that builds the products and platform that drive everything else we do. CJ Desai is going to come up and talk about our products and our platform. All right, please welcome CJ.
Thank you. With that introduction, the bar is set so high, so I'm going to do my best here. As John talked about this, the fundamental thing here, we have many products, and even at this stage of the company, we have single platform. All the key technologies that these products leverage are built in this single platform, and that keeps the innovation engine going at a faster pace. If we have to create a brand-new product, if we decide that a specific workflow, just to give an example, around, say, maybe legal or marketing, if we want to create a product in that area, given that platform provides most of the services, it is a much easier task. Like John said, the harder task is which specific area we need to prioritize.
In visiting customers and speaking to them when they come to the EBC, the one thing that I hear is outside of the products that we have, our customers are using our platform in really creative ways. Some are just routine tasks like how many mobile phones we have, what's the usage billing, tracking parcels for a Royal Mail carrier, or it could be something as simple as a healthcare system. The point I'm trying to make here is that customers are using platform in a strategic way outside of the out-of-box products that we provide, that you saw on the previous slide, and making that platform as a key platform in how the work gets routed throughout the enterprise. When I speak to customers and I ask them, "Why? Why are you using this platform? What makes it interesting?
Besides using the ITSM or other products we have, what is it about the platform that you are building these applications on?" There are a few reasons, but if I have to say top two or three reasons is first, it's a cloud-based platform that can scale with the customer. Number 2, all the things such as analytics, machine learning, how they deliver user experiences, all of that is built in the platform. They have to just call those libraries or software, and they can make things happen. Things being built into the platform rather than in the vertical buckets of the applications makes it easier for them to create applications. In this multi-cloud world, ServiceNow is the right place where you can provide cloud-related services around your visibility, health of your infrastructure, and how you manage cloud through our platform.
What I constantly hear is that you have made all this innovation in the platform, and as John said, that's where Fred started, and the idea was if you build in the platform, it is a cloud platform. You can create workflows and route work through the enterprise. Here is that most of the times in speaking to customers, when they are trying to automate these business processes, these are complex business processes. That's exactly how this platform was designed, and that's what makes us very sticky, and for them to build applications on. Service intelligence. When we do analytics, this is not another add-on different platform, extract the data, experiences, and create a nice-looking UI. That's not enough unless you have fundamentally automated and optimized. Well, it took about 20-some years for it to get mass adoption. It's called system of record, ERP, HCM, supply chain planning.
Layer does, whether you have an on-prem, whether you have a cloud, or any other type of software investment, ServiceNow, given its architecture, focusing on the mobile apps and focusing on workflows that can be built quickly, that can span across the systems like I said before. We are investing in system of intelligence. Simply put, how can we leverage data? As you all know, data is the fuel for AI. How can we leverage data more and more, we are a SaaS company, and create optimization for our customers so they get even more value out of the investment they have made in ServiceNow? This is a simple framework I use. I say, "Okay, what's happening in system of record space?" We are in system of engagement.
We want to make sure that because of the data, can we provide customers even more optimization where it makes sense and continue to invest in those areas? John talked about phases, and I get asked this question, "CJ, what's your favorite product? Which product will become first $100 million, $500 million?" Don asks me that question all the time. Jimmy. I would say from a strategy standpoint, IT will always be our core. We will always invest in IT products throughout our phases. We have not taken our eye off the ball of IT, and we continue to invest in specific functions of IT that I'll touch in a second.
Number 2, the products as we have defined it in our presentation, which you call emerging products, Frank and the team invested that in phase 2, and we are in the early innings in phase 3. These are big markets, CSM, HR, security. These are big markets. We launched this product just a few quarters ago, and you're seeing the results. They are all growing nicely, but they were invested in phase 2 so that we can have benefits out of those products for our customers in phase 3. Given that we are in phase 3 today, the current investment is looking at phase 4 products. What's beyond 2020? What do we need to invest? What are the customers telling us? What are the trends that we need to capitalize on?
Again, keeping a simple principle in mind, we need to deliver great experiences so that our customers get value out of their investment. That's the mental model, is IT will always be core. We'll continue to invest in emerging products as the use cases become mature. For phase 4 products, we have started prioritizing, as John said, with the incubation unit. When you have multi-product portfolio and a platform like we have The simple priorities with my team is, number 1, we need to deliver great experiences. If you want to deliver great experiences for our customers, All the innovation that we do has to go into the platform layer so that all products just magically work with each other.
It's in a very unique position at this scale that you have single platform and multiple products all working in harmony with each other. In the past 18 months or so, these companies are aligned with our priorities. When we said deliver great experiences, we bought an enterprise software and make it work on mobile, truly give nice interface experience for the moments that matter, so you can get work done. Part of my announcements, and then about a couple of weeks ago, we bought VendorHawk because the IT organizations are saying we are investing a lot in cloud. That problem. I'm going to quickly touch on our IT products.
Again, the overall To your project management office, whether it's service management, sometimes these are called infrastructure folks, which is VP of infrastructure that has compute Continue to serve all the major functions of IT and deliver great products for them. For the first time at Knowledge , 12 months out, because our customers and partners are saying, "CJ, we need to know what's the roadmap so we can plan better." The general theme is improving experiences. In every single area, the investments that are happening in R&D is again, never lose sight that IT is our core buyer. How can we route work? If our HR service department is dealing with the employees, how can they serve the employees better? How can they give them great experience?
We have both customer service management product and field service products, and these are showing really, really good signs of success and customers To manage around it. This, again, we are not in the protect or detect space, but the management of all the incidents that the security team and this organization Up to 70% of these numbers. We are able to scale with our customers as they're doing more and more transactions across our products, more and more transactions Re-platform because we could not keep up with the growth of our customer base. So far, at least in this stage, we are seeing that our platform is able to scale nicely.
It is the same platform that our engineering team builds the products on, is the same platform that our customers build the applications on, and it is the same platform My team pushes the boundary of the platform. "CJ, we want to create this use case around, say maybe security or around machine learning." We'll have the similar productize. It is which one we productize first. Okay? Then our ISV/OEM, we are in the early innings of that specific motion. Tools to our customers so that they can route work effectively through enterprise. That's it. We introduced 2 technologies, Flow Designer. Landscape with tools and software. If you cannot integrate with other systems while you are trying to automate a business process, it doesn't work. Other things is all part of our platform Flow Designer and IntegrationHub technology .
I'm really excited because this is truly game-changing event because, one, my applications team will build software and integration using this, so it's easier for our customers and partners. Second, again, is around experiences. When we talk about experiences, how can we make it easier? Most people don't remember the technology. Emails. One of the questions that our partners and customers asked, "Can you give us a predictable schedule?" Because of their freeze during Q4 and so on, every Q1 and every Q3, you will get predictable releases. Testing resources, there are human efforts involved. How can we make it easier? We are going to provide releases in advance, 60 days in advance. They can upgrade within 3 weeks.
Our ask is, with all this innovation coming at this pace, for customers to keep up with it and at least upgrade. This is my favorite part of the presentation. The first thing that we are announcing on Wednesday is this virtual agent technology. We bought. What's the big deal? It's not about chat. What is unique here is first, it is a conversational interface. Think about you're in a via chat interface of your choice. If you like Microsoft Teams, work in Microsoft Teams. If you like some other collaboration tool, you can work in collaboration tool. Morning. Because even if you look at a simple term like network means something different. If you are a telco company, network means Additional interface. Number two, any platform interaction that can be done in ServiceNow can be done via this interface.
For example, you can approve something, you can order a PC, you can order a mobile phone, you can request a leave, you can say, "My this particular product is broken." Across our product spectrum, anything we have could be done via this interface. Because it is natively built in the platform. It's not just chat tool that say, "Oh, I have this problem, and let me get you an agent," and then you have to repeat the whole thing again. This is contextual, intelligent, and conversational. Okay. It's available in London, which is next quarter. Agent Workspace, we have close to 10 million fulfillers. Fulfillers are resolving cases, whether they are for IT, whether they are for HR, whether they are for customer service. These fulfillers are the face of IT.
If you don't have a good experience with IT, it's because it took too long for the fulfiller to solve your case, maybe your experience was not great, and all that. We went and observed how our fulfillers were working around the world, and really designed this product after many, many months of efforts to make it easier for fulfillers to solve the problem. If the fulfillers are effective, when you have your laptop or iPad broken, or your phone broken, or you need a new service, you will get a better experience, and you will say 2 thumbs up. Everybody focuses on always the end users, and that focus is absolutely critical and necessary, but it's not sufficient. We decided that we wanted to really care of these millions and millions of fulfillers on ServiceNow platform to be able to solve cases really fast.
That's what we are announcing in London. The SkyGiraffe acquisition that I briefly talked about we did in October, we will deliver native mobile experiences with two or three clicks for you to be able to get things done. Like you will have in potentially an airline app or any type of consumer app where you're just using few clicks to get the most routine tasks done. This will be available in Madrid. I'm really excited. You will see a lot of this on Wednesday's keynote. Most important thing here is that we are going to provide our customers with mobile designer. Because what customers tell us, "We do not have enough people to create a mobile app. We create a mobile app for the enterprise. The adoption is poor.
I have to worry about single sign-on, authentication, and then my employees just don't use that software. We want to make it really easy in a low-code, no-code format that John talked about, just for regular people to be able to build these mobile applications on our platform. We are going to get that done by Madrid. We are currently in the re-platforming phase, which is almost done, and release out-of-box functionality for our applications or for a custom application in Madrid release. Last but not the least, DevOps. If you look at IT organization, the biggest push they have is the peer group. The peer group of CIO is constantly going to the CIO and saying, "Hey, I want analytics software. I want this particular mobile software for employee experience.
I want this software for my marketing. Whatever the case is, every CIO is trying to figure out how fast they can develop software, either for a business unit or for an internal use. This process today, we went on the agile revolution, but the process today is fragmented, manual, and there are too many holes. Even in just, if you go from plan to monitor, you start plan, and then you go clockwise. There are many, many tools in each process, but what's missing is a workflow around it. Given that we are really good at workflow, we believe that this is going to change how our customers do DevOps.
As much as my team would like to take credit for this, some of our customers have already built DevOps workflow so that they have visibility across multiple software projects, and they can move fast to monitor. John talked about this, so I'm going to spend a little time on this. This innovation request saying, can we build application emergency and response system, or potentially a financial system, or a specific use case within IoT for a building application? Brand new products every year is our goal beginning next year. We formed this unit in December. They have already prioritized four or five use. Second, in the platform layer, yes, we will always innovate around the applications, but in the platform layer, can we continue to have technologies?
[Break]
Please welcome back from ServiceNow Finance and Investor Relations, Jimmy Sexton.
A little over seven years and has been instrumental in our growth over the last seven years. As John mentioned, this new customer success initiative rolls up under Dave. With that
Who runs the global practice for ServiceNow. Dan and I have known each other for,
Five, six years.
Five or six years.
Sure. Thanks very much. It's a great pleasure to be here. Thank you for that. Larry Quinlan, I'm the CIO for Canada and the Americas, so I'm one of our top two or three IT people in We are also in the advisory business, so consulting risk and financial advisory. We have a purpose as well. It was interesting to hear that today, to make an impact that matters.
Also gives us a perspective around evolution of ServiceNow and how it fares to some of our other relationships. Just to add to Larry's point around Deloitte, the message about enduring-
Sensible is this ServiceNow platform. Steve, you started bringing us in to replace a number of different IT service management tools. Maybe you can?
See what we can do with this. We replaced a legacy service management platform. We brought along our global colleagues, our U.S. colleagues, and then Italy and Germany. Things are different or new now relative to where they were just three years ago. We have this massive change taking place in our organization. Here, our security operations are running or being enabled through ServiceNow. Orchestration, automation, we now use it. At that time when we made that decision, as I've said to a few people who have asked me this question, I used to advise clients on technology decisions.
Database that drives the expansion of our business. One of the things that I notice what you're doing is really focused on experience.
Yes.
An experience of the people.
Service. Everything is some form of service that we are doing for the organization. It's how we think. We're very focused on the experience that in our organization anymore, you use the app. You'll probably get an immediate response from us in some way. It has enabled us to enable you-
I guess, that you've got to service every day.
300,000 type As in our business. There's probably a few thousand people like Dan who think they could actually be the CIO.
If you think about that, at the end of the day, we are on a customer-facing side in a business of staying two, three steps ahead. That's our business. Our first project at the time was just about half a million dollar, and in our world, that's considered relatively small project. I tabled a plan to grow this business to be a billion dollar a year business in next five years. The upside is significant-
You're seeing as possible. I'll tell you that seven years ago, I didn't fully see that opportunity and truly understand the power of the global SI organizations.
As a potential buyer. We see chief marketing officer, and on one hand, that creates more complex situation.
board, and we make decisions about where we spend our money, and that includes how we invest in technology. Today, when you come to that investment board, we will have people come and present workflow in our organization, both from a Canadian lens and then the other parts of the world that I was describing to you. You had this story of where we had us together, and we started to reflect on how could we do this. Inside of three to four months, we had a proposal of how we'd go about doing this around the world. Again, that this just, what, less than two years from now. We're on the path to do that. Today, we're running over 50 projects, and it all is driven by credibility. We're simply successful at getting this done.
This everything as a service is driving an engagement layer.
The key that we can do with this tool is we usually get it to the person or the part of our organization that can service that immediately. We have that type of dialogue with the decision-makers.
Both the structural changes or support and the impact it has on you.
I'm sure Dan can speak to it as he encounters it in our clients. Unprompted, that's the question I ask, really one of the key drivers that is helping us get this work done. They're committed to our success. I earnestly believe that we've seen all the way along. As an organization, they've grown over that period of time. We've seen their processes mature. We're a member of product councils where we can help advise on the products. We're already experimenting with some of that. If I were to give you a simple little graph of what's happening in our business, our call volumes are dropping. IM chat, we're already using it today inside of ServiceNow. We now do resolve more things that people need done for them by IM chat in terms of the last three years.
We haven't added a single support person to the organization, yet our volumes have doubled. Present that business case to somebody. People are going to buy that. Our account rep, who we have a very good relationship with. We have a strategic relationship and network across the world that we're working with, and they're all aligned on the same goals. We give them I believe only accelerating in terms of what we see happening.
Stephen, you're spending your own money and your partner's money, I'm sure that you're having to measure the out-
Of incidents or service requests, will be the term we use, more than doubled in the past three years. No headcount increase. Our self-service. Tremendous success for us around our organization. I think we're seeing the same thing in our client experiences.
I think, if I was to reflect on a similar question outward facing and working really well. I think from a cultural fit perspective, even before the most recent leadership change, I think, Dave, you built. Really last night for partners as well. We got another reward, thank you for that, for Largest Deal. This is probably third in a row Largest Deal Award. Why? Well, because we understand our vendors. It goes back to the point I made around high-performing team and the team that really cares about customer success.
One of the things I wake up every morning, and I measure
Will have on organizations and the market as a whole. In terms of numbers, in terms of the scoreboard, yeah, we've surpassed $100 million. We're going to double our business now. When you look at 10 largest global HR transformations, seven of those Deloitte is running. When I look at that part of our business that worries about cyber threats and security and risk and risk advisory, is really well positioned to take that compounding effect of businesses built around platform is going to get us to be a $1 billion business five years down the road.
One of the things that's consistent where I go out to see.
With different technologies over the last 20 years. Some of those you're familiar with, SAP, Oracle, more recently, Salesforce and so on. Communities in our markets to bring people out of school looking for jobs, generation that's, as we hear in the news, troubled by lack of opportunity. We do into this area. It's not just necessarily ServiceNow. It's broad enterprise transformation, employee experience. It's becoming fabric of our broader business and certainly enabler to our growth.
I would echo Dan. From an internal perspective, we've done the same thing. Coming into the organization can get introduced to this and can get knowledgeable quickly. To some of our most seasoned delivery people, they are really excited to get into this because they can see Going extremely well for us.
One of the things that I'm noticing, Dan, is the verticalization element.
When you're starting to go in and work with clients
Professional services organization, I think it's anyone, but Deloitte in particular. Our go-to-market is industry. It's industry focus that are across these different industries certainly are starting to see the upside, and the problems that we can jointly solve. It's a journey A vertical solution appears that's actually now doable and executable and solvable using the platform. In terms of our Have relationships in the market with ServiceNow and are now taking that next step in terms of taking the platform into industries and solving some of the most How much upside there is for them to transform, to change, to cut costs, to provide better experience for their employees, for their customers
Digital transformation letting us participate in that and for building a practice that's really moving mountains within our customer base and helping us rethink about ourselves as a
Purpose, our strategy, and our culture. CJ then walked you through his key strategy, which is all around product innovation. Hopefully, that has inspired you a little bit about where this can go with many of our customers, and there's a long ways to go just within Deloitte, and they are one of our- rate of growth, what's driving that growth. Many customers, companies have these really quick spurts of high growth. Those really long enduring companies, they really have this high growth over a long period of time. I think we can demonstrate that we can do that. Key takeaways for today that I really want you guys to get across is consistent performance. We have a history of consistent performance. We think we can continue to perform. Market opportunity. This is a massive market opportunity.
I've been with the company now for seven years. I remember the days when we were going public and going to many of you in this room. There's actually a few of you in this room that I remember from our IPO. I remember hearing, "Oh, it's a $1.4, $1.6 billion market opportunity you're going after." That is a backward-looking way. We are creating new opportunity, and I'm going to show you really how big this market could be potentially. Then we're going to talk about our financial model. We are very proud of our financial model. We think we are one of those companies that has been able to grow at a very high pace, yet we have continued year after year to give leverage, both from a free cash flow and an operating model.
We're going to hopefully get across to you how we think this can continue for quite some time. Our growth. As I mentioned, we've shown consistent performance. There's not many companies who can show you this type of growth, at this scale. That is the important thing, at this scale. In 2017, we grew 39%, almost doing $2 billion. This year we're going to do close to $2.6 billion we've said. Then couple this with our free cash flow. Our free cash flow actually last year, it has been growing faster than what our revenue has been growing. I think we still have room to continue to expand our free cash flow. The real important thing here is the scale at which we're able to deliver these things. When you couple this is what we're really proud of.
If you look at our growth, our scale and profitable performance in a vacuum, it's unmatched relative to our peers. When you combine that with our growth and free cash flow, looking at every enterprise software company with north of $1 billion in revenue, we are the leader in revenue and free cash flow, 64%. The next is 63%, and then it quickly drops off. This is really unparalleled growth. What's driving this? In 2013, 5% of our business was coming outside of IT. Today, 34% of our business is coming from outside of IT, and emerging products are really driving. You heard Deloitte, Dan, talking about where he really sees the opportunity for customer success in HR. Each of these in of themselves are $1 billion-dollar market, multi-billion-dollar market opportunities. Security operations. Deloitte is a big security customer.
You heard Larry talk about that, but that's another big market in and of itself as well. These emerging products are what are going to get us there, well beyond the $4 billion we've talked about before in 2020. It's really important that we continue to grow our relationships with our biggest customers. If you look at our three biggest customers back since 2013, almost 100% of that business was IT related. You look at our three biggest customers today, it's still 75% plus IT related, but you're now starting to see the platform, the emerging products. What I can't stress enough here is IT is still growing within our customers. You heard Larry at Deloitte, they still haven't rolled out it completely around the world within Deloitte. Sure, they're tier 1 countries, but there's more to grow there.
That's just one example, that is consistent that many of our customers, many of you work for banks in here that are customers, many of you at those banks, it's still just a fraction of what it can be within those banks, and IT is still the driver there. One of the things that's really misunderstood by many people is what are we replacing? We have been replacing for many years, 90% plus of our replacements, our wins are coming at the hands of legacy software vendors. That's no surprise. Manual workflows. You see in 2017, 25% of our wins were against manual workflows. Very little of our wins are coming from modern technologies. There is still massive growth opportunity just within the legacy software and these manual processes that are happening within companies. That's where ServiceNow is ripe to win.
How big is this market opportunity? There was a study done, they were really looking at how much work in an enterprise is done in a structured way and an unstructured way. What we've seen is that 60% of work within organizations is unstructured work today. That is ripe for ServiceNow to go after. That is kind of where our core growth is coming from. Then if you look at the work that's being done by people within enterprises today, 61% of work is spent on administrative work. Much of this administrative work is answering emails, answering phone mails, gathering information, everything done in a very unstructured way. If you take the salaries of all of those people, that's $575 billion is spent annually on this administrative work.
A lot of that work, I would say even a majority of that work, can be put into a system like ServiceNow to put it into a structured workflow to resolve these things. I'm not saying we're going to get $575 billion. That's people's salaries. We're going to make those people more efficient so they can become more productive. At the end of the day, that is why people buy ServiceNow, because of the productivity enhancement that's happening within those enterprises. When Larry was up here, he was talking about how much more productive Deloitte. He didn't say they were firing people. He just said they didn't have to add any more people, and they become so much more productive. That is why people buy ServiceNow.
You can just read at the bottom, there are many different examples of all of these unstructured workflows that are happening within companies in a very manual way today. Let's look at the market opportunity. In 2015, when we stood at our Financial Analyst Day, we started really talking about Global 2000. The reason we started talking about Global 2000 was to just show people it was really a proxy for how we're going to get to that $4 billion in revenue. If you remember at the time, we said, we had 20 a quarter, grow at 4%. They've been 50% of our revenue. They continue to be 50% of our revenue. That's how we're going to get to that $20 billion. That was really just a proxy. Today, we're 43% penetrated within the Global 2000. Long ways to go in there.
It's really not the Global 2000 we focus on. We focus on large enterprises. There's roughly 28,000+ enterprises in the world that have more than half a billion in revenue, $500 million, and 1,000 employees. That is who we go after. It's really not the Global 2000. You're going to hear us talk more about large enterprises going forward. I will tell you, in next year, we're probably not even going to talk about Global 2000. We're going to talk about large enterprise. We'll continue to update our enterprise customers in our 10-K annually. It's really those large enterprise, and that's what's going to cause us to grow. If you look at our customers paying us more than $1 million a year, you go back to 2013, 23% of those were non-G2K. Today, 37% of those are non-G2K that are paying us more.
You're actually seeing commercial customers pay us more than $1 million a year, and those are really coming from some of those emerging products. CSM, we're seeing $1 million+ deals in CSM in the commercial segment. That is just supporting more why it's not G2K, it's large enterprises we're going after, and they can be commercial accounts as well, too. Looking at our Global 2000, if you just look at those customers we have, our large enterprise, or all of our customers we have, they have roughly 100 million employees when you aggregate them all together. We only have 18 million users licensed or 18%. There's a lot of room for growth within our existing customers because we think one day, with our products that we have and products that we will come out with, every single employee within a company should be licensed on ServiceNow.
There's a huge opportunity in front of us within our installed base of customers. You can see this in terms of our net new ACV. Where is most of our net new ACV coming from? Most of our net new ACV comes from our existing customers. It's not coming from new customers. A big misconception that people have, when we land a Global 2000, the average G2K, and it's been pretty consistent since I've been with the company, is it's somewhere between $200,000 and $300,000 a year is what we land a Global 2000. We're not landing Global 2000 on average at $2 million-$3 million a year. Yes, you can get those happen. On average, many of our G2Ks we add, they start at $50,000 a year. You're going to see an example in a minute.
If you actually look at, for all of 2017, 20% of our net new ACV came from new logos, new customers, 80% came from our installed base of customer. That is why when John was talking about customer success, why it's so important, because if we have happy customers, we see that our customers are successful in consuming ServiceNow, they will buy more from us. Actually, in Q1, 84% of our net new ACV came from existing customers. This is a slide that I'm probably the most proud of because you just don't see these with any other software company out there. This is showing our cohort analysis. We started tracking this in 2010. Something investors, I remember, asked in 2013, "What's your cohort analysis look like?" In 2014, we started showing people this.
You can see the annual growth and initial ACV from our customers continues to grow. This includes losses as well, too. This isn't just looking at existing customers that we still have today. That also includes losses. You can't find another software company that can show you this cohort analysis. Now, I want to show you what a typical. I shouldn't say typical because there is no typical. Many people have always said, "What is the typical progression of a customer?" We pulled one of our Fortune 50 customers, and this is their progression. They first became a customer in 2012, $50,000 a year. Who would've known today they're spending $8 million a year with us. You may say, "Well, is that customer fully penetrated?" $9 million in pipeline, and there's more room beyond that with our existing products today.
This is not factoring in any new products that may come in. Every customer matters, and it's all about landing these large customers, and I can't stress enough, not just public. There's a lot of private companies in public sector, and we will see this growth. This is not uncommon growth. It's maybe a little bit higher, but many of our customers have grown like this over the year. One of the most kind of satisfying things too about the company is of our first 10 customers, Fred started the company in 2004, eight are still customers. The investments we're going to make. John mentioned earlier his four key initiatives for this year. It's really we're going to continue with our product in UI/UX innovation. Customer success, I can't stress enough, customer success is an important investment for ServiceNow because that is going to drive our growth.
The next is we need to grow our talent. Our talent is critical to our growth. It's not just hiring people, it's retaining our people we have today and seeing those people grow. We're spending a lot more time today on training. It's not something we ever focused on, I must admit, in the time before when I was with the company. It's really since John has come on board that we're really focused on that and really established the company brand and purpose. We're seeing this, as John mentioned, it's resonating with our employees, but it's really resonating with our customers. You heard Deloitte, that was unscripted when they were listening to that for the first time here. This is resonating with customers. Companies want to deal with companies that have a purpose that align to their purpose. That's an important thing for us.
What you guys are all waiting for. I know you're really waiting for one slide. I'm going to turn to the model now, and what I want to stress is, we're not going to update you with a new number. We really are growing this company to be that $10 billion, $15 billion company. We really do think that. 2015, it really was a spreadsheet to get there. Today, we have real strategy behind how we get to that $4 billion. I can tell you a bigger portion of that is subscription than we thought at the time as well, which is recurring. We're pretty much at that non-GAAP subscription gross margin, 84%-86% in August, and we lock it down in December. We came into this year, we're giving 2 points expansion this year when you factor in ASC 606 in what we've done.
We're just going to say right now it's going to be greater than 1%. It's going to change every year because we think there is such a massive opportunity in front of us that we would be foolish. Focused on free cash flow, and number 3 is operating margin. We do see free cash flow continuing to expand. I'm just going to say it's greater than zero. I would say if operating margin is expanding too, you'll get at least one in free cash flow. Our non-GAAP tax rate, a lot of people are asking, we're still working. Going up very nicely. A lot of that is we're not paying cash taxes in the U.S. We have a number of NOLs. That will switch over time. It's a good thing because it means we're very profitable. Over time.
This type of growth with hiring, we're going to add roughly 1,600-1,800 people this year. We're still keeping our dilution below 3%. We're very focused on that. John, come back up on stage. CJ, come up on stage, and if CJ's here still. Dave Schneider, and I'll give you a chance to talk-
Where is Dave?
ask questions to all of us. By the way, go Warriors. I got my Warrior jacket on today. I'm bummed about the Sharks. Folks coming up. We'll wait here a minute. Let's just wait till CJ comes up. All right. Unless your question's not for CJ. You can start handing out the-
Dom, can you check to see if I think Dave's still talking to the
Dave wants that?
Yes.
Is that right here?
Kirk.
Yep. Thanks very much. Kirk Materne from Evercore ISI. Thanks for the time today and the overview over the next few years about how you guys are thinking about the business. I guess the question as it relates to sort of the longer-term vision to get to $10 billion, $15 billion in revenue, after what Mike just presented is, where do you think you need to be investing more? Is it product? Is it distribution? You guys have been incredibly efficient to date. I'm just wondering when you guys think about those budget meetings one year from now, two years from now, is it giving CJ more? Is it giving Dave more? I'm just kind of curious if there's a balance or how you're thinking about that.
Yes, yes, and yes. I mean, to be honest, the dialogue we're having is how do we build more capacity? How do we build more innovation capacity in CJ's organization? Probably one year ago when CJ took over, 99% of his organization was focused on stuff that delivered in quarter or in year. Now with the incubator, NowX, whatever we're calling it, he's looking at other ways to increase intelligent investment in innovation. Dave investing in customer success. As you know, Dave owns our go-to-market and our customer success. We talk about how can we invest more in driving faster customer success, because when the quality of a relationship If we have more relationships like Deloitte, we're going to grow.
A lot of our dialogue at this point, we can't spend more money smartly this year, we don't feel like, but we're trying to build the bandwidth where we can do it intelligently. Those would be two of the key areas. Then I'd say company brand. I was saying in the break, some people were asking me about company brand. We're going to learn our way into that. We're doing a brand tracker, what our aided and unaided awareness is, we'll begin to spend intelligently around building our company brand. If we find something that we really think will move the needle, we'll come to you and say, "We think this moves the needle, and thus we're going to spend X on company brand." Those would be the three areas that I think could impact margin.
I think talent we'll continue to invest in, I think that we can do within our current operating model. Anything you guys add?
I think you hit it. The nice thing is we have a lot of market to go after, and it's just doing it intelligently to make sure customers are driving their success.
I think we would say our risk is under-investing, not over-investing.
I would agree with that.
This is not going to be a massive pendulum swing. This is like, all right, how do we intelligently build the capacity so we can take advantage of what's a wonderful growth opportunity?
I would add, we're going to invest very heavily in our partner ecosystem as well, too.
Oh, yeah.
You heard.
Yeah
Dan from Deloitte talking about he sees this as a billion-dollar opportunity for their business. I would love that because they'll have to hire a lot of people, and they're going to have to pay those people, and they're going to help drive even more business for us. That's so important.
Okay. Over here. You get to pick. No.
Oh, here, just over there then.
John McPeake, Summit Insights Group. Actually, I want to ask about the financials. You talked about your top three priorities. I noticed you didn't mention GAAP profitability. Is that still on track for in several quarters? An update on that, and also want to ask about your capital plans. There was that press release about the mixed shelf. You have the 2018 you've been paying it off.
Sure.
That's coming this year. Are you going to just take more money to pay that off?
No, good question. You're the first to ask that question today. The first thing is in terms of GAAP profitability, I do see the shares we issue. It's where our stock price goes, because that does impact that somewhat. In terms of the shelf registration, that was really, we have no plans at all, and the reason we filed that shelf registration is with 606, like most companies, we restated our 2016 and 2017 numbers. If there was an M&A deal where we were acquiring a company, which would most likely be a small company, and that company, we really wanted them, but they insisted on shares to get a tax-free deal, and they want to share in the upside, they would want registered shares. By having that S-3 on file, we can quickly grant those shares.
Now that we're filing the Q, actually today or tomorrow, if we had filed the Q without the S-3, we wouldn't be S-3 eligible because then you have to have three years of restated financial statements that have been audited, and it would cost about $1 million more to do that and the time it would take. That's why we filed the S-3.
That cost sensibility we'll never lose. That I love about this company.
Keith. It costs less than $50,000 to file it. Because no bankers were involved.
Hi, Keith Bottman from Bank of Montreal. Mike, just a clarification and question for Paul. The clarification, you mentioned that as long as operating margins grew by greater than 1%, that we would, I think you said you would get a bump in the free cash flow margins as well?
What I said was if operating margins are growing too, we should get about one point improvement.
Okay.
In free cash flow.
Okay. [Paul], the broader question I wanted to direct to you were talking about M&A a bit, and you raised the, I think the specter of perhaps doing more deals, you even used the word large. I want to just ask you on two dimensions. One, how should we be thinking? What does the word large mean to you? Second dimension is what areas are you thinking about? Because most or all your deals have been more tuck-in, and ServiceNow talks actively about your common platform, so it's easy to go to market, easy to upgrade. Would you still stay within that thread even if you're doing potentially some larger deals? Thank you.
Here's the way we're thinking about it now, this will, I think, evolve, which is we feel like the organic growth opportunity we have off our existing platform is significant. You heard me describe it, you heard CJ, you heard, I thought that Deloitte, both internal and external use, a billion-dollar business with existing products is what he was talking about. We think that's significant. Job one, two, and three is to capitalize on that organic growth opportunity. If tuck-in acquisitions can accelerate that, great, we're going to do as many as we can, and CJ's got that power to do that. If you look at $10 billion, there are very, very, very few companies, if any, in the world that are $10 billion off one growth engine. Right? You just look at what other analogies have done.
eBay eventually bought PayPal. Right? Google bought YouTube and Android. Facebook eventually bought Instagram and WhatsApp. We're not focused on that right now because we think in the next one to three years, executing against our organic growth opportunity is job one, two, and three, and we don't know. I hope that our organic growth opportunity off one platform could be $10 billion. If it can, great. We are starting to look at what are some of the adjacent markets? Where are places we can deepen our product portfolio? Are there obvious candidates to be a second growth engine at some point? We're beginning, and that's where I said Lara's leading this, beginning to look at it.
We don't anticipate taking action in the next 12 to 18 to 24 months, we're beginning to look at it, as we learn and grow and develop hypotheses, we'll share them with you. Large acquisitions, I don't think there's a need to do anything
radical when you have this kind of organic growth engine.
I'll just, John, if I may, I'll just add one thing on that point. We get asked this question quite a bit that even in ITSM, which is our core and largest business today, have you reached X% market share? We still feel based on all the numbers we have seen, we did, like John said, analysis in the summer, fairly detailed analysis. We are still in the upper 10% on the market share in ITSM today, despite the great run we had over the past few years. Dave and the team, whether it's customer success or whether we feel on the actual selling motion, there are still many, many opportunities on our core IT business.
That's why I said IT will still continue to be core, and I still feel there is quite a bit of headroom on IT, and that's why what John said, one, two, three, we continue to execute on that.
Carl.
Oh, thanks. Carl Curtis to the Deutsche Bank. Mike, presumably some of these investments are going to have a payoff that will come sooner than later. Why not raise the $4 billion 2020 target? Why not raise it to $4.2, $4.25 under the assumption that a lot of the investments you're going to make in the next 18 months will pay off?
Couple things. One, in 2015, when we put out that $4, it was just $4 as a nice round number. As we're getting closer to 2020, what company actually gives you detailed guidance three years out? We're going to give you guys annual guidance. We're giving you through 2018, and we'll give you guidance in 2019, and I'd like to have upside in 2020. There's no upside to me to do that or us to do that.
I promise you, I've been around this block before. If we said 4.25, you'd say, "Why only 4.25?" If we said, "4.3," why only 4.3? You said 4.11. There's not a lot of value added of picking a number, at least as we talked about it. We're telling you we're confident we're going to make it.
It enables you guys to actually build your models and share with your customers. Adam.
It's Adam Holt from MoffettNathanson. I'm glad you guys got some seats. I was a little worried. I've got some questions about the new products. John, when we've talked in the past, you've suggested that the new products, one to two a year, aren't actually in the revenue forecast. I just want to make sure to confirm that for the broader group. Then secondly, can you walk us through what your experience has been in terms of the time to ramp for some of the recent new products? I think a couple of them, customer service and security were launched, I think two years ago. What that revenue ramp has been like and HR was last year, what that revenue ramp has been like, so we can get a sense for what could be coming from some of these newer products like DevOps. Thanks.
Let me just I'm going to repeat one of the things I said to a smaller group at the break, I make sure I say the same thing to everyone, then maybe you can pick up the-
Of course
how we're thinking about it. The new products is loosely defined in the sense that some, I think, will be applications that are analogous to an HR or a CSM or security operations, and some will be more capabilities. For instance, one of the things we're kicking around now, Internet of Things. We're getting huge demand or requests for Internet of Things. As we develop that product, that may end up being a capability that gets across all products and is a service we can charge across all products, or it may be a new functional application. The one to two a year does not mean we're going to have five applications, six applications, seven applications, but it means we're going to have functionality that can enhance and grow our footprint and our revenue.
Yep. Agreed. I'll address your first question, which is as part of phase 3, which we called it, $4 billion by 2020. As John said, when we went through the exercise, any of these new products were not part of that exercise because we did that last summer. That were existing products, which is the IT portfolio you saw and the emerging portfolio that you saw. That was the existing product. In the new products ramp, I will tell you, I joined approximately 18 months ago, and it has exceeded my expectation in terms of how nicely in unison this HR, CSM, and security products continue to grow. That's a testament to our great go-to market and distribution engine besides us doing enterprise service management use case. What we find is that we are actually doing this based on the customer demand.
They say, "Okay, CJ, can you look after financial close process because that's a very manual process or a legal function for contract renewal or something of that sort." Where I'm going with this is, we find that because this request has come from customers rather than a science project, that we start getting adoption, and within few quarters, we start getting critical mass. We just, for our customer service management, literally I think two weeks ago, which was launched exactly eight quarters ago, because of our great sales team, we crossed 500 customer mark. I have never seen anything like that.
It takes about, from kind of the start when we know we have a product, it takes about three to five years to ramp it to $100 million in revenue. Remember, that's recurring revenue.
The goal is that from $100 million to $1 billion is a lot of fun.
Keith.
This is Keith Weiss from Morgan Stanley. Thank you guys for hosting the Analyst Day. A question about margins. You used to talk to us about growth versus margin frameworks, which would seem to imply a stable unit economics. As growth slows down, more margins froze through on the PNL. This year, you didn't talk about a growth versus margin framework. You just gave us minimums of what is going to be at least. Does that imply in any way that the unit economics deteriorate as you target this larger market opportunity, that these investments come at the expense of the underlying unit economics at ServiceNow?
No. Part of the reason is, we put that framework out a while ago, we really do think we were so focused on just getting to that $4 billion. It really wasn't beyond that. I do think we have under-invested in the business, we really don't want to tie our hands to something. We're going to be very disciplined, as I said, it's going to be revenue growth, we're not going to spend money foolishly. We will continue to give margin expansion. Whether it's one, 2%, or 3%, that's going to change every year based upon the opportunities we see in front of us. Walter. Oh, sorry, you can go to Jen if you want, and Walter can We need some Get a lady.
Thank you. I wanted to talk a little bit about the focus on brand and how you think about that brand evolving over time. In particular, the traditional route into an organization was go to the CIO, then the CIO and the IT department are advocates as other lines of business look at what they could potentially do, then IT really sort of leads the charge. As you think about brand and sort of this more strategic type of brand, do you envision seeing more deals being led outside of IT, and IT is brought in later in the process? Or is it still going to be sort of an IT-centric sale and then expanding out once IT bought in? How does that change, or does that change?
I hope the answer to your question is yes. In other words, I think that IT, as CJ said, and you heard really from the Deloitte team, IT is playing a more strategic role across the company. CIOs, their jobs are changing before our very eyes, and they are teaming up with CHROs, they're teaming up with chief security officers, they're teaming up with chief marketing officers. We don't want to lose what we think is a real strength in IT. When IT goes to their business partners with ServiceNow, it would be really nice if those other C-suite executives have heard of ServiceNow and had a positive brand reputation. I think in the process of doing that will also create additional organic demand. We're on this building our company brand. We're just in the early days.
I thought Dave's question to the Deloitte team about the role of partners raising our visibility with other C-suite executives is spot on, and I hope it's both.
I guess Walter.
Just pass it over. Either for Dave or for John, not sure who to send it one to. From a sales go-to-market sort of organizational structure, you made some pretty major changes. You showed a summary on one of the slides. I think that separating enterprise and commercial was a big change. You haven't really put in place a full vertical type of a strategy. You have product specialists but not separate sales forces. Can you talk us through what might be the next evolution and what you're looking to in terms of what would indicate to you that it's time to make some of those bigger changes down the road?
I'll take it. We moved the commercial enterprise three years ago?
2015.
I remember being crucified by many of you for that move. It was absolutely the right move because we were listening to the customers about how they wanted to be covered. We're continuing to listen really closely, and it should be noted, we do have a very important vertical sales motion, which is the U.S. federal government, and that has been a massive growth engine for us and continues to be so. We see the value of speaking the language of the customer. As we go down the motion, whether we will find industry verticals to specialize in and, again, horizontal product with solution providers giving us that vertical element, and then making sure our product's ready to meet that need. I don't know if I answered your question specifically. We are looking at vertical coverage models.
I will say at the top echelon of our customer matrix, the very large enterprise, the customers with more than 100,000 employees that have significant move-the-dial experience, we're going to continue to focus heavily on making sure we're meeting the needs of that specific customer base as a first priority.
Alex.
Hey, thanks, guys. Alex Zukin, Piper Jaffray. John, I wanted to ask you a question because you made a really interesting point when you started talking about automation, and you started talking about having a stake in the ground in terms of does automation take jobs away or create more productivity. I wanted to ask, in the context of your pricing model, when you think about phase 3, how are you thinking about that today? Maybe as a follow-up for Mike, how many of your customers today, of the largest ones, are licensed for everyone in the company, and what's the right way to think about how you get there?
Well, on pricing, we're having an active dialogue. You'll see smiling because we're talking about how does pricing need to evolve both in the industry. If you have a fulfiller-based pricing model and you have automation, you may ultimately have fewer fulfillers. You heard Larry Quinlan talk about that. That's a good thing, right? It's driving productivity.
As we become increasingly relevant across the enterprise and they're buying 4, 5, 6 products, each of our products has a slightly different pricing model. We're talking about how do we evolve our pricing in a way that's win-win for our customers and us. It's complicated. What's interesting is you have, my experience as far as their customers will say, "Well, I want transaction pricing." Dave and his team will offer up transaction pricing. They'll say, "No, I want predictability. I've got a certain budget. I can't go over it." You get back to a sort of more of a license approach. I would say we don't see a need to dramatically change pricing in the short to medium-ish term, but we're trying to get ahead of the curve and figure out how we evolve our pricing models.
Dave, you're experimenting that with each new customer, really. You're finding new ways. Maybe you can comment on what you see.
I think to answer your question, we're trying really hard to capture value appropriately with customers, knowing that automation's going to change the way we count licenses. As we look at IT service management over time, I think we will see a move towards either per employee, per contract, or transaction levels. Predictability of licensing is a top item for our customers. They're looking for consistency of price so they can budget, and they don't want to be surprised. We're trying to balance those two out. We want to drive automation. We want to drive cost savings. When we have open conversations with executives, they're very aligned with us. That land motion, we have to figure that out, how to get through that, because people are used to a certain fulfiller, approver model.
We're quickly down the path with our more mature customers.
Your other question, very few of our customers are licensed every employee, wall-to-wall on all of our products. I can't think of any on all of our products. HR, we have some, but a very small portion of our customer base. Kash. We'll go to this side, then back.
Hey, guys. Thank you very much. Kash Rangan with BofAML. Two questions for you. One is, the company decided to lump ITOM and ITSM into one category called IT. Just curious, typically when you're going through a growth spurt, you'd want to break out more and more product categories because going through a bit of a growth spurt, and that can give us a little bit more confidence that there's a long tail ahead. Just wondering, what was the thought process behind the decision to collapse the two categories? Secondly, when we look at the other platform category, clearly the growth is shifting to that area. We rarely hear of any major industry market opportunity without competition. Today, we've not really heard about competition. Obviously, you're in a very good position, core ITSM.
As you think about this workflow as a potentially multi-billion dollar market, the platform and workflow categories, who's the likely competition that could end up surprising the company in how you think about positioning that these things can reflect well as a result of your core competence, that you do feel very comfortable given where you are, what your current products do, that you can tackle the competition? Thank you.
I'll answer the first part and let Dave the second. The reason we changed the bucketing and including in IT, ITOM and ITBM, it's really looking at it from the way our buyer buys is why we did that. We're still splitting out ITOM. In the Q, you'll see the ITOM revenue. That's still transparent there. In terms of who we see as competition in our emerging products, I'll let Dave talk about that.
I think the first piece is, do all of our customers, do the light bulbs go on fully to the degree of which Deloitte gets it? That's what the customer success motion is really designed to go do, is to help those light bulbs go on where they may have seen us as a point solution historically, unlocking the value and making sure we go fully broad to get all the opportunities. I view our competition in some ways as ourselves against that. That's not what you're looking for. You're wanting to know who we're seeing in security or HR. In the HR space, I think we're in a really fortunate position of being a leaning in. The customers are leaning back to us, and they're responding very well. On customer service, I think you know who the players are that we're going to go interrupt.
There is a lot of interest and demand for a connected support experience for those customers. We're finding our way through the marketplace with greater and greater speed.
I can't stress enough who our wins are coming at the cost of the legacy software, on-prem software, and those manual workflows where there really never was software before.
Yeah.
That's 90% plus of our competition. The competition on the legacy side is not the legacy vendor. It's more customers kicking the can down the road another three months, six months, a year. Remember, these are long sales cycles to do their initial ITSM replacement. Once they're in, these customers just continue to buy more and more as they realize different use cases for ServiceNow within IT and other parts of the business. You heard Larry from Deloitte talk about that. Raimo.
Thank you. Raimo Lenschow from Barclays. Two quick one. First, can you comment maybe on Fred Luddy's back as the chair of the board, and Frank stepped down, like what drove it, and what's the benefits that you see from that one? Then one for you, John. You talked a lot about the changes that the organization needs as we go from towards $5 billion, $10 billion. Now that you're here, how do you think about process maturity within ServiceNow? With a great organization, Mike run a tight ship. Where are you in terms of just kind of organization structures, et cetera, to kind of drive the growth now to the next level? Thank you.
Let me take both those.
Frank stepping down off the board and Fred becoming chair was part of what I think is one of best-in-practice succession I've ever seen. That same board meeting where I was hired, we agreed Frank would stay on the board for a year. Frank wanted to make sure that I got up and running well. He was an enormous help to me over the last year. Frank was the first to say, "You don't need the former guy around." Same when I stepped off the eBay board. This was part of an orderly succession process, I think just executed beautifully. I can't emphasize how I tell Frank every day I come in, I pinch myself, just so appreciative of the company that he built and how beautifully he handled succession.
The Fred Luddy decision was really, as we thought about it, I had this situation at eBay where Pierre Omidyar was our founder and our chairman. Fred has got such an incredible background and talent around platform. We started talking about engaging Fred more. Fred wants to be engaged more in the company. The act of making him chairman just felt like a natural response. He's thrilled. He'll be here, I guess he's getting here tomorrow morning. He's grading CreatorCon tomorrow night, the CreatorCon contest. Fred and I are doing a fireside chat on Wednesday night. Our community loves him. I think he's going to be a great asset as we continue to evolve our platform. I'm thrilled, and I think the whole board feels thrilled about it.
Again, I want to give a credit to our board for the succession process, which has really been very smooth. In terms of just building out our capabilities, I'd say, I guess, a couple things that strike me early impressions. One, Mike referenced. There's a real hunger for investment in our people, not compensation, but investment in training and development and allowing them to more systematically grow their skills. We've hired Pat Wadors as our Chief Talent Officer. Pat's been working with all of us to put in place just some basics, leadership training program, manager training program. We're using, what's the LinkedIn product? LinkedIn Learning, I think it's something called, where you're able to get training, self-help. We had 2,000 employees that were paying out of their own pocket to access LinkedIn's training program.
It just points to the hunger of our employees to grow their skills. We're investing in the basics and fundamentals there. I would say new skill sets. One of the areas that we're talking a lot about is we're outstanding at functional execution. We need to continue that. Also, we need to get outstanding at cross-functional execution. Something like customer success is the classic cross-functional. Building those skill sets and people to have those kinds of capabilities, both we're bringing them in from the outside and otherwise, I would say that's probably one of the bigger themes in the short to medium term. Kuang.
Thanks for taking my question. When I think about some of the enduring companies, over the last 30, 40 years, you came around big paradigm shifts in computing, with the mainframe, you had IBM, with client-server, you had Microsoft, Oracle, Intel, Cisco. With the cloud and SaaS and whatnot, you've got Amazon, you got some Salesforce, and then it's yet to be determined whether you guys are in that category yet. One of the things that really stands out to me in terms of things that are obvious, in terms of a common thread that is unique to all of them, is that they radically transform organizational productivity for their customers.
I'm just wondering to what extent, you've seen that already in ITSM, what are some of the anecdotal proof points that you have that ITOM, ITBM, CSM, that actually give you confidence that you're driving the same organizational productivity in those categories that you did with ITSM? How do you measure it? What are the KPIs, how would you actually rate yourself?
I feel like we have such enormous opportunity here because we make workflow automation software. By definition, that's productivity. That's productivity, whether it's in HR, in CSM, or in security. What we do is automate workflow, drives value creation and productivity. I would say on our ability to measure it and reinforce it, in the last year, Dave's done a great job. Every time a salesperson puts a proposal in, they have to have a business value analysis next to it. That's into seeing best practices. We have 12 best practices documented there that customers can access.
There's something called an economic value creator, which is responding to CIOs and IT people saying, "Can you help me learn how to build a business case?" We've just built this right into that I think we think we can get to, we're very confident of the underlying value creation. Yeah. Yeah.
You mentioned ITOM, for example. Whether you look at DevOps or a traditional IT infrastructure in a traditional enterprise, simple things like outages
For all your private cloud. We have multiple measures on how we can minimize outages, give you proactive alerts and things of that nature, and have that provided those calculators that you will see 5 to 10 to 12 points improvement in customer net promoter score because proactive customer support working with engineering in a financial service industry or a tech industry is where our product is very focused on. Some of those new products in certain industries, but something like CSM or customer service management, we are very focused on certain verticals.
Okay, one more question. Who wants the last question?
I wanted to ask either John or CJ around the ISV third-party developer ecosystem. I think three or four years ago, you started talking about that more. It's still sort of a rounding error in terms of size for you. Thanks.
It's just another one of those areas we're expanding our bandwidth. When I talk about expanding our innovation and investment bandwidth, that would be a great area. We've got strong leadership with Avaneesh around it. I think there's interest. We're working on making it even easier to build on top of our platform. It's Wednesday, Pat Casey.
To John. One of the things, we started talking about it, I 100% agree that we are in early stages. The feedback we got, whether it's our ISV sit environment for people to build apps. We have just started doing that, and you will see all of that in our later part of phase 3 and phase 4 starting to materialize.
They've heard of us, our brand doesn't hurt. Elevating our brand.
Yeah, I was just at, last week I was traveling and I saw Nuvolo, it's actually a joint. We started off as an ITSM customer. From that customer that was the first one to probably hundreds or thousands of them is significant. I just see huge other areas as well. Our sales organization is seeing the pattern match and is really lighting up in supporting of those partners, which is something that didn't exist a year and a half.
One comment I'd make and wrap up. I hope you've got a chance to see today how we see our opportunity and our future. We're optimistic about it. I hope you see, I think we have such a tremendously strong team that's operating as a team, and I'm so appreciative of having my colleagues on the stage and in the audience. You can count on us trying to focus on these opportunities and execute, continue to be a really strong execution company. One of the things that I think great companies My experience in my prior life is I learned a lot from really smart investors or smart analysts. As you see things out there that you think we should be paying attention to, if you hear things from customers, if you think they're competitors we should be focused on, let us know.
One of the great things about this company, it's a learning, evolving organization at various times. Call Mike, call me, call Dave, call CJ, if you see things that you think will help us be better. Thanks very much for coming.