Please welcome from ServiceNow Finance and Corporate Development, Jimmy Sexton.
Good afternoon, guys. I'm Jimmy Sexton. I work here at ServiceNow. Most of you will probably still call me Dominic Phillips, but I won't take that personally. Before we jump in, I'd like to take care of a few housekeeping items. In this presentation, we may make forward-looking statements. We will be covering these forward-looking statements through our safe harbor provisions. Let's dive into the agenda. First, we're going to hear from our President and CEO, John Donahoe. He's going to talk about what he's been hearing and what he's been doing over his first five weeks since joining the company. We'll have CJ Desai, our Chief Product Officer, come up and talk about the ServiceNow portfolio. We'll have an opportunity to hear from four of our GMs from each of our business units. First, we'll hear from Farrell Hough. She'll talk about IT Service Management.
We'll hear from Abhijit Mitra. He runs our Customer Service Management business unit. We'll take a quick 15-minute break, depending on timing. We'll come back from break, then hear from Deepak. He'll actually talk about our HR Service Delivery product and the strides we're making in that department. We'll close with Sean Convery, who you heard from last year. He's the head of our Security Operations business unit. We'll switch gears. We'll hear from Tony Beller. We just hired Tony in the fall, actually, and he runs our Partner and channel alliances program. He'll bring up one of our largest GSIs to talk about the partnerships that they've made with ServiceNow. We'll get to hear from Michael Hubbard. He runs our Inspire program. This is the program with about 40 ex-CIOs and consultants that add value to our most strategic customers.
He'll bring up a customer example, and they'll talk about the partnership they've made with ServiceNow. Last, but certainly not least, we'll hear from our Chief Financial Officer, Michael Scarpelli. We'll then invite John up, and we'll do a little bit of executive Q&A. After this, we can go out into the foyer. We'll host a 30-minute cocktail hour, and then head to the partner hall around 6:00 P.M. I'd like to remind you that your financial analyst state badge gets you access to the partner hall this evening, as well as all day tomorrow. With that, I'll invite John, our President and Chief Executive Officer up.
Good afternoon. Let me just start by saying that five weeks I'm going to throw this over here. Used to play basketball. I'm five weeks into this, and I'm loving it. I'm absolutely loving it. I get up with more bounce each day than I have in years. What I want to do this afternoon is just share a little bit of my early priorities and a little bit of early impressions, and they are early. Before I do, I want to just mention we have three of our board members here in front, Paul Chamberlain, Ron Codd, and Sue Bostrom. I invite you during breaks and other times, feel free to engage with them. I really had two priorities when I came in. One was for my first 60-90 days.
One was keep everybody focused, or as I described it in one setting, don't screw up. I think on that front, we've made good progress. The succession went as smoothly as I think possibly could have. To a great credit to Frank, I think our organization hasn't missed a beat. People are focused. They're focused on the future. I want to thank Frank for incredible six-year run and what he's built. I'm inheriting a really well-run, really well set up organization. You should feel, I think, pretty good about succession. I'm blessed with the fact that Mike and Dave Schneider and Kevin Haverty are fully on board, and the sales team is fully focused. The sales motions are going as hard and as strong as they ever have. Everyone's head's in the game.
You'll see CJ and the product team, they are very focused, and their heads are in the game. The whole organization understands that we need to meet our commitments, and we need to keep the momentum that we've got. Job one is to sort of ensure there's no distraction, no wondering, oh, what's the new guy going to do? I've said, everyone, focus on executing our 2017 plans. The other big priority for me in my first 60-90 days is do a lot of listening and a lot of learning. I have the benefit and the curse of I'm not a 20-year enterprise software guy. I am someone that's listened to C-suite people describe their problems and needs for years. I am someone that understands business transformation, and I do understand technology.
I'm interviewing every VP in the company, half hour with each, asking them what are things we ought to be start, stopping, continuing. I'm reaching out to industry thought leaders, and by the way, I welcome any ideas on industry thought leaders or people you'd say, "John, you ought to talk to this person. They have a really thoughtful perspective on the industry or on ServiceNow." Most importantly, and what I've focused the majority of my first five weeks on is customers. I set a goal on my first day. I said I want to meet with 100 customers in our first 100 days. The reality is I was having so much fun, I've now met with 100 customers in my first 45 days. That's been in 10 cities across the U.S. It's been large customers, small customers, long-term customers, newer customers.
It's been awesome. It's the best way to learn about a company and learn about a business. I've asked them three simple questions: What are we doing well? Where do we need to get better? I make sure we come back to that because there's a lot of love from our customers. I said, "Now, where do we need to get better?" Maybe most importantly, what are your priorities going forward? I thought I'd maybe just share a couple of early observations based on what I've heard, then my keynote tomorrow will go into some of this in more detail. First thing, this won't be a surprise to many of you, they love our products, and they love our platform. I have to admit, when I came here, I was wondering, am I going to discover some tech debt, right?
When I walked into eBay, there was a lot of tech debt. I will tell you that the feedback on the products and on the platform was universally positive. The interesting thing was around the platform, I was saying this at lunch, there's this sense that this platform is unique and it's extensible. There are people saying, "Wow, we're using it in this workflow and using it in that workflow." We love the new products, this is them speaking now, it's allowing us to extend it into other areas, but a sense that there's still almost untapped potential, and they're recognizing in a world where they've got to digitize and transform their company, that something that can help them simplify, automate, is very powerful. They're extending it to end users. You'll hear this afternoon from Ashley from GE.
It's not just this thing stuck back in IT. It's starting with the end user, or it's starting with customer-facing employees. They're discovering new use cases as they go along. Second observation is they want to do more with us. The new products that you heard about this afternoon are helping raise our visibility with people outside of IT. HR, a lot of demand in HR. The customer support for those that have seen it, and you'll see again a little bit of this today and tomorrow. People are recognizing, wow, this thing cuts across boundaries. It's not just helping a customer support person serve the customer. It's helping us identify root cause, get at it, and remediate it. Security, same thing. I had a great dinner with Sean and 10 CISOs a week and a half ago.
What they're saying to us is, "Do you guys realize what you have? What you have can help us tie together many of the other applications you've got, and what you're doing in the incident and response is allowing us to get more power and leverage our people more effectively." The general sense of it's a strong platform. There's more opportunity. There are also, when I asked, "All right, where do we need to get better?" There were a couple areas that they point to. One is implementation, the narrative I heard frequently was, "I first came on ServiceNow three, four years ago. Because we needed to, we customized quite a bit. Now, frankly, we want the out-of-the-box capability. That's why we're buying SaaS software. We want out-of-the-box capability, so we stay, keep up with your innovation path, your release path.
You need to help us play a more proactive role," not necessarily getting into the services business, which we're not going to do, but by providing more assertive and proactive sense of what are best practices in our 4,500, 5,000 customers. What are best-in-class configurations? What are best-in-class implementations? They want us to be a stronger voice at the table. They want us to continue to build a robust partner ecosystem and ensure that there are an adequate number of trained and certified ServiceNow partners, particularly in the new product areas. They want to do more roadmap sharing with us. They want to have input to our roadmaps and also have us share roadmaps with them.
What I like about that, all those things are manageable things, CJ and Dave Schneider and the whole team, we've talked about how we can make progress on those things. Other observation I'd make is that there's an opportunity to elevate and expand our relationships. We were talking about this at lunch. We have had a great sales motion that goes in and sells to the decision-maker on any given product. What's beginning to happen is you elevate up and listen from the CIO's perspective. They realize that this platform can help them more broadly than just IT. We've done that in some cases, but I think there's an even greater opportunity to raise the awareness of what our full product portfolio is.
I would say about half the customers had a sense of what we do outside of IT, and the other half still are learning about what we do and can do in HR or in customer support and security. I think there's an opportunity to elevate and expand relationships. That doesn't deny who the decision-makers are. The decision-makers are the people we're calling on. Having a little C-suite sponsorship never hurts, and I think it's an essential part of building a great technology company. The last thing I'd say is a lot of the feedback and ideas are things I'd call in basic maturation, right? How do we continue to mature as we build more industry verticals or mature how we handle customer success or mature our user experience?
Things that are, again, a lot easier to do than building a great platform or great technology. I come away enthused. Our customers seem to want us to win. We're quite clear we have a lot to learn, and we're willing to embrace their feedback. I must say, 45 days in, I feel even more encouraged than I did on day one. Now, two quick things. One, I love the fact that how we're spending the agenda here with you today because, at the end of the day, the core of the core of any technology company is our ability to innovate and drive great technology. I think it's appropriate that you're going to get a really deep dive today on our technology. CJ and our team, you'll get to understand the products, you get to understand the platform, understand where we're going with that.
At the end of the day, that's the core of the core, and we need to continue to invest in that. Last thing I'd say is I'm still early on in this listening and learning journey. All these inputs will help me shape priorities and plans going forward. I do not anticipate sudden change anywhere. This thing's working. We have strong, healthy momentum. I do think there's opportunity to build on what we've done as we think about 2018 and 2019, and I welcome your feedback and input, and let me just wrap up with this. I was saying at lunch, my relationship at eBay, I found really good investors, long-term investors, I always learned from. Really good sell-side analysts, I really learned from. I want to hear your thoughts and ideas.
If you send me a model and say, "Fill in the next quarter," I'm not going to do that. Don't want to do that. You can do that better than I can. Your thoughts, ideas, saying, "Hey, John, really interesting company. You ought to check that out," or, "There's a trend going on here. How are you guys thinking about it?" I welcome them, and Mike and I welcome your thoughts and perspectives and ideas. With that, I will hand it over to CJ, who's going to take you through what I think is an awesome exposé of our product roadmap, and then I'll see you again at the end of the day with Mike. Thank you.
Good afternoon. One thing that we have observed is the state of work, and what we define state of work is how are our customers, specifically to their employees or their end customers or their partners, how do they get things done continues to be inefficient, sub-optimized, and frankly, a lot of manual work. Every day, if you think about an employee trying to create an incident request or HR cases, customer service requests, there are emails, various collaboration devices/specific software programs. You look at calls, many software products that cut across the departments, and this is really hard to optimize because it's unstructured. With ServiceNow System of Action, what it allows you to do is replace these manual workflows with intelligent workflows.
Every day, whether you are a requester that is just trying to log a request, and specifically, "My product is broken, my printer is broken, I need this issue solved, that issue solved," can we help them do things in a self-service manner or allow them to look at the status when they file for something? That part is one side of the equation. The other side, people who are providing the services, because we are ServiceNow, people who are providing the services, can they collaborate? Can they prioritize this thing correctly and make sure that the work done is as efficient as possible? We are focused on this specific problem, that as you cut across for our customers, as you cut across different departments, the work today is extremely unstructured, and how can we make it structured, action-oriented, so it's prioritized correctly and employees have great experience.
All of this is possible, like John started out with saying, is because our ServiceNow platform. The company started out as a platform company, and this platform is the solid foundation which provides common services. These services are typical workflows, notification, task, whether you are looking at reporting, whether you are looking at any specific knowledge base, how you create a service catalog. I'll tell you, before I joined the company, I played with the platform. We have a developer program which allows you to get all the training you need to create an application. We'll give you a free instance to play with, and I was able to create a very simple lead-to-opportunity application in just a matter of a few days. That's it.
Because we are a cloud service, the advantage is you really do not have to worry about deploying, management, orchestration, and all that. Which made me wonder if it is this easy to build an application. First of all, wherever there are inefficient workflows, we can provide really good IP in helping our customers when it's related to different departments in our customer's organization. Second, because this platform is so powerful, it also allows our customers to build great applications. I was with a large industrial manufacturer, speaking to them, I think on Wednesday or Thursday last week, and they said, "CJ, we have 5,200 legacy applications. We understand the value of your platform, and it is because of the workflow and orchestration, we are going to replace those legacy applications with ServiceNow.
Oh, by the way, we love your ITSM, ITOM, and Security Operations product." The platform is the power. It's scalable. It's extensible, allows you to build application, and this is why, like John started out earlier, we are expanding our portfolio, in addition to ITSM, going into the areas where automation can be easily done via our platform.
User experience is something that gets talked about a lot, and I would tell you that based on my own experience with the product, as well as speaking to many customers in my first 100 days, the context switching that you do when you are at work or when, even if you are at home and working, when you go to a social media application or requesting a ride or ordering a food from your mobile phone, and then you switch to enterprise application, all of a sudden, your bar is lowered. You know this is going to be complex, you know this is going to be a little slow. You know that the mobile application will not be that great as compared to your consumerized experience. We are going to make sure that we focus on user experience significantly, basically immediately.
Last year, to solve the user experience for our end users, meaning customers, end users who are logging a service request or a Customer Service request, we launched Service Portal. This is a portal technology that creates great experiences for end users when you are trying to request a new printer or a specific laptop or whatever the case might be. The advantage of this technology, because it is built in the platform, is you can create experiences for end users, whether you are accessing from your desktop, laptop, portable device or mobile phone. You just develop once, and it is available through different form factors. That's for the requester. The example I like to use is in airlines. All of you flew to Orlando. If you are a traveler, the kiosk that you use is pretty simple to use.
You can go in the kiosk, locate your reservation, print your boarding pass. Have you ever looked at the UI of the airline employee who is dealing with your reservation? I see some nods here. That's a pretty complex UI because they are trying to do so many things in that screen, in that real estate. We have similar challenges for the IT fulfillers who is looking at, say, a wireless router is broken. Many employees are requesting, "Hey, I cannot access the wireless network," and there is something wrong with the printer here and something wrong in the facilities there. We want to make sure whether you are a Customer Service agent or an IT fulfiller, you will get great experience. That's the next area of focus for us.
On the left, for an end user, AKA employee or a customer, the experience is good. We'll continue to evolve it. For the fulfiller, we are going to make sure that the experience is similar. We are also announcing, this week at the conference, Intelligent Automation Engine. Simply put, what an Intelligent Automation Engine does is if there is a manual task and using machine learning or artificial intelligence, if I can automate that task, why not? That's it. That's the simple paradigm. Let me give a specific use case. You are at your desk, you want to print a document at the last minute, and something is wrong with the printer. You try to create an entry in your portal saying, "Hey, my printer is broken. I'm Joe," or whatever the case might be, or you pick up a phone and do that.
Can we automate this process? Can we make it, first of all, easy for you to just say, "I cannot print my documents"? That kicks off a workflow. It assigns that particular request a particular category, which routes it to the right department and assigns the right resource who can fix that specific printer. Today, for the most part, all of that is manual. If we can solve this, we bought a company, as you are aware, DxContinuum, in January, and we will be focused on this specific problem, whether it's categorizing service requests, whether it's routing them, whether assigning the right priority, whether assigning the right resource for them. That's what we mean in predictive modeling.
In addition, as all of you are aware, we are in operations management space and services, whether you are using public cloud, private cloud, hybrid cloud, we will do anomaly detection, because if a service goes down, if a reservation system of an airline is down, it's already too late. Can we do something where we can look at all the events and figure out what's an anomaly and alert you before the service goes down? That's the problem that we are focused on how do we make it easy with dynamic thresholding, correlation of events, and make it easier for you to do that. That falls in anomaly detection. Farrell will talk about peer benchmarks, I'm not going to touch on that.
Intelligent Automation Engine, just to summarize, if we can use machine learning or artificial intelligence and solve the use cases for our customers, that's what we'll do. This will become part of our platform, or it is already part of our platform as in existing technologies, that all applications benefit from it. If a customer is creating any custom application, they will benefit, too. Putting it in the platform Us hiring the data scientists, which is a skill that is in shortage, and ensuring that becomes part of our core platform, will enable our customers to use these technologies. As I said, every cloud service will benefit from this Intelligent Automation Engine. Whether you are in customer service-- I talked to a large financial services company this morning who uses our HR Service Delivery functionality.
They have about, they told me, 600,000 HR-related requests a day, 600,000 of various kinds, and many to-dos, workflow, and others. Can we make their life easier for the HR Service Delivery team? The same thing on customer service and ITSM. You will see us that every cloud service will benefit from this intelligent automation. All of this would not be possible if it was not for our underlying service, AKA cloud. Everything we do is cloud service. I call it born in the cloud era. This is a company that has been born in the cloud era. Approach we have taken, because we start a little bit later, I grew up in multi-tenant world. I can tell you what are the pros and what are the cons of multi-tenant world.
When I saw here the multi-instance approach, and what I will try to summarize is, if I am a customer, first of all, I decide when I can upgrade to the next release or a previous release based on my customization, unit testing, and others, rather than my software vendor telling me, or a SaaS vendor, "You have four weeks. The new release is coming out. We are going to upgrade your entire install base." The multi-instance, which allows you to have data isolation, allows you to have version control, allows you to have the flexibility so you can schedule when you want to do upgrade, is a key advantage of ServiceNow offerings.
We were, this morning with Product Advisory Council, where we had close to 100 customers, and they all appreciate that us having this multi-instance architecture is easier for them given the kind of application they have built on us. In terms of our availability numbers, because we are multi-instance, as in every customer gets their dedicated environment, our availability numbers are higher as compared to other SaaS vendors. Again, we will continue to improve them as we move along. We have been growing with our customers. Our customer base is growing, as you guys are aware. At the same time, customers are using multiple applications. Because of those multiple applications, our infrastructure continues to grow. What we are going to announce day after tomorrow, we are basically going through our day three keynote today with my team.
What we are going to announce is security, and I spent eight years in security software company creating products that either detect, prevent, or protect against threats. We are announcing security dashboards. If you're our customer, we have given you a bunch of best practices on how you harden your environment. Now, just with one click, you'll be able to see, based on our best practices guidelines, what's your score, how many logins you had, are there issues in your environment that you should worry about and remediate. In addition, compliance and certification, whether you are a large financial services company or a healthcare company, is very important. ISO, all FedRAMP certification, certifications related to European Union, some of the certification related to Singapore and Australian government, we continue to do them. Security is very important, always an ongoing exercise.
Customers trust us with their data, the onus is on us to make sure that we secure their data. What we are going to be launching day after tomorrow is our Jakarta release. This release will be available in the summer. We do two releases every year. Jakarta and Kingston are the two releases that are planned for this year. From a priority standpoint, the first thing we are going to address is performance and user experience. What has happened is when we look at the Net Promoter Score survey, our last, as John announced it in the earnings call, we were at 53 for Q1, and our weighted average was 50 over last four quarters. This is considered by set metrics world-class in enterprise software.
However, I just talked to you about Service Portal and some of the new functionalities related to portal we introduced in our user interface. Our performance took a hit. When I looked at the Net Promoter Score results and look at all the comments from our loyal customers, one of the things that they'd ask of us was continue to increase the performance. Whether it's performance related to how fast the page loads, whether it's performance related to if we want to apply a patch, whether it's a performance related to the upgrades that we go through when we go to a release. Performance work is never done. You will see us focused on performance, and we'll continue to do that. Second, we will expand the capability into our emerging products, which is three specifically you will hear today: Customer Service, HR, and Security Operations.
With Jakarta, we are launching a brand-new product called Vendor Risk Management. This specific product, every one of our customers is dealing with many third-party vendors, hundreds if not 1,000s or 10s of 1,000s. How do you manage that risk? Do you give a laptop to a third party? What kind of data access do they have? Have they filled out the right questionnaire? Do we need to put them under some compliance check? These kind of processes, again, are manual, not automated at all, and error-prone. We are introducing Vendor Risk Management to automate third-party risk, so when our customers look at their entire risk status, they have third-party risk in addition to their own risk. The next thing is on IT. ITSM is our flagship product, and we have a lot of innovation that Farrell will talk about in ITSM and ITOM and others.
We are announcing, because IT is our primary buyer, we are announcing a brand-new product, which is called Software Asset Management. A lot of CIO's budget is on licensing costs across the vendors. How can we make it easy for them to discover what they have deployed? Are they underusing, overusing? What's really going up on the entitlements? When there is an audit from some of the large vendors, it makes those audits painless, and they can reclaim licenses if necessary. A brand-new product will be released in Jakarta. Then the last thing, specifically on Jakarta that I'll talk about is around April 2016, ServiceNow acquired a company called ITapp, and ITapp was focused on one problem. This specific problem was IT has lost control as customers started going to public cloud.
First, originally, it was a few developers, then it became certain lines of businesses, they started getting the wheels from public cloud. It is completely fine because of agility requirement or flexibility requirement, you go to public cloud. However, how can IT make sure that they are still aware what's going on as our customers go on the public cloud or a hybrid cloud journey? We are announcing Cloud Management brand-new offering, which is built on our Service Portal technology. This is a consumer-like experience. We are cloud agnostic for the big three clouds. Regardless of whose cloud you use, you can have now a single pane of glass to look at what resources you have in usage, how much it's costing you, do you want to get some provisioning done, and meter overall.
We are not preventing, our goal is not for IT to prevent if there are certain workloads moving to the cloud. Now you have full control, and you understand what's going on in the cloud. This is a brand-new offering that we are also announcing in Jakarta. In summary, we are continuing to innovate. We have six new products coming in Jakarta, 30 major enhancements. It will be available in next few weeks, in the summer timeframe. Kingston will be the release that follows. As customers are on this journey of IT transformation, for the state of work, wherever we can automate any kind of manual processes which cut across department, please hold us accountable to make sure that we will deliver that via ServiceNow offering. Now I'm going to introduce Farrell Hough.
She runs our biggest business, Service Management, and her team has done some incredible work this year. Without further ado, Farrell, come on stage.
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Hello. Good afternoon. I hope the lights aren't too dark for my lunch table. They were worried about falling asleep in here. We'll work really hard to make sure that you stay awake, and maybe we'll cue the lights if we need to. My name is Farrell Hough. I am the GM for the ITSM Business Unit. I've been with ServiceNow for about five years. I've been a Service Management practitioner for about 15. The majority of those 15 years I spent on being focused on the people and process side. Implementing Service Management technologies or business practices, deciding organizational workflows, what that's going to look like. This past year, I've been able to spend a lot of time, obviously, on the technology itself. It's an incredible time right now to be working in IT.
I'm going to walk you through why exactly I think that is. It's been a great journey here at ServiceNow, and the best is yet to come. I'll be speaking through the whole IT portfolio and focusing in on the incredible innovation that we've been able to deliver across all of the different products that we offer for IT. That looks like starting out with Service Management. We'll go into Operations Management, and we'll also talk about Business Management. The fun part will come where we also talk about how all of that is powered by the Intelligent Automation Engine. Starting out with Service Management, which is my baby. I want to go back just a little bit and say I listened to John and CJ, and the feedback that they're getting from customers is dead on.
We have to make sure that our capabilities are usable, that there's depth to those features, that we didn't just go wide and give a broad brush, that there's actually something underneath it. The focus in this past release, this release we're putting forward Jakarta in Service Management, has been exactly that. Service levels are really what make a service desk function and create fidelity with their customers. Our service levels were really difficult to administer, to understand how they were working or performing, and if they were doing what they were supposed to do. In Jakarta, we created a visual timeline. We also created new roles that allowed service level managers to go in themselves. They didn't have to go through the IT admin anymore, who was already trying to do a million other things, not worry about service levels.
Created a new role, allow them to define their own service levels, and then gave them a visual way to troubleshoot that. At the core of the service desk, those service levels are now something that can be managed much more easily and in real time. The other thing is easier Service Catalog management. Our Service Catalog is 99% adopted across our entire customer base. It is a platform capability. That Service Catalog, I think we estimated we had several hundred million end users who are getting services from this capability. If you are administering the Service Catalog, you may have thousands of items that are there. What we didn't provide our customers was an ability to understand where they'd made customizations, and if they were going to run into issues when they upgraded and didn't understand that their customizations were going to cause a problem.
We started to create visualization for Service Catalog administrators when they are building a new Service Catalog item, where they're off-roading, essentially. If you want to off-road, that's fine, but we need to do something to help you make sure that you understand when you've done it, and that when you get to the upgrade process, you can move past that a bit easier. The other thing that's been absolutely loud and clear is our customers have been asking us for prescriptive best practices. "You guys are ServiceNow. You know what best practice is. You know what your customers are doing. Why don't you tell me how I should set up my process?" We built a capability that's called Guided Setup, and in the Jakarta release, we implemented, from our services team, best practices in this Guided Setup.
What that means is that a brand new customer who's starting with ServiceNow can choose to use the guided setup, take our best practice recommendation, and set up an incident management process in a couple hours. It also means that an existing customer who is setting up a new application can also take advantage of this guided setup as well. This is not a one-time investment. This is an ongoing investment. We will continue to add guided setup best practices across our applications, go deeper. It might look like industry best practices. It might look like specific workflows that an IT organization has, such as a follow-the-sun model for incident handling. We'll set that up, too. No problem. That's an investment that we're making in our customers as well. Lastly, our survey experience, frankly, was extremely poor. We really hadn't invested a ton there.
We gave it a major uplift visually, as well as in the way that you could send out the notifications. You're able to get them on a mobile device or through email, and just making that user experience better overall. That's great. When we walked through the Jakarta release and some of these capabilities and the direction that we were going with our user groups as well as with our PAC, but specifically in one particular user group, we had a customer cry. They literally cried with joy for some of the things that we were investing in here. That is something I'll never forget. That's the kind of product I want to build. Specifically for service management, that's the majority of our customer base.
Yes, we're going to land new customers, we're going to keep the ones we have, too, and it's going to be by doing this kind of stuff. All right. We'll move into operations management next. CJ talked about the Cloud Management Platform that we are announcing this week, and that we've got better visibility in here. This is a cloud portal. You're, as an end user, able to go in and ask for cloud resources. They spin up immediately. As an administrator, you're able to make sure that everything ends up being compliant and handled consistently. The blueprint designer is the capability in the Cloud Management Platform that's going to allow you to do that. It's cloud agnostic. Your users want Amazon services, other ones want Azure services. We're able to spin that up.
You don't have to worry anymore about workflow issues or Amazon wants it this way, or they want this kind of information or adherence to policy. All that stuff's taken care of when you're building it out this way. Another component that came in Jakarta that's not Cloud Management Platform specific, it's more in our service mapping area. When we put out service mapping, we went intentionally in discovery services in the on-premise resources that are out there. You're able to bridge kind of the whole cloud and on-prem environment for your services that are out there. We've completed that picture. You can map out your entire environment now, which is really important. We were missing that piece.
My favorite part with this operations management work and the Cloud Management platform, being a service management practitioner, I love that we're using Service Catalog to spin up these new services, and IT gets to not slow down the business. In fact, they respond very quickly and say, "Hey, yeah, absolutely. You need that? Great." Then all the policy and approvals and all that stuff's in the background. IT gets to operate at the speed of the business, and that's a great position for us to be in. All right. Next, business management. In our financial management application, we really didn't have a lot of visibility for the different roles that are understanding what chargeables look like and what the overall reporting looks like and what we're trying to reconcile.
We created some better visualization as well as more visibility into what chargebacks look like for the financial analyst. Being able to drill all the way down in and know where those charges came from. From the business unit, also understanding that as well and where those charges existed in your organization. Creating a level of visibility that wasn't there. The next component CJ talked about, the Software Asset Management product launch. Man, this one's great. This is such an easy win for IT. Not only are you able to now understand where your software licenses are being deployed, where they're used, how much they cost, but you're also able to reallocate those resources as you need to, and you do not have to be caught off guard anymore by a software audit. That is just a huge win for us.
I flew across the country here and had a customer sitting next to me, and they talked to me about how they just got nailed in a software audit, $500,000 of unplanned spend. They have something like this Software Asset Management product that we're deploying. They can see it coming, and they can move things around and they can cover for those costs. That's really, really exciting. That's going to take off massively in our customer base. Lastly, we did a ton of investment in our Project Portfolio Management and Application Portfolio Management capabilities. I'm not going to dig in deep on those today. All right. Now we get to the Intelligent Automation Engine. This stuff I totally geek out over. I love analytics and figuring out how we can make something better, do more with less, all of that stuff.
Relieve the pressure off of an organization. I'm going to walk through each one of these, not necessarily in order. First up, I think we've got Performance Analytics. It used to be that we really didn't have the capabilities in the platform for you to almost do a retrospective on the data and build a forecasting model that accounted for different variations like seasonality. Your accuracy was a little bit off. You were just getting a linear forecast, which didn't account for variation. With predictive analytics, you've got some serious advanced forecasting capabilities that aren't just linear based anymore. You're also able to do data import from different sources as well. This is going to tell you not just where you've been, not where you are right now, but where you're going, and is that the place you want to be?
In the operational intelligence piece, this one is super cool. This is basically applying machine learning algorithms, looking at your history of service outages, and being able to say, "Okay, well, this outage happened. What were some of the correlations or the indicators that were there that could have told us that it was coming?" Then being able to build signposts in the environment that's going to start automatically detecting that for you and saying, "Yep, this looks like an anomaly, and this is one we want to pay attention to because it could have a major business impact." Then tying it in with root cause analysis. When we talk about being able to eliminate outages, it's this stuff that's going to make it extra real because we are proactive about it. You're not having to manually analyze spreadsheets anymore.
This stuff can apply to a lot of the other tasks that we have as well. In change management, if we've had a failure rate of a particular change, we can start understanding the attributes of what was going on in the environment, to say, "Okay, wait, we need to increase the risk of this particular change because it's failed five times before, and we've got those conditions ripe again." I'm really excited to extend this capability into service management as well. Next up, benchmarks. This is a fun one and was a fun one for me. A lot of times when you are working in service management and you're going to deploy a project, you need to do some kind of business improvement. You got a project, you get the benefit. You don't know necessarily where you stand.
You get questions maybe from your boss saying, "Okay, you got 15%, that's fabulous, but what's so-and-so getting? Is that the best we can do? What's the industry average?" You are answerless. You're a little deflated because 15% you thought was fabulous. You would have to go to an industry report, and it's all survey-based, and it's out of date as soon as you get it. You'd have that, or you would have anecdotal information from a conference, something along those lines, but it just wasn't enough. Because we are cloud-born and we chose to go pure cloud for ITSM, we are sitting on all of that data, and we are able to aggregate and anonymize that data into key KPIs that matter in the service management world. We start with service management. We'll extend it to HR, security.
That's a platform capability that can extend into any of our other product lines. That's something that really equips and empowers the folks who are driving improvement and trying to plan for what's next, with key information they didn't have. Then last, this one's my favorite, too. I have a lot of favorites in this area. CJ talked about the DxContinuum acquisition and our ability to take routine tasks and apply intelligence to them. There is massive administrative triaging overhead associated to working tasks. Whether you're in an IT service desk, you're a customer support help desk, or you're working HR case management. There's roughly, and I know this from experience internally, roughly 30% of the time, our incidents get categorized incorrectly. Rather than going and trying to build the perfect category structure that people are going to go manage, let's not do that.
How about we just let a machine learn what makes sense and get stuff where they need to go? We don't need to apply human intelligence to category picking. That's beyond us. We can give that to a machine. This is going to free up just a lot of overhead and, frankly, frustration, for people who are working help desks and service desks. You can extend the categorization to prioritization, assignment, anything that's like a routine field or on a task, you can start to apply this stuff to. We're going to do it in a really accurate way that makes sense for our customers, and they're going to love it. I'm going to bring us home.
The next slide is really, I just want to share with you where I see the service management industry going. I'm going to start out with where we began. IT Service Management is the heart of-- the help desk is the heart and the face to any enterprise. IT functions as the backbone, but that service desk is the face. We've always had to do some type of knowledge engineering, to get in there and try to figure out, okay, how can we get some of this easy, mundane stuff over to customers so that they can do it themselves? We did that sometimes at the expense of the user experience. Years ago, when I started out, knowledge engineering looked like writing call handling scripts. They were amazing. You knew you were reading off of a script, or someone was reading off of a script.
Not that fun, it worked. It created efficiency for the service desk, but not a great experience for the person on the other end of the phone. Same thing with the IVR. Press one to get to such and such. Press two to talk to an agent, whatever it is. Same thing with those IVRs. That's knowledge engineering on the phone. Next came building out a knowledge base and saying, "Okay, well, now the web's here. We're going to go get everyone to put their knowledge in knowledge articles, and then we're going to expose it on the web." Okay, that works. We're going to now put around it a self-service portal, and we can put service catalog items out there, anything that somebody would need.
They're going to go out on the web and go to the portal and get it. We're going to get incident deflection or case deflection. All those things that go to the web, they cost a lot less. They're like $0.10 compared to $200. All that's great, and that works, and we still do it. It's a huge part of our platform. There's all kinds of strategies that are built around this. The thing is, once again, we have done this at the expense of the customer experience. We're trying to get customers to categorize correctly or follow a script or read a knowledge base article, and even with all the mundane stuff. The thing is, right now, we're at a complete inflection point, and it's the consumerization component that CJ talked about earlier.
It will no longer be tolerated that you come to work and that user experience is not like ordering a pizza on your phone or getting your boarding pass on your phone as well. With that, right now, at this inflection point, we're putting IT in kind of a perilous position a little bit. They've got knowledge engineering that they need to do, but they also need to deliver on that user experience. They need to stop making humans act like machines. The good thing is, it's okay. The technology has evolved to be able to allow them to do both things. Customers are mobile first now, and they're starting to engage in a lot of voice recognition technologies. We're now able to provide them semi-structured forms. I know I can apply machine learning.
I can build algorithms that are only going to present to you the information that you need to know. I already know a lot of information about you, deep personalization can happen now. I don't have to expose every field on a form, just the ones that you care about or just the ones that I don't have the information about. Secondly, will be along the lines of a virtual agent or human-designed conversation. These are the new forms of knowledge engineering that IT is going to evolve into. It's now not making humans have to act like machines. They can just be themselves, and the technology is underneath there to meet them right where they are, and we're not requiring them to do so much heavy lifting for us. We're able to get two things happening at the same time.
IT can get the efficiencies and the automation that they need, but they can also provide an incredible user experience at the same time. Eventually, we're going to move into where augmented reality can be a form of engagement that customers present with, and the conversation design will be automated. You don't need a human necessarily to identify or analyze where a particular call flow didn't go right with a virtual agent. It'll start to self-correct. That's several years down the road. This is such an exciting time to be in IT. With the technology that's out there that we're delivering already, it allows IT to operate at light speed, and where the technology is going, we're going to be able to continue to do that as well. At this point, I'd like to thank you.
I'm going to turn it over to Abhijit, who is going to talk about Customer Service Management. Thank you.
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Good afternoon, everyone. My name is Abhijit Mitra. I'm the General Manager for Customer Service Management here at ServiceNow. I have spent about 20 years in the enterprise software industry building applications, launching new businesses, taking them to market leadership in various companies. You heard CJ and Farrell talk about our platform. It was really that platform that attracted me to ServiceNow. I've been here for two years now, it was last year at this very event that we launched Customer Service Management. We have been in the market for a year now, in the last one year, we have seen widespread adoption of our solution. Today, we have customers in over 10 major industry segments in 28 countries, they're spread all over the world.
What's really interesting is that 48% of our customers, almost half of the customer base that we have with Customer Service Management, are net new customers for ServiceNow. These customers are starting their ServiceNow journey with Customer Service Management. I'm extremely happy and proud about that. Some of these customers are actually here today. These are our early adopters. We call them our Lightspeed pioneers. These customers are all here at this event. They have their own dedicated sessions where they're going to talk about their experiences, about their journey with Customer Service Management. If you are around for the rest of the days, I would really urge you to attend their sessions and hear about their experiences. Let me give you a little bit of idea of what they have achieved. A 70% reduction in cases at one customer.
Another increased case resolution times by eight times. A 40% improvement in Net Promoter Score at yet another customer, one of them even replaced 50-plus portals, customer support portals, with ServiceNow's Customer Service Management. I have been in the software industry for quite a long time, I haven't seen customers achieve so much so soon. I'm really excited about this. Let me tell you a little bit about why this is happening, why customers are adopting Customer Service Management, and some of the benefits that they're seeing from this solution. Customer service is really key to business success, and that's because when customers have great experiences, they become loyal customers. Loyal customers, as we all know, tend to buy more products and services, right? When customers have great experiences, customer service directly correlates to revenue.
This has been proven in a number of research that's out there. Which is why companies spend so much time and effort on trying to create these amazing customer service experiences. However, here is a survey from Forrester which shows that even though 80% of companies say that they deliver superior customer service, yet only 8% of people think that these same companies deliver customer service that's worthy of a superior rating. That's very interesting. There's a 80% versus 8% disconnect here. Let me ask you, in your own personal lives, how many of you remember a great customer service experience? Let's have a show of hands. Okay, I see a few hands raised. That's excellent. Let me ask you, how many of you remember not such a great customer service experience? There you go. I see a lot more hands are raised now.
That really shows how difficult it is to provide amazing customer service experiences. What we did was, we actually reached out to our customers. That's one of the first things that I did, was talk to a lot of our customers and ask them, "What is preventing you from providing an amazing customer service experience?" Here's what our customers told us. Said that they know what it means to provide great customer service. Everybody knows that. One of the fundamental issues is that the existing solutions that's there in the market, they're not sufficient. They're not sufficient because these CRM-based customer service tools, they're designed for letting customers interact with the company. Interaction management, that's what they do. Once customers interact with the company, their issues are captured and logged as cases. That's all that they do, really.
In fact, many of our customers came forward and said that they were looking for a service management approach, one which allows their customer service to be proactive because they want to fix customer issues, not just log them as cases. I have been a CRM practitioner for the majority of my career, actually, and it was really after talking to our customers here in ServiceNow that I actually realized the true value of the service management approach when applied to customer service. That's what we did. We used our platform, System of Action, and we applied a service management approach to create Customer Service Management. That's why we call it Customer Service Management. Now companies have a new way to deliver customer service, one which is effortless, connected, and proactive.
Let me explain a little bit by what I mean with effortless, connected, and proactive. Let me just walk you through this. When I say effortless, it's all about making it easy for customers to get service, to consume service. For example, when customers have repetitive requests, like a password reset. With ServiceNow's workflow, now it's possible to automate those recurring requests and put them up as self-service options on the website. This dramatically reduces the time that it takes to deliver those services instantaneously to customers. In a service management approach, this is what we call a service catalog. That's what Farrell was just talking about. Let's talk about what it means when I say connected. When customers have issues, who do you think fixes those issues?
Is it the customer service agents who are sitting at the frontline and talking to customers and handling those cases? No, right? Typically, those issues need to be fixed by people in other departments, people in engineering or operations or finance or legal or sales. Those are the people who need to fix the root cause of customer issues. With ServiceNow, when everybody's on a common platform, these tasks can now be assigned to people across the enterprise so that the root cause of customer issues are fixed permanently. Once these root causes of customer issues are fixed, customers stop calling. That means case volume goes down. That means support cost goes down. Because the root causes are fixed, the quality of product or service goes up, and customers are generally happier because of that. Those are the benefits, really.
Let's talk about what it means by being proactive. Proactive is about monitoring data, about analyzing trends, even predicting issues and fixing them before customers are affected. This data need not be just historical data. It could also be data that's coming from connected machines that's being analyzed in real-time. All of this is possible using the ServiceNow platform. When we need help in our personal life, when you need help in your personal life, the people that we reach out to and that we trust the most is our friends and our family, right? That's what we do. When customers need help, who do you think they would prefer to reach out to? It's their trusted network, and their trusted network of other customers like them, their peers and topic experts.
Which is why in this conference, we are actually launching or announcing the release of ServiceNow Communities in our upcoming Jakarta release. With ServiceNow Communities, every customer gets a personalized experience and their own community of peers and experts. When customers are helping each other out, they're answering each other's questions, what also happens is knowledge gets created. Knowledge that's user-generated, and that's validated by customers, so it's authentic. Not just that, because Communities is built on the same platform as the rest of ServiceNow, companies now can listen in to the voice of their customers, and they can act on customer insights. For example, if there are issues that are being discussed in community forums and threads, these can be fixed proactively as cases by the company.
If there are topics that customers are interested in when the company is launching new product or services, they can target those specific customers. Communities increases customer engagement and customer loyalty as well. This is really what Customer Service Management is. It's built on the same platform as IT Service Management and the rest of our applications. The key capabilities that we have in the product, if you look to the top, are allowing customers to engage through any channel of their choice, whether it's phone, whether it's email, chat, social media, online, so self-service. The second capability that we have in the product is around managing the data around the customer, who the customer is.
If it's a business, what their account hierarchy is, who are their contacts, what kind of service contracts we have with them, what kind of support and entitlements we have with them. All of that information is managed on that second part there. We have Knowledge and Communities, which is what I just talked about. Case management is a fundamental unit of work because when customers have issues, these are captured as cases in the system. We also offer integrated field service management. When customers need a technician to be sent on-site to fix a physical asset, that's also possible in this solution. Really our differentiation, as I already said, is a service management differentiation. What I'm going to do now is I'm going to show you a demo of all of this stuff in action.
It's easier to visualize in what I meant with some of these concepts. Let's switch to the demo. This is PWR Systems, PWR Systems is a software company. What I'm showing is the experience of a customer of PWR Systems. Julie is a customer, she's a developer. She's browsing through the Communities on her mobile phone, these are the forums that she's interested in. If you scroll down, she's looking at who are the top contributors that she's following and even some of the updates that are of interest to her. These are some of the threads that she's following. If you look at the first thread up there, that's actually a question that Julie has asked. There are a couple of people who have replied to that question.
She decides to take a look, drill down into that question, if she scrolls down, you'll see a couple of replies here. The first reply is from someone called Jordan May. What's interesting is that other users have found this reply to be helpful, users have validated this reply. Julie decides to try that solution and see if it solves her problem. It does. Because it solves her problem, she comes back and marks it as a correct answer. The system now marks this answer as an accepted solution. What just happened is that Knowledge got created because a customer used the solution and said it's a correct solution, Knowledge got created. This Knowledge is authentic, and it's fresh. Because the system is tracking Julie's activities, Julie gets awarded with an expert-level badge because she's contributed to Knowledge.
This badge is now displayed on her profile so that other users know that Julie is essentially an expert on this specific topic, and this is how we encourage users to communicate, collaborate in a community. Julie is on the customer support portal. This is an application of our Service Portal technology, where companies can have their own customer support portal. All the information out here is completely personalized for her. These are all her open cases, which she can update whenever she wants to. She sees that there are three knowledge base articles which have been updated since she last logged in. She is subscribing to those updates, that is why she is getting the information pushed to her. These are all her community activities. Down below, if you scroll down, these are all the community activities.
Everything is at her fingertips, that is the badge that she just got. Because PWR Systems, this company, knows that Julie is specifically interested because of her activity that she is doing, when they are launching a new service, they are able to target customers like Julie. There is an invitation right on top. This is an early access invitation to join a mobile analytics platform, and Julie accepts that invitation by click on that button. Just with one click, she is onboarded into this new service. That is really the power of our platform when we automate things. This page is completely contextual to the service that Julie is now looking at. She can do additional things. For example, ask for a sandbox instance or a development kit, and all of these requests are instantaneously delivered to her through automated workflows.
This is where we apply the service catalog, the service management approach, to make it effortless for customers. What happens when Julie needs help? There is an icon called Get Help. She clicks on that, fills out a description of what her issue is, submits that, a case is created. The Intelligent Automation Engine kicks in. It automatically prioritizes this case, categorizes this, and assigns it to the right agent. You notice Julie did not have to fill out anything other than just a description. That is where we are using machine learning to determine what is the most correct category, priority, and who is the person who can help Julie out. This was an experience from a customer's point of view. Let us look at an experience from a customer service agent's point of view. Let us see how that looks like. This is Kevin. Kevin comes to this form.
This is his service workspace. CJ mentioned about this earlier, all the information that agents have to look at. On the left, if you see, these are all the cases that is on Kevin's plate. If you see on top, a case just pops up. This is the case that Julie just created. Kevin is able to see, there is a score there. This score is something that is also computed by the Intelligent Automation Engine. It is prioritizing work for Kevin. It is telling him that this case has the highest score at this point in time, you need to work on this issue and not on some other issue. Customer impact is high, contact sentiment is negative, that is why it has a high score. Kevin decides to open up that case, and here is the case.
Here's all the information, all the customer data management information that I talked about, who the customer is, what product, what service contract entitlements, all of the stuff is in the middle. If you look to the right, this is where the Intelligent Automation Engine is also searching for possible solutions that could help Kevin solve this case faster. It's already found a couple of matches. In fact, if you look at the top, in the top recommendation, that's a problem record. Looks like this is a known issue that somebody's already working on. Kevin decides to click into that problem and take a look at what the known issue is. Looks like there is a known workaround, Kevin decides to attach that workaround to this case and propose a solution and close this case. A couple of things just happened.
The Intelligent Automation Engine was able to prioritize work for Kevin and recommend solutions which help him close cases faster, more effectively. Kevin decides to take a look at this problem and sees what else is going on. Here's the problem on the top left, sees there are eight other customers, not just Julie, but eight other customers who facing exactly the same issue. He assigns that to engineering. Now when engineering fixes this issue, it rolls out a change, not just these nine customers, but every other customer will never see this. This process where we bring everybody together in a common platform and assign tasks across the enterprise, that is in our service management world called problem management, right?
This makes customer service a team sport because it's not just customer service, but everybody in the company who can resolve the root cause of customer issues. Now we're going to take a look at a third demo, a third scenario. This is about being proactive. We live in a connected world today. The Internet of Things opens up new opportunities. I'm going to show you an example of ServiceNow can really play a key role in that world. Here is TFX Systems, this is a company that provides systems and solutions to transportation agencies all over the world for running ticket machines and cash registers. Jane is a service operations manager. She's looking at her dashboard, looks like something is going on in the San Francisco station. There's a big red blob. Something is wrong.
She clicks on that. She sees the organization of the station with all the different ticket machines laid out. A couple of them are showing some issues. When she drills even further down, the system is detecting an anomaly. This is what Farrell was talking about, CJ was talking about when we talked about anomaly detection. The system is detecting an anomaly. There's a deviation in data. What is the deviation? The deviation is that the ridership, meaning the number of people in the train station, is going up, the transactions, meaning the number of tickets that are getting issued, is going down. That is the deviation. That's not normal. Something is wrong here, right? System warns Jane that something is going wrong. She needs to do something about it. What can she do?
She decides to run some diagnostics, This is using our process orchestration capability to remotely ping these connected machines and see what's going on. What are they responding back with? Looks like there's a hardware error, Jane cannot do anything more remotely. What can she do? Because we have integrated field service management, she can send out a technician. That's what she does. Dispatch a technician, a work order gets created. The field service technician goes on site with his mobile devices, fixes the particular hardware issue, and the system will be restored back to normal operations. That's what it is looking like now. What you just saw is a couple of technologies in our platform working together. You saw our event management capability, where we're able to ingest alerts, our alert correlation capability, which shows you that there's an anomaly.
You saw our process orchestration capability, which runs the diagnostics. With integrated field service, technicians are dispatched, All of this is surfacing on the UI, which is powered by our analytics. The last thing I'll show you is the experience of a customer service leader. Let's say I'm a customer service leader, Here's my dashboard. Some of the things that I look at on a daily basis are things like my operational KPIs, how many current open cases do I have, what's my first call resolution looking like, and things like that. What you see on the right is very differentiating. There's an integration with our financial management application in our IT business management suite. That's cost analysis. Now the cost of providing services to customers can be broken down here, This data can be sliced and diced by different dimensions.
For example, what's the cost of supporting certain product lines versus certain other product lines? This information is very strategic, Now customer service leaders can actually have a very different kind of conversation with their peers in the company. That's how Customer Service Management allows companies to provide an effortless, connected, and proactive customer service. Like I mentioned earlier, all of our Lightspeed pioneer are our early adopters who are here. All 18 of them have sessions at this event, If you are around, I'd really urge you to attend some of the sessions. We also have the product on display at the demo pod. This is the opportunity for our customers to network with other customers, network with partners, as well as with the topic experts.
In this event, in this conference, we're not just launching a ServiceNow Communities product, I'm personally inviting each and every one of you to come and join our Customer Service Management community in real life. Thank you so much.
Now we have a quick 15-minute break. We ask that you be back in your seats by 2:10 P.M. we can resume the second half of the program.
Ladies and gentlemen, please take your seats. The program will continue shortly. Ladies and gentlemen, please take your seat. Our program will begin shortly. Please welcome back your ServiceNow Finance and Corporate Development, Jimmy Sexton.
All right. Thanks, guys. I hope everyone is sufficiently caffeinated for the second half of this program. I'd now like to welcome up Deepak Bharadwaj. He's the head of our HR business unit. He'll give you a little bit of overhead of the product. We'll start with this video.
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All right. How's everybody doing today? Good? Excellent. Thanks, Jimmy, for that introduction. I'm glad to be here. Thanks for taking the time to listen to me. Just to kick things off, one of the things I wanted to share is how we've been working with customers over the past few years. Time and again, what we hear from customers is when their employees need HR service, what they're looking for is a way to get information so that they can make the right choices, step-by-step guidance that hides all of the underlying process complexity. As you know, HR can be quite complicated. The third thing is what we call high touch help from HR when it matters, the ability to actually have that interaction with a real live person on the other side. When they don't get this, what happens?
They resort to the same old unstructured ways of communicating back with HR, so emails and phone calls. As a result, HR is inefficient, and it's always a poor, frustrating, experience for the employee. Before I get into any slides, I'm actually going to start with a demo and show you what if things actually looked different. We'll use an example of this employee. She just got married. She's got a lot of HR stuff to deal with, so to speak. She's thinking, maybe she'll take a different last name. She's thinking about how does she get herself and her spouse on the right benefits. Should she be on the spouse's benefits plan or vice versa? She doesn't really know where to start and how to go about this. This is how we think the experience should be.
Just like the employee is in her consumer life, able to search on something like Google, she comes to this employee service center. She just types in a search term. Let's say, "Newly married." What that does, it brings up a few knowledge articles. She can select this one, let's say, just got married. Her HR department has put together some wonderful information about what that process is, how long it's going to take. At the bottom of this knowledge article, you can also see information about pricing around benefits and things like that, what it's going to cost. Very quickly, she's able to get that information to make the right choices as she goes through this life event. She can then start her request, and this is what we call a service catalog item, if you will.
She can select the options that she's interested in. In this case, she's going to change her name. Check. She's going to update her benefits, and she's going to submit. She made the right choices based on what she was wanting to do, and then now what's going to happen is the system is going to guide her through that step-by-step process. What's happened now is she's got a couple of tasks that have been assigned to her. This is the case that got created, and automatically, we've generated two tasks for her. Everything is self-service, obviously. The first one is to change her name, the second one is to update her benefits. Let's drill into the name change. Simple form right here. It's an HR service surfaced as a to-do for this employee. She can change her name.
The beauty about this now is because of our workflow and integration capabilities, all the other underlying systems can automatically get updated. If the travel system, for example, needs to get updated, it can flow directly into that. That's one example of a task that she can complete without really having to know anything about the underlying process complexity. How about this other one, the benefits task? Click on that, and it's a link to a different provider's website. In this case, this employer has outsourced benefits to a different provider, and she's being directed to go to that benefits provider and complete all of her benefits enrollment there. That's the step-by-step guidance. If she has a question for HR, right here in context, she can start asking HR clarification questions and just getting a little bit more guidance.
The HR person can respond back to them in the context of this case. No longer does this employee have to resort to things like email and phone calls to get a response back from HR. That's the experience that we believe is what we call a consumerized service experience. You get information so that you can make the right choices, you get that step-by-step guidance, and you get inline help and that high touch from HR when it matters. Let's go back to the slides. I started by saying, what if this experience looked like what I just showed you? Well, the good news is we actually have today a System of Action that we've built for HR Service Delivery that does exactly this. What I showed you was the live product.
This is what you'll see if you went on the demo floor as well. This is here and now. Our System of Action really, like I said, helps that employee do all the things around making the right choices, getting step-by-step guidance. Then when they want to interact with HR and get help from them, those requests and inquiries are routed to the right folks in HR. Folks that can actually help her and assist her, they have the right skills to do that and provide that personalized resolution. Let me use a different example and illustrate this with a series of steps. Let's take an example of an employee applying for an extended leave of absence. We'll go through a similar flow, similar to that demo.
This employee would go to that employee service center, they would be able to search for knowledge and get information, get answers to their questions around extended leave of absence policies, things like that. Then they can make choices about what they want to do and how they want to proceed. Once they have done that, again, they can go off, like we showed in the demo, submit a request, which will create a case, assign tasks to the employee. These tasks could be things like e-sign a policy acknowledgment, as an example. Then when they have questions, that could get routed to the right folks in HR. In this case, this would be someone that could really help them with the leave of absence or benefits. This is where it gets more interesting.
Because it's all in the same System of Action, it's all in the same platform, HR can now start to bring together other departments to provide this service. In this case, because this employee is off on an extended leave of absence, IT may want to come in and turn off systems access while they're gone for security reasons. The facilities team may want to come in and repurpose their office space for a meeting area while they're gone. This is how HR can provide that service by being super efficient, super effective, doing more with less. From an employee standpoint, they really get what we call that consumer-like experience because they're able to make the right choices, they get step-by-step guidance, and they get that inline help and high touch when it matters. That's how we think about consumerizing the employee service experience.
Let me talk briefly about the value that we are providing to our customers or helping them uncover. We've got hundreds of customers today that are using us for HR, they report saving in the order of $millions every year. These savings are largely coming from what we call productivity gains for HR. As an example, Sally Beauty, a beauty supplies retailer, they are able to make HR more productive by really centralizing that HR Service Delivery function and moving work from higher cost HR business partners to lower cost HR support personnel. CHRISTUS Health, a hospital network, provides their employees with a way to get answers themselves on that employee service center, thereby reducing the incoming flow of cases into HR. Overstock, an online retailer, is able to make HR more productive by automating the process of new hire onboarding.
Some of these are actually speaking at this conference this week. While it's interesting that all of these customers of ours are saving $millions by making HR more productive, I think it's equally important to understand the impact that they are having on their employees by making it so easy for their employees to get back to their daily jobs. As an example, Envision Healthcare, one of our longtime customers, that's about saving lives. Think about that for a moment. Highly impactful. One of the areas where HR Service Delivery is extremely crucial is new hire onboarding. I'm sure a lot of you agree that this is a process that is broken. It's a poor experience for the new hire. It jams up the HR team, and creates all sorts of ripple effects and bottlenecks across all of these departments.
What I want to do is actually look at why this process is broken from IT's point of view. A lot of our attendees here in the conference are from IT. Let me show you how they think about this process and why this would appear broken to them. Think about onboarding. Onboarding starts in HR. HR has all the information about this new hire, including their job role and department, their location. IT should not have to guess things like whether they need remote access or not. Similarly, the new hire's manager knows what tools and technologies this new hire will need in order to be successful in their daily jobs. For example, do they need access to, let's say, an analytics data warehouse or perhaps an international data plan.
Finally, the new hire might have preferences themselves, Mac versus PC, iPhone versus Android. Now, while we have a lot of customers that use us for HR, for most of our customer base today, the picture actually looks a little bit like this. We've got IT that is using us for modernizing IT Service Management on the ServiceNow platform. When it comes to onboarding, the flow of information between departments looks more like this. It's unstructured, it's incomplete, it's untimely, back and forth. As a result, IT now is having to deal with last-minute requests from the manager, email back and forth from the new hire after they show up, after day one, and all of these are requests that are independent and isolated with no overall context and no overall visibility into the process.
IT is trying to modernize IT Service Management, but really, they still have some hurdles to overcome. In order to overcome those hurdles, they have to work closely with HR and facilities and finance and all of these other departments. If you think about it, onboarding is a multi-department experience. What if there was a multi-department solution to this problem, one that was built on a single System of Action across all departments? Well, I'm extremely pleased and delighted to announce that we've been working on a new solution, this is going to become available soon in an upcoming release. This is so that we can help our customers give employees the onboarding experience that they deserve. This new solution that we are announcing is called Enterprise Onboarding and Transitions. This is really a multipurpose next-gen solution. Why is it multipurpose?
It's not just about onboarding. If you think about it, this can be applied to all sorts of other transitions like off-boarding, transfers, and any other extended complex life events like extended leave of absence. Why is it next-gen and revolutionary? The first thing is it's built on our service management foundation, and if you think about what our service management foundation is, case and knowledge is at the heart of it. Because it's built on that service management foundation, the new hire or the manager actually gets everything related to that information so that they can make the right choices, that step-by-step guidance. Think about that inline help right there during the process.
I mean, how many times does a new hire get stuck in the process and then has to go off outside the application and resort to emails and phone calls just to keep them moving along? Think about the value of that. That's what we think about when we say consumerized service experience, and that's really the foundation of our onboarding solution. The second thing is because we are a System of Action across multiple departments, we can really drive that action across all departments well beyond just HR. If customers are already using an existing HCM or recruiting-based solution for their onboarding needs, we can seamlessly integrate into all of those and extend those processes beyond just HR. Extremely complementary to all of those existing solutions.
Finally, the secret sauce behind what we built is really how easy it is to snap together these processes and experiences literally in minutes. We want this to be as easy as possible so that change management doesn't become a problem and the onboarding experience evolves as the organization's needs change over time. With that, I'm delighted to actually show you what this experience looks like. Let's jump into the next demo here, and I'm going to show you what our new offering is going to look like in the next release. Here we are back on the employee service center. Again, this is brand new in the Jakarta release that's coming out. We've made some significant improvements using the Service Portal technology that is part of our platform.
You'll see that the information that is being presented to the new hire is extremely personalized and targeted. We'll scroll through this, and you'll see things like announcements for this new hire. You'll see some videos that are relevant to him and his role, some upcoming events that are based on his company's location. I really want to get to the to-dos here at the bottom of the screen. Here from one place, the new hire can get instant status in terms of whether there are any to-dos or tasks that are overdue. In this case, he doesn't have any overdue tasks, but he has seven that are coming up due soon. Let's drill into this and see how we can get him going.
We are looking at the onboarding case for this new hire, this is the one place from where the new hire can now start to do everything related to onboarding. This is step-by-step guidance for everything related to completing their paperwork, to requesting services from HR, as well as all these other departments. The first to-do here you'll see is select IT equipment. That's a request of IT. Let's drill into that. That brings up a simple form, within this form, the employee can do things like select preferences for his laptop, PC versus Mac, or select his preferences for his phone. Does he want an iPhone versus an Android? Here is something very interesting about what I just showed. What you're seeing here is an IT order guide.
This is something that the IT department would have already configured as part of their ServiceNow ITSM deployment. What our enterprise onboarding process is able to do is surface up the relevant order guide based on this new hire's department or location or other attributes as a to-do right here in the process. When the new hire clicks submit, this is actually going to create a formal structured series of requests into IT in their ITSM application. We've gone from last-minute unstructured to pre-day one structured information going back into IT. All right, let's move along. I'll give you a few more examples here. Here's the next task. It's HR related. It's about direct deposit. We'll click into that. Again, a simple form. They can fill out all of the information around direct deposit.
Again, this is a service that HR has already configured for, let's say, in this case, U.S.-based employees. What our process is able to do is surface that service catalog item right here within the onboarding process in context. You'll also note that right here within the onboarding process, the new hire has access to things like knowledge-based content, so they can, when they need more information to make the right choices about direct deposit, they can drill into that and they don't have to resort to emails and phone calls back into HR to ask clarifying questions. Let's look at another type of to-do here, sign NDA contract. A lot of onboarding tends to be about signing documents and legal agreements like NDAs. We'll drill into this.
New in Jakarta, one of the things that we've done is provided the ability to automatically populate fields like name and address on documents like this and serve it up as a to-do for e-signature. Like I showed before, if this employee has any questions, they can simply interact with the person assigned to this HR onboarding case right here from within the app in context. What's also interesting is because this is a legal document, while they are interacting with HR, under the covers, HR may bring in the legal department to provide help. That response would come in not just from HR, but from a department outside of HR. All right. Let's quickly look at what this is for the hiring manager.
The hiring manager also has a series of to-dos that she has to complete in order to onboard this new hire. At the top of the screen, what you'll see is a card where the hiring manager can scroll and get a quick sense for the status of where things are in this onboarding process. Right now, right here in her version of the employee service center, she's able to tell that we are in the pre-boarding phase of this onboarding process. Right below that, she also has her snapshot view of to-dos. What's interesting is you see the Show Mine and then you see the Show All. The Show All is a way for her to get a sense for not just her to-dos, but the to-dos that are assigned to everybody else that is involved in that onboarding process across all departments.
Between those two cards, this manager, who otherwise would have had to send emails and make phone calls into HR and other departments, gets instant visibility right here at her fingertips into where this onboarding process is and whether that new hire is going to show up on day one all ready to go or not. I'll show a couple of examples here for the hiring manager. One of the things that she may want to do is make sure that this person is sitting in the right place. If customers are using ServiceNow's facilities management application, then we can surface up a nice intuitive-looking floor plan viewer, and we can have the hiring manager make a selection of where this new person should be seated.
In this case, the yellow offices are where her existing team is sitting, and now she can make sure that the new hire is sitting right next to the rest of her staff. This is going to create a formal structured request for the facilities team to now work on. Last example related to IT. Selecting cloud accounts for this new hire. This is another service catalog item that IT has already created. You'll notice that some of these options are already pre-selected. This is based on the new hire's job role. Because this person is a sales rep, you'll notice that the access to the CRM system is already pre-selected. The hiring manager can then provide additional recommendations in terms of whether this person needs access to that analytics data warehouse or not. Really, here's the best part.
If you're using ServiceNow's IT orchestration, then we can 100% completely automate the provisioning process for our customers. Think about the productivity for this new hire. Day one, all of the HR stuff is taken care of. They're sitting in the right place, right next to their colleagues. They got their laptop with the right software installed, and they have access to all the systems that they need to be productive right there on day one. That's what I call a multi-department experience on a single System of Action. Make sense like that? Okay. Let's get back to the slides. Okay, I'm going to switch gears a little bit and talk about what's next for HR Service Delivery. When we think about innovation, we're always thinking about new and previously unimagined ways of delivering value using great technology.
For us, innovation doesn't have to be coming from us within the four walls of ServiceNow. It's also within the larger partner ecosystem that we have cultivated, especially the ISVs. Well, one interesting ISV story is a company called Build On Me, and you can actually see them, visit them on the demo floor. They're doing some pretty interesting things related to chatbots and virtual agents. Why is this something that's relevant to HR? Well, if you think about the whole consumerization theme that we've been talking about and how we can make it super easy for employees to get things done within HR, in the consumer world, they're also starting to get used to things like Google Home or Alexa.
The way they interact with these systems is through there is voice is obviously a component to it, but what is more important is they are able to speak with it in a very natural language type conversational way. Really what Build On Me is trying to create some IP around is the ability for customers to be able to deploy ServiceNow and all the power of our platform side by side IBM Watson's natural language processing capabilities. I am also happy to announce that our ServiceNow ventures recently completed a round of investment in Build On Me. We are pretty excited about what they can bring to the market. Let me jump into a demo and show you what it looks like.
Build On Me is actually working with one of our customers, Willis Towers Watson, and they are helping them deploy this new technology that they have built out. They call it HR Bob, that is their product. They have a few other products that they have within their portfolio, but one of them is HR Bob. The way HR Bob works is really provides the ability for the employees of Willis Towers Watson to now start to have a very natural language conversational type approach when they are trying to request HR service. Here is an example where Amy, in this case, an employee of Willis Towers Watson, needs to take some time off. She is going to click on chat with HR Bob. Again, all of this could be voice-enabled as well. Here HR Bob comes up and asks her what she wants.
She is going to ask HR Bob how much time off she has. HR Bob is going to respond with the PTO balance. That is one way in which without Amy having to deal with going to the right place or the right system to find the PTO balance, HR Bob is able to surface that, and she just had to ask that question as if she were speaking to a live person. Amy, in this case, has seven days of PTO remaining, and it turns out that she needs to take 10 days off. She has got a little bit of a gap there. She asks HR Bob if she can take more time off than available. What HR Bob is able to do is understand that what she needs to know is the leave policy.
It just took that question, natural language, and as a response, surfaced up what the policy is for leave, and it also pulled up that knowledge article. It turns out that, yes, she can take three days of leave, but those would have to be unpaid. HR Bob offers to submit a leave request for her. It asks her a few questions about when she is going to start taking time off, when is she going to be back, summarizes all of that. Submits a request, which then creates a case, and we are back to where we started. This is the consumerized experience that Amy is now starting to get as an employee of Willis Towers Watson. We saw the ability for HR Bob to retrieve a data field from the system.
We saw the ability for it to search the knowledge base and surface very contextual, personalized search results around the policy. Then we also saw how it's able to gather information and submit a request and open up a case automatically, all using a very natural language style conversational approach. There's some pretty powerful technologies that are powering this, and we're super excited about how this will evolve in the HR space. I look to continued success of BuildOnMe and HR Bob. Let's get back to the slides. Let me close by talking a little bit about customer success and where we are as a business. Like I said, we've had hundreds of customers that have deployed us for HR live on our HR solution.
Really if you think about it, you look at these logos, it's across the board in terms of industry segments, geographies, company sizes. We've got customers that are 1,000 employees, maybe even less, all the way to hundreds of thousands of employees. It's a solution that scales pretty well up and down horizontally, and we really like that about it. We've got in our customer base, about 25% of our customer base is G2K. We've had several million-dollar-plus deals as well. Really looking at this business, and I personally am extremely bullish about where we can take this. In fact, I wanted to share with you a story that I often share with my colleagues here, especially the folks in sales. This is what I think is a good leading indicator of where I think the market is headed.
For those of you who don't know them, Sierra-Cedar is an HR analyst firm that does an annual survey of HR practitioners, and asks them all sorts of questions about what systems they're using. In this case, the question that they asked about 2,000 HR practitioners in 2015 is, what system do they plan to use or are already using for HR Service Delivery? In the 2015 survey, that's where we came up. It's also about the time when I was trying to make the decision of coming here to ServiceNow, and I looked at this chart and I said, "Well, we are above the niche competitors, and look at who we have to replace." It's legacy on-prem, it's solutions like a generic IT help desk that are not really solving the problem, and other is another word for unstructured email and spreadsheets.
I think to myself, wow, this is a super cool opportunity, and it's something that I think I could easily get behind. Now since coming here, and I shouldn't take all the credit for this, a lot of it has to do with our powerful platform and the hard work of our teams. In the 2016 survey, look where we ended up. This is why I believe this is a fantastic opportunity for us as ServiceNow in the HR space, and really a way for us to redefine and reshape what HR Service Delivery is all about. With that, I'll wrap up. Thank you for listening, and hopefully I was able to share the context of what we're doing here at ServiceNow in the HR business.
With that, I'll bring on my colleague here, Sean Convery, head of the VP and GM of our security business. Welcome, Sean. Thank you.
Most enterprises have invested in sophisticated tools for threat detection, but they don't have the intelligent tools they need to remediate the issue when there is a breach. Emails, spreadsheets, and manual processes take too much time, leaving the business at risk. There has to be a better way. With ServiceNow, you can respond to security threats at Lightspeed before they impact the business. ServiceNow Security Operations brings data from your security tools into a structured response engine that uses intelligent workflows and automation to help your team respond to threats quickly. Because it runs on the same platform as IT, threats are automatically prioritized based on both the severity of the problem and the impact they could have on your organization. Your teams can take immediate action on the most important issues.
Incidents are automatically updated with information from external threat intelligence sources, response teams can quickly understand the depth of the problem and activate potential resolutions. While manual research that used to take up to 45 minutes can now be completed in as little as 20 seconds. When it's time to take action, it's easy to route tasks to team members in security or IT. The right people get involved right away on the systems they're already using. Once the incident is resolved, they can skip the postmortem meeting. Everyone is automatically notified, and all of the steps the team took to remediate the problem are documented in a post-incident review. Your IT and security teams can work together as one, resolving security incidents quickly so they can devote more time to hunting for more sophisticated attacks. Find out more about ServiceNow Security Operations today. ServiceNow.
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I have a theory that everybody who gets into the security industry watched the right movie at an impressionable age. For me, and I'm aging myself, it was "WarGames" with Matthew Broderick. Some of you probably remember. I'm seeing some heads nodding. Other folks, it was probably "The Matrix" or some other movie. The byproduct of that is it means we all feel like we need to solve a global pandemic or prevent a nuclear launch to feel satisfied in our jobs. This is interesting because Forbes is forecasting a 1.1 million job shortfall in cybersecurity. If you talk to a chief information security officer, they will say it takes six months to train somebody, six months for them to be productive, and then they leave for double their salary. That's the backdrop that we had as we were going into launching the Security Operations capability.
This is why I, at a personal level, feel like if we can make the analyst's job better, more satisfying, less wasted time, we can make a real impact on the industry, help organizations be safer. I've been in security for 20 years now, and every time I look at the headlines, I feel like, are we really making the kind of headway that we need? That's what I want to talk to you about over the next 25 minutes or so. If you look at where we sit from a product standpoint, we're one of the applications at the top. We're heavily leveraging the platform. This is a major advantage for me and my business in that I never have to worry about building, reporting, or role-based access control, or do database upgrades, or any foundational capability that any enterprise software would need.
It gives me the nimbleness and speed of the best-funded startups with the infrastructure and sales brand capabilities of ServiceNow as a company. I'm very fast and nimble as a business. My organization-- Who was here last year, by the way, when I did this presentation? Show of hands. All right, excellent. If you remember, we were really early about a year ago. We had just launched product in February at the RSA conference. We've now been in market for about, I guess about five quarters. We started out with a team of about six people. We're up over 100 folks now. 50% of our business is Global 2000. Because of the power of the platform, we're shipping a 1.0, and large organizations are putting it into production because they feel confident in the foundation capabilities.
Let me walk through a little bit, for those of you who don't have a security background, about the industry as a whole. I'm going to be vastly oversimplifying what we actually have in the security industry just to help everybody kind of catch up to where we're at. If you think about the entire security market, it started with this idea of protection, right? I wanted to stop something bad from happening, and I used a firewall typically to do that, maybe antivirus, something like that. We realized there are a class of attacks we can't necessarily stop for sure, so we want to detect and alert that this potential issue may have happened. That's the entire detection category, and that's companies like FireEye, Palo Alto's actually in this space as well, Cisco, and others.
The problem was we had dozens of vendors in both of those categories, which gave birth to this visibility category, which is where the entire SIEM market lives. That's QRadar from IBM, that's Splunk, that's ArcSight. These are aggregating alerts. The trouble with aggregating alerts is it doesn't actually allow you to do anything about the alert. You have visibility into it, but then the action falls back to spreadsheets, to emails, to phone calls, to paper notebooks. What we've built our entire foundation on is this idea that this response category is an area we feel permission to play because of our expertise as a System of Action, as a workflow and orchestration capability. That's where we're playing today. That's where the market is evolving. What's so exciting about this is there is not an existing market that we're trying to unseat.
We are going into green fields 80% of the time. Now, there's a number of competitors that are coming up in this space, companies we will enjoy competing with, but the entire category is brand new. What's interesting about that is it plays to the strengths of ServiceNow. Because of the expertise that we have as an organization in workflow automation orchestration, it's actually easier for us to add security onto the platform than it is for somebody to build a pure play security product that can do all the foundation capabilities that we can do. Make sense? All right, let's keep going. If you look at the breadth of capabilities, this is what we talk about with customers across the top.
What I would point out is the rightmost three capabilities are actually platform capabilities that I promoted to top-level objects because they're so valuable to customers. When I talk to customers who are interested in Security Operations, there's two main reasons that this IT integration is so valuable. The first is that without IT integration, you can't get business context. Imagine trying to prioritize how you want to respond to an alert, but not knowing whether the system that was under attack was part of your financial reporting infrastructure or part of your summer company picnic planning wiki. Right? The latter is something you probably can defer for a couple of hours if you have an issue with the former.
For many organizations, they can only look at how scary the attack is to make the prioritization decision, which means they may start investigating and responding to an issue that may take hours or days, but find out in reality that it was a wasted effort because the system was not relevant or not exposed to the particular attack. I am going to talk through four quick use cases. This first use case is something that we hear a lot when we talk to customers, is a challenge with the entire vulnerability response process. If you think about software vulnerabilities, application vulnerabilities, this has been something that has existed for a long time. Some of you are probably familiar with companies in this space like Qualys, Rapid7, Tenable. These are organizations that will help you scan your infrastructure to determine the exposure to specific vulnerabilities.
The challenge is you have to do the patching, then you have to do the remediation. By tying the data from these scanning systems directly into ServiceNow CMDB, we can map the services and understand the impact of a particular vulnerability on the business service that has been affected by the vulnerability. Rather than the compliance team, the IT team, and the security team getting in a room and yelling at each other with a 7,000-row spreadsheet in front of them of all their vulnerabilities, they can actually see, oh, these are my 10 most business-critical services. These are the 42 vulnerabilities on those services. What is an acceptable SLA to respond and stop these particular issues?
It also gives the Chief Information Security Officer dashboarding they can show to the audit committee, dashboarding they can show to wherever they want that will show them how is that trending over time, given the fact that we have got Performance Analytics built into the system. Second use case I want to talk about is where we really put our focus initially as an organization is on incident response automation. This ties into the SIEM example, the Splunk and ArcSight example I was giving you earlier. Once you have the alert, the work begins in a security team. If you have a suspicious piece of malware, for example, and you are trying to figure out, is this malware something that I need to worry about on this particular asset, and what should I do, you have to go through an entire process.
There is often 10, 15 steps you need to undergo to figure out what are the network connections, what are the running processes. Let me compare those running processes to what I expect the processes to be. Let me take the delta and do hashes of those files and look them up on threat intelligence sources. All of these individual tasks, very mundane. These are the kind of tasks that do not make security analysts like their job, right? Because they each take 20, 30 minutes, and there is seven or eight of them to do per incident, and they have as many incidents as they can get through in the day. What they want to do is they want to be the high-value decision maker, right? They want to be the person saying, 'I see the data. I have done the investigation. This is the decision.' Instead, they are doing this mundane task.
We can automate a lot of those tasks and make the organization far more efficient. The threat intelligence side of this, I'll just touch on briefly. Threat intelligence, a whole host of companies that provide threat intelligence to other organizations. If you, for example, as a company, say, have five or six threat intelligence feeds, that probably means you've got thousands of new potential threats coming into you every day. If you're not familiar with what a threat intelligence provider does, they'll publish IP ranges, file attachments, email subject lines, domain names of the bad behavior of the day or the week or the month. These bad guys are moving around all the time, they'll spin up a new domain, do a bunch of attacks, take it down. Being able to move very fast is important.
What we can do is take the threat intelligence data, and again, by tying it to the CMDB, by tying it into the information you have from your SIEM, we can tell you, here's an incident that was just created. Does the Internet at large think it's bad? Has it been seen in your own environment? Has it been seen on a critical asset? The moment you can say yes to those three things, that becomes a really high-value use of somebody's time, as opposed to, maybe it's bad. Let's do some more exploring. The last use case I've already touched on a little bit, which is the whole executive dashboard side of this.
I was just having a breakfast this morning with Ron Wakely, who's actually going to be on stage with us on Wednesday, and I have a slide on Ron's business impact of him rolling this out at AMP Bank in Australia, a Global 2000 financial firm. He was saying these dashboards are a hidden gem of value to the organization. He struggles with, give me a report that I can show in front of the board of directors that doesn't want to get into the weeds but wants to get a sense at an emotional level, how are we doing. We have a whole rich set of reporting capabilities, and because of this time-based trending that we can do, we can give folks really valuable data. These are the four benefits I just talked through.
The top two, like I said, incident response automation and vulnerability response automation are where people tend to start, and the other two tend to get added on after the fact. This is our ecosystem today. We are probably the easiest to partner with organization for a security company for one reason. We're also the least competitive security company that you could partner with. Nobody's worried about us getting into the firewall space or the endpoint protection space or the VPN space. We're just simply not going to play in those spaces because it's not our area of expertise. We can integrate with tons of different vendors very, very easily because of the strength of the platform.
This is a mix of out-of-the-box capabilities, things that customers have built, things that our professional services organization have built, and I expect this to just keep growing and growing over time. By the way, this list was probably at about four a year ago when I was presenting to you. Moving very, very quickly here. All right. Here's a use case that just highlights just how different the actual job of a security analyst is from Matthew Broderick or somebody in an episode of "CSI." This is what people deal with when a phishing email happens. This organization has a security campaign where they will educate folks on what they should do when they see a suspected phishing attack. Right?
Everybody has email security, but it only stops, call it 85%, 90% of potential phishing, and the rest of it gets through, and it winds up in your inbox. Some people have a button that says, 'This is phishing.' Some people forward the message to phishing@acmeco.com. In this case, that list goes to a human. Some poor person has an inbox of hundreds and hundreds of messages, each of which takes 20 minutes to two hours to prosecute. If you look at this flow here, this is way better, right? Because I'm saying, as I go through this list, only send it to me If I know it's bad, I've checked on public sources, I've confirmed it's bad, and my existing firewall hasn't stopped it. That does a couple things. First, it saves organizations tons of time, hours per email in some cases.
The second thing it does is I'm almost more excited about, which is within an organization, you all may have experienced this. When you're at a new job, and you're really fired up, and you want to follow the process, and you want to do things the right way, and you submit the ticket, or you send the message, and what happens? You don't hear back. IT doesn't respond. Security doesn't respond. You start feeling maybe this organization doesn't really care about security as much as they say they do. In this process, if we know it's not phishing, you get a response in seconds saying, "Thanks for reporting it. Turns out it's not phishing. Go ahead and click on the link.
Have a nice day." Only if it is phishing, do we have to involve people, and then we radically reduce the amount of work that those individuals need to respond to. Another organization put a high degree of automation around their vulnerability process. In this case, they integrated with Qualys, and they took their Qualys data in, mapped it to their CMDB, which has business asset understanding, and when the criticality from a Qualys perspective is high, and the value from a business perspective is high, then we create the alert, create the request to patch, and then when the patching is done, security automatically confirms that the patch fixed the problem, and then closes the incident. If you look at that process, IT has to do the patching, but every other step is entirely automatic. For security teams, this is a revelation.
This is a complete transformation of how this process works, we are seeing a lot of traction in this vulnerability response category, we're actually investing more heavily in building out more capabilities here. All right. This is the results that AMP Bank achieved. This actually slide was built by KPMG. That's why it's in a little bit of a different format. I believe that you can see the asterisk there saying projected metrics, but Ron's going to talk about the results he actually achieved, which are very similar to these numbers on stage on Wednesday. The thing I would just point out is there's actually a nice synergy between this vulnerability data and the CMDB, the asset repository within ServiceNow as well. Because as you do the scan, if there's not a preexisting item, it actually creates the item based on the scan.
You wind up radically improving the accuracy of the asset repository as you're deploying security. This has been a really great project for Ron. Let me actually talk about this. I showed you these stats based on last year's numbers, I think it was 206 and 69. However you do the math, it's nine months. Nine months to identify and contain a breach in an average organization, according to the Ponemon Institute. Those numbers are so long, take so long, it's almost unbelievable. Even if they're off by a factor of two or five, it's still far too long to almost be unbelievable. This is really brought about by the multi-year attacks. Organizations will have a breach, the bad guys will be around for five, six months, sometimes years before they're detected.
We wanted to figure out how does that compare to the experience when you're using ServiceNow? We surveyed all of our instances of current production customers for Security Operations, if you look at the average of 201 days and map that to hours, that's 4,800 hours to identify a breach. When you're using ServiceNow, it's actually to scale, I think it would be an invisible green box, but actually it turns out to be 29 hours. 29 hours is the average our customers have in mean time to identify. Mean time to contain defaults to 70, or 70 hours is the industry average, which is about 1,600 hours total. Our average within ServiceNow Security Operations customers is 33 hours. If you compare that to the 201 and the 70, it's 160x improvement and a 50x improvement.
We originally had it as percentages, 16,000% just sounded a little too unwieldy, we just switched it to 160x. This, by the way, I'm not satisfied with this. Nobody should be satisfied with this. This is a massive improvement, we're talking about going from months to hours. I want to get us to minutes. I want to get us to seconds. That's the trend line we're on. The more we can orchestrate, the more organizations embrace tying in multiple vendors into a single System of Action, we're going to be able to achieve those sorts of results. All right. Let me actually do a quick demo to walk you through the state of where things are today. This is a production demo based on what the product can do as of the Jakarta release. If we can switch over to the demo, great.
You can see here our dashboard. Up at the top, you can see mean time to identify, mean time to contain, average time to eradicate. You can see new incidents this week. If I look into this, I can see this number ticking up. I've got an incident now, I've got two incidents now. This is all live data. As I click into this, I can see the two incidents. I have one that is marked with a score of 92 from a risk standpoint, another with a score of 52. This probably has something to do with the fact that one of them is an Apache server of some kind, and the other is marked spare01. This is, again, the power of understanding business priority all of a sudden makes what you need to focus your time on much more apparent.
I can drill in and see more details about this particular server and load up the service map and see that this particular server looks like it's front-ending a whole bunch of different capabilities, and one of them is the bond trading and securities lending piece. Suddenly now I know why it's prioritized so high. We need to try to do something about it. If I close down the dependency view, we can now take a look at the workflow. I talked to you about this changing the way analysts work, giving them an experience where they can take automation and have it do the mundane and allow them to take advantage of that in many different ways. If I just zoom in, you can see an example of a few of the tasks that we're running automatically on behalf of the user.
Again, give the analyst the data they need. Let them be the hero and make the decision, give them the raw data they need to make that call. If I scroll up, you can actually see this indicator data coming through. These are all the individual calls that are being made outbound from ServiceNow into different security systems to request for additional data. Going to Tanium and getting running processes, going to a Palo Alto firewall, seeing if a particular domain is blocked, going out with a WMI call to a Microsoft infrastructure to get information about an endpoint. As all that information is gathered, we start populating a different table where you can actually see malware results.
You can look at all the calls that we made on the left-hand side and see that a number of these findings were malicious for these particular domains and IP addresses. Now what I normally would do is stop there and actually make a decision to block those. What we've also done is engaged in bi-directional sighting search. This is a new capability that we've introduced since last year. It used to be the way incidents were created is, the SIEM tool or some alerting system would create the incident, and then we would prosecute and respond to that. We're actually able to look into Elasticsearch, look into Splunk, those kinds of data repositories, and find out have any of those indicators been seen in the last 14 days.
What I'm really finding out there is, did the bad guy already do damage before I even detected them? If I can figure that out, I figure out have they moved laterally? Do I have secondary exploits that I need to deal with? In this case, you can actually drill into the detail, and you can see the observables and the sightings. In this case, I've got hundreds of sightings of these particular IP addresses, and I have deep links directly back into Elastic and Splunk if I want to see more details. If I back up, I can now go ahead and block these things. If I just click the three indicators that are marked malicious that I want to block, I can choose block request, and I'm done.
The block request was initiated, in this case, via Palo Alto, and it's going to follow whatever IT process you've defined. If security is able to update the dynamic block list automatically, that's exactly what's going to happen, and it'll be instantaneous. If instead it goes through an IT change process, IT will get involved with the SLA that have been defined and the assignment groups and the approvals and the notifications. Everything's going to be documented and audited. As I mentioned at the beginning, security has to tie tightly into IT to really make this closed loop because even things like firewalls are not run by security teams. This blocking capability and the investigation was entirely automatic. The only thing that you had to do is make the decision as the analyst that you wanted to block the data.
We even go further. This is one of my favorite features. We'll actually give you the ROI in terms of hours saved. For every orchestration action, we know roughly how much time it takes, and we're going to measure every time an orchestration fires and map that to dollars. You can see on a month-over-month basis how much money is this infrastructure saving you, just sort of in raw operational value, let alone the value of going from 200 days to 29 hours. That's my demo. This business is on fire. This whole space is exploding. We're really excited to be here. We're excited. We feel like we're in a leadership position, and we intend to maintain that leadership position. Thank you very much for your time, and have a great rest of the day.
Thanks, Sean. If we could go back to the slides. Switching gears a little bit, I'd like to introduce Tony Beller, our VP of Channels and Alliances. With that
Thank you, Jimmy. Good afternoon. I joined ServiceNow about seven months ago, and when I joined, I realized it was an extremely thriving partner ecosystem around ServiceNow. You heard Sean talk about the number of partners that he added just in the last year. Not my doing, but point of it is it's a very thriving ecosystem. Same thing with Deepak on how he's leveraging partners around his technology. With that, we made a decision to reorganize our alliance and channels organization, which we rolled out at the beginning of this year. We also rolled out three key strategies that I want to mention today. The first one is around as we move into a full multi-product company, we want to make sure that we leverage our partner ecosystem to go build markets around all those product lines.
How do we do that? We need to further enable and train and certify our entire partner ecosystem. This morning, we had a global partner summit keynote, across the street, with about 1,500, 1,700 people. We rolled out our new strategy around certification. This year, we'll be rolling out certifications for each one of our product lines, and we're going to require all of our partners to get certified in multiple product lines to make sure that we measure the strength of our ecosystem in terms of capabilities and specialization. The second strategy is around our industry focus. What we want to do here is leverage the partner ecosystem because they have deep industry expertise. You're going to hear in a minute from Mark DiLutto from DXC who they have tremendous industry expertise, and we want to leverage that expertise.
We also know that partners are building solutions on top of our platform and our product lines. We want to take those solutions around industry and take them to market together. This morning as well at our partner keynote, we announced, we rolled out a program we call Catalysts, which is basically us taking those industry solutions and endorsing them and taking them to market together to drive incremental revenue for the two of us. You're also going to hear from Mark around a solution that we actually announced this morning around healthcare and ICops. The last piece is our ISV OEM store ecosystem. This isn't new for us. It's been around for a couple of years. We have about 200 partners already in the store, a few applications on the store generating revenue, but we really think this ecosystem could be massive.
We hired a VP of the OEM that has done this before at other companies very successfully. We think this area can grow for us tremendously. It's another investment that we're making around the ISV ecosystem. You heard Sean talk about the partners. A lot of the partners that he showed were part of the ISV OEM ecosystem. These are our three key strategies where we're focused on all of our efforts and time and resources. We also made some significant changes to our partner program. We call it Partner Now. This is pretty traditional in terms of the tiering, except that we have three subcategories in the Partner Now program. We have a sales partner program, which is where we have our resellers, our referral partners, also this morning we announced that we added our outsourcer, our outsourcing partners into that Partner Now program.
We added additional benefits and requirements to make sure that they keep growing. We also have a services Partner Program, which focus on our consulting and services partners. Again, additional requirements specifically around obviously added more certifications, with added benefits around training and so on and so forth. Lastly, our technology partner program, which is very focused on our ISV OEM store marketplace. Again, we added a lot of enhancements. The VP that we hired, Avanish, he is doing a lot of changes in this area. Earlier this year, we announced a new program within the Partner Program umbrella called the Global Strategic Partners.
When I came in, I looked at our partner ecosystem of the 900 some partners that we have globally, it was very clear to me that it was about five or six partners that were the top partners globally, that invested heavily, they use internally, they act globally with us, we want to make sure that we invested back in them. We created this program, and we have five partners in that category. One of them is DXC Technology, who you're going to hear from in a minute. But in there we have companies like Accenture, Deloitte, IBM, who are investing very heavily in building practices, multi-million-dollar practices around ServiceNow. Last thing that I want to mention before I call Mark from DXC is how we measure ourselves.
Our ecosystem has been growing probably as fast as we have over the several years, they've been influencing a lot of our ACV. Last year, at the end of last year, we finished with 59% of all the ACV was influenced by our partner ecosystem. You heard on the earnings call, Mike talk about 62% was influenced in Q1. Our goal is by 2020, in the next three years, for that to be 75% of all the ACV influenced by our partner ecosystem. Lastly, we also introduced a new metric this year, that we're going to start tracking very heavily, it's a big initiative, we want partners to bring those net new deals and net new ACV to us, we call that sourced ACV.
We started tracking it this year, we think that's another metric that we can probably announce or tell you more about next year. It's a big initiative that we have in the company is track sourced ACV. With that, I'd like to introduce you to Mark DiLutto, who is the global head of the ServiceNow practice at DXC Fruition Partners, he's going to talk about how DXC is using ServiceNow to build a massive practice, transform their business, and transform our customers. Mark.
Oh, geez. That's a way to start. Let me give you a little brief history of time. First off, thanks to ServiceNow for basically letting me speak here and talk about DXC. In a brief history of time, I actually started the business called Fruition Partners. Co-founder here, Patrick. Before we had met ServiceNow, before ServiceNow was a company, we were doing a lot of work on BMC, other technologies. We came across ServiceNow in about 2008. I think there were about 40 guys doing about $15 million in revenue. We realized that they had a really incredible platform that could do a lot more than just service desk, really their original, that GlideSoft platform.
As we grew the business as a services partner with them over the years, we ourselves grew to be their largest system integrator, ourselves being acquired by CSC only 18 months ago. CSC merging with HP only six weeks ago. I'm on my third company name in about 18 months, bear with me. A little bit of background on what is DXC Technology. That is the new name, DXC Technology. It was a merger between CSC, Computer Sciences Corporation, and the HP Enterprise Services branch of HP. There's HP that still had the enterprise software group that's now been sold off to Micro Focus. There's HP, the infrastructure and hardware group that had both personal devices and printers, as you know, and the servers. Then there was HP Enterprise Services, which is actually EDS that had been acquired by HP.
As of April 1st, we are now all DXC Technology. We're still Fruition Partners at DXC Technology company, but we are inside of this large 170,000-person company. I think what you'll see here is we originally made a bet on ServiceNow about 10 years ago. What I'm going to explain is why DXC continues to place a significant bet on ServiceNow. Just looking at some of the numbers. Combined, a $25 billion global IT services company, really mainly focused on services. We do have some vertical products, but mainly it's a services-based business. 170,000 employees worldwide, operating in 70 different countries. Additionally, 6,000 clients.
One of the big things that we're working on is looking at those former HP Enterprise Services customers that were using the HP Service Manager suite to manage their infrastructure, manage their operations, and consider when and why and where and how fast we can leverage ServiceNow to move those companies to a next-gen platform. I'm clicking somewhere. Actually, what I wanted to show here, this actually came from Mike Lowery, our CEO, when he did his investor analyst presentation. He put ServiceNow as the number 1, upper left, the number 1 category for the next-gen platform that we're using. Right? We actually, for the second year in a row, thanks to ServiceNow, we actually won an award for the most number of deployments. We had the most number last year. We continue to have the most number this year.
The most new logos that we won. We have won an additional regional award in Europe. We consider this very strategic. Let me go to the next slide, which I think is relevant, too. DXC. Sorry, I've had three company names. Like I said, it's DXC. Although DXC has many different partners, we consider 14 to be the most strategic. If you look at the partners that are actually up there, you'll see a lot, obviously, in the hardware space, some other services partners. Really, ServiceNow stands alone as that next-gen platform that we're looking to build even more capabilities on. The further investment that DXC has made in this ecosystem. I mentioned when CSC acquired us in 2015, we ourselves had done acquisitions prior to CSC. We'd acquired a company in the U.K. called Partners in IT.
We had acquired a company in Toronto called Manta. Soon thereafter, CSC acquired us. CSC also made an acquisition of UXC in Australia, one of the largest services providers in Australia. With UXC came Keystone. Keystone is the largest ServiceNow provider in Australia. They are now Fruition Partners Australia. Soon thereafter in July, we did a second acquisition, specifically targeted for Aspediens. They were headquartered in Switzerland. They serviced France and Germany with operations in Spain. We've continued to make these investments to win those awards to be the largest services provider in this ecosystem. I think the question is why, right? Why particularly ServiceNow? Why is that of incredible importance to a $25 billion, $26 billion outsourcer? Let's take a look. This is the various offering families that DXC has.
What you would expect from a traditional outsourcer is they would do a lot of work in the center out. Right? Application services, application maintenance, basically running those applications, finding a best of blend nearshore, offshore model. They also traditionally have done a lot of business process services in the BPO space. In the workplace and mobility, taking over people's service desks, taking over their facilities management, doing a lot of the actual people work, and absorbing that from their customer base. As we expand out into what we consider the next-gen technologies, why DXC, this promise of digital transformation, we're looking around the add-ons, if you will. Security is a big one, as Sean had mentioned, for our SecOps offering that we're leveraging the Catalyst program for. Another one, we sit in the enterprise and cloud app space.
Fruition and the ServiceNow capability is down there in enterprise and cloud apps. With that, we sit with Oracle, SAP, Workday, and Salesforce. We also have industry solutions. Those are things like two different products that have been built or bought, Lorenzo for healthcare. I think CSC originally would have been the largest insurance processor in the world by the number of claims processed on their software engine that a lot of the insurance companies use. Additionally, we carry with that a lot of DoD from CSC's history with federal government and manufacturing as well. In the upper left is the cloud and workflow platform. If you're looking at, as we are running people's infrastructure, running their data centers, how do we migrate those things to the cloud?
This is our nine offering families, but the real question still is, how do we see ServiceNow being leveraged across these? This next slide is how we're embedding ServiceNow in and across these offering families. The first one, I'll highlight some of these. You can actually see some of the presentations that we have going on at Knowledge on some of this content. The first one I'll highlight with just ourselves, inside enterprise and cloud apps. We actually have, with the relationships with Workday, Salesforce, SAP, Oracle, we have a connector that we call Link that is actually integrating those various platforms that people have for niche solutions and taking that data and embedding it in ServiceNow. I think that's the one thing that if you haven't heard that enough, what ServiceNow really offers companies is one system of records, one system of engagement.
There are a lot of other niche solutions, but ServiceNow is the one place you can federate this data, absorb this data, so that you can actually share work amongst your colleagues. It's like, I don't want to say email on steroids, but it really is this ability to route work to other people, sucking in data from all these various sources. Another one, security. We're going to do another presentation at the theater on SecOps. Like Sean had mentioned, DXC actually has a significant business in the managed security service provider. We'll actually look at Security Operations. We look at security threats. We look for some of the largest global companies in the world. We're analyzing whether their systems are at risk and what risks could potentially be threatening them. That relies very heavily on having a very accurate asset inventory.
You don't really know if you're exposed. You know there's an exposure and a risk, but unless you know you even own that asset, that Linux database, that whatever server that might be, you're not too sure if you're at risk. We've re-platformed how that entire business unit goes to market. An internally built platform called Pace Portal, we have moved that entirely to the ServiceNow product suite, and we call it SecOps. Looking a little bit broader, we also have an industry solution. We're presenting, actually going live this week, is an employee health and safety application built on ServiceNow. We had a use case coming out of Europe where there are large manufacturers. They had a lot of, as we would call them in the service management space, incidents, accidents against assets.
Those assets are people, and those incidents are they slipped and broke something. We actually are tracking that now in ServiceNow. We actually have a vertical application for the manufacturing industry and going to market with that. Additionally, we have a retail portal. We found that a lot of our customers in the retail space, they have a lot of assets. They have a lot of distributed assets. Those assets might also be PCI-compliant devices. They could be kiosks. They could be technology in stores. The ability for ServiceNow natively to track assets and track workflows and distribute work is a perfect complement to retail operations. I can't forget to mention this, workplace and mobility.
DXC has in the past, and one of the reasons why they acquired Fruition, is they're moving and have been moving their entire support and desktop support operations to the ServiceNow platform, coming off of BMC and going on a single multi-tenant instance or domain-separated instance of ServiceNow. As we continue to migrate a lot of those thousands of customers, getting them off of last-gen technology, BMC, HP, we're moving them onto that blueprint environment powered by ServiceNow. Looking across this, you can see where we're placing our bets, why we're placing our bets on ServiceNow. They continue to make the investments in us, in our practice, in the ServiceNow practice, the Fruition practice, and continuing to embed this across all of our offering families.
Additionally, the one last thing I'll mention is our executive sponsor actually sits in the cloud workflow and platform group looking at, as we decide what new applications to build, what platforms we should leverage, it's first going through there to see as ServiceNow, as you've seen on the Gartner Quadrant, to come out as a platform of choice, whether we should leverage ServiceNow for that platform. In summary, that's us. Thank you.
Thanks, Tony. Thanks, Mark. Next up, we have our VP of our global Inspire program, Michael Hubbard. I think we have a couple of props we need to get up on stage while Michael walks up.
Great. I don't think I've ever had someone so carefully and respectfully place a chair for me on a table. That's special. I'm going to use that very well. Good afternoon. My name is Michael Hubbard. I'm very excited to speak to this audience, having the Inspire program come up on four of the last five trailing earnings calls. It's clearly something that's of interest to you guys. The way we're going to drive this conversation is the same way we drive all conversations between Inspire and our customer base. We're going to start by backing up and looking at the business context. Of all the things that are happening at ServiceNow, what's the subset of things that we're trying to address through our investment in this program? We're going to move on to making it real.
Specifically, what are some examples of the way that we engage and go to market with customers to address that business context? Then we're going to unpack that a bit by saying, of all the ways we could focus on the problem, what are the most important constituent issues? For instance, would any of you be interested to know whether we're billable or not billable, and why? If no hands go up, I'll skip that, and you'll get to the cocktail faster. A few hands went up. Things like that, right? Why have we shaped it the way that we've shaped it? Then we're going to get me off, and we're going to focus on getting Ashley from General Electric on to talk about specifically her experience working with us on a major transformation. Let's jump into it. What's the context?
You've all heard for years the land expand, retain mantra. When I came to ServiceNow, it was the first time I was with a major software company that was also a cloud company. I was so excited about the potential intimacy that we would have about our customers' environments, their outcomes, the benefits, because we were running them. We're running the environments of the largest, most profitable, most capable companies in the world. We should know so much about them and be able to share that story and insight with others.
How can you take that message and start to build it into a program? When I got here, what I heard from Frank Slootman at the time, and from the executive staff at the time, was we had to focus on 3 things. We got to get outside of IT to be an enterprise-wide platform. We've got to drive increased ACV in the customers we have, whether it's in IT or anywhere else. We've got to really do a better job of codifying, culling, and screaming to the marketsops what our customers are accomplishing. Because when we sit with them, when we meet with the CIO, when we go through a renewal process, we know they're successful, but somehow we're not translating that out into a story that other customers understand so that they can quickly follow, or that the analysts or the capital markets fully understand.
That's the goal: to help us focus on those 3 things as we get from $1 billion when I joined to $4 billion now. How do you build a program that does that? I think it's pretty fundamental things. First, you want to make sure that you are doing best in class at demonstrating value of what our customers have already achieved. If they have rolled out ITSM, why was it a good thing that you did? As well as projecting what they will achieve in really tangible business terms. We need to do a better job of that and make it programmatic. The second thing was we needed to evolve based upon that achieved value into value props that were more about mission criticality than just cost avoidance.
If you look at the market cap of the types of firms we're a part of, clearly, we are doing more than cost avoidance if the customers are pouring into the market at this rate and driving this type of market cap valuation for all of us. You get that. That's why you're setting the price points where you are for us. We need to do a better job of demonstrating that mission criticality, long past replacing a BMC Soviet-era technology for IT into something that's much more relevant to the C-suite in terms of top-line employee experience, customer experience. Third, if we've done those things well, we've earned a seat at the table to begin to really create and foster executive relationships. Relationships not just between two people that could come and go from a firm, but between two corporations that will continue in partnership going forward.
Those are the three things we focused on in building out the Inspire program. What's the magic sauce? That was what I was asked at lunch today from one of you. What's the magic sauce? Well, I think it's good common sense. It's good common sense in terms of how you build relationships that start with really high level of trust and a really high level of respect. Start by having a point of view that's informed by data that helps you as a new customer or a prospect, make more informed decisions. Market insight.
I talked a bit earlier about being so excited to be at a cloud company, and one of the first phone calls I made when I got to ServiceNow a year and a half ago was to Farrell Hough, who runs our ITSM business, but at the time also ran all of the cloud data management. Now, we are not allowed to look at the specific data in a table. I can't tell you anything about whether an HP Blade fails more often than a Dell Blade. What I can tell you, and what we are allowed to look at, is the growth of different types of components in our platform. I can look at the way customers are choosing to integrate to other platforms.
I can look at the way they name certain tables, I can start to see that long before we had a CSM product, we had a heck of a lot of customers that were integrating to Siebel. We had a heck of a lot of customers that were creating a table name called Customer Issues, which meant that before we even launched our Customer Service Management product a year earlier, I was able to sit down with a major real estate management company and talk to them about how 300 customers were already working with us around customer-facing issues, and the fact that they came from three different acquired real estate management companies and therefore had about nine or 12 different systems with which they interacted with their single customer, that we could put a front end on that, make it mobile-friendly, et cetera.
Having that market insight that's data-driven from one-third of the Global 2000 and roughly 4,000 customers, really doing that work of mining that data and converting it into the next part of the program, innovation motions. If we find some of these nuggets or these bullets, let's figure out how to fire them. Let's figure out how to make them useful. What is the innovation motion? Work with partners, work with clients that have the power to change their companies, that have the vision to say, "Dang it's my job to change this company. That's why I'm here.
I am either up against an emergency, or I am here to surf an amazing opportunity." Just step into those invitations with those partners, and if we prove that that bullet is, in fact, a silver bullet, and we prove it time and time again, maybe on average three to four times, it is time to move to the fourth motion, which is to make that something that is loaded in the gun of every single person that interacts with our clients. Positive gun. Positive silver bullet that helps them prosecute material economic differentiation in how they manage customers, manage employees, manage incidents. That's the market scale portion. What I'm going to do is walk you through an example of each one of those things.
How many of you have ever wondered how many of our customers are truly using us as a business platform other than just an IT ticketing tool? All of you, right? I have all kinds of data on that. I'm only going to use this as a reference that you're familiar with that says, well, we've already shared with you in previous earnings calls the rate at which customers are buying more than one product from us. As a good proxy or leading indicator that at least through their acquisitions of more than one product, they have an intention to use us for more than what we're necessarily known for, right?
That we are at a pretty good rate breaking out of what I used to call the prison of success, which is, we got brought in to do one thing, but we could do so much more, right? What we did is we took this and we mined this data much more specifically, and we started to look at, as I mentioned earlier, how much of it is related to HR? How much is it related to customers? How much of it is related to automation of work versus just routing of work? We sliced it, as you normally would, by industry, by the complexity of the environment, by the market cap of the company. We started to arm our own team to go have different first-call interactions that established what you guys are in the business of, information asymmetry. I know something you don't know.
You want my research, you want my coverage, right? We're in the same business, which is we know some things about what all these companies are doing, and we can look at how they're progressing over time. You start talking about the Lightspeed enterprise. You start talking about all the things that you heard from the general managers today, and it suddenly can start to feel a bit undirected. It can start to feel a bit like a massive elephant, and you start to get questions like, "Is this going to be like when I implemented SAP for 3 years, but it took 40 years? Is this a big problem, or is this going to be something that we can bite off in smaller chunks?" The key to that is defining the smaller chunks, right?
The key to that is to have a prescriptive path that says, all these customers have gone in front of you, and we have instrumented how they progress through it, and we have best practices by which we can help make sure you get to your outcome faster. Put that into the normal consultative motions of a benchmark, of a workshop, of frameworks, of maturity, et cetera. We use that time and time again with clients until we know it's successful. This is the most interesting thing to me. This is a screenshot right out of our platform. This is one of the artifacts that we create when we're collaborating with a customer.
This is the first time in my career, of more than a decade of building and being a part of programs like this for transforming customers and getting them successfully to a large outcome enabled by an IT or technology platform, that I've actually been able to use the platform to document the intention, begin the organizational change management by which our champions share with their own constituents, maybe their own orgs, what it is we're doing, why we're doing it, instruments their progress towards it. If you look at this for an example, let's start with the basics. What's the vision? This is for a large retailer. What's the vision around why we're changing how IT serves the business? What are the major strategic drivers that are forcing us to inject risk in our business? Because that's what change is. It's a type of risk.
What are the big drivers that are driving this? How are we going to measure the outcomes to make certain that the waypoints of progress are being achieved in a quantitative, objective way going forward? What are the major initiatives that you're going to sort of see and feel that are either going to change your experience or change your job? For every single one of those down at the bottom, put them in a context of a journey, where the little plane is there, right? We talked about that customer journey a little bit earlier. Put them in the context of maybe these random people from Inspire that your boss is going to ask you to talk to, that are going to be asking you a lot of pointed questions and requesting data and requesting insights.
How is that a part of a larger process that's going on between your company and ServiceNow? If you go over to sort of the bottom right, you've got examples, right? Examples of the types of outcomes, experiences, almost Super Bowl or World Cup commercials that'll live on your phone, that will show you what the future's going to look like. Because I don't know about you, but for me, if I were a customer who was considering a major platform implementation of a cloud technology, and the deliverable was a bunch of office productivity PowerPoint slides or Excel worksheets, I'd be left a little flat. Our deliverable is actually prototypes. Our deliverable is in the platform organizational change management, our deliverable is building out and instrumenting through our ServiceNow Performance Analytics product, your progress towards that goal.
When we leave and you've decided that you're going to stand up this instance and you're going to leverage Performance Analytics, you're not going to call me 6 months later to say, "How am I doing versus that strategy you gave me?" If you do, I'm going to log on to a Webex and I'm going to join you in a room and I'm going to help you figure out why you're not using your Performance Analytics platform, because that's the way that you should answer that question. Real-time, real data, real fast, right? That allows us to do one of the most important things that's important to us and to the capital markets, which is to have that customer successfully say, "Yes, move on to the next customer. I've got this." Right?
I understand where I am and where I'm going on this journey." When we've done that two or three or four times with an individual customer on an individual outcome, that example is a very sort of traditional example of making IT better. We will do it for customer service. We will do it for HR. We were working on joiners, movers, leavers, and creating the journey for joiners, movers, leavers early in 2016 and feeding that back to Abhijit and Deepak and others to help shape the product from our HR product to being an onboarding product with these Lightspeed pioneers. We take all that knowledge. We've got to turn it into an asset that doesn't take someone from ServiceNow Inspire.
It might not even take someone from ServiceNow to help a customer understand where they are, where they're going, and what would be the business impetus and measures by which they would progress towards that outcome. The first thing you do is you take the big problem, you break it down into chunks. The second thing you do is you answer the obvious question: Am I the only one going on this journey? If I go all the way in, am I sort of moving into first quartile risk-taker, or am I in a relatively safe water? What we see here is we break out this journey between modernize, taking something that's Soviet era and making it digital. Transform. Now that I've got it in a good container and a good platform, should I make it better?
Of course, I should make it better in and of itself, faster, cheaper, et cetera. Then once I have enough work in the platform, do I have the opportunity to actually have the platform inform decisions that I'm making around resource allocation, around automation opportunities, around risks? What you can see across the bottom is based upon the way we've structured these phases. A good percentage, because we're growing at 30%-40% a quarter, and I'm not changing any estimates there, simply restating what you heard in the last earnings call. We always have a good, healthy amount of customers that are in that modernized phase, that are just getting on with it. Customers very quickly move in to transformation, and we have a good percentage, a double-digit percentage, that are using us in an innovative way to create material economic impacts on their business.
The next question is, why do you start? Why are these customers going on the journey with you? This is a combination of survey data, blind survey data, as well as direct interviews in our engagements. About one in two incidents that flow to that poor CIO's organization are not IT incidents. It's just that through the history of ITIL and ITSM, it is the most well-known, understood, findable digital front door for me as an employee to bring a problem to someone and hope they will route it. Lost my badge, I'll log an incident with IT. Facilities issue. Payroll issue? I don't know how to get in touch with HR, I'll get in touch with IT.
IT, in turn, will tell you, "It's not an HR issue, it's a finance issue, good thing you didn't get in touch with HR." I am the human workflow that has to walk between all those things as an employee, or I just go to HR. One of the first things that happens here is we are creating a better digital front door that's inclusive of things more than just IT issues, that branches us out into a larger journey. These customers are starting with us to do more than IT. They're starting with us around a whole variety of services that are poorly controlled and opaque. I ask for something, I don't know when I'm going to get something back. I ask for something, I'm not certain whether the thing I'm asking for is even available right now.
I'm just getting from out of control and opaque into well-controlled and visible. The next phase, of course, is once I've sort of instrumented this process and taken it from email and conversations in band in the platform, is make it better. Enable self-service. Deflect the need for a person to get involved through knowledge-based incident deflection. Make it consumer-grade in terms of speed and experience. What does it take to do this? The customers that are really moving through the second phase here, they're focused on three major things, you've heard them all throughout the day. The data that we've got here just sort of exemplifies it. It's all about removing organizational friction.
Organizational friction exists when that customer, that user, that employee, has to navigate your org chart as an enterprise instead of making the process about them and letting the system be their navigator. Second, they, as a byproduct of that, start to view service management as a discipline. Right. This resonates really well with the lean Six Sigma guys, et cetera. The third is that it is all about experience, that they're realizing that this is an opportunity to change the experience of being at work or interacting with the customer or dealing with an issue with a customer. What's fantastic is that nearly half of our customers are already here. They're already here using us in more than one department. Later this year, we are confident the majority of our customers are going to be using us in somewhat other than IT. All right.
The question of are we an ITSM company aspiring to be something else? The customers have already voted with their feet, have already voted with their wallets. Now let's look at the most advanced ones. The most advanced ones, there's really three things that make them very different from the rest of the animals in the zoo. The first is they are data junkies. They are heavily instrumenting the process, again, through the ServiceNow Performance Analytics products, so that they are able to real time make better decisions. Often these are directly decisions around where have I allocated resources too highly, where too lowly? Where do I have wait time that could be removed with automation? Where do I have people in a process who 99% of the time, the answer is yes?
Why do I route 99% of the issues to them anyway if they say yes? Why don't I just use the outside cases? Service automation. They're using much, much heavier levels of service automation. We can see how many of them are moving tasks between people and how many are moving them to third-party systems like chatbots, like IoT devices, et cetera. They are automation junkies. The third is, as soon as you try to prosecute this type of problem, you no longer are incumbent to this is a platform that reports to one of the officers of the company. This is something that has to be the CIO, CFO, head of real estate coming together.
What's amazing is when we looked at the roughly 300 customers in that category, if you slice them against their peers by size, if you slice them against their peers by industry, you find two things that are consistent in every industry except public sector. Number one, they're growing revenue faster than they're growing headcount year-over-year if you look at their TED case. That means these are customers that are realizing there's a challenge in onboarding and retaining the talent to do the differentiated work, and therefore, they're removing the non-differentiated work from otherwise their growth opportunity to capture market opportunity, which would be how fast can I hire? How fast can I onboard? They're growing revenue faster than their peers as a % without adding the headcount.
The second, which is pretty correlated, is if you're focused on revenue per employee, these companies have higher revenue per employee than their peers, right. I'm starting to see some of your peers in the market actually comment on this in the way that you're interacting with coverage on companies. There were some financial institutions that actually were getting questions from activist investors around revenue as a percentage of employees. Sorry, employees as a percentage of revenue. Higher revenue per employee, and your growth is no longer capped by your ability to find and onboard talent. That's how we do what we do. What I want to do is quickly answer some of the big questions, the first one being around billable versus non-billable. I've run a $200 million services business in my career.
I've run investment services that turned into billable services, meaning we started off as free, and then we became a for-fee service. Here's what happens. When you're trying to run a billable service line, you ultimately always have to look at four things, even a billable service offering from a technology provider. First, what's the value of this customer? Because as a technology provider, I'm not going to be able to serve everyone because that's not my core business. There's a subset I'll serve. Is this customer the right one to serve? The problem I'm trying to solve, how innovative is it? Is this a problem that we should be able to solve and that 99% of the customer base will be glad we figured it out? What's the market value of successfully solving that problem?
I always have to look at the orange and the white and realize they are the opposite of profitability, right. I have tension between innovation and risk, tension between innovation and profitability of my service. I don't have to live in that world, right. That's why we're not billable. That's why we're an investment service. We can simply look at, is this the right customer? With a really important, crucial question, where if we made that member of the 1% of customers we serve wildly successful, it could change their market cap as a customer, but could also change ours because it would create confidence, it would create understanding, it would create momentum in the 99% of customers I'm never going to have a chance or an opportunity to serve.
The second major question I get is why do customers choose to work with you versus working with someone who's unbiased or someone who's more specialized or someone who's more trusted as an existing services partner? They absolutely do both. Let me tell you about why they work with us. There's really two headlines here. The first headline is about time to value, and the second headline is about accountability. Something I believe every executive looks for in their partners. Let's talk about time to value. If I were to work with a major consulting firm, strategy pure-play consulting firm, to help me figure out where I could optimize my business in a deep blue ocean analysis, that's a good couple months of work with really great analysis that gives me some good hypotheses and some underlying data. I often move to a second team.
Often, it's an internal team that helps me flush out my internal business case, gets my C-level executives all lined up to agree that of all the things we could do next year, this is one of the important ones we must do. I work with yet another partner who's unbiased. Maybe it's related to my audit partner or anything else, and they help me determine and run the RFP process for the technology platform that's going to enable this outcome. Again, because almost no scalable business outcome happens without a technology dependency in today's world. Finally, I get to the point where I select someone to implement this technology from that chosen technology platform. Every time I make a change between an X-axis or a row on this sheet, I lose time. I have the potential for misunderstandings.
I also create an environment where I can have a he said, she said sort of disagreement between the original inception of the idea, the original promise for the value it would create, the decision as to the technology approach, the accountability that technology's value gets realized through all the people, process, technology, and governance that stands in the way of the technology's potential. We try to compress that, right? We compress that by having accountability all the way from the beginning of the strategy inception, all the way through a documented business case, all the way through the initial org change management of communicating this to the stakeholders that have to buy in. Obviously, if you're working with us on this type of transformation, you could take this advice and implement another platform.
Your number one hope is to have a partner who would truly understand your problem. I've never had a customer make that change. It's a great immediate transition into prototyping and understanding of how this particular technology can get you that outcome. Very early on, because we've been through this, we can bring that implementation partner in. Right? I could bring in my friends, Patrick Stonelake and Marc Talluto very early on to quickly deliver value for this customer, which delivers two things. We get on with it faster in terms of the value realization, I have complete accountability between whether you achieve those outcomes all the way back to the original inception of strategy. Final thing that most people ask, how are you measured?
If I'm sitting with a CIO or a CFO or a CEO, they will ask, "How is your team measured?" Because they're trying to figure out who I am in their vendor sourcing world. I will literally talk to them a bit about the things I talk to you about, I'll say, "It's my job to find the right manner in which your business outcomes could be transformed by our technology platform and get you off wildly successful, aggressively, but yet safely with people, process, technology, governance." I point at the sales rep, I say, "It's his job to figure out how ServiceNow monetizes that between now and that success point." The executives get that. They get that difference in relationship. They work with us on the transformation, they work with us on the outcomes, we develop really tight trust.
We will interact directly and indirectly with about 250 customers this year. Directly means my team's on the playing field in the meeting, driving the conversation. Indirectly means that we are taking those scale motions, those silver bullets we know work, and we are enabling our field, or we are enabling our marketing organization, or we are enabling our partners to go have a different conversation and run a different play with that customer. We believe that a leading indicator, although it's not tied to compensation for anyone on my team, is whether the sales rep, who's always in that account, who's a tight part of this collaboration motion with the customer, is inherently seeing that he or she has opportunity this year or next year, and it's showing up in our pipeline. Right? I'm not in charge of closing pipeline.
I am in charge of creating access to real problems with tangible adjacencies to our solutions and tangible intent by new fulfillers, new requesters, new budget areas that are now actively considering ServiceNow as a platform or destination to solve that problem. We believe we'll create about $200 million of incremental pipeline this year and next year. This is the lagging indicator, which is really about maturing our relationships in these accounts. Right? As executives move from company to company, ServiceNow becomes one of the first things they do in that new platform. Broad relationships, so that when that executive leaves, the ones that are left are still big champions for our platform.
The most sort of pinnacle of that type of partnership is when they come to market with a public case, and they talk about the business outcome they were chasing, how we helped shape portions of that, and how together we helped achieve something great for their company. In turn, it changed the perception of what's possible from our company. We'll drive about 20 of those cases this year. Some of those cases, some of this content is available on our website. Some of the customers you'll hear about throughout the week will also be talking about this. With that, I'd like to bring up one such customer. From General Electric, a great partner and client of ours for a long time. I'd like Ashley to join us.
She's the head of customer service and customer support for GE Digital, which is about a $6 billion software company that has emerged from the traditional industrial company. With that, let's grab a seat, and we'll have a little chat.
Fantastic. I'm always careful when I'm on stage sitting in seats like this so I don't pitch forwards.
Tip them over or anything else?
Yeah.
Yeah.
You've never had chairs placed this carefully on stage?
Never this carefully.
I don't think you've ever had a guest sit so carefully in a chair.
Apparently, I'm making people nervous.
Not true.
Thank you for being with us today.
It's a pleasure.
Really the most important thing we always start with is business context.
Yep.
What is the business context for GE Digital and for you, in terms of transformation you're driving?
Absolutely. I've been with GE for almost 20 years, and we are in the middle of a massive transformation from an industrial company to what we are calling a digital industrial company. Basically what that means is we believe in a future where physical operations of industry around the world can be optimized through physical science, through data, and through advanced analytics. We also believe that over the next decade, this digital transformation has the potential to unlock $8.6 trillion in value. I see a couple heads pop up. Nothing like a tea and a conversation to get people leaning forward. What's interesting about that is that in order to realize those outcomes, I have to show up differently from a global support perspective. GE has typically gone to market in all of our verticals.
You may have a customer who's purchased software for four or five different businesses. It was different platform, it was different support maintenance agreements. It was different teams providing that service experience across different processes and tools. If you can imagine sitting in a vertical like oil and gas, consuming all of that, it can be confusing, and it's far from a delightful experience. The charter that we have really in this transformation journey is how do we become one. It's one process, it's one insanely great customer experience, and it's one set of systems and tools that we're really using to deliver that to unlock top-line growth as well as margin expansion.
For me, when I talk to my team, the rallying cry is really how do we get global support out of the back room squarely into the outcome delivering revenue and operating profit generating front room, and that's part of the transformation as we chase this $8.6 trillion in industrial value.
Similar transition to where we're trying to take all of service management from the back room, tactical, to the strategic in the front room.
Yeah.
You talked about showing up differently for GE customers. As we moved from our history of serving GE purely as a ticketing desk, replacing traditional IT ticketing systems into work that we've done over the years with the Predix platform and now, an ambition to serve you and serve your customers.
Yep
the criticality is increasing. We have to show up differently in the way-
That's right
that we partner with you. How are we doing that? How are we showing up differently?
The Inspire program has really helped, I think, to galvanize our organization around the opportunities for us to think more holistically across all of our customer touch points, and that in and of itself is a tremendous win. I will say that the real value of ServiceNow for me started about a year and a half before you and I ever met.
It was ServiceNow really showing up as a partner, and we engaged in some conversations around how ServiceNow thinks about the three amigos. Support, product management, and engineering, and what those relationships look like to make sure that your customer's voice is really represented in what you're doing. We had some things to learn. We took some of your best practices, and we've been able to deploy them internally with our organization to really have support, have that full seat at the table, and frankly, start to span some of the organizational functions and silos that our customers can feel when they are working across support functions, product management functions, and engineering functions. Isn't that really the definition of a great partnership, right?
You come together, you create space to listen, you create space to learn about people's informed perspectives with that deep domain knowledge, understanding the possibility of what software can solve, and then you get after getting it, which I think is really exciting.
We have been getting after getting it.
We have.
Along those lines, what made this solicitation to help you different from others, right? I mean, a company like GE with your chairman and your CEO talking about a digital transformation-
Yeah
you must have more people that want to help you than you can count, right? Because they see some opportunity for them.
Sure.
What was different about why you said yes to collaboration with us?
Everything. I would say it really started with the beginning, the middle, and the end. What I mean when I say that is the beginning of our conversations were really embedded with you trying to understand the key outcomes that I was after in this support transformation that I was galvanizing within our company. It was not about a statement of work, it was not about a PO, it was help me understand your business, which was a very different body posture. In the middle, I think what was different was you gave me functioning prototypes that I could use to then generate excitement and enthusiasm within my organization around the journey that we're on.
Change can be a little hard. Change can be a little scary. When you show people the art of the possible, all of a sudden you have the ability to capture more than just their minds, and you capture their hearts. I think that's pretty powerful. Lastly, I think the thing that was different is just the governance process that you articulated.
Really how we have taken the strategy, and we have translated that to implementation plans and roadmaps that we're holding each other accountable to as we go on this transformation journey together.
Absolutely. That's actually a perfect segue into let's look at what that roadmap looks like. How have we helped you crystallize the vision-
Yeah
for what we're going to go do together?
We have a chart that we typically show when we're going through this, but it really started with our financial outcomes. It was around how do we drive greater top-line productivity? How do we drive top-line revenue? It was around how we automate some experiences with our customers to drive that effortless experience that I talked about. It was also around how we design for supportability and scale in a reliable way. Out of those outcomes and those strategic drivers, we double-clicked into a series of work streams that you and I have been working on together. It's been all about an insanely great customer experience, but gosh, aren't agents' jobs hard? It's a little bit like working in payroll. People only call when there's a problem, and usually they're not happy about it, right? How do you make people's jobs easier?
By putting information at their fingertips and by automating as much as possible. The other thing that it's about is this notion of proactive services. As we move from an on-prem business to the cloud, how do we drive as much automation as possible in terms of full stack traceability, auto case creation, that we're not doing just on a specific customer instance, but across populations of customers that may be having issues, which is valuable time for our customers and valuable money for us.
Fantastic. We're off to a good start, but we are not done together as partners. We have so much opportunity. Where do you feel we're going to go together next?
I'm really excited about where we are in this journey. When I talk about this horizontal that we're creating from a GE Digital perspective, it means that we're going to be consolidating dozens and dozens and dozens of systems. These are systems that might've been homegrown. In some cases, they're the usual suspects that you might be sitting in similar financial analyst meetings around. We chose ServiceNow as our partner in large part because of how you've shown up. You had the technology that got the job done for sure, but it's been the body posture and the willingness to partner, and the willingness to create those silver bullets.
right. You pushing the platform, us pushing capability together, that I think is just really exciting. I think the future is about figuring out how we transform our business into this single set of tools. I think it's about that insanely great customer experience, and it's about really driving net new revenue for our company as well as for yours, and then profitability and margin expansion on my side.
Absolutely. We're in it together.
Yep.
Thank you so much for being here.
It's a pleasure.
We'll hand it back to Jimmy.
Great.
I'm going to introduce you. For everyone who's listening in on the webcast and asking me when Mike is going to present, the answer is right now. I'll introduce our Chief Financial Officer, Michael Scarpelli.
Thank you, Jimmy. Thank you all for being here today. Hopefully, we need a little bit of a pick-me-up, so I'll try to be a little loud, and you guys can hear what I'm having to say. Hopefully, there's nothing too earth-shattering you're going to hear from us. The big theme here is we're really firing on all cylinders. What I want to talk about today is the three main areas I want to talk about. I want to talk about our execution. I want to talk about our long-term model because you guys are always asking questions about model and numbers. I want to talk about the impact of the new accounting standard, which is probably the most dramatic accounting literature that has come out in my almost 30 years in working in finance accounting, and that's ASC 606.
That's going to catch a lot of companies off guard. Not going to have that big of an impact on us, but we'll talk more about that. There's really five key investments we've made in 2016, and these are really taking off the key investments we made in 2015. I just want to remind you guys, in 2015 is when we realigned our sales force because we knew in order to get to $4 billion and beyond, we had to segment our sales force into a commercial sales organization and enterprise sales organization. It's also when we made the decision that we couldn't be a single-product company to get to that $4 billion. We set up our company so that we could have various BUs underneath one head of our product. In 2016, the areas that we're investing in are sales support.
Taking off the BU structure, we realized we had to have sales specialists within the BUs that could support our sales organization to sell the various different products from having specialists in ITOM, specialists in security ops, customer service, HR, and so on. Michael Hubbard, who was just here, he talked about the Inspire team. Inspire has been a huge investment. Remember, these are ex-CIO type, consultant type people. These are expensive people. We have about 40 people in our organization, give or take, coming into this year, and we'll exit with about 50. An investment like that is close to $15 million a year this is costing us. These guys are going to help drive our revenue in the future by making our engagements with our customers bigger. Because it's not about, as Michael was talking about, just modernizing a customer's environment.
It's really about transforming that customer. The next thing, I want to talk about our partner ecosystem. We've been investing heavily in our partner ecosystem, but we really stepped it up. You saw Tony Beller, who came on stage here. I think he was with Salesforce for 10 years. He did that same role at Salesforce. We've been very heavily investing in our partner ecosystem. That's just not the GSIs. That's also our technology alliance partners. We have a lot of those, where you're going to see when you go into the partner hall. It's also our smaller implementation partners, too, because those are really important to us. Those are the people that are on site locally in the various cities where our customers are, and they are helping most of our customers, these small guys, and that's what the big GSIs are acquiring.
The more we invest in our partner ecosystem, the more these people are going to hire people trained around ServiceNow, and the more business they're going to drive for ServiceNow because they have to pay these people, and they have to make money off that. New products. I can't tell you, I am so excited about some of the new products that are coming out. As a CFO, I know Software Asset Management is going to be very impactful to companies, not just the IT organization. Because ultimately, as a CFO, you hate when your IT organization comes and says, "I have to get a PO for $700,000 I didn't plan on." Trust me, I've been through enough software audits in my days, and you never like when those things surprise you at the last minute.
The other thing that I'm really excited about is the ITapp acquisition that we did last year. We talked about Cloud Management. That's going to be very impactful for our ITOM group. As well in the security ops, the BrightPoint. That ties into our acquisition strategy. We've done a number of these acquisitions. We made a lot of investments. These aren't going to generate revenue in the first year. It's really in the second year you're going to start to get the bookings, and it's two to three years before you really see the impact on revenue of these things. Our acquisition strategy has always been I don't want to say we'll only ever be this going forward, but it's really going to be smaller technology acquisitions where there's really good domain expertise where we don't have that.
Generally, anything that we acquire, we are going to rewrite on our platform. It's not just going to be an implementation. It generally takes about 2 releases before we can get that company we acquired on our platform. Then we're also making investments in ISVs. We've now done, I believe, 4 investments directly in ISVs to get them to develop on our platform. 5, Don is telling me. You saw one of them. BuildOnMe was one of them we just did an investment in. You're going to see MapAnything. The interesting thing with MapAnything, this was already an established customer on the Force.com platform, and they came to us because they didn't want to be tied into one cloud vendor. They've now developed on our platform. You're going to see these guys when you go to the partner hall.
There's more. We're continually looking at these things. All these investments, these investments are doing really two big things for us, driving our revenue. You can see our revenue growth. The unique thing about ServiceNow is we have high revenue growth combined with strong free cash flow. You can see here, our midpoint of our guidance range is 34% revenue growth at scale, but we're also accelerating our free cash flow growth in 2017 to 45%. What is this causing us? As a result of this, if you benchmark us against every SaaS company or every enterprise software company at more than $1 billion in revenue, you can see we are the highest growth enterprise software company.
When you couple this with that free cash flow I show you, we have an unmatched combination of those exact same other companies, unmatched combination of free cash flow and revenue growth. That's pretty impressive. There's not too many companies that have been able to do that, and we think we're going to continue to sustain this for some time. Now, where are we getting this from? Our contribution is coming from three main areas. Global 2000, we've always talked about the Global 2000. If you look at us as of December 31st, the Global 2000 accounted for 51% of our annual contract value exiting the year. The other bucket comes from enterprise, and the public sector falls in there, 26%, and the commercial segment is 23%.
That commercial segment grew 50% in 2016 over 2015, that was because of the investments we made in splitting our sales organization. I got to tell you, our commercial sales organization is really, really bullish on some of our new products, in particular our CSM. They are seeing that that is a product that is relatively easy to sell. As Abhijit talked today, it's also a product that you don't need to sell into an existing customer. I don't want to say it's easy. The salespeople would definitely say no sale is easy. It's a product we can sell into a new customer and not having to penetrate IT if we're not successful in getting in through IT. It's a much bigger pain point, and people are willing to pay more money for that because it influences their customers. Now, what does the Global 2000 represent?
The big thing here that I want to get across is we are still very much in the early innings of Global 2000. You may say, "Well, you're 38% penetrated. How can you be in the early innings?" If you just look at our Global 2000, many of our Global 2000 customers, we're just scratching the surface. We just have a small subsidiary. As an example, last quarter, we landed 26 Global 2000 into our company. If you look at the average ACV out of those Global 2000, I think it was somewhere around $210,000, $215,000, and you may think, "Wow, why is it so small?" That's not uncommon. Gee, Ashley, when they started as a customer, it was before Ashley's time, I think. I think you started at $60,000 or $80,000 a year. Many of our accounts start small, and they grow big. That's why it's so important.
We land, then we grow, and we are geographically dispersed. You may say, "Well, you're under-penetrated in Asia Pacific." That's still our most recent market that we've gone into, and we landed, I think, seven Global 2000 in Asia Pacific last quarter, and we think that will continue. You can see the Global 2000 adds. The other thing that's really important, this is what drives our growth, is you land these guys, and they grow. Our Global 2000, the average ACV per Global 2000 has grown 22% year over year. If you actually looked at the aggregate ACV per Global 2000, it was two slides ago, that actually grew 43% per year because that doesn't factor in the this is an average per customer. The other thing that's really impressive here, too, it's not just about landing those million-dollar sales.
It's those upsells that lead to customers paying us more than $1 million. We now have 370 customers that pay us more than $1 million a year. That was 51% growth year over year. What's even more astounding there is we now have 26 customers that pay us more than $5 million a year. That's up more than threefold, or almost threefold. It was nine at the end of Q1 2016. It's not as important how big the customer lands at, it's the quality of customer you land, and that's what we focus on. Who has the opportunity to be that big customer one day? This is all about our execution. The other thing that is I can't find another software company that has this type of cohort analysis, as I talked about. We want to land customers because when we land the customer, they grow.
We started tracking in 2010 our cohort analysis. What this is telling you here is the chart that has current there, that is their growth in initial ACV year over year, and then the prior year. You can still see we still continue to grow, even our 2010 cohort. You'd think you'd slow down as you got to a certain point in time, we still continue to grow. Once again, I don't think there's another company out there. This is what's driving our growth and why it's so important that we renew our customers, because when they renew, they buy more as well, too. What's driving these cohorts? A lot of it is still buying existing seats within Service Management, which was, in most cases, was the product that people started with. It's as we come out with these emerging products, HR, SecOps, CSM.
You can see last quarter, 34% of our net new ACV we landed came from these emerging products. 13% came from ITOM. I know a lot of people have asked about, in some of the questions we got on the call, "Well, why is ITOM down?" Well, first of all, it's a percentage of the total, but I can't stress enough, ITOM tends to be lumpier deals. They tend to be bigger deals, and many times with ServiceWatch in particular, that's what causes the variability per quarter. Overall, our ITOM business continues to grow, and that is our biggest product outside of Service Management. Without Service Management, we wouldn't have these customers. Everyone keeps asking and saying, "Well, is your Service Management business slowing down?" You look at our top 20 deals of all of 2016, every single one of those had Service Management.
You look at the Global 2000 we land every quarter, almost every single one of those have Service Management. What's even more important here is 17 of our top 20 deals now had more than four or more products they started with. Which is pretty impressive, and that's the whole strategy of going beyond a single-product company, which we started that evolution in 2015. Switching over to our longer-term model, haven't made too many changes here. A few tweaks we've made. The one thing we've done here is we have taken up our sales and marketing expense slightly, 1% on the bottom and high end.
We've taken up our R&D expense two points in the bottom and one point in the higher end, because we started making these investments in 2016 that we're now incorporating in here, and there's some other investments we're going to continue to make as we're seeing the opportunity. We're investing more heavily in R&D, especially with CJ coming on board. We're being able to attract some really good R&D talent, and we'll continue to do that. We are going to get more leverage out of our G&A line. Bottom line is we're not changing our operating margin guidance for 2020. Free cash flow margin is staying in that 30%-32% as well. This does not factor in the new accounting standard that I'm going to talk later about. Important piece here is the framework.
This is how we operate our business and the way we think about making investments. It's not growth at all costs. Yes, revenue growth is the number one thing we do look at as a company. The next thing after that is really continuing to see that operating margin expansion and the free cash flow, and I'm going to talk more about the drivers on free cash flow in a little bit. As you can see, we're actually right between that growth and high growth. Our midpoint is 34% of our range right now. We are giving you 2% on the free cash flow this year, rather than the framework of zero to 1%, but a lot of that is a function of some of our cash slipping from 2016 Q4 into Q1 with some collections we had, and I think that's a one-time thing.
A lot of people talk about billings, I really want to make sure, because it's probably the most important metric that you guys look at, is that we would like you to understand the seasonality. Before we get into seasonality, what are the components of billing? The biggest piece of our billings in any quarter is billing our contracted backlog. It's not our new business. It's not our renewals. It's the contracted backlog. The other thing after that comes renewals. Renewals now, I've told people this before, at the end of 2016 is when we crossed over where if you aggregate the annual value of our renewals that we're doing, it's bigger than our net new ACV. That's because our renewal base is getting so big, I think that will just continue.
I don't think you're going to see our net new ACV be bigger than our renewal base, just with how big that is right now. The next thing is net new ACV. We have a gross down. I would like to explain to people what the gross down is, because this has the biggest impact on why Q1 for us is such a big quarter. When we license a customer, many times the contract start date is day one of the following quarter, especially in Q4 of any year, so it has a January 1 start date. Why is that? Many Global 2000 companies are still on calendar years. When we do our big deals with many of our Global 2000 customers, they want to get it in the budget cycle for the next year.
A lot of those contracts start on January 1, even though we signed it in December. In December, there's no revenue impact to that because the contract starts January 1. Even though we're legally entitled, if we signed it on December 21st, our contracts enable us to bill it that day, and we do invoice and bill it that day. Because the service hasn't started, we gross our balance sheet down, we gross the deferred revenue down. On January 1 of any year, we have the most amount of our billings already booked that day. That is why you see Q1 be a relatively strong billings quarter relative to Q4, where many other software companies, Q1 drops dramatically.
The other thing is, Q2 tends to be our smallest, you may say, "Well, why is that the smallest?" Well, our net new ACV is bigger than what we do in Q1. At least that's how we forecast it usually is. The reason being is going into Q2, you don't have this big gross down phenomena because mostly you sign a customer in Q1, they're already in their budget year, not a big deal if the contract starts on March 21st or April 1st. We find Q2 has the lowest gross down in any quarter. That's what causes that seasonality. You're always going to see Q4 and Q1 be our two biggest quarters. Or sorry, Q2 and Q3. Sorry.
Q4 being our largest, Q1 still being a relatively good billing, Q2 being our smallest, Q3 being a pretty good quarter. You also have in Q3, the federal government is typically one of the strongest quarters there. Free cash flow. There's also seasonality in free cash flow that a lot of people don't appreciate as well, too. Q1, you get the phenomena of you have so many billings that go out on January 1 of any quarter. Well, you collect those because most of our billings term are 30 days. We're collecting those in Q1. Because Q4 is such a big billings quarter where you're still billing a lot of contracts that you signed in December, you're collecting those in Q1.
You don't have that phenomena in Q1 where you have all these billings going out at the end of the quarter to collect that cash in Q2. Q2 is typically the lowest in the quarter. We also have things in Q2, paying for this conference. We have a relatively low operating margin in Q2 and Q1. Remember, there's three components that really drive our free cash flow. It's operating margins, and then it's the collections and employee stock plan. Q3 and Q4 typically have our highest margin. Remember, we hire most of our people in the first half of the year. We make a lot of our investments with our sales kickoff, this event in the first half of the year.
We don't have those same investments in the second half of the year, and those flow through free cash flow or operating margin that come into free cash flow. Collections, Q1, Q4 are our highest collections. We have this phenomenon with our employee stock purchase plan. Every January 31st and July 31st, we buy the shares in our employee stock purchase plan, while in Q2 and Q4, we're collecting the cash from the employees through their payroll withholdings. That positively impacts our free cash flow. Expect this type of seasonality as we go forward. I know we just came off 37% free cash flow. We're guiding 24% for the year, 25% for the year. You will see some little dip in our free cash flow this quarter and next quarter. Turning to some housekeeping items.
One of the things people are asking all the time is about dilution. We lowered our dilution forecast slightly. We were up close to 3%. We're now getting down to 2.4% exiting 2020 here. We have been looking at this quite a bit. As we mature as a company, we're paying more people cash, but reducing the amount of shares we're giving to people because I know there is a big focus with investors around stock-based compensation. This is one of the things we look at very closely, as I know you guys do these days. The other thing I want to talk to you about is longer-term tax rates. I want to caveat with this is there is a lot happening around the world, not just in the U.S., with regards to countries and their corporate taxation and looking at international tax structure.
The way we are structured today and what is in law today, this is where we see our long-term tax rate getting to. We do pay cash taxes. Most of these cash taxes are in our international markets. There's very little that we pay in the U.S. as we have a number of NOLs, and it'll be years before we pay any taxes there. There could be changes depending on what comes out of U.S. corporate tax reform, if and when it happens, or some of the things that are happening around the world. Turning over to the impact of ASC 606. There's three things that are impacted here. One is revenue recognition, two is the amortization of commission expenses, and three are added disclosure. You may say, "Well, you're a cloud-based software company.
Why are you going to get impacted by the revenue?" The revenue is impacted only to the extent you have on-premise customers or customers who have the right to go on-prem without a significant penalty. We do have about 7% of our revenue comes from customers that are on-prem or have the right to go on-prem without significant penalty. Under the new standard that is going into effect January 1, 2018, you have to recognize the license component for that type of customer that's on-prem, upfront under the old perpetual model of recognition. Think of it roughly, if it was roughly 80% of a one-year term license would be recognized upfront as a perpetual license, and the 20% would be spread ratably over that period of time.
If we had adopted this new standard on January 1, 2016 for all of 2016, the revenue impact for us actually would have been a pickup in revenue of $22 million-$27 million for the year. I will say you can get pretty big swings quarterly, depending upon the timing of renewals for some of our on-prem customers, because we have some pretty significant on-prem customers from there's some federal governments, there's some large banks, and other customers that are on-prem. The other thing that you have with this, and the problem with this is right now, it's pretty easy to guide revenue on a ratable basis, and you're going to land within a very tight band.
Unfortunately, if under this new accounting standard, when you have to guide revenue, if you have an on-prem customer that's up for renewal on December 31st, and by the way, we do have a number of on-prem customers that have December 31st contract end dates. If that renewal slips a day, it can materially impact your revenue. If you have a customer that was going to sign a three-year renewal and their annual value is $5 million a year, that's $15 million. It could be up to around $11 million you would have recognized as a perpetual license value upfront on December 31st. If you missed that one day, that would slip into Q1 from Q4. Unfortunately, this new standard does create a little less visibility in terms of forecasting your revenue.
I want to stress it has no impact on any of your cash flow or anything. For us, it's not going to be as big of an impact. There are many other companies that this is really going to make it more difficult for them to forecast their business. The second thing we talked about is commissions. Today, you have two choices. You can expense commissions immediately, or you can defer and amortize commissions over the contract term. We've always deferred and amortized commissions over the contract term. Under the new standard, you have to defer and amortize commissions over the economic life of the customer, and the economic life of the customer is longer than the contract term, especially when you have a high renewal rate.
This is still kind of working through. We believe the economic life of a customer is five years for us, and we are amortizing the commission expense over five years. By adopting this in 2016, this would have reduced our sales and marketing expense by $22 million-$27 million. When you couple this with the impact of the revenue, there'd be an operating margin impact of roughly increase in operating margin of 3%-4%. I can't stress enough, zero impact on free cash flow, zero economic impact to the company of this. It's all about how we report. The other big thing, and this is where most companies are really struggling with, is trying to figure out what does this mean for disclosures?
They talk about how you have to give both qualitative and quantitative discussion around A, how your deferred revenue rolled off your balance sheet and contributed to your revenue in the reporting period. You also are supposed to disclose your deferred revenue and backlog. You're supposed to give qualitative disclosure around how that backlog and deferred revenue is going to be recognized into revenue over time. We are still working through this. The other thing that's an important piece now, too, that is important, especially when you guys are trying to calculate your billings. You're going to have this, you could have a three-year renewal that happens for an on-prem customer. From the customer's perspective, it doesn't matter. They're still only going to pay us 12 months in advance.
We now have to recognize the three-year value of that perpetual license up front, which creates this unbilled receivable that now goes on your balance sheet. You have to factor that unbilled receivable, which is a new thing we don't have on our balance sheet today, into your billings calculation, and that's how you figure out what the unbilled portion of that perpetual license that's calculated up front. A lot of things that are going to change here. We will be adopting this in our Q1 2018. We will start to give guidance around this most likely when we give our guidance in October 2017. We start talking about the impact on our long-term model. The plan would be to update that around then.
It's not going to change revenue significantly at all, but it will have an impact on operating margin on a go-forward basis. With that, let's bring John up here, and we can go into Q&A. Jimmy can moderate.
Yeah. I'll be calling on you guys. No NDR questions for Mike. Tough crowd. All right.
Kind of a long day.
We have some mic runners. If you just raise your hand. I think I see Walter in the back.
Hi. Walter Pritchard from Citi. Just a question, I guess, on you sort of get at with the cohorts, you've got all these products that are driving growth outside of IT. I'm wondering if you could talk about just, say, a typical Global 2000 customer and sort of what you see as the value in HR, customer service, relative to ITSM and ITOM. Is there a way to sort of Obviously, every customer is a bit different, but I think what we're all struggling with is we can do the math on some of these markets that you've been in for a long time, or we can look at the Gartner numbers. In terms of looking at some of these newer markets, it's hard to tell exactly what's addressable by you, maybe some sort of opportunity assessment there would be helpful for us sizing it.
Well, I can give you some real examples without naming customers. There's one large Global 2000 that is a very significant ITSM customer, what they're doing in HR is as big as what they're doing in ITSM. That kind of puts in perspective that HR can be just as big as ITSM in many of our customers. Now, this is a company that has a lot of employees relative to the size of the company.
What about customer service?
Customer service, well, we have commercial accounts that pay us $1 million a year for CSM. If you talk to I think Salesforce says the CSM market is a $12 billion market. We were saying $9 billion. CJ believes it's an $18 billion market opportunity. It's a very, very large market opportunity to go after in CSM. As I said before, that is a more competitive market. It's not a greenfield opportunity. We're generally displacing an existing system, which makes it harder. In the case of HR is definitely not as big as CSM. Maybe. Who knows? It's still uncharted territory. The reason I say that is because in many cases, we are taking unstructured work and putting it into a structured workflow. We're replacing what was being done in email, what was being done in Excel and voicemail and other things.
That's why it's harder to quantify the true size of that market. Some people say it's a $2 billion-$4 billion market, the HR Service Management business.
I see Kirk, and then Alex after.
Thanks very much. Kirk from Turnith Core. John, when you talk about sort of taking the discussion up to the C-suite level, it seems the Inspire team has started to do that to a certain degree with you guys. I know you just started, so you're probably trying to figure out a game plan around this over the next year or two. Can you talk about verticalization as well? Because it would seem to me that one of the abilities to go have a deep discussion with a C-level executive is that someone in that discussion knows the industry, and so we can speak to it from a business process perspective, from an industry perspective. Is that something that would make sense? I know you have SLED Med right now.
Over time, should we expect that the Inspire team plus some sort of vertical orientation might be the way for you guys to get there? I'm just trying to get your sense on sort of the verticalization aspect. Thanks.
I think it's a natural evolution. If you look at most services businesses, professional services or others, you begin to build vertical expertise over time. In most of the larger software companies, they've built vertical expertise over time. I think at the end of the day, it gets to time to value, right? That's what the client cares about. That's what a CFO or a CIO cares about, is, "Do you understand my business? Can you help in this transformation we're trying to go part of?" You think about what Ashley showed at GE. Jeff is driving a massive transformation across GE, and Ashley's driving that digital transformation across all their divisions. In that case, you may not need specific expertise in each division. In that case, vertical may not be as important.
You go into a bank, or you go into a hospital or healthcare arena, or you go into other highly regulated industries, understanding the vertical specifics of that industry is critical to drive change. We're starting, I think, in a very thoughtful way, learning our way through it. I think over time, you'll see naturally building more vertical capability, and also partnering with our partner ecosystem, many of whom have strong vertical capabilities.
Alex.
Thanks. Aleksandr Zukin with Piper Jaffray. I wanted to ask, and either one of you guys feel free to answer, but about the platform opportunity. This has been something that has been core to ServiceNow or ServiceNow's been talking about for many years. I'm curious, what are you doing that's driving developers onto the platform with an increasing frequency? What are you doing about the economics of distributing software that's built on your platform? How important and when should we expect that to become a more material, actionable part of the revenue or the story of the business?
Maybe have CJ talk-
Sure
a bit about what we're doing on driving developers to the platform, we can take the second part. Everyone knows CJ Desai.
Thank you. We launched our developer program a couple of years ago, the whole idea was for developers to be able to access our platform without any friction. You get an instance right away. Literally, all you need is an email address. You get the instance, you can start creating application, see the power of platform. First was just removing the friction in getting access to the platform. All the functionality that we internally use, whether it's for Customer Service app or HR or SecOps that Sean Convery talked about, is, again, the exact same platform. If you go today on the developer program, you will have, "Hey, do you want to access Istanbul, Helsinki?" Whatever the releases are, you can access that functionality. As long as you build application and keep it current, we will let you run it.
It is, from an infrastructure standpoint, a cost that we incur. We don't charge the developers for it, but it is really, really valuable. They develop the communities around it, where they discuss the best practices, share an application, and other. To answer your question, the second thing is we have created a focus in Tony Beller who just spoke earlier, on the ISV program, as well as other partners developing on our platform. Reaching out to the ISVs, they may be stuck in the traditional client-server world and want to move to the cloud, or they may found a use case that we are not interested in, but they think they want to build an app for a healthcare or that kind of industry. Once that app is done, they make it available via our store so that customers can access it.
There is a billing model and so on. From a platform strategy perspective, it's three things. One, we continue to innovate on our platform so we can build applications that are really powerful. Second, through developer program, getting development community to build applications, play with our platform and products, and become part of SI someday. Third, for ISVs and ecosystem partners to create an app that can be sold via our store, there is some revenue share that we go, like other companies do.
Okay. Thank you.
Thanks for taking my question. Matthew Hedberg from RBC. I guess for either John or Mike, could you talk about the federal and then the SLED markets? How close are we to standardized pricing there? It would seem to me, if you could stamp out, say, a state, for instance, all these states should be able to standardize on a similar sort of application or pricing.
One of the reasons for creating that vertical of SLED, MED, SLED being the state, local, and education, is for that very thing, and our sales organization is still working on rolling out more standard offerings and pricing for the various similar government agencies across the country, as well as the higher education. We're working on doing the same thing within the medical space as well, the hospitals, because these guys all talk.
Keith.
There you go.
This is Keith Weiss from Morgan Stanley. I wanted to ask about sort of sales efficiency and marketing efficiency, given sort of the spread of the product portfolio. As we go through the presentations, you're talking about security, operations, management, and I'm like, "That sounds like stuff that Palantir is talking about." You talk about HCM, the HR stuff, and it's like, that sounds like stuff that Workday's talking about. With the competitive dynamics spreading like that, how do you keep the marketing message really tight and really efficient? How do you keep sales execution really tight and really efficient when it seems like the competitive dynamic really spreads out for you guys?
Can I?
The one Oh, go ahead, CJ. I'll stress the one thing, though, and I'll let CJ. Go ahead, CJ. Go ahead.
First of all, I do want to address on Security Operations. We are very focused on the actual end user, as in the security operations analyst. We are agnostic to all the security ecosystem, and we are focused on security incidents, prioritization, how you look at the threat intelligence, resolve the incident, and then store it in our configuration database so you can submit it to your audit committee, compliance committee, or to the CIO. When we look at Palo Alto, the example you used, or any of the threat protection, threat prevention vendors, we are all partners with them. From a selling motion standpoint, we are actually approaching CISO for the security operations community. Palo Alto specifically is our partner. They understand we are an incident response business. So are the other security vendors.
It's very much the same thing in HR, and I think this is really important. Same thing with Workday. We are partners with Workday. We are not competing in what they do. We view ourselves very much as a security or a service management company, and what we're doing is not being done by other people. We view this as a very positive sum thing to deliver a great experience. I know there's some confusion because it's both labeled HR, but we're doing a very different thing, and we think what they do is outstanding, and there's enormous growth for both of us as partners.
Justin?
Thanks. Justin Ferbey with William Blair. Last year at your analyst day, I think, Mike, you broke out, you went into 2020 different product categories, and I know you hate the question around different products. I guess two of those products were brand new a year ago in terms of customer service and security, and I think you stack ranked those as sort of number 2 and number 4 in terms of your other products. Just curious if you could sort of update. I think you had ITOM 1 platform and customer service were 2A and 2B, business management and analytics were 3, and then security was 4. Just curious
Hey, Justin. I'm not sure where you got those from. The only thing I said in 2020 is, if you recall, was
Maybe my notes were wrong
for ITOM, it is our second-biggest product outside of Service Management. That is the only product that we actually give you, we break out revenue. What we said was, in order for it to be 15% of revenue in 2020, it would have to grow on average at 19% per year, the ACV, a percent of our net new ACV to get to that 15% in 2020. Other than that, I've been pretty consistent. We never break out revenue by all the other products because all of those are licensed in the same way. Many times they're bundled together.
What I did say is I was pretty bullish and pleased with what we're seeing with the early traction in CSM, in SecOps, in HR. I'm telling you, if you looked at last quarter, all three of those products from a net new ACV perspective were pretty much equal.
Okay. Just on the ASC, the revenue standard, will we see that on-premise piece? Will you break that revenue out?
Yes. There's going to be a discussion around that in the MD&A, there will be still going back exactly the presentation in the financial statements, whether it's a third line or it gets lumped in, there's no disclosure around it. That's going to create variability, so you're going to disclose that.
I see Michael back there.
Here you go.
Hey, guys. Michael Turits from Raymond James. A lot of new products announced today, this is a much more productized company than it was, say, 4 years ago. How has the company changed structurally in order to accommodate the kind of product rollout and R&D? You did just raise your R&D margins slightly. They're still pretty low. Do we feel like you've got a handle on those and that might not go up over time?
The way we have everything set up, remember we started making those investments in 2015 of creating different BUs, business units, we have GMs in each of our business units, some of our business units have some, or will have some junior GMs underneath them as we further productize underneath one product. They all roll up into CJ, who's our Chief Product Officer. The beautiful thing about it is we roll out new products, 80% of it is taking what we already had in our core service management as what we've done historically, we've repurposed that and built on that remaining 20% to get that gen 1 product, then we continue to invest in it.
In terms of R&D, we think we're spending a significant amount of money in R&D, we will continue to spend, and I think that's at the right level to support our growth. We are doing more in India. I think in the next two years, you'll find India will be our biggest single presence in terms of engineering outside of the U.S. It's not today, but it's getting there. That will help keep our costs in line with putting significant resources there. A number of our GMs have all had experience with having development teams in India, and I think we can do that pretty successfully, and I think CJ's happy with what he's seeing out of there right now. That's what's going to help with the leverage.
Is it Derrick?
Thanks. Derrick Wood at Cowen. You guys changed pricing a couple times over the last few years. Now you've got a lot of different products with different SKUs and price. Just wondering how you're feeling about pricing and any changes you need to do. Second part would be on the app store. I think you launched that a couple of years ago. Not a whole lot of talk about it today. Are you finding that maybe just not a big driver for the market, or is it something that we can see flourish more in the years ahead?
Pricing, I'll tell you the one thing. Pricing will always evolve over time. As you mature as a company, as you roll out new products, you get more feedback from customers, pricing changes. Our pricing has been pretty stable the last couple of years. We are looking at some of the pricing. We realize that as we introduce more automated intelligence, machine learning into our products, that we may need to evolve our pricing over time, and that will happen. What's that going to be? To be determined yet. Price per SKU is not something that I get too wrapped up about. I'm more concerned about how much money are we extracting out of a customer, and how do we get that to grow over time. If we need to tweak our pricing to grow that's more important to me.
I'm not hearing from any of our customers that pricing is a problem or pricing is confusing. It's when they see it being confusing that we have to change our pricing model. The last part of your question.
Can I just comment quickly on pricing?
Yeah.
Just add to it, Mike, that the two things, my observation would be from 100 data points. One is, as Mike said, it's no longer just per fulfiller, which is what we've tended to price ITSM with. That with some of the other products, we're touching more employees, in some cases, all employees. What I observed is a very open discussion between our sales team and the clients trying to figure out what is the best way to use an economic unit. Increasingly, our clients want more people using our platform. Take what Deepak was showing or what Abhijit was showing. They want more of their employees using our product. I think, as Mike said, that will evolve. Here's the biggest opportunity I see on pricing, which is what Michael Hubbard talked about, framing it more in terms of value.
We have historically been framed, how are we priced vis-a-vis what Remedy used to be or vis-a-vis what some other competitor used to be. Increasingly, we're adding enormous value in our clients, and we have opportunity, I think, to bring that value more clearly and crisply to the customers, whether the CIO up through the CFO, and have our pricing be understood in terms of value, not just in terms of what historically they paid for a given SKU.
The second part of your question was around our app exchange or store. We launched that two years ago, and if you recall at that time two years ago, I said, "Don't expect it to be material to our business anytime soon." It's important to our business. As you guys go into the partner hall, we have over 300 apps or something that are-
Close to that, yeah.
We have about 300 apps that are on our store today that are available for download for purchase. We did do a million-dollar transaction in our app exchange through one of the partners who's going to be there, MobiChord. Nuvolo is doing big transactions in there today. Go talk to some of those partners, and they'll tell you. It's not about the revenue share we're getting from the people that are downloading, and that's the interesting thing to us. It's getting the licensing to be able to actually use our platform is what drives revenue, and we don't call that app, the app exchange. That's coming through the platform.
I can't see with the light, but Candice, right over there.
Hi. Karl Keirstead at Deutsche Bank. Maybe a question for John. John, I'm sure you saw this at EB, too, but with high-growth companies like ServiceNow, you've got this natural tension between driving growth by chasing all the big opportunities you've talked about today and delivering margins and cash flow as well. I know it's early, but have you arrived with sort of a growth margin trade-off framework that you have in your head that you're contributing to the company?
No. In all seriousness, I think two things are true. If you're a technology company, you have to invest in innovation. The reason technology companies slow in their growth is they slow in their innovation. CJ knows that we want to continue to innovate both at the platform level, and then as we build out cloud-based applications and as we build out other services. That investment is paramount. The investment we've made in our sales team over the years has been paramount to our success. We have a world-class sales team. We need to do what it takes to continue to invest and grow. What I like about the framework that Mike put up earlier and sort of I think is the prevailing framework here is one that makes sense to me.
We're investing intelligently, but it doesn't mean that. In the consumer world, things have gotten a little bit away, where you can invest in a sort of open-ended way, and I don't think that's going to be necessary here.
I would say, too, there's a lot of room in our model to continue to invest heavily to get that growth. These are big numbers you're talking about.
Thank you both.
No one has any questions? What about the analysts who didn't get a chance to ask a call or a question on the last call? This will be your chance to ask a question. Alex.
John, I know one of the things that we talked.
All right. We're going to put you on the mic so the webcast can hear you, Alex.
We've talked a little bit about, I think, verticalization, the platform, and you've also talked a little bit about how the machine is running, the first rule is don't screw it up. What in your mind, at a company of this stage and scale, given the likely sales transformation to a more verticalized sales motion over time, what is the biggest change you anticipate making over whatever time period you deem to see fit? Because I think some people here are trying to figure out what is going to be your disruptive presence or element on this company to get it to that next stage of growth?
I'm not sure it has to be disruptive presence, first of all. As I said earlier, the core of the core of a technology business, the first thing that I was looking for was the health of the platform and the health of the product. I was looking, is there any technology debt? Tech debt. Or people starting to say, "The product's not quite measuring up." Or, "Here we're having a different competitor whose product seems to be better," or there's some startup that's beginning to eat into your performance or eat into your product on a relative basis, I heard virtually none of that. That, to me, is the core of the core of continuing growth and continuing to grow up through $4 billion and beyond, and we can't lose that. We'll continue to invest in that.
We'll continue to upgrade our team and talent on that. I think you saw evidence today of how the growth that's going on is quite organic and quite healthy. A lot of what I see is things that are almost natural evolutions in the actual maturing of the company. So we haven't historically had big relationships like GE, where we're serving a very big corporation. We need to understand how not only to sell to them, Ashley talked quite well how Michael helped in that process, and our Inspire team, but also how we serve them over time. I was having dinner with Ashley last night, Scott Mason from Novartis, both of whom will be talking tomorrow, and we were talking about how do we best serve you over time so that we can both deliver value, expand our relationship.
Some people call this customer success, some call it customer intimacy, some call it customer life cycle. We haven't had to really deal with that with scale global companies, where we're viewed as mission-critical in what they're doing, not just in IT, but in this case, in the transformation program, the core transformation program of the company. To me, that's all blocking and tackling. Those are problems that have been addressed by others and solved before. We'll learn from the experience of others, and we'll evolve, much the same way that Dave and Kevin have led the evolution of the sales force over the last few years, by adding in product sales, by adding in commercial, by adding in things like the Inspire program.
An awful lot of the opportunity I see is just building on the foundation that's been created and learning how to grow and operate better as we become a more significant company and a more successful company. I don't see a need, at least in the short to medium term, based on what I've seen thus far, for any sort of dramatic change or any disruptive change. We've got to be aware of what technology's going on, and if there are disruptive changes in technology, we have to be there, be part of it. We have to embrace machine learning. We have to embrace rapid automation. We have to embrace some of the other core technology evolutions that are going on and build them into our platform, which we're doing. Then we got to keep one of the greatest assets of this company is its execution.
I tell you, it's one of the things I just respect so much and appreciate, the sort of execution mindset. I'll say one more thing, and it actually matters, is not become arrogant or fall in love with your success. That's one of the things. When I joined eBay 12 years ago, it had fallen in love with its success. It was just breeding a little bit of complacency. There is not any complacency in ServiceNow, and that's a credit to Mike, that's a credit to Frank, that's a credit to the leadership over time, and we need to maintain that hunger. We need to maintain that desire to continue to grow and continue to deliver for customers.
One more from right there.
Hi. Shankar from Bank of America Merrill Lynch. I have a question on the AI partnerships you have. I believe you are closely working with IBM Watson because they have been in the industry for a while. Can you talk a little more broadly on the partnerships you have with, say, Microsoft and Google and Amazon, how you're leveraging their platform to sell your AI services to enterprise customers?
I'll leave the technical one to CJ.
In general, we have two approaches. This is an evolving field, and as you have seen, the innovations in the past few years now makes sense, right? AI has been talked about for 20, 30 years, but only just recently we have been able to see some of the advances that we can utilize. We are starting internally. We bought a company, DxContinuum, in January, that has been talked about, which is in the supervised machine learning space, and we will make that available for our customers in our Kingston release, and we are going to bake off internally, with our own instances beginning June, July. On your question around partnerships, we are starting out with IBM on Virtual Agent. We announced it a few months ago. Even with Microsoft, we are exploring.
The beauty of our platform is every single record we have, or even the data structures that our customers create, can be integrated easily via SOAP or REST APIs, which allows us to, whether it's voice activated, anything related to machine learning, AI, meaning doing integration with Watson or with Microsoft or Google maybe in the future. I'll tell you an example specifically. We are looking at chatbots. One of the challenges you have is the natural language processing, understanding the language, understanding the emotions. We found out Google has a great library. We'll most likely utilize that library rather than building it ourselves. Where it makes sense, partner, where it makes sense, build, but again, build it in the platform so it's available for all of our customers.
I just build on that, sort of been interesting seeing this in the consumer world, now seeing it in the enterprise world, is I think there's going to be a natural evolution, natural stack that evolves in, call it machine learning. I'm not going to use AI because it's so much of a confusing world, where the public cloud providers, whether it's IBM, Microsoft, Google, Amazon, the people who are investing really heavily down at that level, will be providing increasingly services. Their goal is to make machine learning or AI as a service that we can or others can evolve and build on top of. Our job becomes to take that service, add the specific functionality we need to for our customers. The real power in this is the data.
The real power is how does an end user like GE use their data combined with the data we have in our ecosystem to solve real business problems? At the end of the day, it can't be a solution looking for a problem. It's got to solve real business problems. That's what our focus needs to be. You'll hear us talk about this tomorrow on this Intelligent Automation Engine, which is how do you take the capability that we can get ourselves or partner with others or buy from others and translate that into solving real business problems for our customers using our data and theirs. I think that there's going to be more action at the top part of that, which is where the sources of differentiation are going to come, rather than who's got the best AI machine.
It's an exciting opportunity, I think it does allow you for even the next stage of transformation in terms of automation. You get to the world of predicting and preventing instead of just recognizing and responding. Any more questions? We got about another minute left. Yes, Karl.
Thanks. Just to follow on that train of thought, John. If it's a differentiating technology and is it something that can be ultimately monetized? You don't have to answer this necessarily for ServiceNow. Every one of the companies we follow in SaaS has some machine learning or AI sort of initiative right now. I think the question a lot of people are asking is that just table stakes? If you don't have that, do you get left out of the discussion longer term, or is it something that you can potentially add on, add a SKU on top of sort of your base feature? I don't know how much you want to get into that from a ServiceNow perspective, but maybe just holistically how you think about that.
Well, ultimately, this is again, I'm in the dangerous category because I have a personal perspective based on my history before coming to ServiceNow, I have five whole weeks here. I think ultimately what's not going to be the differentiating characteristic is the fundamental underlying service, machine learning as a service or AI as a service. It is how do you build value-added applications on top? I read sort of a system of intelligence is maybe the enterprise software way of describing it. If you build value in your platform and it's driving value for clients, ultimately you can monetize over time. Exactly how, I don't know, but it certainly builds a stickier relationship because you're adding value and you're helping them drive greater productivity, greater growth, more efficiency.
I don't have any specific idea of how exactly it will be monetized over time, but I do know that it's going to be an important enhancer or an accelerator of the ability to add value for clients. Clients are going to need that because they're under more pressure than ever. Every company is under more pressure than ever to grow. How do I innovate and grow? How do I drive productivity at the same time? AI in a platform like ours helps you accelerate both.
With that, we're out of time. Thanks, John. Thanks, Mike. As a reminder, we're going to be hosting drinks out in the foyer for about 45 minutes, then the partner hall opens at 6:00. Your badge gets you access to that tonight and all day tomorrow.
I'll just say thank you to everyone for coming and investing a day like this, a half day like this. We value your feedback. Hopefully, you liked hearing more about the products. Thank you for investing the time.
Thank you.