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 covered under these forward looking statements through our Safe Harbor provisions. Let's dive into the agenda. First, we are going to hear from our President and CEO, John Donahoe. He is going to talk about what he has been hearing and what he has been doing over his 1st 5 weeks since joining the company.
Then we'll have C. J. Desai, our Chief Product Officer come up and talk about the ServiceNow portfolio. And then we'll have an opportunity to hear from 4 of our GMs from each of our business units. First, we'll hear from Farrell Huff.
She'll talk about IT Service Management. Then we'll hear from Abhijit Mitra. He runs our Customer Service Management business unit. Then 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 that department. Then we will close with Sean Convery, who you heard from last year. He is the Head of our Security Operations Business Unit. Then we will switch gears. We will 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 talk about the partnerships that they've made with ServiceNow. Then we'll get here 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 will bring up a customer example and they will talk about the partnership they have made with ServiceNow. Then last but certainly not least, we will hear from our Chief Financial Officer, Michael Scarpelli. We will then invite John up and we will do a little bit of executive Q and 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 p.
M. I'd like to remind you that your Financial Analyst Day badge gets you access to the Partner Hall this evening as well as all day tomorrow. So with that, I'll invite John, our President and Chief Executive Officer, up.
So good afternoon. I'm let me just start by saying that I'm 5 weeks I'm going to throw this over here. I used to play basketball. I'm 5 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. And so 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 3 of our Board members here in front, Paul Chamberlain, Ron Codd and Sue Bostrom. And so I will invite you during breaks and other times, feel free to engage with them. I really had 2 priorities when I came in.
One was for my 1st 60 to 90 days. One was keep everybody focused or as I described it one setting, don't screw up. And I think on that front, we've made good progress. The succession went as smoothly as I think possibly could have. And to a great credit to Frank, I think our organization hasn't missed a beat.
People are focused. They're focused on the future. And I want to thank Frank for incredible 6 year run-in what he's built. I'm inheriting a really well run, really well set up organization. But you should feel I think pretty good about succession.
And then 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 heads in the game. You'll see CJ and the product team, they are very focused, and their heads are in the game. And the whole organization understands that we need to meet our commitments, and we need to keep the momentum that we've got.
And so job 1 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 against our 2017 plans. Then the other big priority for me in 1st 60 to 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. But 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. And so I'm interviewing every VP in the company. It's 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 want to talk to this person.
They have a really thoughtful perspective on the industry or on ServiceNow. And then most importantly, and what I focus the majority of my first 5 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. And the reality is I was having so much fun.
I've now met with 100 customers in my first 45 days. And that's been in 10 cities across the U. S. It's been large customers, small customers, long term customers, newer customers. And it's been awesome.
It's the best way to learn about a company and learn about a business. And I've asked him 3 simple questions. What are we doing well? Where do we need to get better? And I make sure we come back to that because there's a lot of love from our customers.
So I said, no, where do we need to get better? And then I mean, most importantly, what are your priorities going forward? And I thought I'd maybe just share a couple of early observations based on what I've heard. And then my keynote tomorrow will go into some of this in more detail. First thing, and 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. And the sort of 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.
And we love the new products. And it's allowing us to 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. And 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, and they're discovering new use cases as they go along. And second observation is they want to do more with us, and that the new products that you heard about this afternoon are helping raise our visibility with people outside of IT and 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 to serve the customer.
It's helping us identify root cause, get at it and remediate it. And then security, same thing. I had a great dinner with Sean and 10 CSOs a week and a half ago. And 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 response is allowing us to get more power and leverage our people more effectively. So the general sense of it's a strong platform, there's more opportunity. Now there are also when I asked where do we need to get better, there were a couple of areas that they point to. One is implementation. And that sort of the narrative I heard frequently was, I first came on ServiceNow 3, 4 years ago because we needed to.
We customized quite a bit. And 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. And so 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 our best practices in our 4,500, 5000 customers, what are best in class configurations, What are best in class implementations?
And 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. And they want to do more road map sharing with us. They want to have input to our road maps and also have us share road maps with them. And so that's those what I like about that, all those things are manageable things.
And 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 that decision maker on any given product. And 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.
And 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. So 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.
But having a little C suite sponsorship never hurts, and I think it's an essential part of building a great technology company. And then the last thing I'd say is a lot of the feedback and ideas are things I'd call them 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. So I come away enthused. Our customers seem to want us to win.
We are quite clear we have a lot to learn, and we're willing to embrace their feedback. But I must say, 45 days in, I feel even more encouraged than I did on day 1. Now two quick things. 1, 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. And so I think it's appropriate that you're going to get a really deep dive today on our technology.
CJ and our team, you get to understand the products, you get to understand the platform, understand where we're going with that. Because 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 our priorities and plans going forward. I do not anticipate sudden change anywhere.
This thing is working. We have strong, healthy momentum. I do think there's opportunity to build on what we've done as we think about 2018 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. And so 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.
But 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? So I welcome them and Mike and I welcome your thoughts and perspectives and ideas. So with that, I will hand it over to CJ, who's going to take you through what I think is an awesome expose of our product road map.
And then I'll see you
again at the end of
the day with Mike. Thank you.
So good afternoon. So 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. So 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 slash specific software programs. You look at calls and then many, many software products that cut across the departments and this is really hard to optimize because it's unstructured. So with ServiceNow system of action, what it allows you to do is replace this 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? So 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.
So 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 do you create a service catalog. And 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. And 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 customers' organization.
But 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 50 to 100 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. And by the way, we love your ITSM, iCharm and security operations product. So the platform is the power, is scalable, is 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.
Now 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.
So we are going to make sure that we focus on user experience significantly, basically immediately. But 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. And 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. So you just develop once and it is available through different form factors.
So that's for the requester. Now, you know, 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, you know, look at your reservation, print your boarding pass. Have you ever looked at the UI of the airline employee who is dealing with your reservation?
That's a pretty complex, 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. So 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, but for the full filler, we are going to make sure that the experience is similar.
We are also announcing, this week at the conference, intelligent automation engine. Now simply put, what intelligence 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. So 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 a entry in your portal saying, hey, my printer is broken, I'm Joe, whatever the case might be, or you pick up a phone and do that. Can we automate this process? Can we make it, 1st of all, easy for you to just say, I cannot print my documents? And 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. So if we can solve this, so we bought a company as you are aware, DX Continuum 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're 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. So 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?
So that's the problem that we are focused on, on how do we make it easy with dynamic thresholding, correlation of events and make it easier for you to do that. So that falls in anomaly detection. Farrell will talk about peer benchmarks, so I'm not going to touch on that. But 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 an existing technologies so that all applications benefit from it.
But if a customer is creating any custom application, they will benefit too. So 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. Now as I said, every cloud service will benefit from this intelligent automation engine. So 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 do's workflow and others.
Can we make their life easier for the HR service delivery team? The same thing on customer service and ITSM. So you will see us that every cloud service will benefit from this intelligent automation. Now all of this would not be possible if it was not for our underlying service, AKA cloud. So 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. And approach we have taken because we started 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, your 4 weeks, the new release is coming out, we are going to upgrade your entire installed base. So 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 have 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. And again, we will continue to improve them as we move along. And we have been growing with our customers. Our customer base is growing as you guys are aware, but at the same time, customers are using multiple applications and 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 3 keynote today with my team. But what we are going to announce is security and I spent 8 years in security software company creating products that either detect, prevent or protect against threats. We are announcing security dashboards. So if you are our customer, we have given you a bunch of best practices on how you harden your environment. And now just with one click, you will 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're a large financial services company or a healthcare company is very important. ISO, all FedRAMP certification, certification related to European Union, some of the certification related to Singapore and Australian government, we continue to do them. So security is very important, always an ongoing exercise. Customers trust us with their data. So it's the onus is on us to make sure that we secure their data.
So what we are going to be launching day after tomorrow is our Jakarta release. So this release will be available in the summer. We do 2 releases every year. Jakarta and Kingston are the 2 releases that are planned for this year. And from a priority standpoint, the first thing we are going to address is performance and user experience.
So 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 4 quarters. This is considered by Setmetrics 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. So when I look at the Net Promoter Score results and look at all the comments from our loyal customers, one of the things that they 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 and whether it's a performance related to the upgrades that we go through when we go to a release.
So performance work is never done. You will see us focused on performance and we'll continue to do that. 2nd, we will expand the capability into our emerging products, which is 3 specifically you will hear today, customer service, HR and security operation. With Jakarta, we are launching a brand new product called vendor risk management and this specific product, every one of our customers is dealing with many third party vendors, 100 if not 1,000 or tens of 1,000. How do you manage that risk?
Do you give a laptop to a 3rd party? Do you 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.
So we are introducing vendor risk management to automate third party risk. So when our customers look at their entire risk status, they have 3rd 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. But 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 CIOs budget is on licensing costs across the vendors. How can we make it easy for them to discover what they have deployed? Are they under using, overusing, what's really going up on the entitlements, so that 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. And then the last thing specifically on Jakarta that I'll talk about is around April of 2016, ServiceNow acquired a company called Itap.
And Itap was focused on one problem and 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 and 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. So 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 is costing you, do you want to get some provisioning done and meter overall. So we want we are not preventing our goal is not for IT to prevent if there are certain workloads moving to the cloud, but now you have full control and you understand what's going on in the cloud. So this is a brand new offering that we are also announcing in Jakarta. So in summary, we are continuing to innovate.
We have 6 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. And 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 Huff.
She runs our biggest business, Service Management, and her team has done some incredible work this year. And without further ado, Pavel come on stage.
IT leaders want to deliver responsive high quality service, but they're held back by complex legacy systems and rising costs. Now IT service management consolidates complex legacy tools into a cloud based single system of record. So all of your ITSM processes work together efficiently, reducing total cost. Employees can request and track IT services through a simple self-service portal. IT staff are notified immediately so they can respond to the requests in real time.
You can 0 in on what is most important and relevant right now, like service disruptions, prioritize work in IT, assign IT staff to the most important tasks, and address any issues that are affecting service availability or user productivity. With ServiceNow, you can deliver services consistently and predictably across the entire enterprise. And by freeing IT from the time and cost of managing legacy systems, your teams can shift resources to launch new projects and deliver tangible value to the business. On average, ServiceNow customers see a 46% increase in agent productivity for incident management with reduced downtime, annual savings in the 1,000,000, and payback in months, not years. Now you can consolidate legacy systems, automate Service Management today.
ServiceNow, Service Management today. ServiceNow, work at Lightspeed.
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 Beryl Hough. I'm the GM for the ITSM Business Unit. I have been with ServiceNow for about 5 years. I have been a service management practitioner for about 15. And the majority of those 15 years, I spent on being focused on the people and process side.
So implementing service management technologies or business practices, deciding organizational workflows, what that's going to look like. But this past year, I've been able to spend a lot of time, obviously, on the technology itself. And so 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. But 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. And then the fun part will come where we also talk about how all of that is powered by the intelligent automation engine. So 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. And so the focus in this past release, so 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. And 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 time line.
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. So 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. And that service catalog, I think we estimated we had several 100,000,000 end users who are getting services from this capability. And so 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've 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? So 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 onetime 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. But that's an investment that we're making in our customers as well.
And then 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. So you're able to get them on a mobile device or through e mail and just making that user experience better overall. So that's great.
When we walked through the Jakarta release and some of these capabilities in the direction that we were going with our user groups as well as with our pack, 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. And so that is something I'll never forget. That's the kind of product I want to build.
And specifically for service management, that's the majority of our customer base. And yes, we're going to land new customers, but 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 is taken care of when you're building it out this way. And then another component that came in Jakarta that's not cloud management platform specific, it's more in our service mapping area. We when we put out service mapping, we went intentionally in discovery services in the on premise resources that are out there. We've now added in cloud resources.
And so you're able to bridge kind of the whole cloud and on prem environment for your services that are out there. So we've completed that picture. You can map out your entire environment now, which is really important. We are missing that piece. But my favorite part with this operations management work in 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, yes, absolutely. You need that? Great. And then all the policy and approvals and all that stuff is in the background.
So 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. So 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 charge backs 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 level of visibility that wasn't there.
The next component, C. J. Talked about, the software asset management product launch. Man, this one's great. I mean, 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. And that is just a huge win for us. I was sitting 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, dollars 500,000 of unplanned spend. And 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. So that's really, really exciting. That's going to take off massively in our customer base. And then 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. But 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.
But first up, I think we've got performance analytics. So 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. And so your accuracy was a little bit off. You were just getting a linear forecast, which didn't account for variation. And so with predictive analytics, you've got some serious advanced forecasting capabilities that aren't just linear based anymore.
And then you're also able to do data import from different sources as well. So 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? And then being able to build signposts in the environment that's going to start automatically detecting that for you and saying, yes, this looks like an anomaly and this is one we want to pay attention to because it could have a major business impact.
And then tying it in with root cause analysis. So 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. And 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 then say, okay, wait, we need to increase the risk of this particular change because it's failed 5 times before and we've got those conditions right again. So 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're 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.
When you get questions maybe from your boss saying, okay, you got 15%, that's fabulous, but what's so and so getting? What is that the best we can do? What's the industry average? And you are answerless. You're a little deflated because 15% you thought was fabulous.
But and so 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. And so you'd have that or you would have anecdotal information from a conference, something along those lines, but it just wasn't enough. And so 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. And 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. And then last, this one's my favorite, too. I have a lot of favorites in this area.
CJ talked about the DX Continuum 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. And so 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. And we're going to do it in a really accurate way that makes sense for our customers, and they're going to love it. All right. So 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.
And 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. And 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. And 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, but 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 1 to get to such and such, press 2 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 and knowledge articles, and then we're going to expose it on the web.
And then, oh, 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. And 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 And so 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. But 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 based article and even with all the mundane stuff. And the thing is, right now, we're at a complete inflection point. And it's the consumerization component that C. J. Talked about earlier.
It will no longer be tolerated that you come to work and that user experience is not what you is not like ordering a pizza on your phone or getting your boarding pass on your phone as well. And so 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. But 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. And we're now able to provide them semi structured forms. So 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. So 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. And then secondly will be along the lines of a virtual agent or human designed conversation. And that these are the new forms of knowledge engineering that IT is going to evolve into.
And 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. So we're able to get 2 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 will start to self correct. But 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. So 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 Pitra. 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. And you heard CJ and Farrell talk about our platform.
So it was really that platform that attracted me to ServiceNow. So I've been here for 2 years now and it was last year at this very event that we launched customer service management. We've been in the market for a year now and in the last round 1 year, we have seen widespread adoption of our solution. Today, we have customers in over 10 major industry segments in 28 countries, so they're spread all over the world. And what's really interesting is that 48% of our customers, almost half of the customer base that we have with customers 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. And some of these customers are actually here today and we call 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.
So if you are around for the rest of the days, I would really urge you to attend their sessions and hear about their experiences. And 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 8 times, a 40% improvement in net promoter scores at yet another customer. And 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, but I haven't seen customers achieve so much so soon.
I'm really excited about this. So let me tell you a little bit about like why this is happening, why customers And that's because when customers have great experiences, And that's because when customers have great experiences, they become loyal customers and loyal customers, as we all know, tend to buy more products and services, right? So when customers have great experiences, customer service directly correlates to revenue. And this has been proven in a number of research that's out there. Now 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 worthy for superior rating. So 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. So that really shows that how difficult it is to provide amazing customer service experiences. So 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? And here's what our customers told us.
Said that they know what it means to provide great customer service. Everybody knows that. But one of the fundamental issues is that the existing solutions that's there in the market, they're not sufficient. And 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. And 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 lock them as cases. Now 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. So that's what we did.
So we used our platform, a system of action and we applied a service management approach to create customer service management. That's why we call it customer service management. So now companies have a new way to deliver customer service, one which is effortless, connected and proactive. So let me explain a little bit what I 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. So for example, when customers have repetitive requests like 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. And this dramatically reduces the time that it takes to deliver those services instantaneously to customers. And 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 front line and talking to customers and handling those cases? No, right? I mean, typically, those issues needs to be fixed by people in other departments, people in engineering or operations or finance or legal or sales.
So those are the people who needs to fix the root cause of customer issues. With ServiceNow, when everybody is 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. And once these root cause of customer issues are fixed, customers stop calling. That means case volume goes down. That means support cost goes down.
And because the root cause are fixed, the quality of product or service goes up and customers are generally happier because of that. So those are the benefits really. And 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. And 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. And all of this is possible using the ServiceNow platform. So when we need help in our personal life, when you need help in our 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. So 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. So when customers are helping each other out, they're answering each other's question. What also happens is knowledge gets created, knowledge that's user generated and that's validated by customers. So it's authentic.
And not just that, because communities is built on the same platform and as the rest of ServiceNow, companies now can listen in to the voice of their customer and they can act on customer insights. So 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 or if there are topics that customers are interested in when the company is launching new product or services, they can target those specific customers. So communities increases customer engagement and customer loyalty as well.
So
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. And 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. Now who the customer is, if it's a business, then what their account hierarchy is, who are their contacts, what kind of service contracts we have with them, what kind of support entitlements we have with them, all of that information is managed on that second part there.
Then 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. And we also offer integrated field service management. So when customers need a technician to be sent on-site to fix a physical asset, that's also possible in this solution. And really our differentiation, as I already said, is a service management differentiation.
So what I'm going to do now is I'm going to show you a demo of all of this stuff in action. So it's better it's easier to visualize and what I meant with some of these concepts. Let's switch to the demo. Okay. So this is PWR Systems and PWR Systems is a software company.
And what I'm showing is the experience of a customer of PWR Systems. So Julie is a customer. She's a developer. She's browsing through the communities on her mobile phone. And these are the forums that she's interested in.
And 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 threat that she's following. If you look at the first threat up there, that's actually a question that Julie has asked. And there are a couple of people who have replied to that question. So she decides to take a look, drill down into that question.
And if she scrolls down, you'll see a couple of replies here. The first reply is from someone called Jordan May. And what's interesting is that other users have found this reply to be helpful. So users have validated this reply. So Julie decides to try that solution and see if it solves the problem.
And it does. And because it solves the problem, she comes back and marks it as a correct answer. And the system now marks this answer as an accepted solution. So what has 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.
Now because the system is tracking Julie's activities, Julie gets awarded with an expert level badge because she's contributed to knowledge. And this badge is now displayed on her profile so that, you know, other users knows that, you know, these are the Julie is essentially an expert on this specific topic. And this is how we encourage users to communicate, collaborate in a community. Now, Julie, who is on the customer support portal. Okay.
This is an application of our service portal technology where companies can have their own customer support portal. And all the information out here is completely personalized for her. So these are all her open cases, which she can update whenever she wants to. She sees that there are 3 knowledge based articles which have been updated since she last logged in because she's subscribing to those updates. That's why she's getting the information pushed to her.
And these are all her community activities. So down below, if you scroll down, these are all the community activities. Everything is at her fingertips and that's the badge that she just got. Now because PWR system, this company knows that Julie is specifically interested because of her activities that she's doing. When they're launching a new service, they're able to target customers like Julie.
So 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's onboarded into this new service. That's really the power of our platform when we automate things. Now this page is completely contextual to the service that Julie is now looking at.
And 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. Now what happens when Julie needs help? There's an icon called get help. She clicks on that, fills out a description of what her issue is, submits that, a case is created and now the intelligent automation engine kicks in, it automatically prioritizes this case, categorizes this and assigns it to the right agent.
You notice Julie didn't have to fill out anything other than just a description. That's where we're using machine learning to determine what's the most correct category, priority and who's the person who can help Julie out. So this was an experience from a customer's point of view. Let's look at the experience from a customer service agent's point of view. Let's see how that looks like.
Now this is Kevin and Kevin comes to this form. This is his service workspace. CJ mentioned about this earlier, like all the information that agents have to look at. Now on the left, if you see, these are all the cases that some Kevin's played. And if you see on top, a case just pops up.
This is the case that Julie just created. And Kevin is able to see, there's a score there. And this score is something that's also computed by the intelligent automation engine. It's prioritizing work for Kevin. It's telling him that this case has the highest score at this point in time.
So you need to work on this issue and not on some other issue. Customer impact is high, contact sentiment is negative and that's why it is a high score. So 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. But 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. And he's already found a couple of matches.
In fact, if you look at the
top,
in the top recommendation, that's problem record. Looks like there's a known issue that somebody is already working on. So Kevin decides to click into that problem and take a look at what the known issue is. Well, it looks like there is a known workaround. So Kevin decides to attach that workaround to this case and propose a solution and close this case.
So 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. Now, Kevin decides to take a look at this problem and sees what else is going on. So here's the problem on the top left and sees there are 8 other customers, not just Julie, but 8 other customers who are facing exactly the same issues. So he assigns that to engineering.
And now when engineering fixes this issue, Rick rolls out a change, not just his 9 customers, but every other customer will never see this. And this process where we bring everybody together on a common platform and assign tasks across enterprise, That is in our service management world called problem management, right? And 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. So now we're going to take a look at a 3rd demo, a 3rd scenario. This is about being proactive.
We live in a connected world today. The Internet of Things opens up new opportunities. And I'm going to show you an example of ServiceNow can really play a key role in that world. So here is TFX Systems and this is a company that provides systems and solutions to transportation agencies all over the world for running ticket machines and cash registers. Jaime is a service operations manager.
She's looking at her dashboard It looks like something is going on in the San Francisco station. There's a big red blob. Something is wrong. So she clicks on that and she sees the organization of the station with all the different ticket machines laid out and a couple of them are showing some issues. So when she drills even further down, the system is detecting an anomaly.
This is what Farrell was talking about, C. G. Was talking about when we said when we talked about anomaly detection. The system is detecting an anomaly. There's a deviation in data and what is the deviation?
If you yes, the deviation is that the ridership, meaning the number of people in the train station is going up, but the transactions, meaning the number of tickets that are getting issued is going down. So that is the deviation. Now that's not normal. Something is wrong here, right? So system wants Jane that something is going wrong.
She needs to do something about it. So what can she do? Well, she decides to run some diagnostics. And 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.
So Jane cannot do anything more remotely. Now what can she do? Well, because we have integrated field service management, she can send out a technician. So that's what she does, dispatch a technician, a work order gets created. Now 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.
So that's what it is looking now looking like now. So this is how what you just saw is a couple of technologies in our platform working together. You saw our event management capability where we are able to ingest alerts, our alert correlation capability, which shows you that there's an anomaly. Then you saw our process orchestration capability, which runs the diagnostics and then with integrated field service technicians are dispatched and 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.
So let's say I'm a customer service leader and here's my dashboard. Some of the things that I look at on a daily basis are things like operational KPIs, how many current open cases do I have, what's my first call resolution looking like and things like that. But what you see on the right is very differentiating. An integration with our financial management application in our IT Business Management suite. That's cost analysis.
So now the cost of providing services to customers can be broken down here and 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 and now customer service leaders can actually have a very different kind of conversation with their peers in the company. So that's how customer service management allows companies to provide an effortless, connected and proactive customer service. So like I mentioned earlier, all of our Lightspeed pioneers are early adopters who are here, all 18 of them have sessions at this event.
So 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 port. So this is the opportunity for our customers to network with other customers, network with partners as well as with the topic experts. Because in this event, in this conference, we're not just launching our ServiceNow community 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.
So now we have a quick 15 minute break. We ask that you be back in your seats by 210 so then we can resume the second half of the program. 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 Broadwaj. He's the Head of our HR Business Unit and he'll give you a little bit of overhead of the product and we will start with this video.
HR leaders want to provide the best possible service experience, but legacy systems and manual processes get in the way. And with poor visibility into employee interactions with HR, service levels can't be improved. But what if you could deliver an outstanding employee experience at light speed? With ServiceNow HR Service Management, you have the intelligent workflows and automation you need to facilitate employee interactions. You can deliver a modern service experience with customizable branded HR portals that provide employees quick and easy access to information or to open a case.
Rule based case routing eliminates repetitive tasks and frees HR staff to focus on more strategic initiatives. Because they run on the ServiceNow platform, HR workflows can be integrated with IT, facilities and other departments for processes like onboarding. And with built in tracking and trend reports, Learn more about HR service management today. ServiceNow, work at light speed.
All right. How's everybody doing today? Good? Excellent. Well, thanks Jimmy for that introduction and 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. And 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. And as you know, HR can be quite complicated. And 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 life person on the other side.
And 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. And as a result, HR is inefficient and it's always a poor frustrating experience for the employee. So, before I get into any slides, I'm actually going to start with a demo and show you what if things actually looked different. So, we'll use an example of this employee and she just got married and 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? And she doesn't really know where to start and how to go about this. So 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 and she just types in like a search term, let's say newly married.
And what that does, it brings up a few knowledge articles and she can select this one, let's say, just got married and her HR department has put together some wonderful information about what that process is, how long it's going to take. And 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. So very quickly, she's able to get that information to make the right choices as she goes through this life event. So she can then start her request and this is a, what we call a service catalog item, if you will, and she can select the options that she's interested in. So, in this case, she's going to change her name, check.
She's going to update her benefits and she's going to submit. So 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. So what's happened now is she's got a couple of tasks that have been assigned to her. So this is the case that got created and automatically we've generated 2 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 and the beauty about this now is because of her workflow and integration capabilities, all the other underlying systems can automatically get updated, right? So, if the travel system, for example, needs to get updated, it can flow directly into that. So that's one example of a task that you can complete without really knowing or 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. So 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 in there. Now, 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. And the HR person can respond back to them in the context of this case and no longer does this employee have to resort to things like email and phone calls to get a response back from HR, right.
So, 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 in line help and that high touch from HR when it matters.
Let's go back to the slides.
So 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, 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. So, this is here and now.
And 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. And 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. So folks that can actually help her and assist her, they have the right skills to do that and provide that personalized resolution. So let me use a different example and illustrate this with a series of steps. So, let's take an example of an employee applying for an extended leave of absence.
So, we'll go through a similar flow, similar to that demo. This employee would go to that employee service center and 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. And 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 would create a case, assign tasks to these to the employee and these tasks could be things like e sign a policy acknowledgement as an example. And 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. So, in this case, because these employees are off on an extended leave of absence, IT may want to come in and turn off systems access while they are 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. So, this is how HR can provide that service by being super efficient, super effective, doing more with less and 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 in line help and high touch when it matters. So, 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. And these are we've got hundreds of customers today that are using us for HR and they report saving in the order of 1,000,000 of dollars every year. And these savings are largely coming from what we call productivity gains for HR. So 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.
In 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. Now, while it's interesting that all of these customers of ours are saving 1,000,000 of dollars 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 long time customers, that's about saving lives. Think about that for a moment.
Highly impactful. Now 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. So, let me show you what how they think about this process and why this will appear broken to them. So, think about onboarding. Onboarding starts in HR.
HR has all the information about this new hire including their job role and department, their location. So, IT should not have to guess things like whether they need remote access or not. Similarly, the new hires manager knows what tools and technologies this new hire will need in order to be successful in their daily jobs. So for example, do they need access to an analytics data warehouse or perhaps an international data plan? And 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. But 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 and 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 1. And all of these are requests that are independent and isolated with no overall context and no overall visibility into the process.
So IT is trying to modernize IT service management, but really they still have some hurdles to overcome. And 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. So 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 and this is going to become available soon in our upcoming release.
And this is so that we can help our customers give employees the onboarding experience that they deserve. And this new solution that we are announcing is called enterprise onboarding and transitions. And this is really a multi purpose next gen solution. So why is it multi purpose? 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. So 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 and think about that in line 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. So 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. And if customers are already using an existing HCM or recruiting based solution for their onboarding needs.
But we can seamlessly integrate into all of those and extend those processes beyond just HR. So extremely complementary to all of those existing solutions. And 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. So with that, I'm delighted to actually show you what this experience looks like.
So 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. Okay. So here we are back on the employee service center. And 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.
And we'll you'll see that the information that is being presented to the new hire is extremely personalized and targeted. So 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. But I really want to get to the to dos here at the bottom of the screen. And 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.
So, this case, he doesn't have any overdue tasks, but he has 7 that are coming up to you soon. So let's drill into this and see how we can get him going. So now we are in the we are looking at the onboarding case for this new hire and this is the one place from where the new hire can now start to do everything related to onboarding. So, this is step by step guidance for everything related to completing that paperwork, to requesting services from HR as well as all these other departments. So, the first to do here, you'll see is select IT equipment.
So that's a request of IT. So let's drill into that. That brings up a simple form and 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? Now, here is something very interesting about what I just showed.
What you're seeing here is an IT order guide. So, this is something that the IT department would have already configured as part of their ServiceNow ITSM deployment. And what our enterprise onboarding process is able to do is surface up the relevant order guide based on this new hires department or location or other attributes as a to do right here in the process. So now, when the new hire clicks submit, this is actually going to create a formal structured series of requests into IT in their ITSM application. So we've gone from last minute unstructured to pre day 1 structured information going back into IT.
All right. So 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. So, 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, US based employees and what our process is able to do is surface that service catalog item right here within the onboarding process in context.
Now, 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 say 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. So we'll drill into this.
And 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. And 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. Now 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. So that response would come in not just from HR but from a department outside of HR. All right.
So, let's quickly look at what this is for the hiring manager. So, 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. So 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.
But 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. So 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 our fingertips into where this onboarding process is and whether that new hire is going to show up on day 1 all ready to go or not. So 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.
And so, 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. And again, this is going to create a formal structured request for the facilities team to now work on. For our last example related to IT, selecting cloud accounts for this new hire. Again, this is another service catalog item that IT has already created and you'll notice that some of these options are already preselected.
Again, this is based on the new hires job role. So because this person is a sales rep, you'll notice that the access to the CRM system is already preselected. 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.
So think about the productivity for this new hire. Day 1, 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 1. That's what I call a multi department experience on a single system of action.
Makes sense like that? Okay. All right. Let's get back to the slides. Okay, so I'm going to switch gears a little bit and talk about what's next for HR service delivery.
So when we think about innovation, we're always thinking about new and previously unimagined ways of delivering value using great technology. And 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 chat bots and virtual agents.
So 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. Well, in their consumer world, they're also starting to get used to things like Google Home or Alexa. And so the way they interact with these systems is through, well, there's voice is obviously a component to it. But what's more important is they are able to speak with it in a very natural language type conversational way.
And 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'm also happy to announce that our ServiceNow Ventures recently completed a round up investment in Build On Me. So we're pretty excited about what they can bring to the market. Let me jump into a demo and show you what it looks like. So, 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.
So, they call it HR Bob. That's their product. They have a few other products that they have within their portfolio, but one of them is HR Bob. And the way HR Bob works is really the provides the ability for the employees of Willis Towers Watson to now start to have a very natural language conversational type approach when they're trying to request HR service. So here's an example where Amy in this case, an employee of Willis Towers Watson needs to take some time off.
And so, she's going to click on chat with HR Bob. Again, all of this could be voice enabled as well. But, here HR Bob comes up and asks her what she wants. And so, she's going to ask HR Bob how much time off she has. And so HR Bob is going to respond with the PTO balance.
So that's 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. So Amy in this case has 7 days of PTO remaining and it turns out that she needs to take 10 days off. So she's got a little bit of a gap there. And so she asks HR Bob if she can take more time off than available. And what HR Bob is able to do is understand that what she needs to know is the leave policy.
So 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. And it turns out that yes, she can take 3 days of unpaid she can take 3 days of leave, but those would have to be unpaid. And then HR Bob offers to submit a leave request for her. So it asks her a few questions about when she's going to start taking time off, when is she going to be back, summarizes all of that and submits a request, which then creates a case and we're back to where we started. And is the consumerized experience that Amy is now starting to get as an employee of Willis Towers Watson.
So 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. And 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. So it's a pretty powerful technologies that are powering this and we're super excited about how this will evolve in the HR space and I look to continued success of Build On Me and HR Bob. All right, let's get back to the slides.
So let me close by talking a little bit about customer success and where we are as a business. So like I said, we've had hundreds of customers that have deployed us for HR live on our HR solution. And really if you think about it, you look at these logos, it's across the board in terms of industry segments, geographies, company sizes. So we've got customers that are 1,000 employees, maybe even less, all the way to 100 of 1000 of employees. So 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 $1,000,000 plus deals as well. So 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.
And 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 about all sorts of questions about what systems they're using. And in this case, the question that they asked about 2,000 hour practitioners in 2015 is what system do they plan to use or are already using for HR service delivery. And so in 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 look 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. So 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, this has to do with a lot of it has to do with our powerful platform and the hard work of our teams. But in the 2016 survey, look where we ended up.
So, 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. So 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. And with that, I'll bring on my colleague here, Sean Connery, Head of the VP and GM of our Security Business. Welcome, Tom.
Thank you.
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Good afternoon.
So I
have a theory that everybody who gets into the security industry watch the right movie at an impressionable age. For me, and I'm aging myself, it was War Games 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. But 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.
And this is interesting because Forbes is forecasting a 1,100,000 job shortfall in cybersecurity. If you talk to a Chief Information Security Officer, they will say it takes 6 months to train somebody, 6 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. And so that's what I want to talk to you about over the next 25 minutes or so. 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.
So 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. So it gives me the nimbleness and speed of the best funded startups with the infrastructure and sales brand capabilities of ServiceNow as a company. So I'm very, 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. So 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 5 quarters.
And we started out with a team of about 6 people. We're up over 100 folks now. 50% of our business is Global 2,000. So 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. And so let me walk through a little bit for those of you who don't have a security background about the industry as a whole.
So 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. So 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. And then we realized there are class of attacks we can't necessarily stop for sure. So we want to detect and alert this potential issue may have happened.
And so that's the entire detection category. And that's companies like FireEye, Palo Alto is actually in the space as well, Cisco and others. And 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. So 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 e mails, to phone calls, to paper notebooks. And so 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. And so 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 greenfields 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. And 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.
Makes sense? All right. So let's keep going. So if you look at the breadth of capabilities, this is what we talk about with customers across the top. And what I would point out is the right most 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 2 main reasons that this IT integration is so valuable. The first is that without IT integration you can't get business context. So 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. But 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 was it was a wasted effort because the system was not relevant or not exposed to the particular attack.
So I'm going to talk through 4 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. So 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 then you have to do the patching, then you have to do the remediation. And so 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 been affected by the vulnerability. So 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's an acceptable SLA to respond and stop these particular issues?
And 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've got performance analytics built into the system. 2nd use case I want to talk about is where we really put our focus initially as an organization is on incident response automation. So this ties into the SIEM example, the Splunk and ArcSight example I was giving you earlier. So once you have the alert, then the work begins in a security team. So if you have a suspicious piece of malware, for example, and you're 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's 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 don't make these security analysts like their job, right?
Because they each take 20, 30 minutes and there's 7 or 8 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've done the investigation, this is the decision. But instead, they're doing this mundane task. And so we can automate a lot of those tasks and make the organization far more efficient.
So the threat intelligence side of this, I'll just touch on briefly. So threat intelligence is a whole host of companies that provide threat intelligence to other organizations. So if you for example as a company say have 5 or 6 Threat Intelligence feeds that probably means you've got thousands of new potential threats coming into every day. So if you're not familiar with what a threat intelligence provider does, they'll publish IP ranges, file attachments, e mail subject lines, domain names of the bad behavior of the day or the week or the month because these bad guys are moving around all the time and so they'll spin up a new domain, do a bunch of attacks, take it down. So being able to move very fast is important.
So 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 SIM, 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? And 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. Then 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 Wakeley, 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 2,000 Financial Firm. But 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. And so 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. All right. So these are the 4 benefits I just talked through. The top 2, like I said, incident response automation and vulnerability response automation are where people tend to start and the other 2 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 simply not going to play in those spaces because it's not our area of expertise.
So we can integrate with tons of different vendors very, very easily because of the strength of the platform. So 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. So this by the way, this list was probably at about 4 a year ago when I was presenting to you. So moving very, very quickly here.
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? So 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. And so some people have a button that says you know this is phishing some people forward the message to you know phishingacmeco.com.
In this case, that list goes to a human. Some poor person has an inbox of 100 and 100 of messages each of which takes 20 minutes to 2 hours to prosecute. But 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, have confirmed it's bad and my existing firewall hasn't stopped it.
So that does a couple of things. First, it saves organizations tons of time, hours per email in some cases. But 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 it back. IT doesn't respond.
Security doesn't respond. And so you start feeling maybe this organization doesn't really care about security as much as they say they do. But 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. So in this case they integrated with Qualys and they took their Qualys data and 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. So for security teams, this is a revelation, right? This is a complete transformation of how this process works. And we are seeing a lot of traction in this vulnerability category. And we're actually investing more heavily in building out more capabilities here.
All right. So 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. And 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. So the thing I would just point out is there's actually a nice synergy between this vulnerability data and the CMDB that the asset repository within ServiceNow as well because as you do the scan if there's not a pre existing item it actually creates the item based on the scan. So you wind up radically improving the accuracy of the asset repository as you're deploying security. So this has been a really great project for Ram. So let me actually talk about this.
I showed you these stats based on last year's numbers and I think it was 20669. But however you do the math, it's 9 months. 9 months to identify and contain a breach in an average organization according to the Ponemon Institute. Those numbers are so long, so it takes so long, it's almost unbelievable. But even if they're off by a factor of 2 or 5, it's still far too long to almost be unbelievable.
And this is really brought about by the multi year attacks, right? Organizations will have a breach and the bad guys will be around for 5, 6 months, sometimes years before they're detected. So we wanted to figure out how does that compare to the experience when you're using ServiceNow. So we surveyed all of our instances of 0 1 days and map that to hours, that's 4,800 hours to identify a breach. And when you're using ServiceNow it's actually to scale I think it would be an invisible green box but actually turns out to be 29 hours.
So 29 hours is the average our customers have in mean time to identify. Mean time to contain is defaults to 70 or 70 hours is the industry average which is about 1600 hours total. Our average within ServiceNow security operations customers is 33 hours. So if you compare that to the 201 and the 70, it's 160x improvement and a 50x improvement. We originally had it as percentages, but 16,000 percent just sounded a little too unwieldy.
So we just switched it to 160x. But this, by the way, I'm not satisfied with this. Nobody should be satisfied with this. This is a massive improvement, but we're talking about going from months to hours. I want to get us to minutes.
I want to get us to seconds. And 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. So 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 Jacquard release.
So if
we can switch over the demo, great. You can see here our dashboard. So 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. So if I kind of look into this, I can see this number ticking up.
I've got an incident now and I've got 2 incidents now. So this is all live data. So as I click into this, I can see the 2 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 spare 1.
And so 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. So 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. So suddenly now I know why it's prioritized so high. Now we need to try to do something about it. So if I close down the dependency view, we can now take a look at the workflow.
So 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.
So 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 analysts the data they need. Let them be the hero and make the decision, but give them the raw data they need to make that call. So if I scroll up, you can actually see this indicator data coming through. So these are all the individual calls that are being made outbound from ServiceNow into different security systems to request for additional data.
So going to Tanium and getting running processes, going to a Palo Alto firewall, seeing if a particular domain is blocked, 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. So 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. So now what I normally would do is stop there and actually make a decision to block those. But we've also done is engaged in bidirectional siting 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. Now 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. So what I'm really finding out there is, did the bad guy already do damage before I even detected them? So if I can figure that out, then I figure out have they moved laterally?
Do I have secondary exploits that I need to deal with? And so 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. So if I back up, I can now go ahead and block these things. So if I just click the 3 indicators that are marked malicious that I want to block, I can choose block request and I'm done.
So the block request was initiated in this case via Palo Alto and it's going to follow whatever IT process you've defined. So if security is able to update the dynamic block list automatically, then that's exactly what's going to happen and it'll be instantaneous. If instead it goes through an IT change process, then IT will get involved with the SLA that have been defined and the assignment groups and the approvals and the notifications. So 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.
So 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. And then we even go further. This is one of my favorite features. We'll actually give you the ROI in terms of hours saved.
So 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. So you can see in 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, 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. So 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. So with that.
Thank you, Jimmy. Good afternoon. So I joined ServiceNow about 7 months ago. And when I joined, I realized there 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 very thriving ecosystem.
Same thing with Deepak on how he's leveraging partners around his technology. So with that, we made a decision to reorganize our Alliance and Channels organization which we rolled out at the beginning of this year. And we also rolled out 3 key strategies that I want to mention today. So 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. And 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 1500, 1700 people And we rolled out a new strategy around certification. So this year, we will be rolling out certifications for each one of our product lines and we are 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. So what we want to do here is leverage the partner ecosystem because they have deep industry expertise. You are going to hear in a minute from Mark Deluto from DXC, who they have tremendous industry expertise and we want to leverage that expertise. But we also know that partners are building solutions on top of our platform and our product lines. So we want to take those solutions around industry and take them to market together.
And so this morning as well at our partner keynote, we announced, we rolled out a program we call Catalyst, which is basically us taking those industry solutions and endorsing them and taking them to market together to drive incremental revenue for the 2 of us. And you're also going to hear from Mark around a solution that we actually announced this morning around healthcare and iSightOps. And the last piece is our ISV OEM store ecosystem. This is 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 other companies very successfully and we think this area can grow for us tremendously. So it's another investment that we're making around ISV Ecosystem. You heard Sean talk about the partners, a lot of the partners that he showed were part of the ISV OEM ecosystem. So these are our 3 key strategies where we are focusing 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 3 subcategories in the Partner Now program. We have a sales partner program, which is where we have our resellers, our referral partners And 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 Now program that's focused on our consulting and services partners. Again, additional requirements specifically around obviously adding more certifications with added benefits around training and so on and so forth. And then lastly, our technology partner program, which is very focused on our ISV OEM store marketplace. And again, we added a lot of enhancements. The VP that we hired, Avanish, he is doing a lot of changes in this area.
And then earlier this year, we announced a new program within the PartnerNow umbrella called the Global Strategic Partners. When I came in, I looked at our partner ecosystem of the 900 and some partners that we have globally And it was very clear to me that it was about 5 or 6 partners that were the top partners globally that invested heavily, they used internally, they act globally with us and we want to make sure that we invested back in them. And so we created this program and we have 5 partners in that category. One of them is DXC Technologies, 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, multimillion dollar practices around ServiceNow.
And last thing that I want to mention before I call Mark from DXC is how we measure ourselves. So our ecosystem has been growing probably as fast as we have over the several years. And they have 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 talked about 62% was influenced in Q1.
But our goal is by 2020 and the next 3 years for that to be 75% of all the ACV influenced by our partner ecosystem. Lastly, we also introduced a new metric this year, yes, this year that we're going to start tracking very heavily and it's a big initiative is we want partners to bring those net new deals and net new ACV to us and we call that sourced ACV. We started tracking it this year and we think that's another metric that we can probably announce or tell you more about next year. But some big initiatives that we have in the company has tracked sourced ACV. So with that, I'd like to introduce you to Mark Deluto, who is the Global Head of the ServiceNow practice at DXC Friction Partners.
And he's going to talk about how DXC is using ServiceNow to build a massive practice, transform the business and transform our customers. Mark?
Start. So let me give you a little brief history of time kind of and first off, thanks to ServiceNow for basically letting me speak here and talk about DXC. But in a brief history of time, actually started the business called Permission Partners, cofounder here, Patrick. And before we had met ServiceNow, before ServiceNow is a company, we're doing a lot of work on BMC, other technologies. But we came across ServiceNow in about 2,008.
I think there were about 40 guys doing about $15,000,000 in revenue. And 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. So 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 then merging with HP only 6 weeks ago. So, I'm on my 3rd company name in about 18 months.
So, bear with me. So, a little bit of background on what is DXC Technology. That is the new name, DXC Technology. So it was a merger between CSC, Computer Sciences Corporation, and the HP Enterprise Services branch of HP. So 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, in the servers. And then there was HP Enterprise Services, which is actually EDS that had been acquired by HP. So as of April 1, we are now all DXC Technology. We are still fruition partners, a DXC Technology company, but we are inside of this large 170,000 person company. And 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. So just looking at some of the numbers, Combined, a $25,000,000,000 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 and additionally, 6,000 clients. So
one of
the big things that we're working on is looking at those former HP Enterprise Services customers that were using 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. Clicking somewhere. So actually, this is what I wanted to show here, this actually came from Mike Lowery, our CEO and he did his investor analyst presentation. He put ServiceNow as the number one, upper left, the number one category for the next gen platform that we're using, right? And we actually, for the 2nd 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. Additionally, the most new logos that we won and we have won an additional regional award in Europe. So, we consider this very strategic. And let me go to the next slide, which I think is relevant too.
Although DXC, sorry, I've had 3 company names, like I said, it's DXC. So although DXC has many, many different partners, we consider 14 to be the most strategic. So 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. But really, ServiceNow kind of stands alone as that next gen platform that we're looking to build even more capabilities on. So the further investment that DXC has made in this ecosystem, I mentioned, we ourselves at CS when CSC acquired us in 2015, we ourselves had done acquisitions prior to CSC.
We had 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 and then CSC also made an acquisition of UXC in Australia, one of the largest services providers in Australia.
With UXC came Keystone. So Keystone is the largest ServiceNow provider in Australia. So they are now Fruition Partners Australia. Soon thereafter in July, we did a second acquisition specifically targeted for Aspidians, which was in they were headquartered in Switzerland, but they serviced France and Germany with operations in Spain. So we've continued to make these investments to win those awards to be the largest services provider in this ecosystem.
But I
think the question is why, right? Why particularly ServiceNow? Why is that of incredible importance to a $25,000,000,000 $26,000,000,000 outsourcer? So 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 kind of in the center out, right? So application services, application maintenance, basically running those applications, finding kind of a best of blend near shoreoffshore model. They also traditionally have done a lot of business process services in the BPO space. And then in the workplace and mobility, taking over people service desks, taking over their facilities management, doing a lot of the actual people work and absorbing that from their customer base. But as we expand out into kind of what we consider the next gen technologies, why DXC this promise of digital transformation, we're looking around the add ons, if you will.
So security is a big one, as Sean had mentioned, for our ISEC ops offering that we're leveraging the Catalyst program for. Another one, so we sit in the enterprise and cloud app space. So 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.
So those are things like 2 different products that have been built or bought, Lorenzo for health care. And 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. But additionally, we carry with that a lot of DoD from CSC's history of federal government and manufacturing as well. And then in the upper left is the cloud and workflow platform. So 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?
Now, this is our 9 offering families. But the real question still is, so how do we see ServiceNow being leveraged across these? So this next slide is kind of how we're embedding ServiceNow in and across these offering families. So 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 was just ourselves inside enterprise and cloud apps. So 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 and one of the 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, so security. So we're going to do another presentation at the theater on ISECOps. Like Sean had mentioned, DXC actually has significant business in the managed security service provider. So 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. So we've replatformed how that entire business unit goes to market. They have an internally built platform called PACE Portal.
We have moved that entirely to the ServiceNow product suite, and we call it ISEC Ops. So looking a little bit broader, we also have an industry solution. So we're presenting actually going live this week is an employee health and safety application built on ServiceNow. So we had a use case coming out of Europe where they're 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. But we actually are tracking that now in ServiceNow.
So 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. And the ability for ServiceNow natively to track assets and track work a So DXC has in the past, and one of the reasons why they acquired Frutition 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 of domain separate instance of ServiceNow.
So as we continue to migrate a lot of those thousands of customers, getting them off of kind of last gen technology, BMC, HP. We're moving them on to that blueprint environment powered by ServiceNow. So I mean, 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 could as we decide what new applications to build, what platforms we should leverage, it's first going through there to see ServiceNow, as you've seen on the Gartner Quadrant, come out as a platform of choice, whether we should leverage ServiceNow for that platform.
So in summary, that's us. So 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. And I'm very excited to speak to this audience having the Inspire program come up on 4 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, which is we're going to start by backing up and looking at the business context. So 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? Then we're going to move on to making it real.
So specifically, what are some examples of the way that we engage and go to market with customers to address that business context? And 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. Okay.
A few hands went up. Things like that, right? So why have we shaped it the way that we've shaped it? And 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. So let's jump into it.
So what's the context? Well, you've all heard for years the land, expand, retain mantra. And when I came to ServiceNow, it was the first time I was with a major software company that was also a cloud company. And 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. So 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 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.
And we've got to really do a better job of codifying, calling and screaming to the market tops 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. So that's the goal, to help us focus on those three things as we get from $1,000,000,000 when I joined to $4,000,000,000 now. How do you build a program that does that? Well, 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, well, why was it a good thing that you as well as projecting what they will achieve in really tangible business terms. And 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, right? 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 market cap valuation for all of us.
You get that. That's why you're driving that setting the price points where you are for us. We 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. And then 3rd, 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 2 people that could come and go from a firm, but between 2 corporations that will continue in partnership going forward.
So those are the three things we focused on in building out the Inspire program. So 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, right?
It's good common sense in terms of how you build relationships that start with really high level of trust, point of view that's informed by data that helps you as a new customer or a prospect make more informed decisions. So market insight. So 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 Huff, 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 blades fails more often than a Dell blade. But 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. And 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 3 different acquired real estate management companies and therefore had about 9 or 12 different systems with which they interacted with their single customer that we could put a front end on that, mobile make it mobile friendly, etcetera, right? So having that market insight that's data driven from the 1 third of the Global 2,000 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. So if we find some of these sort of 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. And then work with partners, work with clients that have the power to change their companies, that have the vision to say, dang it, 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 serve an amazing opportunity. And then 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 3 to 4 times, it is time to move to the 4th 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. And that's the market scale portion. So what I'm going to do is walk you through an example of each one of those things.
So 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 is data 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 there are 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? And 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, 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? And then we sliced it as you normally would by industry, by the complexity of the environment, by the market cap of the company.
And 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. And then you start talking about the Lightspeed enterprise, you start talking about all the things that you've 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? Well, 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 and put that into the normal consultative motions of a benchmark, of a workshop, of frameworks of maturity, etcetera. And then we use that time and time again with clients until we know it's successful. Now 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 the 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. And then instruments their progress towards it. So if you look at this for an example, I mean, let's start with the basics. So 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. So 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. And then 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?
And for every single one of those down at the bottom, put them in the context of a journey where the little plane is there, right? So 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? And 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 live on your phone that will show you what the future is going to look like. Because I don't know about you, but for me, if I were a customer who had just 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. So our deliverable is actually prototypes. Our deliverable is in the platform organizational change management. And our deliverable is building out and instrumenting through our ServiceNow performance analytics product, your progress towards that goal.
So 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 we should answer that question. Real time, real data, real fast, right? And 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.
And when we've done that 2 or 3 or 4 times with an individual customer on an individual outcome, that example is a very sort of traditional example of making IT better, but we will do it for customer service. We will do it for HR. We were working on joiners, movers, levers and creating the journey for joiners, movers, levers 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, 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. So 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 1st quartile risk taker or am I in a relatively safe water? And what we see here is we break out this journey between modernize, taking something that's Soviet era and making it digital, right? 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, etcetera.
And 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. Well, 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% to 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. They're just getting on with it. But 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 1 in 2 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? Well, I don't know how to get in touch with HR, so I'll get in touch with IT. IT, in turn, will tell you, well, it's not an HR issue, it's a finance issue.
So good thing you didn't get in touch with HR. But I am the human workflow that has to walk between all those things as an employee or I just go to HR. So 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 and that branches us out into a larger journey. So 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 asked for something, I don't know when I'm going to get something back. I asked for something and I'm not certain whether the thing I'm asking for is even available right now. So 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 e mail 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. And what does it take to do this?
The customers that are really moving through the 2nd phase here, they're focused on 3 major things, and you've heard them all throughout the day. The data that we've got here just sort of exemplifies it. First off, 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. 2nd, they as a byproduct of that start to view service management as a discipline, right?
And this resonates really well with the Lean 6 Sigma guys, etcetera. And 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 the customer. And what's fantastic is that nearly half of our customers are already here, right? They're already here using us in more than one department, right? And that later this year, we are confident the majority of our customers are going to be using us in somewhat other than IT, right?
So 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. 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, right? They are heavily, heavily instrumenting the process, again through the ServiceNow performance analytic products, so that they are able to real time make better decisions.
And 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. So 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. And we can see how many of them are moving tasks between people and how many are moving them to 3rd party systems like chatbots, like IoT devices, etcetera. And they are automation junkies, right? And then 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, right? This is something that has to be the CIO, CFO, Head of Real Estate coming together.
And then 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 2 things that are consistent in every industry except public sector. Number 1, they're growing revenue faster than their 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 percentage, but without adding the headcount.
And then 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? And 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, right? So 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. So higher revenue per employee, and your growth is no longer capped by your ability to find an 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. So I've run a $200,000,000 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. And here's what happens. When you're trying to run a billable service line, you ultimately always have to look at 4 things, even a billable service offering from a technology provider.
1st, 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. So there's a subset I'll serve. So 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? And then what's the market value of successfully solving that problem. But 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. So 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?
And they absolutely do both. Let me tell you about why they work with us. There's really 2 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 of works of a couple of months of work with really great analysis that gives me some good hypotheses and some underlying data. Then I often move to a second team, often it's an internal team 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. Then I work with yet another partner who is 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. And then finally, I get to the point where I select someone to implement this technology from that chosen technology platform. And 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 and then the accountability of that technology 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 could 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. But your number one hope is to have a partner who would truly understand your problem. And so I've never had a customer make that change. So it's a great immediate transition into prototyping and understanding of how this particular technology can get you that outcome.
And then very early on, because we've been through this, we can bring that implementation partner in, right? I could bring in my friends, Patrick Stone Lake and Mark Taluto very early on, right, to quickly deliver value for this customer, which delivers 2 things. We get on with it faster in terms of the value realization, and 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.
And I will literally talk to them a bit about the things I talked to you about and 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, point at the sales rep, and I say, and it's his job to figure out how ServiceNow monetizes that between now and that success point. And the executives get that. They get that difference in relationship. And they work with us on the transformation, they work with us on the outcomes, and we develop really tight trust. We will interact directly and indirectly with about 250 customers this year.
Directly means my team is 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? So 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.
And so we believe we'll create about $200,000,000 of incremental pipeline this year and next year. And then this is the lagging indicator, which is really about maturing our relationships in these accounts, right? So as executives move from company to company, ServiceNow becomes one of the first things they do in that new platform. Broad relationships that when that executive leaves, the ones that are left are still big champions for our platform. And 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. And in turn, it changed the perception of what's possible from our company. And we'll drive about 20 of those cases this year. Some of those cases, some of this content is available on our website. And some of the customers you'll hear about throughout the week will also be talking about this.
So 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 $6,000,000,000 software company that has emerged from the traditional industrial company. So 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 forward.
Dip them over or anything else? Yes.
So you've never had chairs placed this carefully in stage.
And I
don't think you've ever had a guest sit so carefully in a chair.
Apparently, I'm making people nervous.
Not true.
So thank you for being with us today.
It's a pleasure.
And then really the most important thing we always start with is business context.
Yes.
So what is the business context for GE Digital and for you in terms of transformation you're driving?
Absolutely. So 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. And 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 $1,000,000,000,000 in value. So I see a couple of heads pop up, nothing like a tea in 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. And GE has typically gone to market in all of our verticals. So you may have a customer who has purchased software for 4 or 5 different businesses. It was different platform. It was different support and maintenance agreements.
It was different teams providing that service experience across different processes and tools. And 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. So the charter that we have really in this transformation journey is how do we become 1. It's one process. It's one insanely great customer experience and it's one set of systems and tools that we are really using to deliver that to unlock top line growth as well as margin expansion.
And 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 $8,600,000,000,000 in industrial value.
Similar transition to where we're trying to take all of service management from the back room, tactical to the strategic and the front room. Yes. Now you talked about showing up differently for GE customers. As we moved from our history of serving GE purely as 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. The criticality is increasing.
We have to show up differently
in the
way that we partner with you. So how are we doing that? How are we showing up differently?
So 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. And it was ServiceNow really showing up as a partner. And we engaged in some conversations around how ServiceNow thinks about the 3 amigos, right?
Support, product management and engineering and what those relationships look like to make sure that your customers' voice is really represented in what you are doing. And we had some things to learn. And we took some of your best practices and we have been able to deploy them internally within 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? And 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.
And we have been getting after it, 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, 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. And I would say it really kind of started with the beginning, the middle and the end. And what I mean when I say that is the beginning of our conversations were really embedded with you trying to It was not about a PO. It was help me understand your business. 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. Because change can be a little hard and change can be a little scary. But 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. And I think that's pretty powerful.
And then lastly, I think the thing that was different is just the governance process that you implementation plans and roadmaps that we're holding each other accountable to as we go on this transformation journey together.
Absolutely. And that's actually a perfect segue into let's look at what that roadmap looks like. So how have we helped you crystallize the vision for what we're going to go do together?
Yes. So we have a chart that we typically show when we're going through this, but it really started with our financial outcomes. And 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. And it was also around how we design for supportability and scale in a reliable way.
Out of those outcomes and those strategic drivers, we then 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? So 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. So we're off to a good start, but we are not done together as partners, right? We have so much opportunity. Where do you feel we're going to go together next?
Yes. So I'm really excited about where we are in this journey. And when I talk about this horizontal that we are creating from a GE Digital perspective, it means that we are going to be consolidating dozens and dozens and dozens of systems. And these are systems that might have been homegrown. In some cases, they're the usual suspects that you might be sitting in similar financial analyst meetings around.
And we chose ServiceNow as our partner, in large part because of how you've shown up. I mean, 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. So 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 doing it together.
Yes. Thank
you so much for being here.
It's a pleasure.
And we'll hand it back to Jimmy. Great.
Yes, 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. So I'll introduce our Chief Financial Officer, Michael Scarpelli.
Thank you, Jimmy. Well, thank you all for being here today. Hopefully, we're going to 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. But the big theme here is we're really firing on all cylinders.
And what I want to talk about today is the 3 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 number. And 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. And 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.
So there's really 5 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 $4,000,000,000 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 $4,000,000,000 We set up our company so that we could have various BUs underneath one head of our product. And 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 BU's 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.
And then Michael Hubbard, who is just here, he talked about the Inspire team. Inspire has been a huge investment. Remember these are CIO 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 $15,000,000 a year this is costing us. And so 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. And 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. But we've been very heavily investing in our partner ecosystem. And 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. And 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.
That's what the big GSIs are acquiring. And 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. And then 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, here's 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 Itap acquisition that we did last year. We talked about cloud management. That's going to be very impactful for our Itap group. And as well in the security ops, the Brightpoint.
And 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 1st year. It's really in the second year you're going to start to get the bookings and it's 2 to 3 years before you really see the impact on revenue of these things.
But 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. And generally, anything that we acquire, we are going to rewrite on our platform. It's not just going to be an implementation. So it generally takes about 2 releases before we can get that company we acquired on our platform. And 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, Tom is telling me. You saw one of them build on me 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 1 cloud vendor. They've now developed on our platform.
And so you're going to see these guys when you go to the partner hall. And there's more. We're continually looking at these things. So what are the what all these investments, these investments are doing really 2 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 are also accelerating our free cash flow growth in 2017 to 45%. And what is this causing us? This is as a result of this, if you benchmark us against every SaaS company or every enterprise software company at more than $1,000,000,000 in revenue, you can see we are the highest growth enterprise software company. And then 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 continue to sustain this for some time.
Now where are we getting this from? Our contribution is coming from 3 main areas. Global 2,000, we've always talked about the Global 2,000. If you look at us as of December 31, the Global 2,000 accounted for 51% of our annual contract value exiting the year. And then 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 20 15. And 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 because 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. It's easy to I don't want to say it's easy.
Salespeople would definitely say no sale is easy. But it's a product we can sell into a new customer and not having to penetrate IT if we're not successful in getting into IT. It's a much bigger pain point. People are willing to pay more money for that because it influences their customers. Now what does the Global 2,000 represent?
The big thing here that I want to get across is we are still very much in the early innings of Global 2,000. You may say, well, you're 38% penetrated. How can you be in the early innings? If you just look at our Global 2,000, many of our Global 2,000 customers, we're just scratching the surface. We just have a small subsidiary.
As an example, last quarter we landed 26 Global 2,000 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 she came when they started as a customer 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.
So that's why it's so important we land and then we grow and we are geographically dispersed. You may say, well, you're underpenetrated in Asia Pacific. And that's still our most recent market that we've gone into. And we landed I think 7 Global 2,000 in Asia Pacific last quarter. And we think that will continue.
So you can see the Global 2,000 ads. The other thing that's really important, this is what drives our growth is you land these guys and they grow. Our Global 2,000, the average ACV for Global 2,000 has grown 22% year over year. If you actually looked at the aggregate ACV for Global 2000, it was 2 slides ago, that actually grew 43% per year because that factor in the this is an average per customer. And the other thing that's really impressive here too, it's not just about landing those $1,000,000 sales, it's those upsells that lead to customers paying us more than $1,000,000 We now have 370 customers that pay us more than $1,000,000 a year.
That was 51% growth year over year. And what's even more astounding there is we now have 26 customers that pay us more than $5,000,000 a year. That's up more than 3 fold or almost 3 fold. It was 9 at the end of Q1 2016. So 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. So who has the opportunity to be that big customer one day? This is all about our execution. Now 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. And 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 of time, but we still continue to grow. Once again, I don't think there's another company out there.
And 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. Now 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. But as we come up 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. And 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. And that's what causes the variability per quarter. But overall, our Itom business continues to grow and that is our biggest product outside of service management.
But without service management, we wouldn't have these customers. Everyone keeps asking and saying, well, is your service management business slowing down? Look at our top 20 deals of all of 2016, every single one of those had service management. You look at the Global 2,000 we land every quarter, almost every single one of those have service management. But what's even more important here is 17 of our top 20 deals now had more than 4 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.
Now 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 and D expense 2 points in the bottom and 1 point in the higher end because we started making these investments in 20 16 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 and D especially with CJ coming on board. We're being able to attract some really good R and D talent.
We'll continue to do that. But we are going to get more leverage out of our G and A line. So bottom line is we're not changing our operating margin guidance for 2020. Free cash flow margin is staying in that 30% to 32% as well. This does not factor in the new accounting standard that I'm going to talk later about.
So 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'll talk more about the drivers on free cash flow in a little bit. As you can see, we're actually kind of 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 0% to 1%. But a lot of that is a factor a function of some of our cash slipping from 20 16 Q4 into Q1 with some collections we had.
And I think that's kind of a one time thing. Now a lot of people talk about billings and 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. But 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 a 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, if you aggregate the annual value of our renewals that we're doing, it's bigger than our net new ACV.
And that's because we continue that's because our renewal base is getting so big and I think that will just continue. I don't think you are going to see our net new ACV be bigger than our renewal basis with how big that is right now. And then the next thing is net new ACV And then 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 1 of the following quarter, and especially in Q4 of any year.
So it has a January 1 start date. And why is that? Many Global 2,000 companies are still on calendar years. When we do our big deals with many of our Global 2,000 customers, they want to get it in the budget cycle for the next year. And so a lot of those contracts start on January 1, even though we signed it in December.
So in December, there's no sorry, there's no real there's no revenue impact to that because the contract starts January 1, even though we're legally entitled and if we signed it on December 21, 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. And so on January 1 of any year, we have the most amount of our billings already booked that day. And 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 so Q2 tends to be our smallest. And 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 and it usually is. But 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 it's the contract starts on March 21 or April 1. And so we find Q2 has the lowest gross down in any quarter. And that's what causes that seasonality. So you're always going to see Q4 and Q1 be our 2 biggest quarters. And then you're going to see sorry, Q2 and Q3 being sorry, Q4 being our largest, Q1 still being a a relatively good billing, Q2 being our smallest and Q3 being a pretty good quarter.
You also have in Q3 the federal government is typically one of the strongest quarters there. So 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 phenomenon of you bill 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.
And so we're collecting those in Q1. You also have and also 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. So 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 3 components that really drive our free cash flow. It's operating margins and then it's the collections and employee stock plan. So Q3 and Q4 typically have our highest margin. If you remember, we hire most of our people in the first half of the year.
We make a lot of our investments where their sales kick off 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 at free cash flow. Collections Q1, Q4 are our highest collections. And then we have this phenomenon with our employee stock purchase plan. So we every January 31 July 31, we buy the shares in our employee stock purchase plan.
Well, in Q2 and Q4, we're collecting the cash from the employees for those through their payroll withholdings that positively impacts our free cash flow. So 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. So you will see some little dip in our free cash flow this quarter and next quarter.
Now turning to some housekeeping items. One of the things people are asking all the time is about dilution, dilution. So we lowered our dilution forecast slightly. We were up close to 3%. We're now getting down to 2.4% exiting
amount of shares we're giving to people because they know there is a big focus.
But reducing the amount of shares we're giving to people because they know there is a big focus with investors around stock based compensation. So 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. So I want to caveat with this is there is a lot happening around the world, not just in the United States with regards to countries and their corporate taxation and looking at international tax structure. So 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 will be years before we pay any taxes there.
But 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. Now turning over to the impact of ASC 606, there's 3 things that are impacted here. 1 is revenue recognition.
2 is the amortization of commission expenses. And 3 is our added disclosure. And you may say, well, you're a cloud based software company. Why are you going to get impacted by the revenue? Well, 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. So think of it roughly if it was roughly 80% of a 1 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 $22,000,000 to $27,000,000 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 The other thing that you have with this and the problem with this is it does create right now it's pretty easy to guide revenue on a ratable basis.
And you're going to land within a very kind of 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. Now if you have a customer that was going to sign a 3 year renewal and their annual value is $5,000,000 a year, that's $15,000,000 It could be up to around $11,000,000 you would have recognized as perpetual license value upfront on December 31. If you missed that one day, that would slip into Q1 from Q4.
So unfortunately, this new standard does create some a little less visibility in terms of forecasting your revenue. But I want to stress it has no impact on any of your cash flow or anything. Now 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 amortize 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 new when you have a high renewal rate.
We've this is still kind of working through it, but we believe the economic life of a customer is 5 years for us and we are amortizing the commission expense over 5 years. By adopting this in 2016, this would have reduced our sales and marketing expense by $22,000,000 to $27,000,000 So 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% to 4%, but I can't stress enough, 0 impact on free cash flow, 0 economic impact to the company of this. It's all about how we report. So 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, but 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 because you're going to have this, you could have a 3 year renewal that happens for an on prem customer. And from the customer's perspective, it doesn't matter. They're still only going to pay us 12 months in advance.
But we now have to recognize the 3 year value of that perpetual license upfront, which creates this unbilled receivable that now goes on your balance sheet. And so 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 is calculated upfront. So 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 of 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. And with that, let's bring John up here and we can go into Q and A. And Jamie can moderate.
Yes. So I'll be calling on you guys. No NDR questions for Mike. Tough crowd. All right.
It's been a long day.
So we have some mic runners. If you just raise your hand. I can see Walter in the back.
Hi. Walter Pritchard from Citi. Just a question, I guess, on you sort of get out with the cohorts and 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 2,000 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.
But in terms of looking at some of these newer markets, it's hard to tell exactly what's addressable by you. And so 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 2,000 that is a very significant ITSM customer and they are what they're doing in HR is as big as what they're doing in ITSM. So 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 is has a lot of employees relative to the size of the company. Customer service, well, we have commercial accounts that pass $1,000,000 a year for CSM.
So if you talk to I think Salesforce says the CSM market is a $12,000,000,000 market. We were saying 9. CJ believes it's an $18,000,000,000 market opportunity. So it's a very, very large market opportunity to go after in CSM. But as I said before, that is a more competitive market.
We're generally not, It's not a greenfield opportunity. We're generally displacing an existing system which makes it harder. Where in the case of HR, HR is definitely not as big as CSM, maybe, who knows, it's still uncharted territory. And the reason I say that is because in many cases, we are taking unstructured work and putting it into a structured workflow. We are replacing what was being done in e mail, what was being done in Excel and voicemail and other things.
So that's why it's harder to quantify the true size of that market. Some people say it's a $2,000,000,000 to $4,000,000,000 market, the HR Service Management business.
I see Kirk and then Alex after.
Thanks very much. Kirk from Turin Theraport. 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 2. But can you talk about verticalization as well?
Because it seemed 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? And I know you have SledMed 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.
Well, I think it's a natural evolution. I mean, if you look at most services businesses, right, professional services or others, you begin to build vertical expertise over time. And in most of the larger software companies, they've built vertical expertise over time. And 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? If you think about what Ashley showed at GE, Jeff is driving a massive transformation across GE and Ashley is driving that digital transformation across all their divisions. In that case, you may not need specific expertise in each division. So in that case, vertical may not be as important.
But you go into a bank or you go into a hospital or health care arena or you go into other highly regulated industries, understanding the vertical specifics of that industry is critical to drive change. And so we're starting, I think, in a very thoughtful way, learning our way through it. But 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?
Alex Zukin with Piper Jaffray. I wanted to ask either one of you guys feel free to answer, but about the platform opportunity. This has been something that has been kind of core to ServiceNow or ServiceNow has been talking about for many years. But I'm curious, what are you doing that's driving developers onto the platform with increasing frequency? What are you doing about the economics of distributing software that's built on your platform?
And 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 C. J. Talk to you about what we're doing on driving developers to the platform and then we can take the second part. Everyone knows C. J.
Desai. J. Desai:] Thank
you. So we launched our developer program a couple of years ago and the whole idea was for developers to be able to access our platform without any friction. So you get an instance right away literally all you need is an email address. You get the instance, you can start creating application and see the power of platform. So first was just removing the friction in getting access to the platform And all the functionality that we internally use, whether it's for customer service app or HR or SecOps that Sean 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, and you can access their functionality. And 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 developers for it, but it is really, really valuable. And then 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, Tony who just spoke earlier on the ISV program as well as other partners developing on our platform. So 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. So and 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. So from a platform strategy perspective, it's 3 things.
One, we continue to innovate on our platform so we can build applications that are really powerful. 2nd, through developer program, getting development community to build applications, play with our platform and products and become part of SI someday. And 3rd, for ISVs and ecosystem partners to create an app that can be sold via our store and then there is some revenue share that we go like other companies do.
Thanks Matt.
Matt 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
So
So, part of the one of the reasons for creating that vertical of SLED meds, SLED being the state, local various similar government agencies across the country as well as the higher education. And we're working on doing the same thing within the medical space as well the hospitals because these guys all talk.
Keith?
Here you go.
Excellent. 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 like Palo Alto Networks is talking about and you talk about HCA, the HR stuff and that sounds like stuff that Workday is talking about. So with the competitive dynamics spreading like that, like how do you keep the marketing message really tight and really efficient?
And how do you keep sales execution really tight and really efficient when it seems like the competitive dynamic really spreads out for you guys?
So the one go ahead, C. J. I'll stress the one thing, though, and I'll let C. J. Or go ahead.
Go ahead.
Okay. So 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. So 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.
And from a selling motion standpoint, we are actually approaching CISO for the security operations community. So we are Palo Alto specifically is our partner. They understand we are in incident response business. So are the other security vendors.
And 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. And so we view this as a very positive something to deliver a great for both of us as partners.
Justin?
Thanks. Justin Furby with William Blair. Last year, your Analyst Day, I think, Mike, you broke out, you went up to 2020 different product categories. And I know you hate the question around different products. But I guess 2 of those products were brand new a year ago in terms of customer service and security and I think you stack rank those as sort of number 2 and number 4 in terms of your other products.
So 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
Okay. Just curious I'm not sure where you got those from. The only thing I said in 2020 is, if you recall,
where
ITOM it is our 2nd biggest product outside of service management. That is the only product that we actually give you. We break out revenue. And 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. And so what I did say is, as I was pretty bullish and pleased with what we're seeing with the early traction in CSM, in security ops, in HR. And 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. And then
just on the ASC, the revenue standard, will we see that on premise piece in your will you break that revenue out?
Yes. There's going to be discussion around that in the MD and A and there will be still going back exactly the presentation on the in the financial statements whether it's a third line or it gets lumped in and there's no disclosure around it, but that will definitely be because that's going to create variability. So you're going to disclose that.
I see Michael back there.
Hey, guys. Michael Turits from Raymond James. A lot of new products announced today, and 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 in R and D? And you did just raise your R and D margins slightly.
Do we feel like but they're still pretty low. Do we feel like you've got a handle on those and that might not go up over time?
So the way we have everything set up, remember, we started making those investments in 2015 of creating different BUs, business units. And we have GMs in each of our business units. And some of our business units have some or will have some junior GMs underneath them as we further productize underneath one product. But they all roll up into CJ, who is our Chief Product Officer. And 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 is what we have done historically.
And we've repurposed that and built on that remaining 20% to get that Gen 1 product and then we continue to invest in it. In terms of R and D, we think we're spending a significant amount of money in R and D and 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 2 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. And that will help keep our costs in line with putting significant resources there. And we have 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 C. J. Is happy with what he's seeing out of there right now. So that's what's going to help with the leverage.
Is it Derek?
Derek Wood at Cowen. You guys changed pricing
a couple
of times over the last few years. Now you've got a lot of different products with different SKUs and just wondering how you're feeling about pricing and any changes you need to do? And then 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?
So pricing, I will 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? But I'm not pricing is not 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. And if we need to tweak our pricing to grow that, that's more important to me.
And 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. And then the last part of
your question Can I just comment quickly on pricing just to 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. And 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, because increasingly our clients want more people using our platform. So take what Deepak was showing or what Abhijit was showing, they want more of their customers more of their employees using our products. So 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 that we have historically been framed how are we priced visavis what Remedy used to be or visavis what some other competitor used to be. Increasingly, we're adding enormous value in our clients. And we have opportunity, I think, to sort of 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.
And then the second part of your question was around our app exchanger store. So we announced we launched that 2 years ago. And if you recall at that time 2 years ago, I said don't expect to be material to our business anytime soon. It's important to our business as you guys go into the partner hall. I forgot how we have over 300 apps or something that are we have about 300 apps that are on our store today that are available for download for purchase.
We did do a $1,000,000 transaction in our app exchange through one of the partners who's going to be there MobiCord. Nuvolo is doing big transactions in there today. So go talk to some of those partners and they will tell you. It's not about the revenue share we are getting from those 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. Candice right over there.
Hi. Karl Keirstead at Deutsche Bank. Maybe a question for John. John, I'm sure you saw this at EB2, 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. Now 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.
I mean, in all seriousness, I think 2 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. And so 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. So 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. So 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 I think is the prevailing framework here is one that makes sense to me. And so we're investing intelligently, but it doesn't mean that you sort of 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?
So 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, 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 a disruptive presence, first of all. I mean, 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. And I was looking, is there any technology debt, right, tech debt or people starting to say, the product is 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. And I heard virtually none of that. And so that to me is the core of the core of continuing growth and continuing to grow up through $4,000,000,000 beyond.
And we can't lose that. And so we'll continue to invest in that. We'll continue to upgrade our team and talent on that. And I think you saw evidence today of how the growth that's going on is quite organic and quite healthy. And then 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 was having dinner with Ashley last night and then Scott Mason, I was having dinner with Ashley last night and then 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, and some people call this customer success, some call it customer intimacy, some call it customer lifecycle. 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. And so 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. So 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 got to be aware of what technology is going on.
And if there are disruptive changes in technology, we have to be there and 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. And then we got to keep the 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 this 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. And that's one of the things. When I joined eBay 12 years ago, it had fallen in love with its success. And it was just breeding you could just breed in 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 Anthony.
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. But 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. All right.
So in general, we have 2 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. So we are starting internally, we bought a company DX Continuum in January that has been talked about, which is in the supervised machine learning space and we will make that available for own instances beginning June, July.
On your question around partnerships, we're starting out with IBM on virtual agent. We announced it a few months ago. And 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, like 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 will most likely utilize that library rather than building it ourselves. So 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.
And I just build on that sort of an interesting sort of seeing this in the enterprise world is, I think there's going to be a natural evolution, natural stack that evolves and 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, really heavily down at that level will be providing increasingly services, right? And their goal is to make machine learning or AI as a service that we can or others can evolve and build on top of. And then our job becomes to take that service, add the specific functionality we need to for our customers. And then 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. And that's what our focus needs to be. And you'll hear us talk about this tomorrow in 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. And I think that there is more 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 and I think it does allow you for even the next stage of transformation in terms of automation and you get to the world of predicting and preventing instead of just recognizing and responding.
Any more questions? We got about another minute left. Or we will yes, Kurt.
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? And you don't have to answer this necessarily for ServiceNow, every one of the companies we lot of people are asking is, is that just table stakes?
If you don't have that,
do you have that lot of people are asking is, 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 in 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 and I have 5 whole weeks here. But I think ultimately what's not going to be the differential 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.
And if you build value, 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.
And so 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. And clients are going to need that because they're under more pressure than ever, Every company is under more pressure than ever to grow, right? How do I innovate and grow? And then how do I drive productivity at the same time? And AI and AI in a platform like ours helps you accelerate both.
So 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 and then the partner hall opens at 6 and your badge gets you access to that tonight and all day tomorrow.
And I'll just say thank you to everyone for coming and investing a day like this, a day like this. We value your feedback. Hopefully, you liked hearing more about the products. But thank you for investing the time.