ServiceNow, Inc. (NOW) Earnings Call Transcript & Summary

Yes. No, so as I mentioned, like, if you think about the -- what we're doing from a service management, from an operations management perspective, we really see those 2 capabilities driving the outcomes both on the employee, customer side as well as for knowledge workers. And more and more, like, customers are looking to drive those together, meaning like if I can understand something in my environment that's coming from the operations space, I can more quickly resolve issues or serve customers before they create a ticket or an incident. And we've got a very healthy business with operations -- with ITOM. We can see -- we see that growing to be over a $1 billion business. It's right now our second largest product in the portfolio and growing healthily. And an acquisition like Loom really does bring those 2 pieces together to drive some of those outcomes. And from a Loom perspective, we've been very focused on AIOps and making sure that we're driving relevancy to take the operational world, find those needles in the haystack, which is really about getting those insights that AIOps drives. And then the secret that we bring to that puzzle is we can now actually drive the workflow on top of it. So a lot of AIOps is about understanding the world of data that you have. But with ServiceNow, you can actually drive automated workflows on top of it. And that's where we think like we [ lend an ] influence to the AIOps lens. And Loom is really helping us do that by taking all the data that exists and being able to quickly identify what is happening in the environment, get those needles in that haystack out and then tie it to knowledge, tie it to insights, tie it to an actionable outcome that a team could go and then take. And then from a Sweagle perspective, one of the things that we talked about at our Knowledge20 Conference in May and we're going to be talking about more in Paris is this notion of a Service Graph. And if you think about our CMDB and the system of record that we're providing from a CMDB perspective, we think that like, really, as companies are driving outcomes in their operating estate, they really need to take a service-level view of everything that they have. And what that means is, it's not just about the infrastructure, the network, the devices, what you have on-prem or in the cloud, but it's also about configuration and then application in service and being able to show that holistically. And so we're announcing in -- as part of our Paris release, some integrations that are from a Service Graph perspective, bringing in that core data to be able to provide that visibility. And then Sweagle, what I think it's going to do is now it adds on this configuration layer so I can understand my configuration estate on top of my infrastructure estate to be able to drive better outcomes. And it ends up being a means to an end. It means that I can resolve issues more quickly from a service management perspective. I understand what's happening in my environment. I can tie it to my critical business services from an operations management perspective. Or on the security side, I can resolve the vulnerabilities that I have that are tied to my most critical services first.

So there's 2 threads I want to pull on there because this feels like now a lifetime ago. But back in late February, you guys had your Federal Forum. And when we were down there, a lot of the feedback we often get is, is that having the -- ServiceNow be the core configuration management database oftentimes leads to the adoption of ITOM or of GRC on the security side. So I think for those of us who maybe are not necessarily technologists by background, maybe if you can help us understand why it's so important to marry ServiceNow's CMDB offering and why that matters so much for the adoption of ITOM and for security as well.

Yes. And I'll say this, like, we do build our solutions with the ability to drive them separate from CMDB in mind. So you can do ITOM Health without a CMDB. But the reality is that the value proposition, when we talk -- when I talk about that one platform and that one data model that's lives in the architecture, like, a lot of it at the core is fronted by the system of record of the operating estate that you have. And the reality is that every solution that we have both feeds and gets from the CMDB. And that's true for the products that we build. That's true for ISV community, and that's true for our customers as well. So as an example, when we populate the CMDB from an ITOM perspective, that means that now you can tie your incidents to your CIs to the critical business services, which helps you prioritize and automate route work on the service management side. It also then helps you, from an asset management perspective, understand your asset estate and quickly get the value to do audits or do entitlement checks for the assets that you have. And so really, that is a power of like how you bring the data into that CMDB drives all these outcomes that we have across the solution set. And while a lot of that does start on the IT side, it extends across the platform. So from a customer service perspective, as an example, like, you can deliver better customer service by understanding where an issue is, where it exists in your operating estate, who that is tied to. So now you can be proactive and engaged with the customers that may be impacted when a pod in your environment goes down, and you know who the customers are, you know the team that's working on it, and you can drive that better experience. So it's strength in upsell from an ITOM perspective, but really, it really drives that disproportionate platform value that I talked about earlier as well.

Yes. I was going to say I think it speaks to the platform being the core, allowing you to stitch everything together with one clean data model. So I'm -- just because we only have about 7, 8 minutes left, I'm going to weave in some audience questions as well. So the first one is a question that's focused on the -- I believe, on AIOps. But the question is, how much of it's ServiceNow internally built versus partnering with other companies such as a Datadog? Maybe just helping us understand what's native versus what's done via partnerships.

Yes. So first, I'll talk internally, and then I'll talk about the ecosystem. So over the time I've been here last year, we've been very invested in terms of building out those AI and ML capabilities for the operating estate, whether that's our operational intelligence solution, what we're doing from a health perspective with bringing events and driving correlation and outcomes as well as some of the acquisitions like Loom that are helping accelerate some of the outcomes that we want to drive from an AIOps perspective. And as I said, like, the AIOps world is really taking a massive amount of data and then trying to drive insight from that data. And then on top of that, we're also invested in making sure that then you can go and take automated outcomes from those insights. And so we've got a healthy [ build path ]. And a lot of the ML, AI acquisitions that we've done like DxContinuum and others are helping us do that because we're leveraging those under the covers to be able to drive incident prioritization or do better correlation within ServiceNow. Now I'll say this: in the end, it's an ecosystem. And we understand like our customers are going to have hundreds, if not thousands, of different solutions or tools that they're using across a software life cycle to plan, dev, build and deliver operations. And so our view is really driving a full end-to-end single-platform view across all those integrated platforms. And you've seen this in some of the analyst reports around value streams, managing the value stream layer. Like, we really see our ability to drive that value stream and then do integrations with those different solutions to be able to bring that all into one common pane of glass and then drive those workflows across it. So it ends up being joint win-wins for our customers with the observability solutions with what we have on the platform. And ultimately, the long-term goal is get those customers to the outcomes and provide that single pane that really lets you do the work across IT and then into the other parts of the C-suite.

Great. That's very helpful. And then another one that -- as much as this is mostly on products but maybe a more short-term-oriented one. Absolutely, COVID is on everybody's mind and the associated impact. I'm just -- I'm curious maybe if you could talk to what you see from your seat in terms of customer dynamics, whether that's retention or how customer conversations have evolved like for the deals that you're an executive sponsor for. Just how has customer behavior been as far as you view it in terms of decision-making?

Yes. So in -- outside of pandemic, like when I talk to customers, like a lot of focus is, from a technology perspective, how can I drive better experience for my employees and customers? How can I do -- drive operational productivity and then innovate more quickly? And in the pandemic, the productivity on the operational side, really, like we've seen a big focus on operational resilience. And the other big thing that's also been sort of -- at the short term, there's been focus on, like, how can you help me save costs? And whether that's going to like an ITSM Pro that's helping drive better inflection and make sure that your teams are focused on the things that are highest value; or from an asset management perspective, understanding your license provision and being able to save if you're underutilizing solutions. And so I think like -- as I think of those outcomes and I think about the conversations that I'm having with CIOs and CTOs and their directs, like in the end, through this pandemic, like, there has been a shift in focus in like a few areas of, hey, like, cost saving is important, I need to be able to drive ROI around the solutions, which we ultimately think we have a strong value proposition for. And broadly speaking, like if you looking across our customer base and serving the enterprise and large enterprise, because it's a -- these are the largest companies in the world, like, there's a lot of resilience. And even though we've seen some impact in certain industries, we've also seen focus. Like, we had a -- as an example, in the hotel space, like one of our largest security deals ever, we closed through this pandemic. So even amidst some of the headwinds that there are, like, there have been -- in this time frame, we've seen healthier pipeline than we've ever had, definitely comparing to previous years. And we do see -- as we look forward, the big thing I would say is my conversations with IT technology leaders is that they do see this shift and the need that the pandemic has really accelerated a long-term view to drive digital transformation and make sure that customers are on -- that companies are on the other side of this digital divide. And so I say that's been reflective sort of as we look forward in sort of our future pipeline and sort of the strength that we see going forward as this pandemic continues.

Very helpful. So I have time for one more question for the people that are pinging me. So I'll end with a product question. I think DevOps makes a lot of sense for ServiceNow as a natural extension. So maybe just how important do you see that for customers? And how do you -- how are conversations in terms of cross-selling DevOps into the installed base going from your perspective?

Yes. So let me -- I'll talk about it through -- first at a concept level, and then we can talk about the product as well. At a concept level, as customers are trying to go and digitally transform, they're focused on a few things. They want to be more agile. They want to move workloads to the cloud. They want to innovate more quickly at the core. And they're trying to do so, and they're trying to bridge the central pieces they have within IT to the teams that they're working with that are doing the engineering. And that could be a team that is working on waterfall for like an ERP deployment or something like that. Or more and more, it sees digital teams that are trying to move much more quickly and innovate fast. And as every company becomes a software company, like, IT is really trying to look across both of these and drive that pace of innovation while maintaining security and governance and quality through the pipeline. And so that ends up being a very strong value proposition for us, which is we're already a trusted adviser in central IT. And now it's a bridge and a connection to these teams to be able -- to enable them to work and collaborate more quickly as the worlds of, what you'd say, traditional IT and the engineering teams are coming closer together. And so we see that as a strong tailwind for us. Our DevOps product really does provide some of those capabilities. But really, it's across our entire product line. Like, our operations management or even from a planning perspective, our ITBM solution, making sure that we're driving both visibility into the waterfall world as well as the agile world, really brings that single pane glass together. So net-net, I think I am very optimistic around how we enable customers to drive to the other side of this digital chasm by providing these capabilities, and DevOps is definitely one of the ways that we're doing that.

Great. Well, Pablo, we really appreciate your time. I think that, that was -- I know it's very helpful for me to dig in deeper into the technology and product side. And your insights are definitely unique to some of the conversations we have. So thank you so much for your time today. Hope all is well on your end. And we tried to get to as many questions as we could for the audience, but I'm going to go ahead and just apologize. We only had 25 minutes. But thanks again for joining us today. I really appreciate it.

Thanks, everybody.