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

Welcome to ServiceNow's Financial Analyst Day 2023. Thank you for joining us. As you can see, we have a great agenda today. Before we begin, I want to remind everyone that today's event will be webcast and recorded for future playback. Information pertaining to our forward-looking statements and a recon of our GAAP and non-GAAP results are available on our IR website at investors.servicenow.com.

Please welcome ServiceNow's Chief Executive Officer, Bill McDermott.

Hey, everybody. How are you doing? I hope you're enjoying our Knowledge event so far. We've had the biggest showing ever for ServiceNow. Are you having a good time? Yes? Good. I'm so excited to represent this incredible company, this incredible growth story. And today, you've got the management team in ServiceNow from CJ to Gina. We've got a great lineup of innovators behind them, and I think it's going to be an incredible Knowledge session where, you really get to see where we're going with the company. and the future of ServiceNow could not possibly be brighter. ServiceNow is at the center of what I call the great reprioritization, and this has been happening in the enterprise for some time now, but it's hitting a hyper cycle. Today, I want you to walk away from this knowing that ServiceNow is the intelligent platform for end-to-end digital transformation, and why that is so important is that companies are changing very rapidly in terms of how they think about technology and how they think about ServiceNow. They know they have to take cost out of the business and they have to improve productivity. At the same time, they have to evolve these business models. 40% of the CEOs out there today say, "If I don't change course, I will not have a viable company in the next 10 years." And digital transformation is at the top of their agenda. The tech landscape is consolidating quite quickly. As you know, point solutions have really gone out of favor. And platforms now, especially if they're cloud-based, are ruling the day. 93% of the execs out there are consolidating point solutions and tech that doesn't matter into cloud-based platforms that do. And finally, we see a complete generational shift going on now with generative AI and the opinion of the CIOs and the C-level executives realizing this is a big movement in the tech industry, maybe the biggest one in the last 50 years. So I'm giving you the big picture. This is the digital transformation company of this generation. And that's why when I came here, I came to you with a dream to make it the defining enterprise software company in the 21st century, and I've never felt more strongly that we're on the doorstep of getting that done. So thank you very much for coming. Every person here matters to us. We are so grateful for you to think of ServiceNow as a priority. In your agenda, there's lots of places you could be. So let's let the show begin. We can go to the next slide, please. There's a few things about ServiceNow that are worth mentioning. One is our trajectory remains best-in-class among scale peers, and I say peers because we're the only one that does what we do the way we do it. It's not we compete with these companies, it's just that they're very successful and they've had very successful histories. But no company has gotten to $7 billion of organic innovation faster than ServiceNow. We did it in 28 quarters. It took the other very fine companies longer than that. The other thing is we're performing at a rule above 50, and none of the others are. So when we think about our category of digital transformation, our brand and our future, we're very pleased that it builds on a very strong foundation of terrific execution. We're a platform company. We believe organic growth is delicious, and we're going to stay on that path. Our market-leading performance is well known. I think you know it better than anybody. And we recognize that we're operating in a complex environment. We're leaning into it. As I think about the company right now, I think about a few things. One is unbelievable customer satisfaction and loyalty, best retention rates in the industry, soaring adoption of the platform and soaring big deals above $1 million across the global economy. And most importantly, I think right now, to have a culture that is thriving, no layoffs, growth culture, innovation-driven culture, customer-obsessed culture, and our people are happy. They are recognized as happy by Glassdoor, and we're obviously Fortune's or certainly one of Fortune's most admired companies. So on all accounts, I can tell you the sustained value creation is there, and we're feeling stronger than ever. The best-in-class execution is a representation of the great management team and the great employee base that we have in the company. All credit to our great innovators, and you'll see them today. And obviously, I'm so proud of this culture and the way this culture is responding. I told them, everybody was talking about where are we working. We're working from home. We're working from offices. Main thing is we're working. And we're back. And we're connecting with customers. We're connecting with life. And I told them to keep that sustained growth rate going, keep the shareholder satisfaction proper, you're going to have to give extreme effort. And the culture has responded beautifully. Today, CEOs are engaging with us more than ever. I mean it is incredible how we're getting market pull now from CEOs, where just a few short years ago, they were trying to figure out what it is that ServiceNow does. They knew we were good because their IT personnel told them, but they really didn't understand the platform. Now they understand they don't want silos in their companies. They want end-to-end digital transformation. They want collaboration. They want integration. And why do they want integration? Because only 19% of the digital investments they've made pay off with return on invested capital because of one big problem, integration, and we solve that problem. So with AI, we're very convinced that the IT strategy is the business strategy. And as I think about Fortune 500 CEOs, I'll just tell you a little story. This is consistent, by the way. Usually, we meet them. They tell me, "I've heard great things from my people. I don't know exactly what you do." And I ask them, "What's on your mind?" And they say, "I made promises to the capital markets to improve my margins. I might have had to address head count. My growth is not once what it was. But I know the digital transformation, productivity, efficiency is on the scorecard because I got to make my company perform like a best-in-class company." Okay. You can say yes to that with ServiceNow. The other thing that they say is, "I have to create new growth opportunities because what got me from here -- there to here isn't going to get me from here to there." And then we get into the employee experience improving motivation, retention rates, how you service the customer from the front, mid and back office, how the creators can build net new applications, net new innovation, net new ideas. And before you know it, the CEO is saying, "Well, why didn't I know all this? Who's keeping this a secret?" Nobody, and that's the beauty. Now we have the CEO, we have the technical community, and we have the line of business executives saying, "How do we coalesce on this common platform for intelligent automation and really driving end-to-end digital transformation?" So I think generative AI gives us a major bull case, and you'll see that in a few minutes. We have a lot of growth engines going on here at ServiceNow. They're giving us unparalleled momentum. The state of the pipeline, the state of the business has never been stronger. We're going into major globalization. We're focusing not just on Americas and EMEA and APJ, but we're really now going into markets that we know we can achieve greatness in. One example is Japan, which is a young market for us. We hired a terrific leader, and we know it's basically a country that has to get to the cloud, get there fast and make all those prior investments work. So we're seeing big growth in the global footprint all over the globe. We have focused on industries. You see the 5 that you know well that we're in, and we're expanding across all industries in all domains. In customer segmentation, you'll hear from Paul today and others, we're focused on marquee accounts, the top 250 in the world, bring in everything we have to them. Enterprise, obviously, 85% of the Fortune 500 runs ServiceNow now. We're focused on the Fortune 2000. Execution, very good. And commercial, where we're going from 1,000 employees and up, excellent execution, using a lot of very interesting sales techniques to have a low-cost, partner-driven model to get more share. And today, we made an announcement that ServiceNow is playing in the big leagues with nonprofits because they got big problems, and those problems are tied to the world's problems. And to be a brand that wants the world to work with it, we need to be there, and I'm excited about the potential. And I'm very excited and proud of the partnerships that we have. The ecosystem is building out quickly. You see these wonderful brands. It's certainly not limited to them, but they're among our biggest and best and obviously rise up with ServiceNow. We made a commitment to train and certify a million technologists in the global economy on the ServiceNow platform. Obviously, we're not going to hire a million people, but our ecosystem and our customers and us in combination, we will. And that is expanding our platform, our brand. And most importantly, it's given these companies the digital skills they need to expand the digital transformation they need to conduct to make their company's winners. So this is super cool. What I do want to make mention of. In geography, we have Suzuki-san in Japan. In industries, in all these industries, we have great leaders, one that I just want to call out in the public sector. Raj Iyer led the biggest digital transformation effort in the history of the United States Army. He did his service to the country. He served the time in his agreement with the Army, and he chose to come here because the transformation was on the ServiceNow platform. In customer segments, it's incredible what we're doing with these marquee accounts in the top 250. We have great leaders like Paul Fipps, who came from Under Armour. I had the pleasure of being on that Board for 15 years, getting to know Paul really well. He's doing a great job here. And Erica Volini, who came in from Deloitte, is really expanding our ecosystem. And obviously, Amy Reagan Moore House came in from Salesforce and has done this before but wants to do it in an even more incredible way with ServiceNow. So upscaling a million rise up. All these leaders are absolutely fantastic and have my total trust. They're doing a great job. So what am I communicating today? We have a dream, and that dream to be the defining enterprise software company in the 21st century is well founded. The 20th century architectures are very important. They do important things for the enterprise, but what we are doing is building great products to solve today's challenges, to make sure that today's users get a consumer-grade experience in the enterprise, that the promise of integration can finally come true and that we can go end to end and really drive organizational performance for our customers. We're telling a great story. The world works with ServiceNow today. You saw great brands like PepsiCo and State Farm on stage with our excellent Chief Digital Information Officer, Chris Betty. We're very proud of that. We want literally thousands and thousands and thousands of companies around the global economy to tell their story, and we will help them amplify it. We're delivering truly amazing experiences. You're going to see some of them today. And might have been present when we did Element AI quite a while ago, and AI wasn't on everyone's radar screen at that time, but it was on ours. We always knew that if we could take the Now platform end to end and power it with generative AI and really take business cases and bring it to that integrated platform with all the governance and the security that enterprise customers are going to count on, we could change the world. So I think you'll see consumer grade with next-generation experiences today. Very, very proud that we're building a movement. That movement does include no layoffs. The trust, the culture, the passion is amazing. We're hiring 9s and 10s, not 8.5s or 8s because we don't have to. And we're building great partnerships, and I do believe the extended ecosystem is going to be part of this major movement at ServiceNow. And obviously, customer trust is at the core. But I want you to know, we have lift off. And this is my message to you. And our great Chief Financial Officer, Gina, will tell you more about this. You'll see our incredible innovator, CJ. Our great go-to-market leader, Paul. They'll all tell you different pieces of this story regarding our lift off. But here's what I wanted to communicate. I see a $20 billion-plus company in the not-too-distant future. And with that, I also see a situation where you need to believe in ServiceNow the way I and the management team and 22,000 employees believe in ServiceNow. So we want to make sure you understand, your success is also at the top of our list of important things to make sure of. And for that reason, we're putting a major focus on sustained exceptional shareholder value. So one of the things I wanted you to know, the Board of Directors of ServiceNow has approved a $1.5 billion share repurchase program. Gina will give you more of the details on that. And the management team and the Board is very committed to driving not only the great operational performance that you've seen, but also this kind of an initiative that proactively just says we're growing fast, we're accumulating a lot of free cash flow, we have lots of our own ideas to continue to innovate and grow on top of, and it's a time where we can provide a buyback that really will be viewed as shareholder-friendly and proactive. And this is something we will continue to keep a close eye on. Because as we grow, you know how it goes with the cash position in the company over the next several years, especially as we see a $20 billion company in our future. So this is a generational growth story. You've been a part of it, in many cases, from the beginning. We're really in your debt. We appreciate all the support. You can count on us to be the defining one, and I'm super excited to come back on stage after you hear the executive presentations so we can take your questions and give you transparent answers, so you know everything that we know about the bright future of ServiceNow. Thank you so much for your time and attention. It's an honor to present to you. Thank you so much. You will now get the next presenter who will be introduced, I believe, by the [indiscernible].

Please welcome ServiceNow's President and Chief Operating Officer, CJ Desai.

Good afternoon, everyone. It's wonderful to see you all. I always start all my slides or any presentation because Fred created this as a platform company. And that's really, really important. It was not an IT company. I get asked sometimes by customers, "Hey, your IT are expanding into other areas." And I say, "Time out. No. We are a platform company, and IT was one of the first use cases that we monetize." Our engineering teams have done a wonderful job to stay true to its core of us being a platform company and building products on top of the platform company. That's innovation at scale. But at the same time, the foundation, which is the platform, they have continued to also reinvent the platform technologies, such as user experience, such as search and many other factors, including automation, integration and so on so that we can deliver value for our customers. Our go-to-market teams are also unbelievable. We collaborate so well. And this is -- I worked with many B2B software companies, and this is the best-in-class, whether it's a new product introduction where we are trying to figure out product market fit. Once we determine a product market fit, how can we hit an escape velocity on a use case? Our go-to-market teams are the best of the best, and that has allowed us to scale from some of the products that were just single-digit millions, and Gina will share with you how much progress we have made on those products over the last few years. The results, they speak for themselves. $200 million a quarter in subscription revenue. Just under 8 years, growing to $2 billion in Q1 of this year, 10x growth organic. It's just phenomenal on how our engineering and go-to-market teams work well with each other to scale our product lines and our platform's usage in enterprise. At the same time, this growth, and Bill touched on this very responsible growth, while improving our operating margin and free cash flow metrics over the same period. So this is how we always do portfolio planning. We look at the numbers. We say, "Okay, this particular product line, where is it going to grow? What does it mean? And what does it mean for all of you, our shareholders?" So I get asked the question from many customers. "CJ, the previous company came in. And they said they are a platform company, too. And the company before also said they're a platform company. What does it really mean? What does it really mean to be a platform company? And why is ServiceNow a unique platform company?" The answer is pretty simple, and this is a logical grouping, not a physical, logical grouping of the architecture. What you see at the top are the technologies that our platform engineering team has built in the platform: workflow automation, which you are familiar with; but user experience; process mining; service portal, integration. We could have taken an easy route and say, "Oh, let's do something around any-to-any integration." No, no, no. We wanted to for ServiceNow use cases built integration in the platform. Machine learning, virtual agent and so on. All of these technologies are the foundation of what was known many years ago called PaaS. And Fred Luddy did this before even PaaS became a term. Okay? And when you have this technology, you obviously need a persistent layer, which is where you store all the data, which is classic, our data model, a single data model. We have evolved it to industry data model. And then you see CMDB, which I'll touch on in a second; and, of course, the security of the platform. And the bottommost layer is the Infrastructure as a Service. So this is compute, networking storage, and we operate globally through ServiceNow Cloud 24/7/365 with one of the highest availability metrics that are out there in enterprise B2B software. So this is what it means to be a platform company. Everything in one architecture, one code base, one data model so that our engineers can build great products on top of it, but our customers can also build products on top of the same platform that we use internally here. And when you look at this portfolio, if you were looking at this 5 years ago, as Bill said, more than half of these products would have not been here. And the portfolio has evolved in the depth as well as breadth on the exact same platform that you see at the bottom, right? That is the foundation. For some products, we may turn on certain things. For some products, we may turn off certain things. But the on-off switching and toggling is what our application developers decide when they create this portfolio. This is how we monetize our platform, right? This is how we have programmatized a particular use case and monetized it. So what are the advantages of being a platform company, the single platform company? What are the advantages? What is in it for you? What is in it for our customers? I would say it's 3 simple things, and I'm going to give you a very specific example. It's around innovation velocity, R&D, unit economics and operating leverage. And what does this mean for our customers? So 3 simple things. Okay? So let's look at the first one. Higher innovation velocity. When we decide in a team that this particular use case is worth going after, which is a very important decision. Our customers, partners, everybody gives us feedback, "CJ, you should build something in this area." And I would say why. And the most important question I always ask, "Okay. I understand the problem we are solving for, but what is the size of the price? What is the size of the price if we decide to build this use case, right?" And once we have conviction that this one can hit escape velocity, we start building the first version of the product using the platform technologies that you just saw. So the global public sector, Bill mentioned a little bit about public sector, direct-to-citizen services, the first version was created in 6 months. And in Q1, we signed a large deal with 1 of the 50 states in the United States where they are going to provide direct-to-citizen services for licensing, permitting and others on this product, and that was a multimillion dollar deal per year. Okay? But we had conviction that this is something ServiceNow platform can serve really, really well. The second product, hardware asset management. It took us 15 months, pretty complicated data model, to create this product. Employees were taking monitors home or any type of hardware asset you have in an organization. How can you create a product around it so that you can manage basically the asset life cycle? SAM, which we introduced in 2017, Software Asset Management. Am I using the licensing properly of a particular software vendor? That was the fastest-growing product when we launched it. And my team said, "Okay. We are going to launch HAM." HAM became even faster-growing product than SAM. Okay? As a vegetarian, that offended me. I didn't want to say ham is my favorite. But HAM did its job, and it is still growing very, very nicely, and it just took us 15 months on this platform to create the product. Second is R&D and operating economics. Same public sector product that I talked about, which a particular state decided to deploy, and a few other states are considering it right now. There was only 7 R&D personnel in a combination of United States and India. Because the platform provides all the underlying technologies, you can create that product. 11 for HAM right? And the reason we have very high gross margin is that because of this single core base, as we expand globally, our infrastructure that supports this core base is standardized. Our CTO and cloud operations team have done a phenomenal job to make sure we solve for performance, we solve for reliability, availability, security so that we can deliver this kind of gross margin. So you have the R&D effectiveness and the operating effectiveness. And third, why is this good for our customers who expand the platform in a particular domain? ITSM. I just spoke to our company last week, there were 425,000 employees, and they finally bought ITSM last year. They kicked it off within 6 to 9 months depending on how you figured out where is the start line. They rolled out ITSM to 425,000 employees. And the CIO told me, "CJ, this worked great, but now we want to offer this as a service to our customers because we know that we can not only scale our own company." And then he said, "We have other areas we want to expand on how long the implementation will take." Once ITSM is rolled out, most of the other products, because our customers develop competency of ServiceNow platform that you saw, sometimes it's few months, sometimes it's 6 to 7 months even at a large, large corporation. The last one is a very large automobile corporation, and they rolled out our brand-new workflow around supply chain in 16 weeks. And this is as complex of an organization as you can think of to on the lower end, 8 weeks, a pharmaceutical company rolled us out in 12 weeks. So why was this platform created? If we ask Fred, he'll say, "Hey, this was all about routing the work or a digital workflow or digital automation even though those words didn't exist at the time." But he wanted workflow automation platform for the enterprise, not just a department or the enterprise. And 3 areas where you can think about how we have evolved. So let's look at the first one. That is ABC because I already used 1, 2, 3. So bear with me. So the first one is 2011 is when we hit the scale velocity, on ITSM. That's the first use case. And for those of you who forgot, it's actually the first demo built on the platform that really stuck with our customers. 2015 overnight, the CEO at the time made the switch and said we are going to go after security, customer service and HR department for workflows, just for workflows, right? And now when you look at it, we have expanded when you saw that portfolio across multiple buying centers. But in addition, what happened, which is point number b, is our buying altitude has gone at a C-suite level. So you look at our journey on the left, where we started with VP of IT, SVP of IT, doesn't matter what titles they use, but they call it IT service management or operations management or service operations, and elevated to CIO. But then you looked at CHRO, CISO, Chief Customer Officer, CTO, Chief Legal Officer, Chief Risk Officer; Chief Sustainability Officer; Chief Procurement, Chief Facilities Officer and the CFO. And this, Bill can tell you this, but all of us all the time are having conversations with these people. These pictures are real. These pictures are people who are in the role at ServiceNow because we have to first grow it out to there -- them before we can go to somebody else because they will ask, "Hey, CJ, that's cool. But is your CISO using this product?" So these are our people who use our product, give us great feedback. We call it now and now, and that's how we learn on the initial product market fit. But this is how we have expanded on the altitude of ServiceNow's TAM and going after this buying center, which is nontrivial because you have to go and learn their language, sell it to them in their own industry, and that's never easy. In 2018 December, I was having a conversation with our Chief Revenue Officer, Kevin Haverty. And one of our conviction was that if we create data model, workflows and integration, specific to an industry, our customers will buy that product over a horizontal product. We can't do that for all of them, but we can do that for a few of them. So we started with telco and financial services. And the thesis was if we create products in this area, and again, this is not a veneer or a screen where I changed the problem to call from a customer to a client, it is actually going in figuring out the industry compliant data model, what are the workflows required and, most importantly, what integrations are required in that specific industry. And that is our thesis. So we got busy in 2019. We funded a few product teams, and the results have been extraordinary. They actually surpassed HAM in terms of ACV that we have gotten in last 11 quarters across these 5 verticals. So what are our growth vectors now in terms of where we are going? So first, I'm going to start with the portfolio. Listen, there are many TAM numbers out there. We believe we have enough TAM. We have an amazing go-to-market team. We have productized very specific use cases that deliver value to our customers. And when you add these numbers, this is for 2025, $220 billion TAM. Our sources for TAM come from industry analysts and others. So we are very careful in not putting out very big numbers here, but we really systematically look at it. Okay, overall, are our markets growing? And even if they are not growing, do we have opportunity to create better leverage by technology investments? And that is the more important thesis around the use case versus how big the market is. Of course, the market is big, and we are going to go after it. So $220 billion TAM, and I'm going to spend a couple of minutes. I flashed this slide early on. But if you look at our technology workflows, when I started here, there are 2 or 3 products. And Pablo Stern and the team have systematically gone after CIO, Chief Digital Officer, CTO, buying centers, figure out where the pain points are, create the 1.0 product. And Gina will share some amazing numbers on how much we have grown across some of these products in creating multi-hundred million dollar businesses organically with the kind of R&D operating economics that I just showed you. Okay? Employee workflow, it was $10-ish million. When I started, it was still unclear. Can we get to a CHRO? Why would CHRO invest? Would they have invested in systems of record? Totally fine. We provide system of action. We added workplace service delivery, legal service delivery, and we are continuing to enhance this particular offering. Customer service, we were in a Board meeting in 2018. And one of the questions that was asked by one of our Board members is, "Hey, CJ, okay, you are competing in this area. There is already an incumbent. So what's the unique advantage? And why would somebody buy ServiceNow?" It was my deep conviction that this is a large enough market. It doesn't have to be just one company or the other company. This is a large enough market. There are enough homegrown systems. And what we provide, which is the mid-office, back office workflows that are driven through customer engagement, can really create a sustainable business that can continue to grow on behalf of ServiceNow for its customers. And this business has shown the growth, which is just unbelievable, at the scale and growing faster than the market growth. And then creator workflow. I shared with you low code, no code, like 31 flavors of Baskin-Robbins. And our goal always had been to sell to the CIO a low-code platform that they can put governance around because you do not want a bunch of low-code applications all over multiple departments. So this is not a departmental selling. We want departments to build on ServiceNow with the right governance. And in today's times, around data privacy and others, governance is more important than anything else. And then Josh Kahn will talk about our new workflow finance and supply chain. We have bucketed that right now under creator workflows and he'll discuss what's going on there, and again, built on the same platform. So our north star, our ultimate north star is, this is just a sample, a current live customer in telco industry that has taken our horizontal products like ITSM, that has taken our telco-specific product. This is what they are using us, right? CMDB, discovering assets in public clouds, managing their network inventory, cell towers, cables and all of that stuff. When they launch a new service, a telco service or shut down a service, how to deal with the CISO using ServiceNow for risk and vulnerabilities. Improving employee productivity, observability, full stack observability. We are -- we started with traces. We added metrics, and we are now adding logs this summer. So full cloud observability stack is what they're going to deploy. They just bought it recently. Streamline order management, so you can decompose the order and get in the path to revenue. And, of course, our core, IT and customer service operation. This is what a north star looks like. If we have the top 250 customers of ServiceNow use us enterprise-wide, this is what that picture will look like. And they will describe here is how we use ServiceNow, not just another help desk. So ServiceNow Platform AI. First of all, Bill touched on it briefly. We have been on this journey for the past 6 years, and we have been extremely intentional either to get tech or to get specific people when we acquired these companies. Some of them had 12 engineers, some had 20. Element AI, which was amazing research team, data scientist team, Joshua Bango, who's a touring award winner and wrote [indiscernible] paper with another employee who is now in ServiceNow in 2014. That paper got cited in 2017 by Google on LLM. Those are the kind of people we got through our Elementia acquisition in 2020, and I'm so proud they're here because they have been looking at LLMs since 2018. They started really getting traction in 2019. And when they became part of ServiceNow, one of the first things, one of the scientists told me, "Hey, CJ, can we get some data ServiceNow data, code data that you're engineering teams right? Because we can do this text-to-core thing." And I'm like, wow, okay, that does sound like a scientific experiment. And you're a scientist, it makes sense, but that's how ahead they were in terms of what could happen with large language models. And because we have been doing this, we launched our ITSM Pro. Those of you remember, in 2018 September, I remember, 2018 September. And if you look at the journey, we have now 40% on Pro Plus across ITSM, CSM, HR, where 40% of our customer base is on Pro Plus, and we have gotten 25% ASP uplift. I mean it's just phenomenal on how our customers have looked at the AI that was built in the platform, whether it's virtual agent or supervised machine learning and many other use cases that we have been delivering through our Pro offerings that they have taken. But the other important thing, as I talked about, Element AI. We have a phenomenal AI leadership team, right? When Google launched Smart Reply, which was just 3 boxes in Gmail at the bottom that most likely this will be a response and you can pick one of the boxes, they enhanced that in 2019 -- 2018, 2019. And the experience on smart campus, where it finishes the e-mail for you, most likely what you will say, now a bunch of other e-mail providers do that. So Amy Lokey was part of the design experience team. John Sigler, John Ball, these are folks with pedigreed LinkedIn, Microsoft, Apple, search-related expertise, engineering expertise, experience expertise and platform expertise. And that's why we are very fortunate to have a team with amazing engineers and scientists driving our AI road map. So I want to address the first question that many of you asked on the earnings call a few weeks ago. And what is my conviction around Gen AI, I'm not going to spell out the whole thing. But Gen AI, what does it mean for ServiceNow? And specifically, what kind of impact will it have? I 100% believe that Gen AI is a catalyst for our platform. It's an augmentation of our platform. You can deliver better workflow results using Gen AI. And we fundamentally believe with the work that all the teams that I just described have done that this is goodness for our customers, and it has an impact on a multitude of our workflows. So then you say, "Okay, CJ, can you give us specifics?" I think one of the reports came out last week and said, hey, we want to understand the specifics on what workflows. This is a sample, this is just a sample of how Gen AI can impact our workflows in a positive context, okay, where our customers can get higher productivity, higher efficiency or a higher value. Okay? For some reason, the most important slide is not showing, but now it's showing. So higher deflection security incidents team at a large bank, when they are looking at kind of an advisory on a vulnerability in Java, I don't know if you ever try to read those, they're pretty complicated stuff. Gen AI can summarize for you in a nice way. Regulatory controls and risk, it can summarize for you. It can then activate a particular workflow based on that summarization. When there is a long-running incident, you cannot reset your password because something else happened and you were not matched in another system. Whatever the case might be, help you do a better root cause analysis to drive automation. I can go on and on, but the overall theme is higher productivity, higher efficiency and more value for our customers. This is just a sample. And on our platform, which just today launched a connector to general purpose AI on search, intent understanding and few other things, it's live today, and we are going to brand this. We're still working with the branding team. It's working very, very fast called Now Assist. Copilot was used by everyone, so we didn't want to do that. So Now Assist and then automated core generation. And I'll bring this to life when we show you the demos, but we believe that Gen AI will have a positive impact, and it's an augmentation to ServiceNow platform. Period. Full stop. Okay? So what is our strategy? Our strategy is two-pronged. Number one, currently, we just launched today our connector integration hub to open AI. You can sign up, you can go to store.servicenow.com. We'll approve it if we feel that, okay, you're trying to do the right thing. And that's available today. And we will learn with you, customers. We are working with Microsoft and others to make sure that this general purpose AI can be used if a customer wants to try out for a few use case on better intent understanding or summarization and so on. We are exploring others. Because once we did that, other hyperscalers reached out and said, "Hey, what about my model?" I said, "Sure, bring your own model." If a customer wants to say, "Our customers have full freedom. Hey, we want to bring our own model because we have a partnership with Microsoft, we have a partnership with Google." Great. We will provide you connector, and it will be an augmentation to ServiceNow. This is a very simple point that BYOL, right, bring your own LLM. We want to enable you to bring your own LLM, and we will provide connectors and integration like we've always done with systems of record. This is just yet another technology. However, the value for our customers is domain-specific LLMs. What does that mean? For our workflows and for our use cases, if we can train the models, that we can take open source model like from hugging phase that we announced last week. You will hear more about NVIDIA tomorrow morning. NVIDIA shared that we cannot release it today because we are working with them. But you'll hear from Jensen tomorrow morning on what we are doing with them. But that's a domain-specific LLM for ITSM use case or a CSM use case, customer service use case or a procurement use case, where customers' data plus that LLM equals goodness while following trustworthy AI guidelines and governance to make sure that our customers get the value and trust with domain-specific LLM that ServiceNow uses. So ServiceNow, think about it. We'll take open-source LLM through these partners, train it for ServiceNow specific data launch it in ServiceNow Cloud and then customers get value because it is trained for our use cases, our workflow with customers' data. And that's the game. That's the game that leads to higher accuracy, lower hallucination. That's the game that we need to play. So you'll ask me, "Okay. CJ, that's all great. Strategy rounds great. What does this mean for monetization." Okay? I would say, first of all, I'm going to address this very specifically because some of you asked this question on our earnings call. Number one, the value that gets delivered to our customers is higher on the right side, which is domain-specific versus general purpose element. Okay? So the value our customers get through Gen AI will be higher on the right side. It will be there on the left side as well, but right side is higher. Okay? So that's number one. We can capture this value, and we are going to price for it. We are 100% going to price for it. So you'll say, "Okay, CJ, how are you going to price for it?" And when we launch ITSM Pro, that was the #1 question asked for the folks who are here on 2019 Investor Day. I know many of you were. And they said, "Wow. What about seat compression? Seat compression, ITSM. What's going to happen?" So seat compression and what's going to happen. And you look at our ITSM results, not only customers because they got value, they have continued to expand ITSM Pro, but they have also expanded our seats on ITSM Pro. And we have 4 years of history with that. We have the same conviction here that the value we deliver, we will be able to price for it. And that price could be, it's P times Q, right? So you can either have a higher price we are add-on SKU with some kind of meters around AI that, okay, you use this many API calls, this is how much you pay. So you have an add-on for something like an ITSM Pro. But as we enable more ServiceNow developers through our creator workflow, it can be queued as in quantity, and we can have higher level of quantity of our products sold because now we will have more developers who are using app engine to create Gen AI as a text to X, text to quote, text to workflow, text to app someday. That's our conviction, that it is P times Q, and you can charge higher pricing on some meter. It's most likely going to be the API cost. And if we can show accuracy, which we are seeing today on the right side, we know that. One of the other points that I wanted to explicitly call out on the questions around seats is our ITSM pricing is pretty flexible. So is CSM. We have moved to unrestricted user licensing. There are many customers who have moved to unrestricted user licensing. So it's an employee count versus the help desk count. But help desk count is still a traditional model. Do you know what percent typically our customers spend say that help desk case 5,000 customer service agents. You'll see one of them tomorrow. 5,000 customer service agent. Our cost is in ServiceNow cost versus the people cost. What percent is that of the total cost of ownership? Most people will guess, okay, maybe CJ, it's 15%, 20%, this, that whatever percent. When we look at the preliminary data across our installed base on whatever information we find from our customers, it is less than 5%. 2% to 3%, maybe 4%. In my own shop, so our own IT help desk, I run our own customer service organization, it is less than 1%. I spent 99% of that cost on people, and 1%. So if we can make people more productive, where you may not need someday more customer service agent, I still feel this is an augmentation, not a replacement. So if that goes 2%, that's great. Right? So that is enough in itself to capture the value that I'm not going to worry about seat compression because we believe the value that we'll deliver on the right side is so high that even if you marginally go, there is an MIT stand for paper, a double-digit, 14% gain, this and that, pick your number, and we believe we can deliver higher value. That's it, monetization strategy, we are absolutely going to monetize. It's P times q. You see the average selling price or a premium SKU or higher quantity we sell because we enable the use cases and these numbers were not included in the TAM. Okay? So those have the benefits for ServiceNow, ASP uplift, TAM expansion and competitive differentiation. We are on Utah release, so we just launched it today that you can bring your own LLM; or when Cooper release comes in September, where we are going to productize, which is literally less than 4 months away. We go in early access in July, which is 2 months away. And as you look at Washington, D.C., this is our road map, similar to ITSM Pro. Super excited. We have clarity of strategy, clarity of use cases, bring your own LLM versus domain-specific LLMs, P times Q. We absolutely believe this is a catalyst for ServiceNow, and it's an augmentation of ServiceNow platform. So we wanted to show you rather than just words on what does that mean in the context of ServiceNow use cases and just show you a road map. So John Sigler, who has worked at Microsoft, Apple and a few other companies and runs our platform team; and Joe Davis, who runs our platform engineering team. John runs platform product, and then Amy will show you the vision of Gen AI. Please welcome on stage John Sigler and Joe Davis.

Thank you, CJ. Good afternoon. Thanks for your time. We're going to talk about generative AI, but we're going to talk about it in the context of the ServiceNow platform. And when we think about generative AI plus the Now platform, there are 3 things that we look at. The productivity of our users, it's going to massively increase when we bring Gen AI to the Now platform. Time to value is going to shrink massively for our customers. And the experiences for our users are going to significantly change, but they're going to change for the better. So what can this Gen AI do for the ServiceNow platform? Well, there are really 3 things that does extremely well: intent and understanding, knowledge synthesis and summarization and then language generation. But today, as CJ said, what I want to do is show you in the context of ServiceNow experience, these 3 things. The intent and understanding, when I ask it something, does it understand what I want, what I need? Next, the ability to summarize, to synthesize. Can we send information from our instance, from our customers' data, send it off to Gen AI and get a summary back? And then the third thing is this language generation, and we really want that to show empathy and really good tone. It's like a really nice person is on the other end. But to show you, I'm going to go over to my phone, which unbelievably somebody called, not a great time. So here we are, and the scenario is this. This is a ServiceNow portal. It is a coffee corner customer service site. And this morning, I ordered a coffee at Caesars, but I really wanted to pick it up here. So I'm going to this site to see whether it can fix my problem, and I'm going to use the bot to see if it can help me. Okay. So the very first thing we talked about was the intent. And when the bot comes up, here it comes, we're going to ask it a question. We're going to tell it the situation that we were in. I ordered a coffee at the wrong location. What are my options? Okay. So now what's happening is we're sending this back to Gen AI. So we're inside of the virtual assistant, and we're sending this back to Gen AI. And the first thing that we want to see is, did it get it right? Does it know that I ordered my coffee from the wrong location? Now a lot of stuff just happened. So let's scroll back up to that first interaction. And you see here, it says, powered by Now Assist, meaning that's coming from a back-end LLM, a generative AI. And the first thing we're looking for, the intent. Well, it knows what I wanted because it says you can either get a refund or you can have your coffee transferred. But not only that, it's very nice to me, right? It's saying, "No problem at all. We can fix your problem." So this is the ultimate in self-service. But let's see if we can do it without involving another human being. As we scroll down, we see that the order information is there in the chat. Now that's ServiceNow. We're going off and saying, please get the most recent order for John Sigler and put it into the chat. Because this is helpful, right? It tells me what my coffee was, where I ordered it. And not only that, we go on. And the bot is saying, "Okay, what do you want to do? Do you want to refund? Or do you want your coffee?" And of course, I want my coffee, but this is where the power of the workflow platform that is ServiceNow kicks in. So we're going to transfer our order. But we need to know where John is. Well, John is in the Venetian now. So let's pick a coffee corner that's in the Venetian. And now there's a workflow, a process. It's going to cancel my order at Caesars. It's going to relocate it over here at the Venetian. And it knows the coffee that I want, and it knows that it's from me. Problem solved. This is an absolute game changer when it comes to self-service. We call it deflection. But that's not all. We have a really smart bot here. And we've told it, look, if the person has not signed up for the rewards program, ask them if they want to join. Okay? And in this case, we've actually seen a really good job of intent and its ability to know what I'm asking for. And it actually did a really good job of the generation of language. But now we're going to ask it to summarize, right? So I'm going to tell it please summarize the rewards program. And this is a little bit different because now we're going to send off everything that we have at Coffee Corner back to Gen AI, and we're going to tell it summarize all that information for John and bring it back into the chat window. And here we go. And again, it's a very nice interaction that I'm having here, but it summarizes all that information. Now I don't have to go and read about the rewards program, and I can make a decision as to whether I want to join the rewards or not. If we scroll down here, it asked me, "Hey, you've learned a bit about this. Do you want to join the rewards program?" And again, now this is solely the ServiceNow platform and the power of the platform. When we say yes, a process has kicked off. We go and we talk to the system that is the rewards program system, and we add John Sigler. So again, this is a game changer for multiple reasons. One is self-service and deflection. It's a different type of bot interaction. Two, we can take additional actions that were outside of the context of the first conversation. We went from I lost my coffee to I'm joining the rewards program. Now that's not all. We talked about the impact on all users. I feel like Mr. Roger is here. I'm going to put my jacket on. I am going to change gears, switch gears. I am now an agent at Coffee Corner. I'm an agent in Iraq. And what I want to do now is see the power and the impact that Gen AI has. When you plug it in to an agent, it actually makes the agent a super agent. Let's take a look. Now as an agent, I do a lot of things, like we ship the wrong beans to a customer. So I fix that problem. Or somebody can't spend their rewards points, so we fixed that problem. Another one is we shipped the merchandise and there's something wrong with it. So let's take a look at the damaged mug exchange case. And right off the bat, we're going to see something is very different in the experience for the agent. It used to be that I would come in here, and we would have this activity stream. That's the section right here. And I would scroll through this. And I would start to say, "Okay. I got to read all these chats to figure out where I am with this case, what did Bonnie want? What was I saying? What were the other agents saying?" But no, when I come into this case now, we wrap all of that up. And we send it off to Gen AI, and we say summarize this chat. So something that would take me 15 or 20 minutes yesterday, I'm done in a minute. I read the summary. I know where the case is at. But that's not all. If you look on the right side of the screen, you'll see recommended actions. This is where the real power of Gen AI, plus ServiceNow comes into play. We take all of the information in the case, the chat, everything has happened here, plus knowledge articles on returns, plus cases that were like this that were already solved. And we wrap all of that up, and we send it off to Gen AI. But we don't ask it to summarize this time. We say, "Give me the steps I need to take to resolve this case." And they did it right here on the right. 1, 2, 3, 4, 5. I'm 2 minutes into this case, and I'm about to close the case. But that's just the Gen AI side. The ServiceNow side understands that what Gen AI is telling us to do is add stars to this person's profile because of the trouble they went through or send out the replacement items. And we have processes for that, workflows for that. So the agent can just come in here and say, "Oh, I need to add stars. I don't have to leave ServiceNow. We can just go talk to that system and add those stars." And then the real kicker here is when you're sending out a replacement item, you have to talk to multiple different departments within the organization, across the enterprise, front office, mid-office, back office because we're sending something out for free, and we're sitting out with free shipping. And we have a process for that, and the agent only has to click on the initiate. Now we go across the enterprise. We do what we do really well. Okay? Workflow. Now this is great, right? This is very, very good stuff. But this live demo is talking to ChatGPT 3.5. So every time I'm interacting, it's going out, talking to that and bringing back the results. Fantastic. But as CJ said, there's real value in power in creating our own LLM inside of ServiceNow for very specific platform things. And we have many LLMs internally, and we have one that's directed at increasing the productivity of developers. And what I want to do now is bring on Joe Davis, our Senior Vice President of Engineering, and he's going to show us the productivity increases we can get through these LLMs.

Thanks, John. Okay. So I'm here because I'm a developer. And I want to show you how Gen AI is going to basically transform the development experience and really increase efficiency, productivity for all of our developers. We're really excited about it. I actually lead the engineering team here at ServiceNow, and we can't be more excited to bring this to our customer base. So I want to show you how this works. Up on the screen here, I'm a developer, I'm in a code editor, and I can now use natural language to interact with our own ServiceNow domain-specific generative AI model. So a common question might be to ask to validate an e-mail. And you can see here, it's interpreting the question that I have, and it's going to come back with ideally a high-quality code response that answers this question. And you can see here, I didn't have to type any code, and it's a pretty sophisticated piece of code that it just generated in terms of just validating an e-mail. That saved me a lot of time. And I'm going to give you another example here. As a developer, as you're programming, our model is just sitting here waiting to give you code responses to the questions that you're typing in. Again, I'm not writing any code. You can see at the very top here. All I'm asking is a few simple questions, and it's dynamically generating really high-quality code that I can use in my application. And I'm going to go ahead and just accept this here. And what you just saw with me using really simple natural language to generate code on ServiceNow's platform using our own LLM, our own generative AI model. And what I want to say is I'm really excited about the power of this technology. I think it's going to open up developing on the platform to millions of new developers. They're going to onboard faster. They're all going to be more productive. And ultimately, that's going to drive innovation and better business results for not only ServiceNow but for all of our customers as well.

Outstanding. Okay.

Thanks.

So this is very powerful stuff. But it can be very, very scary for our customers for their users. And so we want a very trustworthy and human-centered approach to how we deploy this stuff. CJ talked about it. We do control go-to-markets. But we also internally have a central governance team that's from all over the company. We meet once a week to make sure that we're doing the right things. We already had a very secure platform. What that means is if I'm a user of the ServiceNow platform, I can't send information that I'm not allowed to look at off to a large language model, only the things that I have privy to. And that's true today and would be true tomorrow. And then we really look at the UX and the experience of the users because we want to make sure that when we start to apply Gen AI that they have the very best experience. And lastly, as CJ said, we will roll this stuff out over time, and it might be a little bit different than our usual releases. But there are controlled phase releases, and the reason we do that is we work very closely with our customer base. We want to make sure that it's all good and right before we do general availability across our customer base. The point here is we will remain the #1 trusted platform in the world. But the future is extremely bright, and we have a lot of fun thinking about what this is going to be like in the future. And what I want to do now is bring out my trusted partner and my very good friend, Amy Lokey, to show you that future. Amy?

Well, it's fantastic today with you and see this exciting launch of generative AI working live inside of our products. The team just did a fantastic job with that. And then I have the privilege of showing you the future. So what is the future of ServiceNow and generative AI? Simply put, Gen AI, as you've seen, makes our platform better than ever. Now Assist will accelerate everything that people need to do with our platform. Developers will leverage Now Assist. Here we go. Developers will leverage Now Assist to build applications faster on our platform and also customize our out-of-the-box experiences. Admins will deliver faster time to value, shipping products quickly to get into the hands of users. Customer support, like you just saw, will be empathetic and personalized. And employees will have incredible experiences, including creating brand-new applications with no code at all. Now Assist is going to help every single person who touches our platform. So the first thing, everything every customer needs to do with our products, is customize these out-of-the-box experiences with some light configuration. They need to tailor the experience with their very own workflows. So Eric is a developer at our global coffee retailer called Coffee Corner, and he builds digital solutions like IT service management for their global employees. 400,000 employees use these products. So let's see how Eric uses Now Assist to customize our service operations workspace. Eric opens the service operations workspace here in UI Builder. This is a tool that he uses to customize our experiences. But this time, instead of having to go into these configuration panels and spend hours figuring this out, he can open Now Assist in this right-hand panel. So Eric needs to add a new chart that's important to his IT service delivery team. They want to know when a very specific kind of service change creates a priority 1 incident. Now Assist quickly generates 3 different options for Eric to choose from. He can even shorten the time frame shown in the chart just using this chat interface. So when he finds the one that he likes, he can go ahead and you can drag and drop it right on to the application. The next thing he needs to do is create one of those tailored workflows that I talked about. So he wants a team to be notified by e-mail every time these P1 incidents happen. So Now Assist can create that flow for him. And he can also take him to flow designer, where he can take a look at it. So Eric can see Now Assist build the flow for him, creating that e-mail notification right here for those Tier 2 agents just like he described. Analysis can even suggest a better idea that he didn't think of, which is posting a message to those agents in Teams. Eric can add the Teams' notification, activate the flow and then go ahead and jump back in UI builder to give this application one last look. Everything looks great. He's just finished all the configuration in a number of minutes, and so he can let the admin know that it's ready to deploy right here in the chat. So this used to take developers off in hours or even days of work, he just got that done in minutes. So we know that our customers need to accelerate their time to value with ServiceNow, and they need to get these applications in the hands of users quickly. But each of our applications has a lot of specific requirements. And so admins have to take some time typically to research this, read a lot of product documentation and figure this out. So let's see how Now Assist helps our admin Nick launch this experience. So Nick uses the ServiceNow platform to do our work. And as you may know, the platform is themeable, and he loves that he could use his application writing Coffee Corner's brands. He goes to his admin center homepage, and this tells him that the service operation workspace is ready to deploy. He opens Now Assist as well, and he immediately gets help in the flow of his work. Nick can ask Now Assist, what steps does he need to take to deploy this application? Now Assist can summarize ServiceNow product documentation right in the admin experience right in the flow of his work, giving him step-by-step guidance on how to do this. So Now Assist, when it starts to help them out, it starts to recommend that he run the automatic test framework to ensure that this app runs really well across the instance. And now you'll see leveraging our workflow engine, Nick not only gets help on how to do this, he can kick it off right here in the conversational experience. So Now Assist gets his test running, and Nick can start to monitor the progress right here on the admin center homepage. Next, Now Assist recommends provisioning the application to the right users. And this can also get completed right here in the conversation, thanks to this power of a workflow. So Nick specifies that he has to go to the Tier 2 agents, Now Assist gets it done. So not only that Now Assist recommends getting a message to notify the users when they have access to this application, and Nick is pretty happy to not have to write this. So he can just go ahead and preview the message, and he can also decide to shorten it, and now the message looks great. One more thing done. So Nick tells Now Assist, go ahead and send that message once this app is ready, and he's ticked another item off of this list that used to take them quite a lot of time. And while he worked through that, the automatic testing has finished running, and everything is working well, and the app is ready to deploy. So he can click Go Live. And that's it, a new application just got launched to users in a couple of minutes versus days or weeks. All that help was summarized and brought to Nick right in the experience, thanks to Now Assist. And this makes Nick exceptionally productive, and it delivers value to our customers in rapid time. So I'm going to show you one more example that we're really excited about. We've seen how Now Assist can help developers and admins, and we've also seen how it helps the agent experience. I'm going to show you how Now Assist can help everyone using our platform. We can see how every employee can easily create apps with no code at all using Now Assist. So employees frequently need ways to digitize their team's workflows. But usually, they have to go to IT, make a request. And frequently, IT teams are just swamped. They can't support the demand. Hillary is a brand manager at Coffee Corner, and she needs a way to manage inbound requests from salespeople and executives who want a corporate-branded headshot. So right now, she does not have an easy way to manage this, and she can't schedule all the requests herself, and she's handling it in spreadsheets. And frankly, things are falling through the cracks. So let's see how she solves that problem with Now Assist. So Hillary goes to her beautiful employee center homepage here, and she's recently completed a little bit of training. So she's familiar with this new product called Creator Studio, and she knows that she can build applications on the employee center. But she doesn't quite remember how to get started, so she goes to the Now Assist search box right here at the top of her page. She puts in a pretty complex question and ask how to create a forum to manage these headshot requests, and Now Assist knows exactly what she needs to do. So she's directed to Creator Studio, where she can start building her application. Now Assist takes Hillary to Creator Studio, and this is where she learned how to build these custom applications. And Now Assist continue the conversation asking her for a little bit more information. So Hillary describes what she needs. She wants to create an intake form, get some basic information in that, like name and e-mail. And Now Assist, based on other apps like this, can suggest creating a date picker for scheduling. Hillary remembers she's also got to get their permission and get people's consent. So she adds that in, too. And at this point, Now Assist has all the basic requirements it needs to generate an application. So Now Assist gets to work creating this intake form. And Hillary sees a form take -- get built right in front of her, like magic, and she can continue to refine it right here in the conversation. So she goes in and she says, "I'd like to have an additional form field added, and I'd like to have that come in right below the e-mail address." She needs to collect their job titles as well, and she can see that get added right to the form from that conversational input. She's also thinking this form looks a little stark, so she'd like to add an illustration at the top, but she wants to make sure it fits within the company's brand, it's going to tie in with that portal. So she goes in and ask for the image that she'd like to have created and can see a few options here that she can choose from. She'll go through the options, and then she decides she likes the one best with the camera. That one's a little too generic, and there's the camera. So she can add that to the form, and it's looking great to her. So she can go ahead and preview what it looks like on the Coffee Corner portal website. Looks awesome. And then she can also check and see how it looks on mobile. Scales beautifully. Looks great there. And while she's doing that, she sees that Now Assist has also generated a workspace for her. This is where she goes and she can manage all the inbound requests that she's going to get. So she goes ahead and takes a look at that. She previews her workspace, and it's perfect. It's got the calendar there. She can see when these requests are scheduled. She can manage the flow of the inbound requests and see how that's trending, and this is now where she can get her work done. She's super excited now. So she previews it one last time on the portal page, makes sure it all looks good, and then she submits it to her IT team for review. She's super excited. She's created her very first app on the ServiceNow platform. And the next time she goes to her portal, she gets a notification. The app has been published. She can see it live. So the power of the platform now has been extended by Hillary using Now Assist to build her first no-code application end-to-end. Now Assist is built into our platform, and it accelerates our customers' productivity across all of our products. It makes developers and admins more productive, improving time to value. It makes agents, employees and customers more productive with personalized, efficient experiences. And it enables everybody to deliver value on the platform through no-code applications. So Now Assist is truly our next horizon, and we're thrilled to get it into the hands of our users. So next, I'd like to welcome Josh Kahn to the stage. So Josh and I partnered really closely on that text-to-app experience that you just saw, and he and I are also really excited to partner together as we build finance and supply chain workflows. Thank you all very much.

All right. So in 2021, we saw a lot of ServiceNow customers buying creator workflows and building custom applications in finance and supply chain departments. As we dug in with those customers, we noticed an intense amount of customer pain and an opportunity to expand our TAM with new products. It's why I want to start the discussion with an overview of that customer pain. So in these finance and supply chain departments, they have a lot of business-critical processes. I mean they are the heart and soul of a lot of these organizations. But those processes are very manual. That means they're workflowed around in e-mail and Slack and Teams and phone calls and meetings. They're tracked in spreadsheets. As a result of that, they have lower productivity than they should, they have slower execution than they should, and there's a lot of hidden risk of something going wrong in one of these processes and nobody having any idea that happened. Now the processes are a result of the underlying technology landscape. That landscape centers around ERP. ERP is the core data and core logic for finance and supply chain departments. But it lacks automation, and it lacks workflow. And it has a user experience that is really designed for power users, people who live in these systems day in and day out. And so when these processes involve customers and partners and all the employees, as they inevitably do, it's very difficult for those people to actually participate in the process. So one example. We had a customer who all of their employees were supposed to enter time card information, and they're supposed to do it directly in the ERP system. They found it so difficult that the company built a 200-person team to work out of a shared mailbox taking e-mails, opening them up and pulling the time card information out of an Excel spreadsheet to enter it, a 200-person team. That's not an isolated example. There are hundreds and even thousands of those processes at these customers. There's also a lot of point solutions that are necessary to be involved in these end-to-end processes for finance and supply chain to be completed. So that has business users screaming for transformation. They want to digitize right now so they can improve their productivity, lower their cost and get a hold of that risk. The reality for those business users is they're probably going to wait 5 to 10 years for that transformation, and that's because IT is so focused on ERP consolidation and migration. And to give you a sense of why, I'll explain one customer scenario. They have 20 different ERP instances from the same vendor. They have millions of lines of custom code, and they have over 7,000 developers that maintain that code every day. So that's where they're coming from. Now their dream is what a lot of people would call a clean core ERP. It's to get to a more standardized version of the ERP system with all those customizations abstracted, abstracted into custom apps or packaged software, and they want to transform their process while they get to that clean core ERP. The reality, though, is a lot of them are going to end up just doing a lift and shift from the legacy to the cloud platform without transforming process, without satisfying those business users. The customer that I described a second ago, they started their plan in 2017. Their goal is now to complete this in 2028. And when they get there, they will have spent $1 billion, and they will not have transformed their process. So with ServiceNow, we're helping our customers transform immediately while supporting that vision of a clean core ERP and reducing ERP migration risk, and we're doing it in 3 ways. The first is with automation engine. So automation engine is prebuilt integrations to all those ERP systems and the point solutions around them. It's robotic process automation because in some of these cases, APIs aren't available. So you need another way to integrate. With automation engine, we have an abstraction layer on top of that technology landscape. So everything we do in ServiceNow works equally well on the legacy version as well as on the modern version, and so that frees the customers up to innovate today without worrying about tech debt. The second thing that's happening is customers are building custom apps with app engine. It allows them to transform their process today while supporting that vision of a clean core ERP. Customization mining is a way to look inside of an ECC environment, SAP ECC environment, the legacy environment. Find those millions of lines of custom code, find those tens of thousands of custom objects and figure out which ones they can abstract out of there to clean the legacy environment before the migration. With the data access layer, we're making it easier to get access to the data in SAP. So SAP tables are incredibly cryptic. The fields within them are cryptic, and you have to be a real power user to know where to look for what data. We've provided a more human readable interface. That, combined with our low-code tools, allow any ServiceNow developer and really even power users in the finance department to build applications that involve SAP data that help transform processes on and around SAP. With these app engine use cases, our customers really are doing 2 things. One is simplifying the legacy. They can abstract customizations, simplify it, make it easier to move. The other is they're transforming by building new apps today that don't increase tech debt, satisfying those business users and allowing their journey to a clean core ERP to move forward. We're also helping our customers by building product. Sourcing and procurement operations allows them to transform their sourcing and procurement operations today, getting hard dollar savings and productivity gains. So in there, there's 3 products. The sourcing and procurement operations product helps procurement teams, allow employees to get all the things they need to get their job done. It improves the productivity of the procurement team, and it puts more dollars on the best contract so it reduces the overall procurement spend. Supplier life cycle operations allows them to manage their suppliers, the suppliers that provide the employees, the things they need, chairs, tables, laptops, phones, but also the suppliers that power their supply chains with raw materials. By using supplier operations, they're managing their supply chain at a lower cost. And they're shifting more time to ESG goals, which are a higher and higher priority in a lot of supply chain teams today. And finally, with accounts payable operations, which GAs in September, we're helping our customers ingest, process and match invoices so that they can more effectively work through that backlog reducing late payment penalties and taking advantage of prepayment penalties and optimizing their cash flow. Now we shipped the first product in Q1 of last year. We shipped the second product in Q3 of last year. And in that first year, we've acquired over 70 customers, including 8 in the Global 100. There -- many of them are already live. The average deployment time frame is about 12 to 16 weeks, and it's early in their value realization, but some of their business cases they put forward to justify this investment have some astounding numbers in them. One of our procurement customers estimated $1 billion in procurement savings by 2025. One of our supplier customers estimated a 300% ROI in managing their 20,000-plus suppliers. And a lot of that's going to come from consolidation of legacy systems. It's also important to realize we did this without establishing a new go-to-market team. We did it by leveraging existing success in these accounts and getting into an adjacent buyer. So now let me go ahead and show you what these products are. So we're going to start today with Shirley. So Shirley is our employee. She's going to Knowledge, and she's done a great job deploying ServiceNow. So she's going to be on the big stage, and she wants to put her best foot forward. So she lands here on the employee service center. So this is where Shirley gets everything she needs to do her job. She can get things from HR, IT and even procurement. So as she clicks into procurement, she gets all the information she needs, some hot topics up above. She sees articles here that give her the information she needs. She can interact with procurement by submitting things to them. But today, she's going to start in the shopping hub. The shopping hub is a modern, consumer-like experience that allows the employees to find the things they need, but it represents all the best contracts that the company has so the procurement spend is optimized. She's had a great experience with Bright Carbon in the past, so she'll go into Bright Carbon. And she's going to look through for some training. Here's what we're looking for, and she can go ahead and request to buy this. So for Shirley, it was a great experience to shop. But it's also defaulting a lot of the information that is needed and which is super helpful for her, makes it faster, easier. I know the one for me that always kills me in anything like this is my cost center. I never have any idea what my cost center is great news. Shirley's is defaulted for. She's going to hit K23 and go ahead and submit the request. So perfect. Her request is there. In the old days, it went into a black hole. But for Shirley, because they're using sourcing and procurement operations, she's got a view of the status right here. So next, let's go check in with Warren, who is our procurement specialist. So Warren has a workspace. This is Warren's workspace. This his one-stop shop for all of the purchase recs, cases, tasks that Warren has to do. This is replacing a shared mailbox and a bunch of other disparate systems that Warren and the procurement team used to work out of. When that happened, he never could get a consolidated view of anything. In this case, he sees Shirley's request right here. He can go in and check it out. Shirley is authorized for this expenditure. So he's just going to create the purchase order. Now what you just saw is an integration between the ServiceNow sourcing and procurement operations and the ERP system of record. So that purchase order was created in the ERP system, with the entire experience for Warren and for Shirley is delightful and easy and automated and workflowed because it happened in ServiceNow before sending that data over. So next, let's check out our supplier manager, Alejandro. So Alejandro also has a workspace. Alejandro's workspace is where he sees all of his supplier information, his cases that he's working on related to suppliers and even tasks that he's asked suppliers to complete on his behalf. And here's where I want to show you a really important concept in all of this, and it's called a playbook. So a lot of these processes run across multiple departments and teams and they have different steps in each of those teams. When you onboard a supplier, you need the legal team to do an NDA and put some contracting in place. You need the risk team to do a supplier risk assessment. You might need another governance team to do an ESG check. Well, through all of these steps in the past, you had no idea where things were. You had to call or e-mail the legal team and ask them what was going on. Here with the playbook, all the steps are laid out. A lot of these would be completely automated, but some of them might be a manual step in a different department. And Alejandro can simply look here and know exactly what's going on. So with these products, we're helping our suppliers and our employees get the things they need in a delightful, easy-to-use way. And we're helping the people who deliver those, the supplier managers, the procurement specialists and the accounts payable specialist to do it in a more productive way. Now we're innovating here at an incredibly rapid pace. We had this vision 2 years ago. And in that time, we've delivered a complete suite. And if you look at the time from hands-on keyboard to GA, it's actually accelerating. There's no other enterprise software company today that's able to access new TAM with entirely new products at that pace. CJ talked a little bit about it before with some of our other products. Now the reason is the platform. We have a lot of prebuilt objects in the platform, things like portals that have catalogs and a knowledge base, a workspace that you saw a couple of different flavors of, one for Warren, one for Alejandro. All we have to do to build these new products is adapt those to the specific use case in persona and add content. And by content, I mean things like supplier cases, onboarding. And then what are the best practices in onboarding? Well, good news, we've seen it with a lot of our early adopter customers and we can build that out. But it's the low code -- it's the Now Platform, which is totally low code. So our customers can configure and extend it, making it their own and adding their own content in a structured way. So they get more value over time. Now one thing I want to be 100% clear on, we are not replacing ERP. We are building a force multiplier to ERP. ERP is this core data and system of record for finance and supply chain teams. ServiceNow is transformation across the enterprise, an accelerant to everything that happens in the company. When you add ServiceNow to ERP, you get hard dollar savings, you get better productivity to put more time into strategic tasks and you get less risk on your ERP migration. So with this source-to-pay suite, we've added $11 billion to our TAM. And there's a lot more opportunity and a lot of innovation in the pipeline that will dramatically expand that TAM in the years coming forward. We're executing incredibly well on the innovation front, the customer access front, and this is relevant to every ServiceNow customer we have today and our customers for the future. Super excited to share future updates with you, but we are executing well in a great market. And now I'd like to bring back to the stage, CJ Desai.

So what you saw with -- First of all, the team did a great job, Josh, [ Sean ], Joe and Amy. But when you saw Jon Sigler do the demo for coffee corner from his mobile phone, which was a live demo, that went to general purpose LLM, which was specifically in that case, Open AI. And then when Joe did the demo on text to code, that was a domain-specific LLM that ServiceNow have developed, and we just showed you live on what we have done in an incredible amount of short time to show the productivity that developers, self-service areas as well as customer service agents can get. I'm going to quickly wrap up with our go-to-market strategy before the break. So first of all, fundamentally, we still believe, and Bill touched on this a little bit, that we have untapped opportunity across many regions. United States, still remains, when we -- when I look at every workflow penetration in every single customer and how much can we expand our platform enterprise-wide, like that slide I showed you, including public sector for United States, state, local as well as federal, Canada and then LatAm. So these are the 3 areas where we are very bullish on the opportunity. Similarly in Europe, Central Europe, Germany, U.K., across public and private sector and France. And then we look at Asia Pacific and Japan, Australia, Japan as well as India, where we have new leadership in place, and there is plenty of opportunities, both across public and private sector. Our team, our cloud team, engineering team have continued to expand our footprint including the certifications required to operate in these countries. Our public sector success in U.S. federal is not a coincidence, and we have been investing systematically on what it requires from whether it's IL4, FedRamp High, IL5 and so on, including IRAP in Australia and few other certifications that are required for us to capture the public sector TAM. And Gina will share with you some numbers around those. But our global footprint is pretty wide. And now we are also looking at regions like Saudi Arabia and others to see what we can do to expand in terms of ServiceNow presence as we try to capture new logos. And our opportunity built out from these 5 industries, our time penetration in these 5 industries is fairly low. IT in certain areas, we have done, and I saw maybe with ITSM, but there is still opportunity for Pro, Enterprise as well as a lot of opportunities for new logos, including CSM and line of business expansion. Paul Smith, who runs our go-to-market teams, he will be here after the break to speak to a couple of our customers, but we are absolutely focused. Gina will cover on getting leverage from our go-to-market teams. First, Bill touched on this marquee program, strategic customers, how can we orchestrate end-to-end where we are focused on serving this largest of the largest customers and governments in an organized fashion where we are serving them at the highest levels both from a go-to-market standpoint, but also deployment and getting value out of the product. Number two, we have tried to simplify the coverage model. Our one of the first verticalization happened in U.S. federal. Then it was state and local, then it was medical field as in providers, hospital systems and now financial services, manufacturing, health care and life sciences, we have continued to verticalize our go-to-market teams by industry and where we see opportunity, including using our digital sales team to help us with one priority focus, land new logos, okay? And then customer success, very important that customers get value out of it. We meet them where they are and figure out how we can share with them best practices to really capture the value of ServiceNow platform. And Bill touched on this ecosystem. Yes, listen, we need friends. I mean we can only scale so much. So with our partners co-selling, co-delivering and accelerating customer value, we work with all the global system integrators, but also regional partners across the board. So that -- and many of them are here, so that we can capture truly the value of ServiceNow platform in this global economy. And on partnerships, this has been a pretty important point. So we have select technology partners. This is not just a logo collection, but we put significant engineering personnel when you see what on the top left to get those integrations done. This is not like, hey, I entered a partnership program, signed a document and these guys are our partners. This is actual R&D work that happens between us and the companies that are listed on the left to figure out how we can drive innovation relentlessly so that our customers get higher value from our platform and the platform of our partners. Strategic SI partners, you see them here. Standards and controls, I talked about in terms of certifications. And integrations, this is one of those things you're never done. You have to keep up all the integrations, whether it's systems of record, whether it's hyperscalers, whether it's a point solution because somebody is trying to consolidate AI Ops, solution on ServiceNow Store, where we provided the open AI connectors today. We have 1,200-plus partner-developed apps. And at least 95% of the customers have used our store once for a specific integration to deliver the value. And you heard from Bill on the RiseUp program, every single customer says, CJ, we cannot find enough ServiceNow personnel. So on one hand, text to code, as Joe said, will help us accelerate anybody who can code, specifically what Joe showed was the ServiceNow code, not just a Java code or a Java script code, but it is in the context of ServiceNow table or a context of ServiceNow business rule. So we believe that generative AI will definitely be an accelerant as we expand the ecosystem of personnel who uses ServiceNow. So with that, we'll have 10 minutes break, and then Paul Smith will talk to our 2 distinguished customers. We'll be back in 10. [Break]

[Operator Instructions] Please welcome ServiceNow's Chief Commercial Officer, Paul Smith.

Thank you. Good afternoon. Thank you, everybody. So I spend the majority of my time in the field meeting with our customers, our partners and with our field organization. And one thing that struck me very, very profoundly over the last few months is just the thing that just comes out loud and clear is the digital transformation imperative just hasn't gone anywhere. In fact, it's probably more profound than ever before. But what's interesting talking to our customers, and I get to hear every single day, the challenges that they are wrestling with and how they're using ServiceNow to solve business problems. The #1 thing I'm hearing is it's become an and conversation. There's a lot of focus on cost reduction, on how do I reduce my labor costs, how do I reduce my cost to serve, how do I increase productivity, operational efficiency and how do I get all of the benefits of digital transformation in terms of improved customer service, enhanced employee experiences, a more resilient digital-first organization. And customers are absolutely looking for both of these things in effect simultaneously. So -- and I firmly believe that ServiceNow is best place of any enterprise technology organization to enable companies to be able to say yes to all of these competing priorities. So now is a perfect time to hear directly from some of our customers. I'm delighted today to be joined by 2 amazing leaders who are working in industries that are going through some of the most profound transformation that's out there right now in terms of energy and health care. We have 2 fantastic leaders. We have Stefan, CIO of Siemens Healthineers, Kayoor, VP, Information and Digital Engineering at Shell. Please give them a very, very warm welcome. Kayoor and Stefan, please come join me. Well, thank you both, first of all, for being here. Really, really appreciate you investing this time with ServiceNow, and thank you for being such great customers of ours over the years. Look, everyone knows Shell and Siemens and Siemens Healthineers, but perhaps we can start this conversation by you just giving us a little bit of extra color in terms of what you're wrestling with these organizations right now, and your role within the organization. So Kayoor, can I start with you, please?

Absolutely. Thanks, Paul, and it's great to be here with our ServiceNow colleagues. So I'm Kayoor Gajarawala, VP for Information and Digital Engineering. I basically head all IT project delivery globally for Shell. And we deliver to 80 countries globally. And maybe I'll start with a few metrics that I think might be interesting to you. So from a mobility perspective, we have 46,000 service stations throughout the globe, and we are visited by 32 million customers per day. My own team is roughly 11,000 people that deliver 5,000-plus projects on an annual basis over those 80 countries. And ServiceNow has been integral for us to be able to allocate resources, allocate value to those various projects and overall deliver across the globe. It also gives us incredible insights in which we need to hone our project delivery and then where we also need to drive DevOps practices to deliver the maximum value for our customers.

And again, I'm always just struck by the scale of Shell. So we're going to come back to that in a moment in terms of some of the challenges you're wrestling with there. And then Stefan, perhaps the same please for Siemens Healthineers.

Thank you. Thank you, Paul, for let's say, inviting me for this convention. It's a great pleasure to be here. I'm Stefan Henkel, I'm the CEO of Siemens Healthineers, and ServiceNow is one of the strategic platforms which we have set up right at the beginning of our IPO in 2018. We, Siemens Healthineers are pure medtech player. We have our businesses in oncology, cancer therapy. We have it in diagnostic imaging and in lab diagnostics. And we are serving 70 countries, and we are the partner of the majority of the leading hospitals. I think 99 of the leading 100 hospitals in the world are using our equipment in order to serve the patient and to serve the patient on an ongoing base. That means we are, let's say, serving them throughout the life cycle.

So energy transition and health care evolution. So we've got 2 fairly profoundly important things going on here. Stefan, in terms of your journey with ServiceNow, you've been a customer of ServiceNow for 7 years. So thank you for that. Can you just perhaps articulate for the folks here in terms of where that journey has gone from and where it is now?

The journey started, I think, with like the majority of the ServiceNow customers, with the IT service management. So we had very, let's say, domain -- IT domain specific change request tools, which you need to have, and we want to standardize as a company on our own, a stock-listed company because we needed that transparency in order to drive, let's say, the efficiency, but also to drive the innovation across the different technology platforms. So we started with ServiceNow in 2016. And then we identified, wow, the platform is really, let's say, holding what it's promising. It's everything, but then all the features you need to do professional service management for the IT area. And then I had a meeting with our Head of Customer Service, and we sit together and thought, okay, if we have the platform, which is built for service and we, as the global market leader in the med tech industry, we have service as one of our key domain, which differentiates us from everyone else and our customers, the health care providers are trusting us that we can serve them, so why don't we bring the 2 together, our customer service experience and the platform, which is built for service. So we started then rolling out ServiceNow also in our customer service operations. And in this customer service operations, all the different processes in the company need to be linked together. They need to be closely tied together. And it worked out and it's, let's say, quite logic, if you look at it from an, let's say, analyst perspective. You have everything built in the platform. You have the incident management. You have the problem management. You can build it to the asset management. You have the knowledge management. So all the features are really built not just for the internal service, they are also there to be used for the excellence service. And with that, now we brought in the last 5 years, we brought together all our headquarter processes. And we are now looking forward to engage with the customer directly, starting on our journey, bringing the customer into our ecosystem. So there is no more boundary, there's no more difference between our service operations and the customer who is part of our service fulfillment.

And your customer, in this case, is a clinician, is a hospital environment -- yes.

Exactly. The med techs in the radiology department, the med techs in the laboratory department. So it's really, let's say, in the clinical operations.

And you've extended that customer service into field service as well.

Exactly, exactly. This is now where we are now approaching, together with ServiceNow, bringing in the field service management, which is, let's say, really the first mile to our customers, and even going beyond, let's say, bringing the customer in terms of, let's say, program management, when we build, let's say, new facilities together with the customer, bringing him in as a party in our environment, transforming the way health care is provided today to the patients.

It's a fantastic journey and vision. Thank you, Stefan. And we'll come back to some of the most recent things you're doing in a moment. And then Kayoor, again, I said this earlier, Shell, like the complexity of both the breadth of the operations, the geographical complexity, the size, how are you using ServiceNow to manage some of these challenges?

Yes. And much the same way Stefan is doing it, but maybe I can add a little more color. Energy transition and -- is one of the biggest challenges the world faces today. And energy companies are having to transform in an unbelievable way. In fact, we're going to have to employ many different business models to be successful, particularly around things like renewables and also customers. Now ServiceNow is actually a key catalyst to help us do that. It gives us the data we need to make the right decisions around allocation of resources, for example, how we interact with our customers and how we drive value. So one of the things we do capture in ServiceNow is actually value data for all 5,000 of those projects. And at any time, I can go and assess which projects look like they're in trouble versus which ones are actually performing really well, and instead of actually having to go and coalesce through a bunch of spreadsheets and things of that nature. So ServiceNow gives us insights on demand once the data is actually in there.

Yes. Which is, again, it's the only way you can deal with that size and complexity. You're also acquiring a whole ton of companies now on your new journey as well. And I'm assuming this allows you to plug those in very effectively.

Absolutely. And in fact, ServiceNow is actually also quite key to us gaining a single view of the customer because many of the companies we are purchasing, we actually already do business with today. So actually aggregating that data into a single view of the customer is super important.

Fantastic. Fantastic. And when you first started on this journey with ServiceNow, what were your considerations? What made you choose ServiceNow at the start of this process?

A lot of it dealt with strategy. So I think one of the things that was key was any type of internal parity processes that don't drive differentiation at the customer interface, we have a market standard and less strategy. And we really looked at a number of platforms. I think we spent a year doing due diligence. And we felt that ServiceNow was going to be the de facto market standard in this space. And I'm really proud to say that I think it's really panned out that way during the years of our work together.

And during the years of work together, I think we've built a close partnership as well between the product organization, your organization. I think we've done the same with Siemens. Tell me, how is that in terms of that co-innovation piece?

Yes. I really feel like ServiceNow is a very strong partner. I would say it is arguably our strongest partner in the SaaS space. And I'll give you an example. There was some innovation, especially when you have 11,000-plus resources and the large number of projects that we have, it's not easy to match projects to resources and skills. And all of those have to actually come together. ServiceNow worked closely with us to create an automated AI/ML-based matching mechanism to give us a head start on matching resources to the project, so it greatly improved our efficiency. And I'm really happy to say that we continue to work on many different innovations together to actually take us further in this space.

That's awesome. And we're 12 minutes in, and we haven't mentioned generative AI yet. So I'm going to do that now because that's one of the areas we're going to be looking at together as well, right? Because again, it's in the platform. Yes.

So on generative AI, let's talk about that a little bit. I don't think at -- in the short term, it's going to actually replace people, but I think it's going to really help individuals become more productive. And a great example of that is if you're looking, for example, a resource or you're looking for customer data on the last interaction a customer may have had with you, instead of coalescing through lots of data, what you can do is ask a question and get some answers with some level of intelligence built in. And I think that's a great helper in terms of productivity, and it also gives the customers the impression that we have a great deal of intimacy with them.

Yes, that's awesome. Thank you. And again, if we get time, I'm going to come back to you for one more question. But first, Stefan, so one of the areas that we've been co-innovating together on are some of the health care specific use cases that you can solve using ServiceNow in your particular space. And most recently, you started using the health care service management module within ServiceNow. Tell us a little bit about the thinking behind that and again, how we're going to be innovating together there.

Okay. Great question then. Our thinking behind is that we want to have, as Kayoor already mentioned, we want to have this kind of customer 360 view. And the customer 360 view will, let's say, be dependent on all data we have in our customer interactions over the lifetime, over the lifetime of our service interactions, how the system is living at the customer side until it goes to a renewal. And as part of this, we are looking now into this kind of field service management, getting the customer involved. And when I look at the innovations, which are coming now over from ServiceNow for the health care industry, the health care industry is, let's say, a very digital industry, the MRI, the diagnostic, even in the surgery department. Nevertheless, the patient flows over the different departments. So there's a lot what ServiceNow can also do. There's a huge potential supporting the workflow of a patient throughout the different disciplines, let's call them, clinical disciplines. And for us, it would give us the ability in order to connect directly to the customer in a seamless fashion. So for us, this brings together the customer world and our world. We will speak the same technical language and can easily exchange the data. So this will be then, I would call it, the cream on the cake or the addition to the customer 360. And just to build on what you just mentioned, yes, generative AI, huge promising technology. Now we have all data around our customer service, how we service customer, what requests our customers have in one database in ServiceNow. So with generative AI, we see 2 use cases. The one is customer calls and we get at the point of demand, a full picture of what's the current customer situation. You don't need to ask for what reasons, what matter, what is the overall situation. And one hospital has many different customer phases for us because we serve many different departments in the hospital. And the other part is, from time to time, also with our leading-edge equipment, there are downtime situations and downtime situations are always critical. There is a patient waiting for a surgery, there's a patient waiting for a diagnosis. Be it in the shock room, as we call it, so in the emergency room or be it just in, let's say, rural area, where there are not 5, 6 systems in parallel. So it's not everywhere, it's a big city, destiny of our system. Then time matters. And if we can give all the learnings out of all cases we have in our systems in the ServiceNow, at point of care, let's call it point of care for our engineers who are at the customer side, what are the specifics? And how does they fit to cases we already had? We can really limit the downtime. We can -- the customer get much faster back to operations, and this will also improve the quality of life because we can bring patients faster back in the health care treatment. So this is what we think about, what, let's say, the technology built in ServiceNow will bring to the future, and I'm very much looking forward to that.

And that's a fantastic vision, Stefan. And what I love is whenever we have a conversation, we're talking about the customer. The customer is effectively a very significant health care professional that's ultimately working on something that affects our health care. So whatever we can do to keep driving positive outcomes there, you've got our full support. And then, Kayoor, just kind of talking a little bit more broadly in terms of, again, we've had a long partnership. Where else, what next do you think in terms of what you're looking for ServiceNow to do and to help with the many challenges that you've got in your business? We were talking earlier, we were talking about refineries, we were talking about OT, drones, detecting methane leaks and so forth, like it's a fairly complex field out there.

Yes. One of the things I love about ServiceNow is that the platform has grown with us and I'm looking forward to that continuing. I think the next great frontier is going to be the generative AI machine learning frontier. And also really ramping up our customer intimacy, particularly around some of our retail and mobility businesses. I think with the data being in one place and the integrations being in one place with the Now Platform, it's a great foundation to leapfrog into the next stage, which I think is machine learning and AI.

And go fast together, right?

Go fast together.

Yes. Absolutely. Well, look, I'm really looking forward to collaborating with you on this. Stefan, the same. Thank you both very, very much for the partnership that we forged over the years, and thank you for being here today. With our audience, please, everyone, give a very, very warm round of applause to Kayoor and Stefan. And thank you so much for your insights and contribution today. Thank you. Thank you. Thank you, Stefan. Okay. So you've heard from Bill, CJ, our product organization, some fantastic insights from 2 great leaders in our customer organization. I know you're all waiting to hear from Gina and what this all means in terms of the numbers going forward. So that without further ado, please let me introduce best CFO on the planet, Gina Mastantuono. Gina, please come on up.

Thank you, Paul. Oh my goodness. I hope you guys are not too tired yet, okay? A little bit longer. We're almost done. It's great to be back in Las Vegas with all of you today. Clearly, our customers are excited to be with us, which makes us really excited to have you explore and see firsthand all that we're sharing. So I hope you take advantage of that. So taking a step back and pulling everything together that we've seen and heard today, I stand here proud of what we've accomplished and what's in store for our future. So let's take a look. At the end of today's presentation, my goal is that you'll walk away with 3 key takeaways. One, our innovation continues to expand our addressable market, driving durable growth and tremendous opportunity. Two, the strength of our platform model delivers inherent leverage and value at scale. And three, ServiceNow has consistently demonstrated strong execution despite the changing and complex global economy. There's a lot of noise in the market today. So let's cut through that, review our results and talk about why we believe we are in a unique position to seize the opportunities in front of us. Our growth rate remains impressive over the past 4 years. From 2018 to 2022, we grew at a CAGR of 31% in constant currency. We're sustaining strong organic growth at unprecedented scale. We added another $1.3 billion in revenue last year alone. Let me repeat that, $1.3 billion in organic revenue, incredible. And the durability of our top line strength is validated by a robust remaining performance obligations, essentially our total backlog, which provides further visibility into our future growth. We have $14 billion in RPO with half of that current, providing us a strong base of future revenue to build from. We grew RPO at a CAGR of 31% from 2018 to 2022, and that includes 22% year-over-year growth in 2022 despite a challenging macro environment. With a track record like that, you can trust the Now Platform to deliver. Because of our success, we remain as hungry as ever to increase our customer base and feed the top of our funnel for future growth. We will not rest on our laurels. We have plenty of runway still to land new logos. Over the past 4 years, you've seen us sharpen our focus, not just to land new logos, but the right new logos. Not all customers are created equal. We're looking for customers that can grow and expand with us over the long term. In that time period, we've seen 40% growth in new logos with over $250,000 in ACV. What's more, we're continuing to see larger and larger deals with new customers. From 2018 to 2022, we saw more than a 60% increase in the average first year ACV from new customers. So what's driving these larger deals? As you heard today, we are the intelligent platform for end-to-end digital transformation that drives proven value for our customers. New customers that come to ServiceNow are looking to orchestrate work across silos to accelerate innovation, increase efficiency and reduce costs. They are not looking for point solutions to solve a single problem. From 2016 to 2020, we saw a 30% increase in the number of products we were landing with our new logos. In 2021, we saw that same 30% increase in just 1 year. In 2022, we saw another 30% increase. And as you know, more products in each of our deals translates into larger ACV. Once landed, customers continue to show strong growth with us. In 2022, our net expansion rate remained strong at about 125% and perhaps more telling of how much our customers love us. 2/3 of our existing customers spend incremental dollars with ServiceNow despite the tougher macro. Why? Because in challenging times and good times, our platform consistently delivers value. This fierce customer loyalty drives predictability in our business model as over 85% of our new business comes from existing customers. As a result, we have great visibility into the customer journey. Thanks to the innovation that CJ and his incredible team talked about earlier today, even our older cohorts of customers continue to drive strong growth as they adopt new products and SKUs across the portfolio. A customer that spent $100,000 with us in 2010 is spending over $2.6 million with us today. That's 26x where they started, representing annual growth of 191%. Wow, I just think that's great. Yes. Thank you. Clap, I like it. The Better Together story is really resonating clearly across our entire customer base. And as a result, you're seeing more multiproduct deals universally. 97% of our net new ACV was from multiproduct deals in 2022. 77% of which deals with more than 5 products, which is up from 44% in 2018. These bigger multiproduct deals are showing in the growth of our customer sizes. We now have 1,641 customers paying us over $1 million annually, which represents about 20% of our total base. And our largest customers are growing even faster. We now have 327 customers paying us over $5 million annually. This is a 4x increase since 2018. And the average spend of our 5 million-plus customers continues to grow. It's up over 40% in the past 4 years. Clearly, the relationships with our customers are deepening and becoming more strategic than ever before. So I've just shared, we have a strong track record of successfully driving strong organic growth. Now let me double-click into the untapped potential still in front of us. Our rapidly expanding product portfolio and platform innovation continue to extend ServiceNow's relevancy across the C-suite, creating a massive opportunity. Within our 7,700 global enterprise customers, we've identified over 200 that we've designated marquee accounts. These are our most strategic customers with high total addressable market and where we have the potential to drive the most incremental value. As of the end of 2022, these customers' ACV was approximately $3 billion. And if we assume cross-selling just our existing product portfolio into these customers appropriately reflecting their size and real market pricing, the potential ACV for these customers is estimated to be $20 billion plus, 7x their current ACV. So I get this question all the time. Where is that expansion coming from? Well, while some think that our technology workflows are mature and that the cross-sell opportunity lies solely with our emerging workflows, we see plenty of opportunities still within our core. We are the dominant platform for IT and we're uniquely positioned for even stronger growth. Our emerging tech products are still demonstrating tremendous momentum with a CAGR north of 50% over the past 4 years. And even with that strong growth, there remains a lot of potential. The penetration of security, risk and ITOM products are still all below 20%. ServiceNow also has plenty of extensibility beyond IT. We have the opportunity to cross-sell our non-IT workflows into 80% of our customer base, and we're going after it. As a reminder, only about 10% of our customers are using all 4 workflows today. With that massive cross-sell opportunity, it's clear that there's a lot of upside with our newer workflows. And you're seeing it with more than 30% or more ACV growth in 2022 across our customer, employee and creator workflows, putting both customer and creator well on their way to becoming $1 billion businesses in the next year. In addition to the horizontal cross-selling opportunity across workflows, we have also increased value to our customers through our premium SKUs which introduced the AI experiences that the team talked about earlier today. As you heard, ITSM, about 40% of the customer base is now on ITSM Pro and it's continuing to carry a 25% realized price uplift. And approximately 60% of our new customers are all opting for the premium SKUs. So as you think about the opportunity for generative AI, we've already demonstrated our ability to monetize AI-powered experiences successfully. Our industry solutions are also helping to drive accelerated penetration within verticals, and we're seeing great early success. With our telco solution, we've now penetrated 65% of the top 20 G2K telco companies and about 30% of our installed telco base. In 2022, we saw approximately 30% realized price uplift from existing customers expanding with the telco solution. Our financial services solution is also seeing great traction. It's now in 25% of the top 20 G2K banking companies and there's plenty of runway left, as we've only penetrated about 10% of our long list of existing banking customers. In 2022, we saw a 40% price uplift from existing customers expanding with our financial services solution. As many of you know, the public sector remains a tremendous opportunity for us as well. Led by significant momentum in the U.S. Federal business. In the last 4 years, we've seen a CAGR of over 35% in public sector with 30% growth in 2022 alone. We recently launched a public services solution that saw great success in state and local governments in Q1. And the solution presents the opportunity to drive even more growth in what is already a very strong vertical that exceeds $1 billion in ACV. So you've seen our growth vectors. Now we're going to turn to the runway we have in profitability. CJ talked about what it means to be a platform company from an innovation perspective. Now I'm going to talk about what it means from a financial perspective. Our single code base, single architecture, single data model allows us to be much more efficient in product development. For example, we have products like risk, which was built by only 12 engineers and has scaled to be more than a $250 million business in 2022. Now that team is largely based in India, and we've seen an over 50% increase in R&D efficiency from 2019 to 2022. And since the majority of our business comes from existing customers, we also see strong sales and marketing leverage from enterprises that expand with ServiceNow. With the one platform model, it's easy for customers to add additional capabilities built on the same architecture. As such, there's less friction in the selling process, enabling a more productive expansion sales motion over time. Earlier, I shared the compounding revenue growth from our customer cohorts, if you compare that with the sales and marketing expense for a typical enterprise customer, you can see that the expected revenue per dollar spent expands to 4.5x by year 10. Together, these efficiencies are generating further operational leverage. We grew operating profit at a CAGR of 37% from 2018 to 2022 driven by 600 basis points of margin expansion. In that same 4-year period, we've seen free cash flow grow at a CAGR of 31%. In 2022, we generated nearly $2.2 billion of free cash flow, and we're able to maintain 30% free cash flow margins despite the macro and FX headwinds. ServiceNow generates a powerful combination of growth and profitability. Organically, at massive scale. It's remarkable when you think about a company operating near the rule of 60 at our size. And you can trust that we will continue to focus on delivering a balance of growth and profitability going forward. This is our defining moment. We've demonstrated our ability to execute and deliver consistent results. In 2023, this translates to durable demand despite a challenging environment, with subscription revenue growth of 23.5% at the high end of our guidance range, along with Q2 cRPO growth of 23%, paired with strong free cash flow generation of over $2.6 billion driven by a 30% free cash flow margin. Turning to our long-term trajectory. I'm sure none of you have been waiting for this slide. All right. All right. The world has changed a lot since our last Analyst Day. At that time, our targets were based on FX rates as from the end of 2021. We've seen FX headwinds as high as over $550 million for our 2024 target and $900 million for our 2026 target. While that has slightly rebounded, sizable headwinds remain. And although our demand has been durable, we're not immune to the macro challenges. As a result, our growth trajectory has been stretched out a bit to the right, but to be clear we still expect to hit those top line targets we laid out. It will just take a little bit longer, and we're talking quarters, not years. You've also heard, we've seen some interesting opportunities emerge. We're in the early stages of a generational shift to AI-enabled applications. As you heard from Jon and Amy and the team earlier, generative AI presents a meaningful tailwind for ServiceNow as we create a massive productivity catalyst and unmatched experiences for our customers. So as we talked about today, our underlying business remains very healthy and we're very confident in our trajectory. So in 2024, we expect subscription revenues of approximately $10.4 billion. Carrying forward the FX and macro headwinds, our $16 billion threshold gets stretched out a bit into 2027. So our '26 milestone gets adjusted to $15 billion plus and we expect to achieve this with continued operating and free cash flow margin expansion. So speaking of margins, we're raising our 2024 non-GAAP operating margin target to 28%, up 200 basis points year-over-year. With regard to free cash flow, we expect to deliver 100 basis points of expansion in 2024 to a 31% margin despite an incremental 100 basis points headwind from cash taxes. Beyond 2024, we expect continued operating margin expansion driven by the inherent business model leverage we showed earlier. For free cash flow, in 2025, we expect to maintain flat margins despite 200 basis points in incremental tax headwinds. Thereafter, we'll strive for modest expansion as we continue to offset an incremental 1 point per year of cash taxes. Longer term, we remain laser focused on delivering a balance of growth and profitability. You've seen our execution in the past. I just showed it to you. Our approach going forward will be just as disciplined. We're also initiating a new stock-based compensation expense target. We expect our stock-based compensation as a percentage of revenue to decline below 15% by 2026, on its way to a longer-term goal of under 10%. Finally, you heard Bill mention earlier today, we announced that our Board has authorized a share repurchase program of up to $1.5 billion. While investments in innovation to drive strong organic growth remain our priority, with our strong and growing cash position, we're using some of our free cash flow to manage employee dilution. We're also reducing our target employee dilution per year to less than 1.5% down from less than 2% previously, and that's before any share buybacks. So while this growth and profitability trajectory is very important, equally important is getting there the right way. As you've heard me say before, purpose and profit are not mutually exclusive. We at ServiceNow continue to operate with an ESG mindset, a business imperative that promotes long-term growth and value creation for all of our stakeholders. And today, I'm excited to announce the publication of our third annual ServiceNow Global Impact Report. I'm so proud of what we've already accomplished across the 3 pillars of our strategy. In the Environmental pillar, we're moving forward with our near-term SBTi targets and really looking forward to our commitment to deliver net 0 by 2030. In the Social pillar, we've achieved gains across the board in our diverse hiring across all 5 of our DE&I metrics, including women in leadership and underrepresented groups. In 2022, we increased our women in leadership to over 32% globally. In Governance, since we know AI is the future, we've developed a responsible AI steering committee to ensure we're continuing to build trust with ethical and transparent business practices. And let's not forget that this is all supported by the Now Platform, which is the force multiplier for our customers on their ESG journeys. In Governance, since we know AI is the future, we've developed a responsible AI steering committee to ensure we're continuing to build trust with ethical and transparent business practices. And let's not forget that this is all supported by the Now Platform, which is the fourth multiplier for our customers on their ESG journeys. As the intelligent platform for end-to-end digital transformation, we enable our customers to meet their purpose and profit goals. It's why our platform is suited for companies that are looking to act on ESG intent into impact. So let me end with where I started. I'm so proud and humble to be with you here all today. Why? three reasons: One, our innovation is second to none and drives durable growth and tremendous opportunity. Two, the strength of our platform model delivers proven value for customers and inherent leverage. And three, ServiceNow consistently demonstrates remarkable execution. Our purpose of making the world work for everyone isn't just words on paper for us. It's how we show up every day in service to our customers, our partners, our employees and all of our stakeholders. We will become the defining enterprise software company of the 21st century. Thank you for sharing your time today. And with that, I'm going to call up the rest of the team back up to the stage for Q&A. Thanks, everyone.

To ask a question, please raise your hand for our mic runners. Please state your name and firm before asking your question.

Raimo Lenschow from Barclays. Thank you for this great event. And first question, no surprises on AI. CJ, the one conception that commonly -- that I hear from investors, a lot of the time is "ServiceNow is a seat-based model. And now with AI, I need less seats". And so this is going to be like a very interesting future. Maybe -- I mean you explained a lot already today during the sessions, and we learned a lot there, but maybe you can just address it one more time and then we can settle that, hopefully.

Wow. So I think I addressed it, but I'm going to repeat myself. No problem. Thanks for asking. First of all, I would say that the -- currently, the spend you have, the spend you have for any customer on ServiceNow versus people for whether it's customer service or IT, we are below 5%, our technology spend. We are going to increase the value by Gen AI, and that value is what we are going to charge for. We are going to deliver significant value, as you saw in the demos, -- these were live demos, both on domain-specific and generic AI. And when you get that price uplift, even if there is somewhat compression, which we have not seen with ITSM Pro, it makes up for more than whatever concerns are, and Gina just showed you that even new customers, 60% of them have gone with ITSM Pro. So I feel very confident in our strategy on how this augmentation on the productivity that our customers will get for that value they will get, we are going to just capture tiny portion through the price uplift and that price uplift, even if the quantity goes a little lower, if it does, it hasn't with ITSM Pro in our 4.5 years journey or a CSM Pro, I feel very confident that this is still a catalyst on the top line and not others. And we have changed our model in some cases to unrestricted user for companies that wanted to leverage all of the platform. We worked on workforce optimization. Same question was asked. I feel very, very good in our strategy that will deliver value, we'll capture the price and ServiceNow investment is always a smaller number of total cost of ownership between the people and the platform. Did I address it? Okay. Thank you.

Arjun Bhatia with William Blair. CJ, maybe for you as well. You said that ServiceNow is not an IT workflow company that's expanding into other workflows. But that part of the portfolio is rapidly expanding. So as you think about the future, is there -- do you think there's a potential future state where the other workflows, non-IT workflows surpass your IT portfolio?