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

Good morning, good afternoon, good evening, everybody, depending on where you are. Very nice to see you all. I can see filling into the virtual room as it is now. So as people coming in, I will say, hello, it feels like forever since we've done a webinar, I think certainly here in Europe, we have our summer break where we all disappear and go on holiday. I don't think it's quite the same in North America from what I understand. Welcome to everyone. So today, we are doing from Chaos to Control, which I think sums up pretty much all of our lives every day of the week, whether at work or not in 2023, to be honest. So we're going to be looking at the state of ITAM, where we've been, where we are and where we're going. And to do that, I'm joined by the always wonderful bunch at ServiceNow. So those of you -- in fact, let me do the housekeeping bit first before I get carried away. Today's session will be recorded. So if you miss anything, the e-mail will come out within 24 hours, so you can rewatch it, share it with colleagues, et cetera. And there'll be some additional resources in my e-mail as well. But yes, joining me today, if you don't know me, I'm Rich Gibbons from ITAM Review. And alongside me today, I've got 3 fantastic speakers from ServiceNow. So I'm joined by Bryan Blackburn from ServiceNow. I'm Joined by Michelle Campos, who I found out earlier used to be an actual real-life software asset manager. So she knows what it's like. She feels your pain, saw some great insights coming from Michelle I'm sure. And last but not least, also joined by Mike Temple. So three great -- great speakers with great range of experience. So as always, with ITAM Review webinars, questions, questions, questions. Anything that you've got, throw them in, whether it's something specifically about the data or maybe also something that we've not mentioned that you think we should have done anything at all, there's the Q&A and the chat, so it's up to you which one you use. I'll be monitoring that. So make sure your questions are good. And I'll raise them up and get those answered. So with that, thank you all for joining us. Looking forward to a great session. And over to you, Bryan.

Awesome. Thanks so much, Rich. Yes and again, so happy to be here and share some of the data that we have from ServiceNow's Annual IT Asset Management Survey. We're exploring some of the trends, challenges and opportunities that are -- that we're experiencing in the ITAM world. So looking at today's agenda, we're going to talk a little bit more about what we mean by that chaos and some of the conditions impacting ITAM. We'll look at some of the survey demographics. It's just going to be a really quick look so you can get a good picture of where this data is actually coming from. Next, we'll then just go dive right into the data. We'll look at some of the current trends and look at where IT asset management is headed into the near future. And then Mike and Michelle actually, invited them here to day 1 because they have a wealth of knowledge and expert in the industry, but also, they work with our customers and can provide some context on how our customers are kind of adapting to some of this chaos around this. We'll end with some key takeaways before we jump into the Q&A. But as Rich already mentioned, feel free to add questions throughout the conversation. You can use the Q&A panel there at the bottom of your screens. Let us know what's on your mind or if anything that we talk about sparks of that, let us know. And then really quick before we actually get started, I just really wanted to mention that today's presentation will be protected under ServiceNow's safe harbor statement. All right. So again, Chaos. What we've experienced is a lot of change in the past few years. So looking at the right here, we see some of the big things happening on a global scale. And really ITAM teams are feeling the impact of this Chaos and what's happening. So we have increase in remote work. The past few years, we've really had to adjust to a distributed workforce, right? And then even more recently, now transitioning back into the workplace. And so we still have a distributed workforce. But we're trying to kind of balance that dynamic, right? Then we also have just unstable economic conditions. We have inflation, cost of resources are going up. Plus there's been a lot of recent layoffs that have been pretty prominent, especially in terms of like the tech industry, but they are happening everywhere. And then we have environmental concerns. How is the work we're doing impacting our environment? What can we do to make things better. And then we have emerging asset management discipline where software, hardware, cloud, enterprise assets, they're being managed together in some capacity. Some still remain separate in some organizations, but we actually are seeing a really big trend in kind of this emerging discipline, right? And all of these, again, impact ITAM teams. But when we asked about the impact of digital transformation specifically, our respondents kind of were divided into almost 2 equal groups here, here on the right of the screen. The first group, they see this increased reliance on T as opportunity, right? An opportunity to increase ITAMs' influence or if you're in the second group, you might see it as there's the scope, the speed of innovation is really -- all it's doing is increasing the number of tools and assets and asset types that need to be managed. So it is kind of a source of restoration. So digital transformation in terms of all of this other chaos that's happening, it's really making it kind of a challenge for ITAM to get their gears straight. So whether you are on the side of innovation or if you're on the side of maybe a little bit more frustration with what's been happening, one thing is clear, and that's ITAM is really going through a shift right now. All right. So let's go ahead and dive into the actual findings of the report. Taking a quick look at the survey demographics. This is just a really quick snapshot of our survey panel. Our goal really was to have a vendor-neutral audience who specialize in IT, have direct understanding of ITAM function or either play a direct role in managing the organization's assets or the teams that do. And we're excited to see a pretty fair representation across industries and company sizes here. So a pretty good mix. High Tech is kind of leading the front with 36, about 1/3 of it came from the high-tech industry. But we're looking at the individuals who participated here at the top. We have a good majority at the management or the VP level, so those 2 maybe are overseeing asset management. And we also have a good mix of representation of practitioner level professionals, IT professionals as well as a small group of participants at the CXO level. So again, just quickly wanted to showcase where this data is actually coming from. All right. So one of the first questions we asked the panel was which statement best describes IT's area of responsibility. And the majority of our panels said that IT is increasingly being held responsible for the business impact of its investments. So thinking back to like in the wake of all this chaos, IT teams now are expected to deliver more value across the business, and they need to be able to prove that value, especially, right? Then 30.8% of our audience here in the darker green said is only responsible for the performance and availability of the service it delivers. So very specific to just what's going out of ITAM, not much needs to be reported on maybe there's some things that the business needs. But for the most part, they see IT and ITAM teams kind of operating pretty independently where the very small group here, the smallest group, the 4.8% said that IT works within a very specific budget and how they use, it is up to them. They have no real obligation to report on what they're doing. However, when I was talking to Michelle earlier, as we're kind of planning for this webinar and this data point kind of came up and she was very interested to see that 4.8% exists at all because she was very surprised or at least what she's seen is that most organizations that they're working with are at and some capacity reporting back to the business. There's not much difference there, but that 4.8% was a little bit surprising. But an interesting correlation here from just these responses is that 76% of these organizations who report in excess of 20% IT budget increase fall into this category, the 64.4% category, where they're reporting up and out to the rest of the business. And so as ITAM becomes more visible across more functions and especially at the C level, more funding will be rewarded when IT and ITAM get more involved in those business initiatives and conversations. And it's no wonder that ITAM really is expected to deliver more value, no asset visibility, ITAM information, those are critical components to many areas of the business. So security, HR, finance, all those teams are dependent on accurate and complete information, asset information to get their work done. So to that point, ITAM excellence also depends on reliable asset data, not just the rest of the business depending on ITAM data, but ourselves. So we ask the panel, how would you rate the overall completeness and accuracy of your organization's ITAM information. 33.3% rated their ITAM information as outstanding. Their information is complete, it's accurate. It's accessible to other teams, and it's being used effectively. A majority of our panel fell into this second group, the 45.6% who said that their ITAM information was good and then the 21% -- 21.1%, so their ITAM information definitely needs some improvement. And you're thinking about it kind of another way, that's 1 in 5 organizations seeing their ITAM information needs work. And if you're including this good level included, I mean there's still more work to be done in order to reach that outstanding level. So with 66.7%, these bottom 2 lines still reaching toward outstanding ITAM information we can only guess that those organizations are also having challenges adjusting to increasing expectations that the ITAM function is experiencing right now. Again, going back to all this chaos kind of happening around us. But to better understand the relationship between ITAM data and business value, I definitely want to share another interesting finding here. We ask the panel, how would you rate the overall quality of service that your IT organization delivers to all users. As we had 14.7%, say their IT org delivers an average quality of service, 51.5%, which is the majority here reported an above-average quality of service, so they're still kind of on their way up. And 33.8% said their IT org delivers outstanding quality service. So the interesting correlation that we found here is that in the group that answered average only 6% of these respondents also reported outstanding ITAM accuracy and completeness, whereas on the other hand, in the group that answered that they have outstanding quality of service, 70% of these respondents also report outstanding ITAM information accuracy and completeness. So this is just kind of one example from 6% to 70% where ITAM information can either be an asset to organization or it can stand in the way of delivering high-quality service if your asset information just isn't up to par or usable by the rest of the business. So taking a step back, just kind of maybe out of the IT service realm of things, we want to look at the overall maturity of ITAM. And year-over-year, what we're seeing is that there actually aren't a ton of changes to how organizations report on overall maturity, the results from last year to this year were nearly identical, maybe 0.5%, maybe 0.1% change from categories. But overall, it's pretty much the same. It's pretty stagnant right now. Just over half of organizations fall within in active management. We're looking at this section right here. Maturity level, so a majority of their assets are being managed throughout the life cycle and it's great, right? Maybe a few gaps of information here and there, maybe some missing items. But 28% of the panel said that their ITAM maturity is at a standard level. So the approach is in place, but there may be some areas that still remain ad hoc maybe some specific asset types are being managed more effectively than others. Cloud may be a good possibility of being one of those challenging areas just due to its vast complexity. And then just 3% are still at the early stages of maturity. So their approach is very fragmented, largely reactionary and ad hoc. So maybe these teams do tend to get more serious and when ITAM is experiencing things like compliance audit and audits on the horizon. But if we're moving our eyes back up to the top here to the optimized level of IT maturity, we see that 26% of the panel are already at this optimized level and are experiencing minimal risks, many of their key processes are automated. But what is interesting in the that is though is just a little bit deeper in their findings. So we're looking at the same question here on ITAM maturity. And just at this top part here, the 26% who said that they are at the optimized level of IT maturity of the group 100 -- a convincing 100% of these respondents are using a platform approach to reach this optimized level of maturity, and it cannot be achieved any other way. And then my next slide, I'll explain that a little bit more. So what we're seeing is the silo mentality is breaking down when it comes to asset management. We ask the panel to choose a statement that best describes their organization's approach to asset management and we've really seen a lot of changes year-over-year here in this specific category. 34% of the panel said asset management is strategic, there's a drive to bring all asset types onto a shared platform for cross [ streaming ] workflows, and this was an increase of 11% from 2022. And this slide really makes sense, when ITAM operates on a unified platform, asset information across asset types or systems or tools is more complete and accurate especially if the platform has AI or machine learning capabilities, where something like machine learning normalization can really help your -- keep your asset information healthy. And as we already mentioned, complete and accurate data really lays the foundation for the rest of the business in terms of automation, and it's a really driving force for that value-adding business wide. And much of this shift came from the second group here, where 28% of the panel say that there are completely separate teams and tools specific to each asset management or asset type that's being managed. So this is sort of that true representation of what that silo mentality means, is about 28% kind of sit within that framework. Moving down to the third group, 22% of the panels said that hardware, software and cloud assets are being managed together, but things like enterprise assets, IoT, OT and industry assets, those are being managed separately. And much of this shift actually came from this fourth group here at the bottom, where 15% are combining hardware and software as a discipline, but are still keeping cloud teams separate. And overall, we can almost visualize kind of this trickle-up effect, right, as more organizations are becoming more strategic about asset management, bringing more disciplines together and operating on a platform.

Yes Bryan, I'd like to kind of elaborate on that. So.

Yes.

Yeah, if you don't mind. I myself as a practitioner and a lot of people that are probably on the call, this should make sense to you, right? When you're looking at asset management, how many other departments does it touch. We talk about procurement. We talk about legal, we talk about the HR, onboarding, things of that nature. And I'll go into some depth around that with the case studies, but if you're living in those silo tools and you don't utilize a platform where enterprise data is [indiscernible] it becomes very -- a huge struggle to try and maintain those assets and make sure that your inventory is on par for those large hiring events and being aware of some of the security breaches if you don't know what's out there in your environment. So it just really goes hand-in-hand, and I'm pretty sure there's a lot of people on the call that really understand this for sure. Sorry, I didn't mean to interrupt.

No, this is perfect. Actually, I was about to stop here and kind of reach out to the rest of the group of the speakers. We've shared a bit of information already to this point. So I quickly wanted to gauge any of your thoughts. So Mike, Rich and Michelle included too. Is there anything that's been sending out? Anything you're seeing does the findings so far align with what you're experiencing?

So from my perspective, Bryan, it's been an interesting past 30-plus years in this industry where the business has approached it is just something they had to do from year-over-year to something where this has become a disciplined all and of itself with its own set of tools and processes and experts in the field, and it's interesting to see that transform over the past few decades.

Yes, I totally agree. I mean, I haven't been in the IT industry quite nearly as long. But even with my 5.5 years at ServiceNow, where the only product we had in the market was Software Asset Management, we've seen a ton of growth and a ton of changes within the industry. So even within my short 5.5 years, I still can relate to that sentiment. All right. Rich, anything at this point or happy to move on.

I mean I think all I would say is it's great to see because what we talk about so much and we always have done is breaking down the silos, engaging with stakeholders, everyone working together, sharing your data to support the business. So any time we see data that supports it and that people are able to do what they need to do. It's fantastic. So I think this is positive for people that are with us today to take back into their business and say, look, this is what the people are doing. Help me do it as well.

Absolutely. Also, Yes, thanks to the rest of the team for that. I just wanted to check in and see how we're all doing. Let's go ahead and continue on getting back into the findings here. And we'll start with where ITAM is contributing value across the business. So you'll notice right away that these answers are fairly distributed. There's not huge nuances between data, right? But -- so really at every level of ITAM maturity. ITAM is still providing business by value and almost not surprisingly at the top sits better quality of end-user service and increased asset utilization and resource optimization. Makes sense to me as these are very 2 common ways ITAM historically has communicated value and contributed value. And if you're looking at this data from top to bottom, it's kind of funny that the responses almost fell naturally in order from maybe more practical value adds versus more strategic value adds. So the top three here really being those examples are practical ways ITAM is offering value. But once you get past those first 3 items, this is where strategic item really comes into play. So risk reduction and increased data security, that's in collaboration with SecOps and security teams. Then you have cost reduction and cost control, especially when it comes to cloud operations, that can get really confusing without a solid strategy in place. We have improved incident management and response, so bringing integrated risk management teams into the picture. And then we have accurate budget and decision-making. So how are we aligning with business schools and leadership priorities. These are all more strategic in nature and experienced more by organizations that have higher levels of IT maturity. Now then the last item here, Assured Compliance and governments. I'd say it's more like an outcome that is achieved once ITAM is either at or close to optimize. But either way, we kind of see that how these answers are kind of split. And I'm assuming towards the bottom here, it is where we're going to see more of those higher-level ITAM maturity organizations whereas the practical outcomes or the practical value adding, that's going to be more universal not dependent on where you are at in terms of ITAM maturity. But even when lots of value is still being realized, there's still room for improvement, asset life cycle management being a clear front-runner for improvement. So again, regardless of IT maturity, every organization still experiences challenges at some point in the asset life cycle. The phase identified as the most challenging is the monitoring phase. So many organizations may be experiencing uneven asset distribution or an asset utilization, performance data, they may have a reactive approach to security issues. So indicating maybe there's still some gaps between security teams and ITAM teams. So it really does make sense to me that the monitoring phase is the most challenging. When you think of all the teams that are involved not just in monitoring, but also in responding to something like a software compliance audit, a security issue, accurate and complete ITAM data, and I am going to be saying that a lot, right? It is necessary and not all organizations are quite at that point. So the monitoring phase I could see again, being reasonable in terms of being the most challenging for ITAM teams right now. But incomplete, inaccurate asset data comes at a cost. And so we ask the panel what effect incomplete siloed conflicting or an adequate asset information has on the organization and the top two responses were that it increases costs, indeed increases efficiency and that puts security and compliance at risk. On the opposite, just 9% of organizations said that asset information wasn't an issue at all. But instead of going line by line for this specific question, I'd rather touch on the possibilities if you think of all of this data kind of in reverse, so instead of the negative impact of complete information, the reverse side of that would be a positive impact or benefit when asset information is healthy. So these items then become decreasing costs and increasing efficiency, empowering security and mitigating compliance risk, driving automation, building those cross-functional workflows, streamlining, cloud migration and supporting new business initiatives. So again, if anything is learned by the end of this presentation, I'm sure it's going to be that the health of ITAM information is going to be critical to business success. All right. So now I want to jump into what's next for ITAM. And of course, we had to ask our panel what changes to asset management requirements do you see in the next 6 to 18 months. And first, IT leaders predict that higher levels of automation will be biggest change or expectation ITAM teams will face in the near future. This high levels of automation kind of came in the middle, maybe somewhere towards the top of the middle last year. So to see a jump right at the very top, makes sense. We're excited to see just because we do see the value of automation and freeing up time for ITAM teams to invest in innovation and restructuring processes that it really fits to the needs of the business. And automation really isn't just strategic. It's now almost a survival essential for IT. And again, it just so happens to run on information. So the enormous, the almost constant job of making certain asset data is complete and accurate, pretty much guarantees that automation and asset management will increasingly go hand-in-hand. Next on the list, is a greater attention to ESG initiatives. So this was a new item that we added to this question this year. And we were surprised to see it near the top of the list even passing expansion beyond IT assets, which was actually at the top of this list last year, I'll dive into ESG next in a couple of slides, and then move on to the next one. But under ESG, we have expansion beyond IT assets so continuing to build strategy around enterprise assets, IoT, OT, some of those industry assets. But you'll notice there's 3 items here that are in boxes. And when Mike and Michelle kind of talked through some of those customer stories, these 3 areas will be highlighted, but it also helps to see kind of where these box items exist, especially when we're looking at these same predictions from the CXO perspective. So let's take a look. And it really is nice to see that there's some alignment here between the overall results and the CXO results and how they're seeing the future of ITAM. The three boxes that you've seen from side to side, I'll go back for reference, you can see that these three slides or these three items, they shifted a little bit, but they're still pretty much in the same order. And one interesting difference is that the CXO puts increased use of AI and machine learning in the top 3 predictions for the near future. But in the overall predictions, it was ranked fifth, right from those collective responses. So I think that even just that disparate between maybe more practitioner level of the CXO level, I think that just really speaks to kind of the newness of AI in machine learning, leadership, they're probably looking across the industry, really catching on to the benefits of embedding AI and machine learning into their operations. And now teams are just now trying to catch up, trying to figure out how to embed AI into the work at a practical level. So AI and machine learning definitely, again, can bring value to ITAM. Earlier, I mentioned machine learning normalization as that example. But we were actually surprised to see it not at the very top because AI is such a hot topic right now. I'm sure we've all heard about it. And we're expected -- we did expect it to take first. But again, higher levels of automation really took that top spot from both the general and CXO levels. All right. So ESG -- I mentioned I would talk a little bit about ESG here for -- and what it means for ITAM. So what we found from our survey is that overall awareness of ESG is high. So we know what it is and we may be know some of the value it can bring. Yes, teams still are experiencing limitations with the tools and experience and we'll experience with it, but also the expertise which makes it challenging. Maybe they just don't have the right people or the know-how to really get things done in terms of contributing to some of these ESG initiatives. But we found that 63% of the panel said that ESG is a part of their long-term vision and priority. So willingness to invest in ESG and sustainable IT is very high. Yet at the same time, ESG reporting was also selected by the panel as the most difficult asset task to get right and the second only to security and risk management. So here on the right on the screen, these are the areas that are most important to the panel when it comes to ESG and sustainability. Again, the panel knows about ESG and even know where they can focus some of their efforts, like energy, efficiency and cost reduction, carbon footprint and emissions tracking, IT sourcing and supply chain improvements. The importance of ESG is there. Just organizations face challenges in terms of funding, implementation, measurement of these initiatives. And what's really clear right now is that our ITAM tools and processes need to catch up to some of those ESG needs. And finally, just quickly before Mike and Michelle dive into some of our customer stories and what our customers are doing, I really quick wanted to touch on the current state of cloud FinOps and ITAM. So about 43% of organizations, ITAM teams are proactively and consistently collaborating with FinOps and the Cloud Center of Excellence Teams or the CCOE teams. However, the norm in most organizations is that FinOps and ITAM remain pretty much separate specialized teams with only 5% of the panel reporting that one team is responsible for both FinOps and ITAM. But things are quickly changing. We asked to kind of what the long-term relationship between FinOps and ITAM will likely be, then 55% or over half of the panel predicts that ITAM and FinOps will be brought into a larger unified organization with ITAM that will manage all asset types using specialized tools on an enterprise-wide platform. And whereas -- here at the bottom of 11% say that the relationship between FinOps and ITAM will pretty much stay the same and remain separate functions, kind of only sharing information as needed. So it will be interesting to see how maybe this 11% will fare in terms of ITAM maturity in contrast to maybe the 55% of organizations we're predicting they'll move into a platform approach for ITAM and FinOps, kind of bringing those together in the future. So interesting data here. Now it's time for Mike and Michelle, I'm going to hand it over to you guys to talk a little bit more about these customer case studies and use cases for automation that collaboration between teams and maybe touch on the ESG a little bit.