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

All right. Well, we'll go ahead and get started here. I know folks will probably be joining in, but I want to make the most of everybody's time here today. Thank you for taking the time to join today's demos and our presentation on Elevating the Employee Experience with GenAI, which as we go through this presentation today, we'll -- you'll hear us speaking about Now Assist and Now Assist for HR service delivery. Now Assist is essentially our label and product name for our generative AI capabilities on the platform. So without further ado, we'll go ahead and jump in here. We have a lot of exciting content to cover, including our why behind GenAI, if you will, and our ServiceNow point of view on this game-changing innovation. We'll go through a brief demo of some of our most recently released GenAI capabilities that come -- came out with the February store release. And these capabilities are actually currently available to our HRSD Pro Plus and HRSD Enterprise Plus customers today. So really excited that this is all generally available capability for those -- with those entitlements. And then super grateful to have the opportunity to share just a little sneak peek into our road map at the end of our session here. And we want to keep this interactive. So please ask questions along the way. Now before we get started with our content, just a little bit about me. I've been with ServiceNow for just over 8 years in our HR and employee workflows area. I'm based in Denver, Colorado and have the opportunity over my past 8.5 years or so to work with many of our 1,500 Employee Workflows clients. One of my favorite parts of ServiceNow specifically is the innovation and that pace of innovation. I was actually a customer before I joined ServiceNow, and we were an early adopter of HR Service Delivery. We were going to use ServiceNow for HR case and knowledge management. So we were setting up our shared service center. And we deployed on the Eureka release. So today, to see how far we've come with Washington, D.C. coming out in just a few short weeks here and to now be an expert on our latest innovations in AI as well as employee growth and development is another key area where I focus, it's really exciting. And I am really grateful and humbled for the opportunity to collaborate with you all today. Again, we really want to keep this interactive. We have Caleb on the line as well. He is here to help with any chats that come in. And if there's any chats that come in that you think would be helpful for our discussion, Caleb, just interrupt me and happy to off-road a little bit as we get through our content today. All righty. So AI is not new to ServiceNow. In fact, since the Kingston release, which was quite a few years ago, we have been really strategic and intentional about our AI adoption plan and investments to really drive productivity and boost the overall employee experience. GenAI is, of course, one of our latest AI investments. If you attended Knowledge last year, you heard about it in the keynote sessions. And it was released in the Vancouver release just this past fall. We also have with generative AI that came out this past fall, we have Skills Intelligence, which is another key area of intelligence on the ServiceNow platform that was released in parallel with GenAI, again, back in that Vancouver release. So today, of course, our focus is on generative AI, but it is really important for you all to walk away from this session understanding that there are other components of AI woven throughout the HR service delivery experience, which helps to elevate and expand that AI into different areas of your employee experience across the board. So when we combine GenAI and the power of the Now Platform, we have created an exceptionally powerful and unmatched experience for the world of work. Our customers will create and orchestrate their digital workflows on the platform, and they've been doing so for years. And this platform is helping them to connect every system and digital process across their enterprise. So with that platform foundation, those enterprise workflows in place, we combine GenAI and end up with a massive productivity catalyst. So this is really how we're able to transform and capitalize on that potential of GenAI. We all know what GenAI does. I'm sure many of you have engaged with ChatGPT to summarize or create a new content, maybe even using generative AI to generate some content in terms of photographs or images. We are able to connect that power of generative AI and taking unstructured data and putting it together in a concise format to then bring it into the enterprise landscape. Again, ServiceNow is uniquely positioned to take that output of generative AI, that unstructured data and apply it through to an enterprise context through that workflow automation. The important takeaway here is that ServiceNow has that full automation technology in place to take action on that AI-generated content. By taking action on that content, we are maximizing productivity and efficiency, plus enhancing the overall experience through one intelligent platform. So I want to take you through an example highlighting why GenAI is so special on the ServiceNow platform, and again taking that unstructured data and putting it into action and triggering workflows and processes behind the scenes. Previous AI innovations before last year were largely focused in on identifying patterns through predictive intelligence. And so you might be familiar with recommended content for you, being able to proactively surface learning courses or integrations with learning posts that might be relevant to an end user based on their roles. Now with GenAI, we have the ability to create new patterns in 3 steps: Understanding context; synthesizing information; and generating content, which is really going to change the way in which employees interact with the ServiceNow platform and experience their world of work. So let's go through that example. When an employee asks, when will my tuition reimbursement be processed, GenAI is going to understand that person is frustrated and looking for immediate reassurance, especially if they have the multiple exclamation points and question marks along in their response there. Engaging a natural language, the platform then is going to take that natural language utterance and search across multiple data sources. So this could include various knowledge articles that list out the tuition reimbursement policy. It could potentially in the future include third-party data sources, between the search and crawl across these repository of information to identify the reason why the tuition reimbursement refund hasn't been processed yet. In this case, if the employee is interacting with your organization through a virtual agent, they're going to receive that response back in a conversational interface that was going to then help guide them through next steps to remediate their problem. Or potentially if they were doing this via search, they might be presented with a couple of links, which we'll see in our demo here, to then take action further as necessary to get their issue resolved. So when it comes to analysis for HR service delivery and partnering with our HR customers, we understand that in this industry, it is of the utmost importance to have the right guardrails in place and to have an ethical and responsible approach to GenAI strategies and the data protections that we need for your employees. So we know that all of our customers are stewards of their employees' data. And oftentimes, in the HR space, it's sensitive data. And we know that there are concerns about bias, hallucinations, use of that sensitive employee data. And so while this new capability is moving at an astounding pace, we are approaching this with both expediency and care. And we are keeping the trust and experience of our customers at the forefront. We have built in through thorough governance and required security on our platform to make sure your data will be protected and used responsibly. There are multiple different resources that we would be happy to share if our ethical and responsible approach to AI and generative AI is of interest to you. So please let us know if you have any questions. But we do feel that given how we've architected this solution, it truly is a best-in-class solution to help accelerate and enhance the overall HR service delivery experience for your employees. So with that in mind, we also understand that our customers look to us for prescriptive guidance on how to approach this digital transformation with out-of-the-box offerings tailored specifically to the HR line of business. With that as well as our human-centered approach to GenAI, I'm really excited to highlight today our Now Assist for HR capabilities. Again, this is our generative AI solution to transform how employees experience the world of work. Now Assist for HR will help drive new levels of productivity, self-service and cost reduction for our customers with generative AI accessible right on the ServiceNow platform. So before I hop into the demo, I'm going to take a quick pause and look at the chat here. Caleb, any questions that we need to address?

Not right now. Thanks for checking.

All right. So without further ado here, I'm going to go ahead and jump into a demonstration. And this demonstration is of some of the new features that have been released with the Vancouver release as well as our February release for analysis for HR. So with that, I'm going to go ahead and pull up our demo environment here. Just a quick check that you're seeing my employee portal. All righty. So I've logged in here as Maria, and Maria is a recently promoted manager within the organization. And she has a few different questions about getting set up as a new manager and making sure that she is able to take advantage of all of the benefits and programs that are provided to her while also proactively supporting her employees to the best of her ability. And so in this case here, there's a few ways in which she can engage. Now in this case here, potentially, she since has been newly promoted, she is getting overwhelmed with a lot of e-mails coming into her inbox. And she needs to figure out how she can work a little bit more productively, if you will. And so in this case here, there's a couple of channels in which Maria has the ability to go through and engage. We could go in and search. But since this is something where she's just looking for a little bit more guidance and she's feeling really overwhelmed, she wants to have a little bit more of a conversation about this. And so she's able to go in and engage with the virtual agent. Now this virtual agent is quite different than the virtual agent that has been supported in prior releases. This virtual agent is supported by Now Assist in our generative AI capabilities. What that means is no longer do you have to spend days and weeks developing and coding using the virtual agent designer, what your conversation flows look like. You can rapidly generate conversational virtual agent topics within just a matter of moments. And so here, let's go ahead and type this in. She wants to have some of her e-mails redirected to maybe a team inbox to better scale this model here. So in this case here, Maria doesn't need to know if it's IT that's going to be doing this as she needs to talk to HR to get a separate e-mail account set up, set up something for her team. It's going to automatically come back and say that we can help with the new e-mail accounts and we can get started on this. Now in this case here, we're able to go ahead and then populate here what we would like to do in terms of the preferred e-mail address. So in this case here, that looks great, and we're able to go ahead and submit this over. We don't need any attachments. Again, super conversational, but we're actually submitting in the background a new request. And so within just a couple of quick comments back to the virtual agent, Maria was able to get that new account set up for her team, and she's going to be able to work more productively and efficiently without having her personal inbox overwhelmed by all of these new requests coming in for support from her team. Now let's take a different example here. In this case here, maybe Maria needs to change her address. So in this case here, again, using natural language, maybe this individual has just moved, and we have the capability to then go ahead and potentially go and update that. Unfortunately, my virtual agent seems to be timing out here. So we'll maybe circle back to that use case as we do a refresh. Let me go ahead and refresh in my browser here though. All righty. So the next use case here -- and again, the idea with generative AI is that we want to be able to empower your employees to engage in their various channels of choice. And so in this case here, we saw Maria was able to chat with the virtual agent and get her IT support. But maybe she has a question about her benefits. And she wants to know if she goes out on parental leave, does she still get benefits. So we can go through. And again, we're engaging with natural language. We don't have to know the appropriate terms or search queries. And what's going to happen here is the search results are going to go ahead and come back. You'll see here, right off the bat, we don't have to read through a lengthy article. It's going to summarize and say, yes, they remain the same. We can review any additional requirements. And then we also see the source here. Now something that's really important to call out, as we look at deploying GenAI throughout the organization is training your employees' behaviors to interact with this so that we can continue to enhance that overall experience. So you'll notice here we can do a quick thumbs up or thumbs down, and that's going to help curate the responses to be much more impactful for your employees as they continue to receive support and services powered through Now Assist. So that was a quick example here of how we have the ability to support the employee, again, through 2 channels of choice. You'll see in our road map here, channels of choice and omnichannel experiences are something that we're investing in substantially over this coming year. So we'll talk about that a little bit more. But for now, I want to get in to highlight a couple of the additional features here. And next, we are going to focus in on our Now Assist panel. So as Maria, the employee, we saw how she was able to quickly go in and do a search and get an answer or engage with the virtual agent and in a couple of moments, submit a request that's going over to the IT organization. It took her less than 3 minutes likely in total to get 2 really important items addressed, one that was important, is a moment that matters to her, going out on parental leave and the other really important in that it's going to boost our productivity and how she can work and lead her team to have that separate e-mail account set up. Now we still want to boost that employee experience and drive those productivities and efficiencies for your HR support teams as well. And there's a few ways in which we can do this. The first is maybe we've logged in here as our HR support agent, and we've gone up to the Now Assist panel, which I like to think of as the virtual support agent to help empower and boost the efficiencies of your HR organization. And maybe here, our HR agent was just chatting with one of his colleagues who was a little bit stuck on a case that they were working. And Harry wants to be able to coach him a little bit as Harry is the team lead. He can go to the Now Assist panel, enter in the case number that his colleague provided him and say that we want to get a summary. Let's go ahead and go back here. Quick refresh. Opened up my demo, it seems too early for you guys today. Okay, so case number. And essentially, what's going to happen is Now Assist is going to search for that case, find that case and then summarize it here in this conversational interface. So we're able to see what the issue is. There was a change in how an employee was treated after announcing they were going to be taking parental leave. And there's a little bit of concern that is going on. And so this is absolutely a sensitive case here that's happening. So Harry is grateful that his colleague brought it up to him so that he's able to take a look further and then dive in on this item specifically. In this case here, it was just a couple of quick seconds. Harry had the case number, we got the quick summary. And right off the bat, he knew this was something that he needs to dig in further. So this is really important in that we're able to streamline and accelerate service delivery to allow for your HR resources to focus in on those sensitive moments that matter. We're also keeping a human in the loop so that we have that human evaluation saying, wow, this is a sensitive employee relations case. I need to invest and allocate time in managing this versus maybe automating it a little bit further. So in the spirit of potentially automating things a little bit further, I do want to highlight a couple of the key capabilities that are available to your HR agents to help them more expediently process the HR tickets. Now in this case here, this is just an example of a general inquiry HR case that we have. One quick resource available to help boost the productivity of your HR agents, maybe this is something that was transferred over at a shift change from one individual to another. That new individual picks it up. We're able to take a look at the issue. Now Assist quickly generated a summary based on all of the work notes and prior engagements on this record, and then we can see that the resolution is still in progress. And so in this case here, we can quickly go in and share this over to the work notes if we want to keep this or again, we can go out to the Now Assist panel here and potentially go in and generate resolution notes. So in this case here, we can go through, type in a new prompt for analysis, and it will generate resolution notes. Once we generate resolution notes, we can quickly copy and paste these over and close out the case. But again, the importance of keeping a human in the loop, we know, again, having a trustworthy approach to our AI-generated solution here, we might need to make some modifications. But here are some quick resolution notes. We can do a copy, paste this over, post that, and then that will be tracked for further records. Now let's move this example here forward a little bit further. I'm going to highlight one of our features that's currently in limited access but available for all currently licensed Now Assist customers. And this is taking it a step further. So once we have that case that's been closed, we've used GenAI to potentially summarize the case and have resolution notes. We've closed out this case completely here. But we noticed that maybe this is an opportunity where this was a pretty basic question, and we didn't have a Knowledge article to deflect that case from coming in via the employee portal. Once this case has been closed and once we've validated that it is the appropriate response and resolution, which happens again through basic service management practices here, we're able to then have the action to generate an article. Now this is using GenAI to its full potential here. We were able to use it to accelerate the case management process, to provide standard answers adhering to standard operating procedures, making sure that you have resolution notes, that you have work notes to track what happened on that case in the case that there's ever an audit, but then taking those outputs and saying we are now going to use this to scale service delivery to minimize the amount of times that employees have to take HR resources time to answer this very simple question by creating a Knowledge-based article to then deflect this case. In this case here, we just have a very simple template that's being auto populated with this Knowledge article. We're able to then publish or send it off on its approval workflows as necessary here, again, accelerating the time to empowering your employees with information to answer their questions and help them be productive in the workplace. So I know this was a very quick demo highlighting a few of our key features here. Just to do a quick recap before we get into our road map here, some highlights that we showed today. Now Assist on EC Pro is providing that conversational experience for both simple questions and advanced services. We saw that in both search as well as virtual agents. It's really interesting, when working with our customers, oftentimes people think, well, everyone is going to go to the virtual agent because that's going to be so easy and fast for them. But research actually shows that employees when they have a sensitive question, they oftentimes don't go directly to the virtual agent. Just as we saw in our demo today, Maria went to the virtual agent when she needed an e-mail account setup to deflect some of the work coming into her personal inbox. But when she had a question about parental leave, she went to the search because she would rather self-serve that content first and learn a little bit more. The idea here is it doesn't matter. We are providing GenAI through multiple different channels to empower your employees regardless of how they look to get support, still giving them that exceptional consumer-grade experience. We then transitioned into our demo and saw the Now Assist panel to streamline and accelerate service delivery, keeping that human-in-the-loop approach. Again, this will help to reduce risk and ensure compliance with standard operating procedures, making it easy for HR agents to add work notes, add resolution notes and adhere to your standard processes and procedures for supporting employee cases as they come in. And then taking that a step further, we're able to totally maximize the impact of having all of that rich data in the HR case to then generate a Knowledge-based article, content that is going to further help empower you to deflect cases and enable your HR teams to focus in on those higher-touch moments that matter, such as that employee relations investigation that we saw come through. So before I hop into road map here, any questions that we need to address? All right. Looks like chat is relatively empty here. And so we'll go ahead. And again, as you have questions, feel free to pop those in the chat. Caleb is here to help address anything that comes up. And again, it looks like we probably will have some time at the end for open Q&A as well. So we're going to go ahead and get into the final portion of our agenda, which is looking at some of our future capabilities. And again, the pace of innovation, especially in the space of GenAI, is something that's really exciting here. So this next part of the presentation may contain forward-looking statements that are based on our current beliefs of ServiceNow and are based on the information that we have available to us today. These forward-looking statements, of course, are dependent on our road map, and there are various uncertainties that may cause that road map to change. And you shouldn't necessarily rely on what you're seeing here solely for your decision-making purpose, but keep it in mind as this does help to inform where we are thinking of going in the future and give you some insights into our vision and strategy. So again, our pace of innovation with GenAI has been really rapid. We've been doing quarterly releases. And these have taken place since the fall of 2023 and are planned to be quarterly throughout 2024. So a lot to highlight here. Now this slide is a bit of an eye chart here. In Q1 here, all the way over on that left-hand column, these are the capabilities that came out with our February release and are kind of tied into the Washington, D.C. release as well. So we had that Now Assist in VA, which you saw. Note that with VA, we can actually translate those experiences. So it's a great opportunity to provide that GenAI experience in other translated languages as you look to roll this out to your organizations. We have that Knowledge article generation, which we just saw. And then we also have that Now Assist assistant in the HR agent work space to help accelerate again, that service delivery. So as we look at some of our road map capabilities here, there are multiple features coming out that we have. In Q2, we are really going to be focusing in on helping to accelerate the experience for our current customers potentially that have been using the legacy virtual agent and the NLU model to the large language model powered virtual agent with a migration tool. We're also going to look to enhance our integrations with other LLM providers, such as Google Bard, OpenAI and Azure via the controller. We are also going to look at providing additional enhancements for both the employee as well as the agents through having additional capabilities with the virtual agent. One of my favorites here and this is, I think, a twofold benefit is sensitivity detection for HR. So in the example that we saw today, the virtual assistant for the HR professional saw that this was a sensitive employee relations case. The manager was potentially discriminating against an employee for taking parental leave. In that case, we know that since we have a human in the loop, we need to provide human intervention here. But with sensitivity detection in the future, if an employee is chatting, say, with the virtual agent and they mention, I'm nervous to go out on parental leave because of the perception of my team. With sensitivity detection, we're able to understand the intent and say, this is something that is a little bit beyond what a bot can handle. Let me transfer you to a live agent. So in the case, again, maybe where it's a sensitive moment, discrimination and employee relations concern or another type of sensitive moment, I'm not getting paid on time or I'm going to potentially not have the ability to retain an employee because they're interviewing with another company. These are all things that can then be rapidly escalated to HR, providing the employee the experience of service delivery in the time frame that they need and allowing HR to focus in on those more important, sensitive moments that matter and really putting the human back in HR, allowing them to not be so transactionally focused but more strategic and impactful to the business and the employees they serve. Another key feature here that we have is an infusion of multiple source for HR data. So another example that I like to think of here is being able to say that I would like to take some vacation, but I don't know how much PTO I have. Maybe you don't store PTO balances in ServiceNow today, but you keep that on your core HR system of record. Without having to script or code a complex integration hub spoke and a dynamic conversation topic using NLU, you will be able to use GenAI in our LLM-powered virtual agent conversations to ping into Workday or whatever your HCM is, Oracle PeopleSoft and say, you have 5 days of PTO right now. Would you like me to help you schedule it? And you can say, yes, I'd like to start PTO the week after next. And it will auto-populate it with the date of March 8 or whatever it might be based again on your natural language conversation. So again, furthering that conversational experience here. Now as we look at some key themes, where we're looking to head with generative AI, there are 3 key areas of focus for our teams. That's really case deflection, making sure that employees get answers to any question; the other channel of choice, making it so anytime, anywhere, they can ask their questions and hopefully get an answer or be directed to somebody that can answer their question. We want to have a consistent employee experience across these different channels, and we want to make sure that it's accessible to everybody as well. So potentially you have a large population of employees that are deskless workers that are working in a distribution center or a manufacturing warehouse. We are going to invest heavily in providing them voice-operated channels of engaging with our LLM analysis to get their answers just over a quick conversation just like they might with Siri today. We're also going to invest in making sure that they have SMS channels. And then, of course, we have our Microsoft Teams or other conversational interfaces available to your more desk-based workers. And then lastly, you'll see us getting into the space of talent development much more. And we're going to be using GenAI to help boost employee growth and development, helping to curate journeys for your employees, making sure that you're maximizing their skill sets and empowering them to do their best work and grow as an employee at your organization versus potentially moving on somewhere else where they see a different growth opportunity. So with all of that in mind, I do want to take a quick moment to surface our employee workload spring series of events. This spring series is going to be a bunch of virtual events similar to our demo center here today, but we also have a micro site setup that's curated with content specific to both employee growth and development as well as generative AI. Content will be added to this micro site, which you can access if you just scan that QR code below there, and it will be added on a weekly basis. So new thought leadership around GenAI as well as using generative AI to boost your talent and employee growth strategies here. So again, be sure to bookmark the site. Content will be added on a weekly basis. So I want to thank you so much for your time and interest in learning more about GenAI today. Hopefully, you've got to see a glimpse into how GenAI can transform and up-level your employee experience. With that, we'll go ahead and open it up for any questions if there are any. Otherwise, I'll give you some time back to your days. All right. Well, thank you so much, and please reach out if you have any questions. Great to see you all today.