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ServiceNow, Inc. (NYSE:NOW) 2022 Goldman Sachs Communacopia + Technology Conference Transcript September 14, 2022 4:15 PM ET

Executives

Bill McDermott - President and CEO

Analysts

Kash Rangan - Goldman Sachs

Kash Rangan

The volume, I will turn down the volume and the music. The volume from Bill McDermott and this discussion is going to just go right back up. Bill has heard the story a million times. But the first time I met you Bill was, I don’t know 2,000 or 2003, I forget.

The NASDAQ was at 1,000, stocks were trading at 8 times earnings, and they said, oh, you got to meet this new incoming leader of this other company. I was down and I thought I was going to get fired and lose my job because tech was just completely out on out.

30-minute meeting with Bill. I came out feeling great about the job, about the industry, software industry, the stock market. It was just the beginning of, wow, there’s somebody who can actually capitalize an iconic company and not just nurse it back to health but vibrancy. So if you could do something like that, the beginning of about 20 years of getting to know you and watching your fantastic career.

Bill McDermott

Right.

Kash Rangan

So it’s a great pleasure that finally we could be on stage together in front of a live audience, and in that vein, just given the sagging spirits of the market, hopefully, you have nice things to say that it will be yet another revisiting of a bottom in the market. Hopefully, things look up.

Bill McDermott

It will be, Kash. I have more material to work with now.

Kash Rangan

See. There you go. There you go. So, with that, welcome, everybody to the conference. As I was just telling Bill that this is -- this could be the largest Goldman Sachs Conference put together in many, many years. So thank you for your attendance and we owe it to content and having people like Bill willing to spend the time with us. So why don’t we jump right in?

Bill McDermott

Thank you, Kash.

Question-and-Answer Session

Q - Kash Rangan

Yeah. What is your most audacious goal for ServiceNow? Long term, what -- if you were to come back to the Goldman Sachs 2027 Conference, what does ServiceNow look like? I am not asking about revenue guidance. We know that, right? But what -- how would you like ServiceNow to look like to be known as and how do you get there?

Bill McDermott

By 2027 I definitely want you to say ServiceNow is the defining enterprise software company of the 21st century and everything you said since 2019 has happened. We will build great products. So the strategy is an organic growth strategy. We are building great products and ServiceNow has evolved into a platform company. We are providing a tremendous service to our customers.

If you look at the business impact, they are deriving from the platform. The results speak for themselves. We have an unbelievable team. The team is super strong and very, very happy and that’s necessary to scale a company like ServiceNow to be the defining one and the ecosystem.

Today, I left 4,000 partners in Santa Clara. They weren’t all there in person, but it was a great turnout. And they believe and they are building with us geographically in industries and personas. So the future is bright, and by then, we will have accomplished the 2026 ambition, which I have announced and we will be celebrating on stage, and you will say, you did it again.

Kash Rangan

Amazing. Yeah. One of the things I didn’t recall is, whenever I spent time with you, I came out inspired that I could just go take on any challenge. I know you and I discussed a challenge that you post me to do and I did accomplish that, and I have said, I would not have done it had not been inspired by Bill. So now, let’s move to technology.

Bill McDermott

Sure.

Kash Rangan

Workflow technology. I mean what is this workflow technology, because I grew up -- you and I grew up in the time that apps were developed using a database. You bought a database server and application server, development tools and you spent six months, nine months building these things.

Bill McDermott

Right.

Kash Rangan

Now you guys have been talking about workflow-based technology to build new applications, and yes, you have a new friend. Satya Nadella talked about -- he proclaimed 75% of apps will be built using no-code local technology. So there’s some agreements…

Bill McDermott

Yeah.

Kash Rangan

… some consents are starting to build here, and I have already heard people say, hey, is it 500 million applications in the backlog. Another person said, well, I heard it 750 million. Maybe it’s coming from Bill McDermott. Are you the man propagating the 500 million applications in the backlog? If so, what exactly gives you the conviction that this is the new way we are going to be building applications, why not go back to the old ways?

Bill McDermott

Well, Kash, it’s 750 million net new applications will be built on low-code platforms in the next two years. So this is a low-code revolution. And the reason for that is pretty simple. The 20th century platforms were so complicated and they are so difficult to change and they don’t enable the business agility that’s required to navigate environments like this, where you all deal with investors every day and we don’t have to rewrite the script of inflation, tighter monetary policy, dislocated supply chains, wars in Ukraine, you know it all.

So all of these external factors force businesses to change and they have to change quickly. So we are a born in the cloud company, it’s a pure-play cloud platform and we just celebrated our 10 years as a public company, by the way.

Kash Rangan

Congratulations.

Bill McDermott

I’d like to send a big thank you to Fred Luddy, the founder of the company, for the original idea to make a platform that made everyday people in the office, made them a little bit better, gave them a little better experience and really improve their productivity.

So to simplify the answer, think about a workflow automation platform that can navigate an enterprise end-to-end from the way IT supports the business to the way you manage the employee experience, to how you service your customers.

And as Kash said, how you build net new innovation on that same platform, which gives you unique competitive advantage, because you solve the integration problem on one enterprise wide platform and that’s called the Now Platform from ServiceNow. And it’s interesting. You mentioned we have been pals for 20 years and that’s true. It’s an honor for me to have you as a friend over that time.

Kash Rangan

Thank you, Bill, on my part.

Bill McDermott

Really, it’s really an honor. But what’s amazing is, most of the companies we were talking about back then were 20th century companies. There are very few 21st century born in the cloud market leaders like ServiceNow.

In fact, I can’t think of any at our size and scale. So this is a segment of one company with incredible topline growth, the best margins in the business and a management team that’s born to win. So it’s a lot to like.

Kash Rangan

Winner’s dream.

Bill McDermott

Winner’s dream.

Kash Rangan

Yeah.

Bill McDermott

Absolutely.

Kash Rangan

Bill…

Bill McDermott

It’s so funny. Someone brought up the book today and they said, what is it about the book that I should know? I said, well, if you just read the first quote in the book, you know everything. When Robert Kennedy said, some men see things as they are and say why. I dream things that never were and say why not. And that’s the way I think about business. If not us, who? If not now, when? Why not us? And that’s the attitude we take to the office every day.

Kash Rangan

I have a story that I cannot discuss in public, but why not, that why not? I think you are inspired with that why not somebody that we both know that absolutely did. It’s unthinkable. We will discuss that offline, but…

Bill McDermott

Yeah.

Kash Rangan

… you can guess who that is. So I like your why not.

Bill McDermott

Yeah.

Kash Rangan

So, Bill, give us an example. So this workflow technology is so good. Can you think of some mission-critical applications that were built using the ServiceNow workflow that we can look at and say, hey, this is a pretty decent validation of Bill’s vision?

Bill McDermott

Sure. You could take a very well-known German auto manufacturer who is dealing with 30 million parts, 4,000 suppliers between Europe and Mexico, and has to in real time reorient the supply chain on a low-code platform to mitigate the risk of a very, very complex supply chain.

We could think of another one in auto that basically is a luxury provider of great autos and they now have to be more like Tesla where they can configure a vehicle, especially in EV in the perfect color configuration be able to change that across a whole dealer network.

In one portal that’s designed for the customer experience and any change could be made in real-time within literally days of the actual final order, huge customer satisfaction, huge simplicity back to the dealers, more sales productivity for the manufacturer.

Or you could take a very well-known bank in New York City right down the block from you, even though you are a great customer too. And what they are doing is navigating across 24 very complex platforms.

They use ServiceNow’s customer master database to aggregate the data so they have it in one place, where they can provide one user experience with all the data and all the dashboard intricacies and look at workflows across the enterprise all in real-time.

So when there’s a vulnerability, there’s an outage, there’s some kind of a problem. They could zero right in on it and they can fix it, because they know what’s going on and that couldn’t have been done without the ServiceNow platform, which is why I often call it the platform of all platforms.

Recently, we made a move to help the ERP companies in partnership with them, because if you look at a well-known multinational manufacturer in Japan, what they had to do is really look at their financials and their accounting needs.

It was so complex that they weren’t using their core system. They were using spreadsheets and mail and text to solve very complicated financial problems. That’s not a good idea. So we put the Now Platform over that in days on a shoestring budget and made their ERP, in this case, financials experience world-class. Again, rapid innovation.

If you take well-known agencies in the United States Government trying to provide a great service that had very low satisfaction scores, then they go with ServiceNow. So everything can serve their constituents on the mobile.

They can book conference rooms. They can set up appointments. They can even take out house loans from different administrative units without ever leaving their mobile UI, and the best part of all, it’s a gorgeous UI.

So this weekend, I happen to have the honor of speaking at the Black Corporate Conference in Laguna. And I realize that our Tokyo release, which we are announcing this month, I will be in Tokyo in a couple of weeks, actually in-person, because I want to meet our customers and our partners, because Japan has to go for the cloud. The world’s third largest economy has to go for the cloud. We are going to help them get there.

But what we are looking at now is, the whole enterprise concept in the cloud is where it’s at. So people want to manage risk. They want to manage ESG. They want to manage all their assets. And they want to do it in real time. And they want to do it in the cloud.

But they need one platform that actually can do that and not compete with, replace, annoy all the other investments they have done. No, cooperate with them. Make them actually relevant and better. And then if they don’t stand up over time, you can turn off the switches and then capture the productivity and the margin improvement with ServiceNow. So that’s a little taste.

Kash Rangan

Those are extremely diverse use cases, but united by one common underlying technology, really interesting. I want to go back to your core products, ITOM, ITSM. A question that I get is, how much more room to run, I mean, where are we in the adoption cycle? Is this not the case of one day we are going to wake up and say, oh, mature, right? But what you -- what do you think of that statement that we don’t have that much of a runway, and if we do have a runway, what is the reason for your conviction that it’s a long runway?

Bill McDermott

Yeah. I know what mature looks like. This isn’t mature. When ServiceNow first went public, Gartner had sized the market for ITSM at $1 billion. Gartner has updated the ITSM market by 2024 to be a $9 billion addressable market.

Kash Rangan

Still too low?

Bill McDermott

Right. Now this is just in the IT segment of our business. So we are the definitive market leader in that segment, but we don’t have a single customer that is running all of the workflows from ServiceNow. So there’s so much more we can do.

So what’s happening now is 90% of our customers are investing in multiple workflows when they close a contract with ServiceNow. So we are talking about IT from a security and assets and operations management perspective, but we are talking about the employee experience.

We are in a talent war like no other and if you can’t recruit higher onboard, provide all the services that your employees need in one portal with a gorgeous UX up to an including moments that matter, whether it’s maternity leave, leave of absence, healthcare issues, and ultimately, when you retire an employee and you afford them, all of that has to be world-class and we have the best employee experience in the business.

Then when you think about customer service management, everybody has got to be direct-to-consumer. Just think about how the streaming business has transformed media and entertainment. Direct-to-consumer, gorgeous user experience.

So it’s no longer okay. Even in the CRM context to have a great engagement layer. Who cares if you engage me and you sell me something, if the moment of truth happens and I don’t get a great service? What we do is we provide the great service.

And we can give you the engagement too, but we could also cooperate with market leaders that have done good at that, and we can handle all the mid office, the back office and the IT things that generate a dynamite experience.

So when great companies like Disney scale, we can scale up with them, and transform and invent new business models. And then, of course, you have the creator side of it, where these net new applications are being built to transform businesses.

So what am I going with this? We are a platform company. So it’s not just an app, it is a platform where organic things are happening on a net new side where people are building their own apps on it and generating tremendous dependencies as a result. The customer experience will always be on top of every CEO’s list, so too will the employee experience and the IT experience holds it all together.

One of the things that was interesting when I spoke this weekend, I was talking about procurement and we just announced Procurement Service Management as a product. And I explained that we, because we care about diversity, equity and inclusion, we believe in ESG and we report on that. It’s pretty important that if you are procuring things, you procure from MWBE organizations and you give people a fair chance at your business.

Well, instead of the average, which is like 2% of your spend going in that direction, we have 16% and I am proud of that. Yes, we have very good leaders. But I couldn’t do it without the Now Platform, because we create the rules in the workflow automation to make it happen and we learn things all the time.

For example, if you want to make it work and you want to give businesses a break, you have to pay them earlier than you would pay mature ones and we are willing to make that rule change to accommodate our values.

And I know a lot of other companies would be as well. So we have today 11 businesses in the cloud that are generating more than 200 million contract value per annum. That’s 11 companies in a company and we are just getting started.

Kash Rangan

I know that you are way ahead of your time when it came to diversity, equity, inclusion, back in 2006, 2007, somebody that you and I know, somebody that may be my family, you had this idea that women in executive leadership is a possibility. You have this amazing program, which is nothing relevant to ServiceNow. But as you talked about this program, I am reminded by of the two women you picked up and trained and one of them is still working with you.

Bill McDermott

Yeah.

Kash Rangan

And the other one, identity will not be named due conflict of reasons, but…

Bill McDermott

Yeah.

Kash Rangan

… that was 15 years, 16 years back.

Bill McDermott

Exactly.

Kash Rangan

Yeah.

Bill McDermott

Exactly. Some of this is data and its technology, and some of this is really the dream and the inspiration. When I was 21 years old, somebody gave me a break, and I wanted it, and I needed it, and I got it, and I never forgot that.

Today, I live for giving other people their break and creating a culture where everybody really cares about each other, about the customer and about excellent, excellent products, services and delivery, so we are regarded as an examplar corporation.

But what we learn is diversity rules, diverse companies perform better and we can always look at the results. But the inspiration comes from home, you have got a little idea, that I don’t have. You are a specialist in an area, I am not.

Wow, you come from a different upbringing than I did. Different education, what can we learn from each other? And we really try to foster that. I have always said anything worth communicating is almost always under communicated. So this is a high touch sport. We all have to be in it together.

Kash Rangan

I had a fabulous opportunity to listen to President Obama and actually meet him last week, and this is exactly what he said, listen to diverse opinions, makes the decisions richer.

Bill McDermott

Exactly.

Kash Rangan

The next one I wanted to ask you, the products that you announced at your user conference ServiceNow Knowledge, what has been the customer response to some of the new offerings when you have these discussions?

Bill McDermott

It’s fantastic. This is an interesting scenario also. In the cloud, you are always innovating and the innovation is on demand. But follow me on this. Does anybody have a Tesla? I have a Tesla. And what I find sensational about the Tesla in this context is, if I program at a 2 o’clock in the morning when I am not going to be driving it to give me the latest innovation and that download takes place when I start the car up in the morning, I actually push the button, that innovation is in there. We do invisible upgrades.

So when other companies are talking about shutting you down for days on end while they give you the latest release, the upgrade process is painful, it’s expensive, it’s extremely dangerous to business continuity. We don’t do that.

So when we give you our new releases, which we do giant releases twice a year and we always name them after a city somewhere in the world. In March, it was San Diego, and in September, it’s Tokyo. That’s why we are going to be in Tokyo just like we were in San Diego.

And what you hear about ServiceNow is, I love the UI. The UI is really gorgeous and we put enormous effort into the design of that user experience, and we have some incredible leadership in that regard. The new features, the new functionality, it always works.

Ask anybody. First 100 days, I was with ServiceNow, I traveled the world. Thank goodness because it was before COVID. I met the whole team, met the biggest customers in the world and I expected to walk out with my to do list of all the things I had to fix and I don’t have one complaint. The only thing I had is do more, do more. Let’s go, let’s go, let’s go. How do I do this? Can I do that? And it’s just a virtuous cycle of innovation.

And now, as I told you, Enterprise Asset Management, this real focus on enterprise security and tying that all into ESG, also Procurement Service Management and so on. These are all examples of new release level productivity and innovation that’s coming in Tokyo.

The San Diego release was sensational. We are always on time. We are always on quality. And if we say we are going to deliver something, it’s in there. Best of all, as you carry your innovation forward and you say, okay, I build on the low-code platform. I have my secret sauce. I want it my way.

You carry all that forward with you. You don’t need a team of consultants to rewrite the custom configuration of the custom code. That’s all part of your instance in our cloud. That is breathtaking. That is what customers want. If they customize something for their own unique secret sauce or we build it and it’s preconfigured in there, it’s all the same to us. It’s theirs.

Kash Rangan

Got it. Let’s talk about -- I know you talked about ITOM and ITSM, then moving on to employee and customer workflows.

Bill McDermott

Yeah.

Kash Rangan

Softer great start. Are you seeing -- what kind of potential do you see ahead for these two workflows? Could they become multi-billion dollar businesses long-term?

Bill McDermott

No doubt. In fact, our next $1 billion cloud business will be Customer Service Management, because let’s face it, the customer experience is how you generate your revenue, it’s how you keep the revenue you have and it’s how you see around corners with new business models and the constant innovation to stay on top of things. So that’s the next billion.

The employee experience, you have to appreciate how complicated it is out there to appreciate the employee experience in ServiceNow. So, for example, it is not uncommon to deal with a customer who has one HR application for every 1,000 employees. Doesn’t that sound outrageous? It’s actually true.

And with ServiceNow, you can literally have one experience, one portal, one layer of service that connects everybody on their mobile, because they are all on the move, whether they are home, they are in the office or they are just on the run. It really doesn’t matter in terms of the experience that we deliver, because everything we build has a mobile-first concept to it.

And the employee experience is really doing well and it continues to do extremely well, and I don’t see the war for talent slowing down. Of course, in our case, I see it being a huge advantage that other people are hitting the brakes and it will just give us more access to more talent.

It takes 7,000 resumes to get an applicant into ServiceNow. So we have put a lot of focus on that. I think other companies should have a tight focus on that and have a workflow automation layer that enables great recruiting and hiring and so forth. So those businesses are doing amazing. And look, in 20 out of the top 20 deals that we reported in our Q2 earnings, low code was in 20 out of 20.

Kash Rangan

Wow!

Bill McDermott

That’s a revolution. And IT, it continues to grow very close to the overall corporate rate. So as it relates to the maturity concern, not even. And that’s what’s really great, like all these businesses are so strong.

Kash Rangan

Creator Workflow, that’s the…

Bill McDermott

Yeah.

Kash Rangan

…that’s -- every application software company is, one -- has at one point in time with their life tried to be a platform company.

Bill McDermott

Yeah.

Kash Rangan

And it’s -- the success rate is pretty mixed. How do you make Creator Workflow, which is a customer application development platform but based on workflow technology? What -- I am curious, what have you learned from the other companies and how you plan to apply that to make Creator Workflow potentially also a multi-billion dollar product?

Bill McDermott

Yeah. What’s interesting and it will be a multi-billion product. ServiceNow actually was a low-code platform to begin with. That’s what it was. It just so happened that IT people saw the magic in it and that’s where we made our fastest advancements.

But it could have easily been in the employee experience, the customer service experience or you could have just put it out there as a platform that people could build on. What’s interesting now is all those things have come together once.

And if you think about business and you think about digital transformation, 80% of the digital transformation efforts out there don’t pay off, and you say, why is that? Integration. One system doesn’t integrate well with another system, and ultimately, these integration challenges of clunky 20th century architectures get in the way of a good digital transformation idea.

With ServiceNow, it is born in the cloud, it was all organically innovated, if we did a small tuck-in, we rewrote the code to the ServiceNow platform standard and one begets another. And what we are seeing now, I had one CEO from a bank tell me he’s got to write or rewrite 5,000 legacy applications. And I said, wow, it sounds like a lot.

So how long is that going to take you? Oh, Bill, I will be long retired when all that’s done as well. You think maybe we should figure out of the 5,000, which ones of the 25 that have the big dollar signs on them? And maybe we should just take the low-code platform from ServiceNow and get those out the door now, high net worth clients and so forth. You could do this?

So our biggest challenge right now is just making everybody aware of what’s possible on the platform, which is why we have a great brand with the world works with ServiceNow, Goldman Sachs works with ServiceNow, Kash Rangan works with ServiceNow and really breaking that down from the global to the company, to the persona.

Because most businesses don’t get digital transformation over the line, because they don’t have necessarily great role model leadership saying, we are going to be born in the cloud in terms of how we are going to experience the future and we are going to line up the IT leadership with the business leadership, and we are going to align on common standards. And that’s what gives us such a great advantage, but that’s also the work in front of us to make sure enough people understand what’s possible.

Kash Rangan

There was a concerning thing that you said, 80% of digital transformation projects don’t achieve their full potential. But if that’s the case, then should investors be concerned that this is a secular trend, because we are all hoping that this transformation thing really is a big tailwind for us?

Bill McDermott

Digital First is not an option. 95% of the CEOs know that and they have a Digital First strategy. The reason that you should feel really good about that remark is now ServiceNow is as ServiceNow section of your agenda today, is there with a platform that can accommodate the integration needs of every business geographically and by industry in the Fortune 2000.

And they don’t have to undo what they have done, we can make all the ones they have already invested in better or they can take a clean sheet design approach on ServiceNow and we can do it all. We could do it in pieces. We could do it all. We can collaborate with others.

We have a very unique company and a very unique platform and we are highly cooperative with everybody, and we don’t have a competitor on our dashboard saying, we have got to win against them today. No one has to lose for ServiceNow to win and that’s the beauty of the story.

Kash Rangan

Not even Microsoft, but when you think of them…

Bill McDermott

Not at all.

Kash Rangan

... the power apps and the workflow platform?

Bill McDermott

No. No. First of all, Satya is a very good friend of mine and Microsoft has been a great friend of ServiceNow’s since the inception of the company. So when you think about Microsoft Dynamics, we run it as an underlying system of record, and then, of course, we do all the workflow things to make it is super exciting.

If you think about Azure, we team up with Microsoft on Azure. And if you think about IL5 security in one specific sense, there will be situations where we will be highly cooperative and do things collaboratively for especially public sector but not limited to that.

If you look at Office 365, you look at Teams, what do we got, like 250 million Teams users out there now, all of that is seamlessly integrated into the Now Platform. So when you are a Teams’ user, you don’t know if you are coming in through ServiceNow or you are coming into Microsoft, because we did the deep engineering effort to make sure the integration was world class.

So if you think about power app or other things, Microsoft is a great company. Again, no one has to lose for us to win. Our strength is in the breadth and the depth of what we do and in the enterprise nature of those apps. So it’s not necessarily for one particular department to optimize one particular process.

When you do something on the ServiceNow, you can build it, but it’s now integrated into all the other mission-critical business processes. So it’s a size, it’s a scale and it’s an enterprise platform, and yes, we highly cooperate with Microsoft.

Kash Rangan

Great. I know you like to talk to customers. I’d like meeting with our customers and clients. In fact, this is the largest gathering of our clients that I have been in front of with the management.

Bill McDermott

Okay.

Kash Rangan

Thank you once again. This is an incredible, incredible outcome. But the fed is on a mission, a direct this party, have already -- they have direct the party. Rates are going up. It’s 50 bps, 75 bps. They go up again. When you speak with your customers, how sensitive are they do the idea of rates? What are they doing with their ServiceNow book of business or whatever they intend to do? Is that changing their plans or not so?

Bill McDermott

Right. Yeah. I think that’s very clear to me that the hyperautomation business is a great place to be. I think of ServiceNow is like the best house on the best street in the best neighborhood. The neighborhood is great, because if you are an innovative IT company and your digital transformation-oriented, you should do pretty well.

The block that we are on is a good block and we happen to be the best house on that block, because what we do is we enable you to do more with less. So if you are putting the brakes on hiring, the work didn’t go away. So how do you automate the business process to accommodate less people in it to actually still achieve the goal, hyperautomation and that’s perfect for the ServiceNow use cases.

You have the supply chain dislocation in the 20th century world. It would have taken you six months to decide on the software, you are going to have to do it and then another two and a half years to implement it. The use case I gave you was done in 30 days.

So we are in an environment where the rush to value is immediate and the business outcome has to be irrefutable. For example, that government services scenario, I pointed out to you at a 319% ROI in year one. So business impact is what it’s all about.

And if you have a platform that’s on the short list of the platforms that matter and you can get people to value quickly to accommodate a choppy environment, you are going to win, and that’s why our pipelines and our business remains ever strong in every geography across all the industries and now across the personas, because we become a platform and a solutions company and that’s the next leg of the journey.

Kash Rangan

Yeah. A couple of rather than software companies noticed pertubations in their pipeline. I think Workday, Snowflake did.

Bill McDermott

Right.

Kash Rangan

We have seen so many companies that start to give the name straight over the last couple of days and then there may be adjustments in their pipeline close rates. And they come out -- they came out swinging.

Bill McDermott

Yeah.

Kash Rangan

There was a learning curve in adapting to possibly higher cost of financing, et cetera. You guys did the right thing, too. I mean you cautioned us back in late July that, hey, we were starting to see some effects. So how comfortable do you feel that you have dialed in the right set of assumptions and that you have achieved some level of normalization or maybe that is a bit of a stretch?

Bill McDermott

No. No. I think that as you rightfully pointed out, I tell it like it is. When I see it, I tell it like I see it. I think that the world...

Kash Rangan

Let take some other companies now, so...

Bill McDermott

They are closing up. Sometimes you don’t either understand the information, because you are not close enough to the action or you don’t like what you see and you would rather not talk about it until reality hits in hit.

What I see now is I see people, meaning customers, seeing that this is reality and now you have to navigate through it. Generally, it’s that, whoa, let’s go on out here and what do I do? I think we are past that phase and we are into how do I do it.

And there’s no question that companies have to be thoughtful, they are going to be highly selective on the platforms they choose and they are going to be very focused on how quickly can you get me where I need to go and what are the business implications when I get there.

And again, those are things that play to our strengths. So no matter what the environment is, I feel so prepared as an all-weather company, and if you think in quarterly terms or you think in yearly terms, again, remain ever confident that ServiceNow will do well in the environments that we have to do well in.

Because we are on the right side of what the customer needs and I think that’s the difference between a platform and an app. Because if you have an app, if that buying center is very focused on that app and they need it, they will buy it. But there will be from any one time or another, things that are more important than other things.

And right now, I think, productivity, automation, rapid self-directed innovation with self-directed business outcomes, not just where they are hearing a company tell them what the company is going to do, they want to take control of some of these things themselves, which is why I believe so strongly in the low-code revolution.

Kash Rangan

Wonderful. In the 2 minutes that we have, the precious 2 minutes, shall we do a pause for a second…

Bill McDermott

Okay.

Kash Rangan

… and see if anybody has a question and whoever ask a question, drinks on me at 6 o’clock as usual.

Bill McDermott

Right.

Kash Rangan

Do you see an old friend of ours there?

Bill McDermott

Yeah.

Kash Rangan

I have a photo of the three of us actually, a shot from eight years back or so. Anybody with a question, just raise your hand and I will give you. Oh, there is a question, okay or not maybe, because you are just moving with the microphone. So I wanted to go down the technical deep end. DevOps, you have a play there in DevOps. There are publicly-held companies, Datadog, Dynatrace, Splunk, et cetera, seems like elastic as well, seems like a crowded marketplace. But at the same time, every one of these CEOs that presented from these companies saying their TAM is growing?

Bill McDermott

Yeah.

Kash Rangan

And it’s not really as competitive as we think. What are your observations on DevOps? Is there something to do there for ServiceNow?

Bill McDermott

Oh! Yeah. Of course. DevOps and I don’t doubt…

Kash Rangan

Yeah.

Bill McDermott

… what they are saying on their TAMs. There’s a lot of messy stuff out there and DevOps is super important. I think our move with Lightstep in the observability space. The Lightstep company is young and we wanted it that way, because they have a cloud-native architecture. So with cloud-native architectural companies, we win every time.

And we wanted to acquire a little tuck-in that represented where the puck was going, not where it had been. And Lightstep notebooks, if you want -- ever want to look it up, it really does radically simplify the way companies can look at the root causes of what they are observing, understand that really rapidly and then make timely decisions on the fly to resolve things.

So business continuity and results can be achieved. So I think we believe in that. But I also believe that teaming up with some of those vendors that you mentioned is absolutely the right thing to do.

Kash Rangan

Partnerships or...

Bill McDermott

Absolutely.

Kash Rangan

Yeah.

Bill McDermott

They all integrate into the ServiceNow platform, which is another important thing. Nobody has to lose the ServiceNow to win. They have good businesses. They are doing well. Sure. You can cooperate with ServiceNow. You can integrate with ServiceNow. The main thing is we give the customer what the customer needs. So, yeah, I think their businesses are going to do fine.

Kash Rangan

Yeah. I have one final question before you might actually run into somebody you might know, that will be the CEO of Disney, who’s…

Bill McDermott

Wow!

Kash Rangan

… the next person on stage. Yeah. He will be joining us in about 3 minutes or 4 minutes.

Bill McDermott

Great.

Kash Rangan

That will be moderated by my friend, Brett Feldman, who covers -- he should be here. But in the next 30 seconds, the role of M&A, at this time, assets look really attractive. What are you thinking?

Bill McDermott

I said and I repeat the magic of having a fully integrated platform where you never pass on any tech debt to the customer is the silver bullet. So, in and of itself, we have so much left to go. Again, even the customers that do business with us, most of them are not running all of the workflows. We have the innovation that they will build. We have new innovation that we are building and releasing every 90 days.

So there’s just so much to do organically. There’s so many geographic opportunities, whether it is Japan, as an example, whether it is reinventing public sector in Germany or expanding deeply in the Middle East or LatAm, there’s so much.

And then you look at industries. If you think about the ecosystem, when I first came in, I would sit down with the ecosystem partners, and they said, oh, I am really excited. I know I have an idea where we can make $100 million together, and I am saying, you are just missing a few zeros, and now we have partners that are working on their second billion.

And that ecosystem and the leverage is amazing. We will have 250,000 net new ecosystem partners of ServiceNow in the next year and a half or so. And they are not on our payroll, but they are mission-critical to the customer’s business and our expansion. So we are in early innings. Now as it relates to the assets that are out there, we don’t have any plans right now…

Kash Rangan

Yeah.

Bill McDermott

… for large-scale M&A, and I have been straight up about that and I have actually delivered on that promise. We haven’t done any. It’s not like I am against it. It’s just that there’s so much we have in front of us. It would have to be an extraordinary situation one that I haven’t seen yet.

Kash Rangan

Wonderful. On that note, a round of applause for Bill McDermott. Thank you...

Bill McDermott

Thank you. Thank you very much.

Kash Rangan

…once again.

Bill McDermott

Great being with you.

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