but cube at servicenow knowledge 14 is sponsored by service now here are your hosts Dave vellante and Jeff trick here we go hi buddy we're back this is Dave vellante with Jeff freak this is the cube we go out to the events we extract the signal from the noise we have a crowd chatting on its crowd chat / no 14 so check that out put your tweets in crouch at awesome engagement app Frank's Lupin is here president CEO of service now Frank it's it's a pleasure to have you back on the cube great to see again great to be here thanks things how you feeling I'm feeling great no I got that keynote got the keynote out this morning you had the financial analyst in yesterday had the industry analyst and they're working you hard absolutely it's a circus yeah so your keynote this morning was great I was right up front they have a nice spot for the industry analyst so appreciate that take good notes but one of the themes that you struck was really hit home to me because you talked about transforming IT from essentially a cost center into a value producer and how service now is at the heart of that and and how the role of the CIO is changing so one of you could sort of summarize and talk a little bit about how you see the role of IT and generally in the CIO specifically changing and what role service now plays in that transformation yeah just just to give a little bit on macro context right that's sort of the worst of all scenarios that we see out there where I t is essentially viewed as as a commodity as a utility and as a result you know people don't see much impact I just want to get a cheaper cheaper cheaper and they want to cut more costs out of the infrastructure and staffing levels and so on and actually is just an organization that we're tolerating because I guess we have to have email and Internet access and all that sort of thing now you go looking into broader world around what technology has done to change business right what amazon has done based on their technology platform what we've seen an online banking you know what we're seeing an online education there's just just incredible examples of innovation using technologies now aighty hasn't done that for their own enterprises they happen in some instances are some some really great examples out there where I t did impacted business but by and large IT is not viewed as to go to people that know how to bring technology into business you know in a way that that really turns the tables on the competition do some mind-blowing things i always ask CIOs when i when i meet him and says what have you done in the last 12 months that really blew people's minds or in terms of applying technology to business problems right and they start sort of thinking like i'll actually it is surely nothing i can think of well that's probably you know a question you should be asking yourself all the time right if it's not when lightning in a bottle when it's not the sort of thing that sort of lights up the whole enterprise like we won't do it is we have to do this that excitement then you're shooting too low and you know in general I find the the cost obsession and IT is an indication that we're not looking for the opportunity and I think that's that that's it that's a damn shame or we're here to change that well you talked about panning for gold was that proposed here in California and it's also a propellant you your company is smoking hot and you know your your commonly associated with the likes of workday and Salesforce and sponsor must be very very proud of that but also there's gold and then RIT shops right there's goal than those organizations that's not being being mined and and you know I think you talk about your penetration is what twenty percent of your your target your global 2000 where we have footprint in about eighteen percent of the enterprises that we think are relevant and appropriate to us but within those eighteen percent you know we were probably a third saturated so so very early innings for service now even though we've achieved considerable scale and very high growth at that scale so when you go into one of your accounts can you discern actual that actual value production vision that you set forth can you see it can you touch it can you you know to this to a skeptic a prospectus yeah Frank that sounds good but can you actually sort of provide proof points yeah managing surface is just essential in terms of economizing and saving money and here's why no I'll give you some some very pedestrian examples that we've seen in real life and the human resources department and probably get the example because I t everybody sort understands how to how the game works right HR organizations historically have not had service models they have that email and phones and so on the problem just called somebody as a result that was a huge amount of work that preoccupied the HR organization that nobody knew what people were working on and the staffing grew and grew and grew to deal with the growing volume of ink wires and problems and changes and so on until they have systems service models and they have reporting and analytics that showed them what was consuming their time once you know that you can put initiatives in place to start dealing with the underlying causes that are driving that work I have seen HR organizations dwindle their staffing by 50% just by understanding what of this day we're working on right that's what service management is all about instead of just delivering service you're managing and once that quarter drops by the way IT organizations they get this in space right because you know large enterprises they got fifty hundred thousand one hundred fifty thousand instance flowing to their organization a month it's a huge consumer of resource right if you go to these other service domains and you see very similar things this layer of software really optimizes that resource well the way they attack it oftentimes is human resource doesn't that scare a lot of prospects away when they hear oh wow near cup service now and they're going to replace all these these people it's a it's a good question actually wrote a blog post about it recently as well there is no doubt that in the economy at large we're going to see massive substitution from people to systems why because the technology is here and the economic imperative is here it's very much a societal and social question but you know here's the thing see alternative you know are we going to try and stop it and not do it it's going to happen the markets are going to run their course what needs to happen is that we adjust you know for example you know in education we have a lot of teachers right what's going to happen to teachers when education is delivered through online streaming well teachers gobble you want to become crooklyn developers in other words evolve and change in their roles because education is going online slowly but let's go into why because the format the service experience is that much better it scales that much better in step much more economical than what we currently have well you said today in your key note that the system is broken you know I'm having to put four kids through school I appreciate a nudge there to the educational system why did it take so long I mean these are the IT guys ease of the technology guys in the organization they're there to deliver value why did it take so long for this kind of transformational yeah wave Steve Jobs has been the late Steve Jobs been quoted many times people don't know what they want until I show it to him and that's sort of what we're doing we're showing it to him that's what we did this morning we're showing people what they can aspire to that's what we're here for we're trying to stimulate inspire motivate give people a sense of mission right as opposed to keeping the lights on managing crises running around with your hair on fire that's not a very attractive you know a view to half of your organization and what you do all day right yeah so I have it struck again by your keynote the Affordable Care Act affectionately known as Obamacare they not the government not a customer of yours or what's the scoop oh no they could you have helped with had problem we could have for sure but then again many people cook that for the foot of people then software and technology they look at something like that yeah last night I set a dinner with Adam infrastructure for Kaiser Permanente and they had a certainly know the problems of open enrollment that a massive scale and certainly we didn't want to trivialize the problem it is really really hard to need to operate the service like that at the scale that that they need to but there is no doubt that you know we don't need any new core technology to build systems like that I mean the technology exists the skills exists sure that I want to walk better than so let's talk about your business a little bit this year third year now right since you've joined service now exactly three years this week yeah so let's sort of break that down but when you when you join service now that the discussion was around and you talked about this yesterday the the whole team and everybody was looking at help desk saying wow how can these these these values be justified and of course you blew that away and now people are beginning to understand that it's interesting to note that data domain you sold the company i think for what 2.5 billion the entire market is is now greater than the market that it replaced interesting that's right the market was three billion it's now I according obviously bigger than three billion and growing yeah you know so that's kind of interesting now that's a much more confined market you know you talked about the tons of the team they're being finite you always knew it was finite here it's different you guys have started to sort of fine tune your tam analysis and communicate that it's still hard because you just don't know the how people are going to use your software they're finding new ways but the team and I took a stab and I came up with 30 billion but it was a top-down it wasn't a bottom up and it was I had to get the blog post out so it's kind of a back of the napkin but still it's very very large clearly a multiple of the IT service management market so I wonder if you could talk about sort of the the evolution of your thinking in terms of the market opportunity with service now were you always sort of where we are today or that have to evolve over time now it has evolved I'd say dramatically obviously the expansion from what used to be called help desk management to IT service management basically you know exploded the market at least 5-fold and they were licensing five to ten times as many people on our system now for itsm purposes then we used to and in the mid 90s during to help desk area because back then all we did was licensed people ever physically on the help desk right people that would take phone calls and emails and so on now really everybody in the IT organization is an actor and a participant in the workflow of service management you may be a DBA maybe a network engineer you're going to get when an incident comes in or a problem is defined you're going to be part of that workflow right so that Dad expansion was not understood early on but beyond that services is everything is everywhere and services everything and every physical and even non physical assets have service models around them so once you start looking forward you see it absolutely everywhere you know I don't know what's a few billion among friends you know I know all that the numbers are but this is heavily transformational I think one of the things that people struggle with they're looking for a line of sight right in our company like workday is viewed very possibly why because they're seeing them take dollar for dollar market evaluation away from companies that they can identify recipe in Oracle and so on feels very credible to gamma that's 250 billion dollars or mark oh I can see those guys from work the Oracle Sapa okay take a chunk out of their eyes I know you go look at service now you need to have more imagination there's this great court from Arthur Schopenhauer that I showed you yesterday which said you know you know takedowns to hit a target that nobody else can hit but it takes genius to hit a target on nobody else can see right it's transformational right what worked it does is modern with what service now does this transformation is fundamentally different so when you came on to service now I presume your focus was putting in the infrastructure and the process is to make sure that you could scale just having watched you in your career you're you're big on growth and yeah you're pretty aggressive so so take us through sort of you know where you sort of started and what the emphasis was and and where it is now be clearly you're investing in sales and marketing you're investing in AP I didn't know this the substantial number of global 2000 companies in asia-pacific so that's another so how is that I mean break that down into maybe one or two or three sort of segments of your attention and effort there there's sort of you can sort of split up in two major stages or phases the first phase you know when when I took over the helm of the company was very much focused on operationalizing stabilizing scale being able to deliver what we're already doing in a consistent and predictable manner and that was not a minor task because because the company had grown so fast but hadn't been able to basically catch itself in terms of bill into business building the organization underneath its business so that preoccupied us tremendously the whole thing about cloud is is not like there's a lot of people you know running around out there to actually no clout that understand clot that can build clouds and how many people do you know that I've actually done this because there's you know three years ago I mean they were far and few we actually recruited people that have built the original cloud of ebay because those guys were pioneers they have solved a lot of the problems associated with cloud early on we saw a lot of people that understood data centers the cloud this is almost in verse two data centers the mentality that you need to to run them davos phase one before us and we sort of got through that you know about you know a year and a half ago for sure about a year ago and we started to shift gears you know really from the operational infrastructure concentration that we've had to really trying to drive strategically the business towards enterprise service management they're really expanding the addressable market way beyond where we had been before we were going to market until i see i l-look itsm replacement you have to do it you're sitting on 10 15 20 year old software it's crappy it's got to go fine we're going to do that right but we want to give you this much bigger perspective managing service in the enterprise and you know make that a mission that you can own as a CEO and drive throughout your organization over a period of years and a lot of our customers have road maps that are 24 36 months and it shows you all the things they're going to knock off over that period of time and all the different you know parksley enterprises to sell is its engineering its market yourself so on yes okay so Tam expansion and now obviously accessing that to him we hire in a lot of sales people and go to market I was struck walking around the exhibit hall last night because you just announced app creator I think last year yep knowledge I was struck by you know that the booth down there with the number of apps I mean it's just astounding where that's going wouldn't have predicted you know some of them that I that I saw so that's obviously part of the the tam expansion as well I wonder if we could talk about the importance of a single system of record in order to achieve that vision because it's not always easy right politically people want to keep data in their own little silos so how does that work you can't force it in because it sort of just happen organically how critical is that to your success I mean when you have applications or services that relate to each other like for example you know this morning we showed in a demo I think we're sure like seven or eight different applications in the course of one demonstration the reason that is a single system of record matters so much when you do that is all these apps need to be aware of each other right when your when your staff in the projects you need to look at the resource management well that resource management relates to the skill requirements as well the skills that are available right what you don't want is these apps living in their own universes with their own data moss your own database because now you have to start the hack integrations between them to make any sense out of that and that's the world we lived and that's been the bane of software existence for for so long the ServiceNow said I'm not going to do that okay every application that relates to any other application they're going to be operating on exactly the same data model and by the way you see that throughout our platform right when you bring up an asset in the CMDB like a server or a rather or Santa whatever it is you'll be able to see all the other data artifacts throughout the platform like instantly problem of changes in projects and tasks that relate to that particular asset there's nobody else that can do that right and we provide the 360-degree visibility that makes application development so compelling because you know all the users are already defined the system you don't even have to get started with that you only define users once right you reuse all that and all the other artifacts already exists so you get this data gravitas that the more data that is there to richer the application with almond environment becomes yeah we talked about this too at the analyst meeting about the relationship to your M&A strategy you've got to be selective it's got to fit in to that single system of record does that however limit your choices in rule absolute limit our choices but you know this is the commitment from an architectural standpoint that we make us that we're not going to repeat what legacy vendors have done is I mean you know 50 apps whole stand along to hack integrations between them as I said that's the world our customers want to leave behind because it was just horrible former from an efficiency standpoint after a while all you people do is managing the operability of the patchwork plethora of assets that they have they're not doing anything productive and in our world they don't they do none of that right they're not upgrading software because it's the clouds you know we do that and they're not hacking integrations between apps because there is no constant of integration on service not with all the apps are aware through a shared data model so is there still plenty of M&A opportunity for you out there though I mean your stocks up I know it's off a little bit lately which I think it's really healthy I'm happy about that nice little breather but still you know you've made great progress adding value you can obviously use your stock as acquisition card co there's still plenty of opportunities for you notice there's absolutely tons of opportunities again in a day you know software infrastructure is it's very similar and very common between application itself for us to bring an application into our user interface framework I mean they have to have a user interface framework of some sort right so whether we replace what they have with ours with a replace the data structure we replace the underlying cloud we can do all those things right the question is is there going to be hard is it going to be expensive is it going to be time-consuming or maybe not as much and that will influence how attractive we are to the asset all right Frank we're way over on time but I could go forever i mean really appreciate you coming on CX for having us here it's really fantastic event all right keep it right to everybody we're back with our next guest this is the cube we're live from moscone right back