okay we're back this is Dave vellante Wikibon organ this is the cube where we go out to the events we extract the signal from the noise we bring you the best guests that we can find we like to call them Tech athletes I'm here with my co-host Jeff Frick Doug Leone is here he's a partner at Sequoia Capital very well-known VC on the board of service now Doug welcome to the cube >> thank you so today here >> here you know a lot of times venture >> it's great to have you capitalists they'll get in they'll help see the company's help grow the company's go to go to an IPO successful IPO and kind of go on to the next one so you're here and you're seeing the growth of this company the meteoric rise and your see this user conference you must be delighted to see the the degree the enthusiasm of the user base it's very exciting >> it's very exciting to be here and see close to 4,000 people being here and hearing some other feedback from the customers terrific >> so how is it that that they've been able to keep you interested in in this journey and you know you're still here you're helping you know grow the company >> the short answer is that the job is not well I think done yet we we are in the early innings if one thinks about IT service management we're well on our way but one thing we learned from the conference is that customers are finding many use cases for the software and the software is spreading in IT, in HR in many other areas so I actually think we're in the early innings and so I think there's a great deal of opportunities for the company and I would like to very much try to help in garner as much market share in that opportunity as we can >> been around the technology industry for >> yeah you've a while why is it if you feel that I t is now ready to change >> well i think it's-- ready to change for the simple reason that the world has changed if you think of IT maybe four or five years ago essentially what the role of IT was a defensive role to protect the enterprise and the employees and the technology were enclosed in  four walls and a little bit on the tax side where no was the first answer and yes was the other answer and they work mainly in infrastructure I think our that is the plumbing well suddenly the the role of the CIO is completely changed the defensive part of the house has become much more challenging that technology is out of the building and the employees are out of the building so that requires a lot more skill set and it's way more exciting and the plumbing side of the house is completely change where the CIO is no longer the plumber is a business partner so his role has been elevated within the corporation and I think it's the most exciting time to be a CIO in a history of CEOs so I think that the future is very bright for this market segment lastly for the very first time the IT function touches every employee in a company and so that there's a lot to be done for every employee >> we talk a lot on the cube about the whole hyperscale trend and people I colleague John first is if you want to know what's going to happen in the enterprise five years from now go look at what's happening at you know Google and Facebook and Amazon and you remember after the calm crash and Nick Carr wrote his famous book does IT matter everybody just pulled back like you said got defensive but the hyperscale crowd showed us that technology actually can be used to create competitive advantage nonetheless a lot of traditional IT has continued to be defensive do you think that platforms like ServiceNow can actually change that mindset and bring IT back to being a competitive advantage and also importantly catalyze increased spending within IT >> would take it one step further I think  well I actually that companies like service now offer a product that are extremely necessary for IT to change I don't think it can be done with our ServiceNow for the very first time we have employees that can create applications on the fly that can create application many applications that talk to one another in a single type of a data model therefore the ERP for IT and instead of the end uses having to wait weeks months for any changes that can be done very quickly very overnight by a user so I think having learned a little bit from amazon and from Google in the expectations of the end user within a corporation's a company like ServiceNow now offers a solution where companies can make those kinds of changes and build those kinds of systems very very quickly >> so Doug I wonder if you could talk from step back from kind of a VC perspective where we saw a few years back you know tremendous investment and valuation creation in Facebook's and and Google of course and a lot of consumer facing buzz Zynga and this and that and now you know it seems to kind of shift it back to the enterprise side but I think what's what's interesting is how the consumerization and those applications both in infrastructure as well as user experience seem to really now be influencing where the enterprise side of the house is going you speak this >> sure please keep in mind that the business of investing in these small companies is a business of latency if you invest in one year products on the market for two years later and consumer adoption is three or four years later and unfortunately the venture industry tends to run with momentum investing so 50,000 venture guys do consumer 50,000 venture guys do infrastructure and IT I think the good investors have seen some of these trends just begin to evolve four or five years ago and we you have to be quite consistent and be true to your vision if you start coming in to companies in infrastructure right now one could argue that you're investing at a local maximum maybe four or five years ago but unfortunately in the investment industry is momentum driven industry for most investors and you know the thing that happens with momentum you're always a little late i'm paying the highest price and then the moment that you get there that you see a peak so i think the trick is to have careful market maps have a clear vision and then have dumbo like ears available to listen to guys like Fred Luddy so when you run across them and they have a crystal-clear vision of the future you're ready to jump on him for the simple reason you've thought I had and maybe it was one of your veins of your market maps >> What was it  when you first talked to Fred that really struck to you what was the vision that resonated >> I think two or three things one he was crystal clear in what he wanted to do and the great founders are crystal clear because they are great thinkers they spend all the time thinking and therefore when you spend a lot of time thinking then what you can do is articulate in very few words second Fred knew exactly as the founder in very few words of the company what is strengths were and what his strengths were not or his weaknesses were and he asked some of his trusted friends investors and colleague to help them find people to shore up the other side and third he just told it like it is no surprises as a matter of fact for every board meeting we went to  for the first year and a half the only surprises we got was surprised on the upside and I will tell you that never happens >> Doug  you have said that the the the next big thing in enterprise IT really doesn't exist you're telling us now your philosophy is somewhat non contrarian most VCS like you said are out chasing a trend they're trying to focus on momentum so so talk about that a little bit if there is no next big thing in IT well how do you decide what to invest in you said you have these market maps talk a little bit about that philosophy so I I think what I really said is that there's no way we know what the next big thing is as a matter of fact if I could articulate what the next big thing is i'll tell you it is not the next big thing as i said earlier in a presentation the day before we met Fred ludie if you had asked me that question I would not have told you IT Service Management is the next big thing it took Fred to come in and explain to us why that was going to be a market opportunity and we jumped on it so if we make ten investments four or five fits some kind of market map it's an extension of the world we know mobile is going to penetrate I can tell you the real exciting investments are the ones where no one's paying attention and someone like Fred lady can see the future so there is no so yes there's going to be next big thing is going to be wearable computing is going to be Google glass who the heck knows but there's going to be a founder an entrepreneur that's going to explain to us here's an application for google so you haven't thought of that's going to make it very clear why we want to chase that and not just wearing a pair of glasses marc andreessen was on CNBC yesterday talking about the perils of public companies and and and basically well it was somewhat self-serving I tended to agree with a lot of what are you saying i mean the barriers for a public company are now so high but now here you are with with service now what's that experience been like taking the company public i guess if you're always beating on the upside that helps but you know there's eventually going to be some bumps in the road so what's your you know opinion on the whole public market you know so what's your stance on that well the position i have is that it's better to stay private because that you can do a lot more so there's only two or three reasons to go public one is a branding event your competitors will say oh it's a small private company they're running out of cash and so on sensing your financials are not public some customers may tend to believe it second is to finance a company although one thing I'd argue is that if you've got a great investment with lots of money whether your private or public and third is to provide some liquidity for employees unfortunately the liquidity for them is not something that happens overnight you know one day you go public the next day is not the david you sell all your shares and so it really comes down to a branding event and our position is keep companies private until they get very strong practice for a year or so done to what it's like to be public have your financial house in order then go public and always start with an o first and move the way towards a yes because the IPO is simply a day in the life of the company as you're trying to build a great business it's not the other way where you go public let's all go public for the heck of it so start with an old justified chuoi yes your life was change and you better have control over your forecast your financial systems and so on prior to being published yeah so service now obviously New York Stock Exchange selling to the global 2000 the biggest companies that had to help from a branding standpoint it helped a lot because old the fight in the business or in the market that was spread by our competitors we're not financially viable well I think the whole world sees that we are way more than financially viable all that junk that a local salesman is going to say against another local salesman in the heat of sale situations is completely out of the market because now what you're dealing was with facts and we knew that our fax way better than our competitors facts well there's so many insularity benefits to it wasn't the motivation for going public but you've you know prior to going public cash flow was king and you had to you know invoice a certain way and now you've got you know hundreds of millions of dollars in the balance sheet and and so you're able to it gives you greater financial flexibility as well yeah we have cash flows as a private company and you know and as a public company it's not that if you have a lot of cash that you can spend it for the heck of it you have to justify model why doing so is the the right thing cash cash is always available if you have a terrific company there's people that are willing to throw cash in bucketfuls of you so it's not cash um we talked it was interesting to hear Frank today talking about Facebook he was my second topic just definitely the first major IPO and technology right after Facebook he called it the face plant IPO tongue-in-cheek but then of course you had work day as well and you guys seem to be more work day like you know kind of similar transformation even though you're going to IT is that a fair comparison yes I I think it's a fair comparison is that it's too fabulous SAS companies you know about six months ago if I act if I'd ask someone what's the grade the second greatest company in the SAS marketplace nobody could name it Salesforce nobody new number two now people know its sales force its work day and it's service now it's a fair comparison I think that both companies have a very long term market opportunities and I think both companies have standalone possibility have the possibilities of being large and standalone companies for many years to come so Sequoia obviously great firm you know one of the leading venture capital firms in the in the west coast in the win the world what's that what sets Sequoia apart we've been in business for 40 years and we've been on top of our game for 40 years or on top of the business I hate calling it a game we tend to hot sports analogies here that's okay no there's dangerous with sports analogies because the moment I mentioned team and a sports team there's only room for five people and a basketball team was starts and that's the koya if you've got ten people were skillful we have room for all 10 of them so I'm always a bit leery of the sports analogy but but it's the culture it the culture of people that came from humble beginnings who have a deep-rooted need to win we have good business instincts who are willing to learn and we're willing to be business partners and that's a key set of words business partners to founders to help them build a great business over the very long term you've spent some time in business development and sales over the years how has sales or has sales changed over that time frame some things have some things haven't I remember 15 years ago 20 years ago wait you could not get to what we call the SMB the small businesses because the cost of sales was too expensive now due to telesales and the internet that you can get there but there are some things that have not changed if you've got a sales force you they should be very well paid they should not have a high base they should be able to make a ton of money sales leadership you come from a former salesperson so some things have change and some things are deeply rooted in the DNA of a salesperson and may never change I took the only we're out of time but I want one last question is we're observers of service now outside observers what should we be watching for what are the things that you would ask us to pay attention to what watch how deeply ingrained throughout the many departments of a company the ServiceNow software becomes not just for IT Service Management but for a variety of applications written by employees of that company for the benefit of that company all right Chuck thank you very much really exciting to have you on the cube great job congratulations let you said you're not done yet so good luck when you're your future journey is really a thank-you a measure thank you thank you very much all righty buddy I'll be right there we will be back with our next guest this is service nows knowledge conference i'm dave vellante with Jeff Rick this is the cube we'll be right back after this short break

[Music] [Music] okay we're back after that nice break here from knowledge we're here in Las Vegas at the Aria hotel this is service now's big customer conference about 4,000 folks here mostly customers most of the content at this event comes from customers its practitioners talking to practitioners which is quite rare actually at these conferences I'm Dave Volante everybody thanks for watching with wiki Bond org I'm here with my co-host Jeff Frick this is Silicon angles the cube we go to these events we extract the signal from the noise we love to bring you tech athletes and Fred ludie is here he is a tech athlete he's the founder of ServiceNow he started this platform around 2003 Fred welcome to the cube thank you very much so we really want to hear the story you know but we've been asked to sort of hold that off because we got another segment with you tomorrow but I just I have to ask you I mean seeing how this conference and ServiceNow as an organization has grown you just must be so thrilled in particular with the customer enthusiasm <Fred>  you know fundamentally I've got a personality flaw and I call it a kindergarten mentality I want to see my art on their refrigerator and the only way you can do that is by making somebody happy and so to see these people here with the excitement the enthusiasm and the smiles on their faces really is satisfying that kindergarten mentality cakes oh good stuff we were talking about that earlier Jeff had not seen the cakes before and was was quite amazed today no I think that's an industry-first actually good well be yeah announcements today you know that's if so you guys had some you're gonna transform an organization you got to have mobile I mean the whole world to go on mobile five billion devices and and growing what you guys announced today <Fred> well we announced the ability to run all of our applications on the iPad and you know I think people's reasonable expectations these days are that they should be able to manage anything anywhere anytime using the device that they currently have now I I like to think of an iPad as something that you use when you're pretending to be attending a meeting or when you're pretending to be watching TV with your family and when you are pretending to do that it'd be nice if very efficiently and very effectively you could manage whatever you needed to manage to get your job done and so today what we've announced is the ability to run everything that ServiceNow has on that iPad  <Dave> yeah I mean it seems to mobile is basically a fundamental delivery model and maybe even the main delivery model going forward wouldn't it be I <Fred> I think it will be a main delivery model and it's a it's a user interface that that requires complete rethinking about how you're going to do things you know for the longest time we we looked at screens with 24 by 80s you know these character screens and then we got big pixel monitors and then we got bigger pixeled monitors and we got very accurate Mouse's and everything got small and got hovers you've got you know this massive amount of data and now the form factor is completely shrunk and you're looking at this as my major input device so how am I going to get you know everything I used to do with a mouse where I'm hovering over things to see what they do or I'm touching you know 16 by 16 pixels which you by the way you can't hit with your fingernail how am I going to get all of that stuff how am I gonna be able to work with all that stuff using only my thumb or thumbs so how are you specifically taking advantage of that smaller form factor and you know the feature sets that you see in things like iPad <Fred> well I think it's a matter of rethinking so we're trying to get the user to be to be able to accomplish their task by doing considerably less work and one of the things that our system is actually very comprehensive it's very big and we create in the browser and our first user interface it was really created in 2005 we treat all the elements of the system equally so now what we've done in the in the mobile which I think is very unique it does MySpace I mean Facebook doesn't have this Lincoln doesn't have this we know exactly what you do as a user and we remember those things that you do edit of Li and so we're able to create shortcuts or we're able to remember the system is able to remember what you do and then very quickly present you back with those tasks which are repetitive so we're trying to simultaneously compress the information and reduce the interactions yeah so that doesn't sound trivial it sounds like there's some secret sauce behind that talk about that a little bit <Fred> well it's not trivial and it's a there there is secret sauce but it does it just requires you to rethink and for me you know if you if you read the jobs biography there were a couple of interesting things in their number one when he met dr. land they had both agreed that everything that had been invented was going to be invented had already been invented right the other thing that they that they pretty much agreed on are what job said and a quote that I've used for years is that great artists copy good artists copy and great artists steal and I've been a thief all my life I just I'm gonna admit it right here it's not on camera live and so what we do is we go ahead and take a look at who's doing this great Amazon is doing it great Zappos is doing it great asan is doing it great you know we and we capture those ideas and then what they meant by great artists steal is that you take them and you reformulate them for the task that you're trying to solve for the problem that you're trying to solve and the rich the artist won't they probably the original artist probably won't even recognize that as their work but yet they're they're deeply inspirational to us an artist so do you fancy yourself as a bit of  <Fred> well I think it's interesting  down down the road and you know to I was watching the Bellagio fountains create something like that if you think about the physics and the art that had to go into that to create that beautiful masterpiece you know it's not just a painting right think about the physics that goes on to shoot something seven its water seven hundred feet in the air and then cut it off instantly and have that all choreographed I mean it's phenomenal amount of engineering but it took also a phenomenal amount of art just to make that interesting so that we were we actually stood there in rapt amazement of you know look how all this is choreographed so yes I do in fact I don't think I take exception to the term engineering software engineering I don't think we haven't progressed to the point where this is an engineering this is this is an art this is a craft you know it's something that people practice and we try to get better at it and better at it and better at it but I don't think it's anywhere near an engineering discipline <Jeff> yeah the other interesting from the jobs book that I never really got until I read the book was like the iPod shuffle because when I first saw the iPod shuffle and you can't do anything you can't manage your playlists on it you all you can do is change songs I don't get it and then in reading the book as you just said you know what is what is it you're trying to accomplish with that form factor right and don't just automatically try to replicate what you can do a one form factor to another form factor but really rethink what's that application and it sounds like you're kind of taking advantage of that opportunity as you take the app to the mobile space into the iPad specifically to rethink what is the best use case for that platform you'll see tomorrow the iPad was really  <Fred> that's right and as as the inspirational first step that we're taking toward a totally mobile app and just like the Apple evolution of building all of this note wonderful new capabilities into iOS and then bringing them back into OS X we're going to be doing the same thing so you'll see tomorrow on stage not only in an iPad app but you will see a native iOS app running and you'll see that it does even more things than the iPad app does and much faster it's a wonderful user experience and those those notions will be also coming back into the browser etc the same way that apples been bringing a lot of the capabilities of iOS back onto OS X <Dave> I was talking to an IT practitioner last month at a large grocer and I asked him what's your what's your biggest challenge what excites you the most and he said the same thing he said both of X what's my biggest challenge is embracing all this pressure from my users for mobile and that's what excites me the most because I have a mobile addict I got in it pulls out all those devices so how do you see this announcement within your user base changing you know the lives of IT  prose.    <Fred> well it'll you know technology since the dawn of time has been used really for two things it's been it's been used to streamline make make tasks more efficient and more streamlined and it's been used to create business differentiators and so our our product really is about process and moving process through an organization and so we want to streamline that as much as possible so if I can we do things like change management change management has multiple levels of approval if I can get it to the point where a manager can pull his phone out of his pocket and do five approvals between meetings he's become significantly more efficient right the changes are going to be done in a more timely fashion and the bottom line improves it's as simple as that <Dave> yeah it's interesting we were those of you watching no we were earlier the today broadcasting from sa P sapphire event and if you go to sapphire are you here to to get huge doses of two things one is Hana of course which is there in memory database but the other is mobile he's all you hear and it's interesting to hear you guys talk about the ERP of IT and your si PE they know the poster child for ERP and all their customers are going to mobile whether it's retail manufacturing you know across the supply chain and so it sounds like you've got sort of similar mentality but more focused obviously with it within IT but of course now you're also reaching beyond IT do you see you're a mobile app a push going beyond the IT community <Fred> yeah absolutely you know our underlying all of our applications we have a platform that say it's a forms based workflow platform that's really purpose-built for something that we would characterize as a service service relationship management so pretty much any request response fulfillment type workflow can be handled by our platform and what our customers have done over the years is create different applications that help them streamline that workflow typically that workflow is handled by by people creating a spreadsheet emailing it to somebody else having a TA back perhaps they built a Lotus Notes app but yes everything that that that or I will say that our platform usage has been expanded by our customers sometimes beyond our wildest dreams and and we love it so you talked about you know some of the greatest artists we stole rights of and so now you guys put up this platform I've said a number of times today it's not trivial to it to actually get a CMDB working in the way that you wanted to get it to work so now you've had this platform out for quite some time your successes started to you know you get a lot of press people are starting to see it do you worry sometimes that people gonna say okay I can do that too I'm gonna I'm gonna you know rip it off what gives you confidence that you can stay ahead of those those thieves out there <Fred> well I have great confidence in that you know we have a very broad base of applications that are very deep in functionality but if that's really something that you want to happen yeah because you want some young people with fresh new ideas to try to unseat you because they will come at the come at this from a completely different perspective and a completely different angle and they will do things that you never thought of and so the race is then on are they going to become more relevant than me or am I going to be inspired by their ideas incorporate them into our platform and stay ahead of them see welcome that all right absolutely welcome back yeah we we wouldn't be where we are today if Edison and Bell weren't weren't the jobs and gates of their time I mean they had just and I think jobs and gates as well right they had this great rivalry that really caused technology to move ahead a lot faster than when it was just I be am selling mainframes and so you need those rivalries you need that you need that competition you know I'm I'm watching these young guys from asana it's a great little platform for for tasking and you know they came out of Facebook they have a very Facebook mentality and they have phenomenal ideas and believe me guys from asana I'm watching you those are just that's where great ideas come from >> <Dave> Wow we always like to say we love sports analogies here in the cube and Jeff your kids are into sports well as our mind you always want to see and play that more competitive you know environment it sounds like Fred you have the same philosophy yes very much so yeah excellent all right Fred well listen we really appreciate you coming by now you come back Fred's gonna be back again tomorrow we're gonna go through the story of service now that's why we really didn't touch up on it and in any kind of detail today but to it but but but Fred actually started the company we give him a little preview Fred so you started the company really not to go solve an IT service management problem right you came up with this sort of idea this platform and and then you you that was really the first application that you developed right up a step in for that oh great you see give us a little tidbit we're gonna back >> every day I wake up that's all I really >><Fred> I've been a programmer now for 40 years want to do why do I program because I want somebody to take a look at the technology that I build and say hey that's pretty helpful I like that I can use they're gonna put that in my fridge fridge so the real strategy behind the company was to build some software that somebody wanted that hopefully they would pay me so I could build more software that was the entire strategy and so you know on one hand I love technology and on the other hand it really irritates me when it makes me feel stupid or it makes other people feel stupid so what I wanted to do was to create an enterprise platform that people could use and they would feel empowered they could walk up and use it like they'd walk up and use an ATM like they'd walk up and buy something from Amazon etc so a completely you know consumer eyes thought process and then that was the thought process really in O 3 and no 4 and then what we do really figured out was that a platform is a very hard sale you know it's tough to convince somebody that they should take this it'd be like selling you an Intel processor and telling you can do anything you want right I want to solve a business problem and so we decided to go after the ITSM space first it was a space that was very underserved very lucrative and and growing significantly <Dave> amazing so so join us tomorrow we're gonna Fred back on and we're going to here this story the founding story of ServiceNow and how we got to where we are today so Fred thanks very much for coming on and sharing the news and I'm gonna change it all by tomorrow good all right so so keep it right there I will be up next we've got Douglas Leone coming on which is a partner at Sequoia Capital and and and one of the better-known DC's out in the valley so so keep it right there will be back with Doug just in a minute this is ServiceNow this is the cube this is 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