live from Las Vegas it's the cute covering knowledge 60 brought to you by service now here your host dave vellante and Jeff Frick I very welcome to service now knowledge this is knowledge 16 know hashtag no 16 we're here in Las Vegas the Mandalay Bay Hotel Jeff feels like our second home with his cube season and conference season this is day one actually of our coverage really day two of the conference it kicked off yesterday with a lot of the technical sessions but the keynotes started today in the General Sessions we heard Frank's luqman laying out the vision of service now yesterday I happen to sit in the financial analyst meeting this is a billion dollar company baster passed a billion dollars last year grew in excess of sixty percent they're on track in my view to do a billion and a half this year service now is laid out of vision by 2020 of it being a four billion dollar company so Jeff we've been covering service now since the early days when they're a relatively small company with large ambitions and they've been executing nearly flawlessly on the vision that they set out and they continue to expand that vision expand the total available market bring out new products bring on acquisitions but the real story of service now is around the customers the core customers would sleep and calls our peeps the the IT folks within the you know the heart of IT bringing service management discipline not only 2i t but throughout the organization the other big vector of of stories at any knowledge conference of course is the founder Fred ludie and his core team the team of innovators we're in Iquitos today I swear Fred ludie was coding on his laptop he loves to code the guy's a programmer by heart but you're seeing things like elegant design we saw the announcement of a of a service now SmartWatch today a wearable device basically an enterprise you know system to predict to be informed to take your favorite KPIs and bring them right to your wrist so Jeff it's kind of more the same just bigger and badder this year they just keep clipping along right just like he said it's an execution game I talked to Chris Pope a little bit in the hallways this morning during breakfast and he said kind of what's the magic and it did it just get stuff done right people can just get their job done using service now and and as you said Frank loves to talk about the IT pros as their peeps but he made an interesting comment in the keynote that there's a lot more IT functioned discipline execution outside of the core I team structure so that obviously both really well for for service now but again we've like I said they've this our fourth year here run into the same customers every year the passion keeps growing and then you know the other thing I think it's interesting looking at the little service providers that are no longer little service providers Cloud Sherpas and fruition partners both now part of accenture and CSC so when you see the big Ian wise here service integrators they don't make a play unless they see a really big opportunity yeah they like to eat from the trough as it was as it were and so the trough is getting larger but I remember Jeff the first service now knowledge we went to knowledge 13 which was here in Vegas the smaller hotels any rate the area and we walked the floor that time and we were sort of asking ourselves well where is Accenture you know where are the big sis and we saw a cloud Sherpa syrup risen from companies like fruition who had a big presence there both of those companies were required Accenture acquired cloud sherpas of CSC acquired fruition the other thing I want to point out for those unit may not be is familiar with service now the company started with this sort of help desk you know mentality really try to automate and improve on help desk Frank's lubin said years ago he said at one of these conferences desk is a four-letter word and he got some booze because people hanging on to their help desk but it started with a relatively sort of legacy attacking a legacy business you know back then Gartner group was talking about how this is you know the the end of that business it's kind of going to go away and you know sloop Minh came in and really was the right guy for the job helped energize you know the vision that was set forth in the early days by Fred ludie but what you've seen consistently is the company has expanded its total available market going from you no problem man management change management help desk etc expanding that out into IT Service Management IT operations management now bringing service management across other parts of the enterprise what service now laid out today in the general session was essentially you had the the first software estate was ERP and that was brought to fore by the likes of Oracle and and of course s AP and then the next greatest state were skipping over some estates were sort of fast forwarding to you know the open systems world but the second greatest date was really that brought on by CRM and and one by Salesforce and what you're seeing service now is positioning is service management across the enterprise for everything in between back office operations and the sales and customer engagement like facilities HR but touching upon sales and marketing and some of the back office stuff so they are laying out a vision of the third greatest state which is service now everything is a service enterprise services service management where I t is the backbone of all of those operations in Jeff we're seeing that I mean I T we've talked for years IT touches every part of the organization but increasingly companies are becoming cloud ified and sassa fide across the enterprise and that's really a tailwind for service now it's the theme we talked about over and over every company has to be an IT company just what services or products to they wrap their IT around so important for a competitive advantage if i go back to abe to the our day at the Aria a couple days with Aria and I rewatched our interview with with Fred our day to interview we did a couple with them and he talks about the story of this platform vision that he had from day one and talking about the to the initial investors they said well was it do well does everything what do you want to do and really you know kind of a classic platform application play were then he you know built the application around a very specific use case and go to market and now you're seeing that vision that he had back then as the platform capabilities expand to do so much more and the other thing I remember from that that interview with him was talking about the copy room all the papers the different color papers in the copy room I need a vacation I need a new laptop I need to do this thing and really enabling everyone to build those little processes that were all encumbered by over and over again using this platform yeah so I remember again going back to the early days we had walked the floor in the early knowledge 13 days and said wow look at all these companies in the ecosystem watch that's the key to this is watching the ecosystem grow and specifically trying to understand which those companies in the ecosystem service now is going to require remember we had asked Fred about acquisitions and do they have to fit in do they have to be already running on the ServiceNow platform and he said well that's kind of interesting and what we've seen now is Andy related answer the question back then but what we seen because you didn't want to show his cards what we've seen is when service now makes an acquisition like they did with with with I tap and some others they brought in service watch with another company they purchased the GRC capability they completely replat form the company the software into service now same UX using the CMDB the the the CMDB using the same user interface everything is the same experience that's it that's huge now I want to dig into that a little bit and see how much how the service now do that so quickly I mean because basically it's taken out a year to replat form these maybe nine months 12 months 14 months but it's not the the nine years that we see with for instance oracle fusion which is sort of everything rewritten in java so it's gonna be really interesting to see that what else Jeff should we be looking for the other piece of that I picked up from Frank in the keynote was really kind of the different engagement models he specifically contrasted CRM versus the service management approach and you know you take care of the problem he keeps going back to the I fallen and I can't get up use case over and over so I'm not that it's kind of funny but but he takes it to the next level within a service management which is to do the analysis and to do the root cause analysis so that you don't have this thing's repeating over and over so it's a very different way to kind of approach customer engagement i look forward to kind of digging a little bit deeper with Frank on that great all right keep right there everybody we got wall-to-wall coverage three days of coverage from knowledge 16 check out well the hashtag is no 16 check out crowd chat / no 16 we've got burnt Lattimore documenting the cube interviews in there keep right the everybody will be right back after this brief word it's always fun to come back to the cube because

live from Las Vegas Nevada it's the kue covering knowledge 15 brought to you by service now we're back this is Dave vellante with Jeff Frick this is the cube SiliconANGLE is continuous live production of knowledge 15 service now's awesome I have to say customer conference 9,000 people we always say Jeff that this is you know one of our favorite conference absolutely it really is it's just tremendous the innovation the excitement customer stories you never seen so many satisfied happy you know excited customers a great management story the messaging matches what's going on in the market a lot of fun cloud we heard about productivity increases expanding beyond IT some really cool new development environments some new capabilities mobile modern technologies that this company is using audience loved it and we heard today about a lot of cloud high availability ready for primetime lot going on and always the passionate customers I mean I think it's an interesting gauge for all the shows that we do to look at the percentage of customers that are on our own show and are willing to come on and talk about what they do versus just executives and partners and kind of more normal set and we continue to have just a tremendous representation here at servicenow now we've been coming for three years our third year in a row we're getting a bunch of new customers that we hadn't on before and really that's the thing that I think that's great i love that the kind of the completion of full circle of the vision that that for it talks about when he sits down he tells the story of year about building the platform that nobody wanted to buy because it was just a platform we known as budget for platform may have passed the budget for applications are solved problems put the application in play sell it be successful and then slowly that platform play comes back out as other people jump on and develop new apps new places to go and it really seems to kind of be hitting a stride not that it wasn't hitting us try it a year ago in Moscow knee remember my friend Omer Peres who was the CIO of Aetna international when I first met him in the early 2000s David floor and I had a CIO consultancy and Omer came in and was our sort of you know advisor and he worked for us many years we had a lot of fun and I used to ask him as a CIO what what's the one thing that you would want out of a software company for your IT operations and he said I want the ERP of IT so this was 2001-2002 we were like wow that's big task so not something we were going to build but that's essentially what service now has built right the ERP of IT they've used that terminology you know that whole notion of them making changes to my infrastructure and I need a single system of record that can manage those changes and document them make sure I'm in compliance with those changes have an audit for those changes and then extend into other business processes and that's exactly what these guys have built but but the neat thing is erp has with it's such a heavy connotation and big implementation and classic old-school Accenture and SI p coming in that's not going to sell best marketing right but now these guys are delivering the function but using today's modern technologies its cloud-based its continuous innovation its ongoing improvements you know the talking about rolling 30 days in not having this big monolithic let's design it let's build it let's deliver it now as we do that and push out well that's the thing they have to worry about it because people know what their platform looks like and it's like when moriches talked about the software mainframe and all the more people said oh don't use that term but essentially that's pretty powerful concept in virtualization world and I think ERP of IT is very powerful here the other interesting thing is we see service now extending into non IT domains throughout the organization we saw there was announcements Salesforce extending inward taking you know what is normally sort of their CRM system and now driving toward HR and we've been saying all week with two years ago we said wow app creator service creator that's like a pass layer that's kind of like Salesforce and interesting to see how the opportunity is going to collide down the road and that's exactly what's happening you'd expect that for a company like service now that has a 40 to 45 billion dollar Tam they're going to run into a lot of places and their advantage is they're running into those places with their what Frank sleeping calls their homies which our IT people why is that an advantage the reason why that's an advantage because I t touches every aspect of the business everybody gets an IT tax right right why do I get it's like the government they're everywhere in your life you can't get away from it the same thing with IT it's everywhere whether it's marketing finance sales logistics a chart doesn't IT technology is the substrate and touches every part of the business as a result I tea has purview over that entire view maybe not the right word but it's got visibility around the entire process is so it's going to be a really interesting dynamic as these this company grows into new spaces look at a company like Salesforce they're coming at it from a sales force right angle right very important function within the company but you know does it touch HR directly does it touch logistics that I touch you know to your effects finance but do they support the processes no so that's why i would say that service now has the advantage the flip side of that is you get a company like salesforce big company hot company huge community very very interesting dynamic emerging there yeah and it is it is kind of the base in the community from which you grow and i thought some of the interesting stories that came up over the last couple days where where is where the IT guy had an efficient process and effective process that gets people a new laptop to onboard new employees and the people in the department said hey that's pretty cool and you got that done pretty well how could we do that for some of our internal processes so you know they almost have IT now is an internal sales force we hear over and over again about the IT role changing and really building stores for their services and really getting entrepreneurial and changing the company there's just there's this a really good vibe and you know most great tech companies have a really strong leader at the helm who's got a personality that helps really define that company see it with Oracle you see it with Apple you know the jobs and and fred is ease and rock star but he's so he's such a humble guy he's so approachable he walks around and people are running up taking selfies with him and he you know he's one so humble but then too don't discount the vision the guy is super smart and still one of our favorite enemies we ever did was with Doug Leone two years ago describing his impression when he first talked two to Fred and listening to that vision and I I can't remember the exact quote but basically he's a really smart guy and he can make it a really simple and he knows where he's going well what I like about Fred laude well first of all I'm a groupie I admitted I tweeted out I'm a Fred ludie groupie and I with a bunch of our homie I guess I owe me here's the better I'm groupie I mean I am only because I just his a guy who's got tremendous vision you can talk to him about virtually any kind of technology subject obviously can talk about service now I just remember one of our interviews I think it was last year or maybe two years ago we're like Fred you know know you're super busy you probably got a runny goes no I got time let's keep going yeah all right right which I love I mean it's just like a lot of these you know times at these conferences that executives are so stressed out because they're being pulled in a million different directions and Fred just kind of takes it all in stride he loves talking to the people pressing the flesh people come up they want to touch him right like I lean right but you know you're that you're good analyst you study the numbers you look at this where do you think potential head winds are obviously they're growing the bigger profile they get the more targets are going to start coming on their back what do you think some of the head ones are going to come well I mean the near-term head wounds obviously our currency related and that's what sort of noctum knock service now off the of the 12 billion dollar market cap peak last Friday it has recovered that's a financial analyst this week and clearly they communicated the story in fact it's talking to Mike scarpelli CFO and he said look when you compare the the currency you know pre currency fluctuation numbers we blew it out okay and I think what the what the street did you know Ferrari was saying well the street really doesn't understand i think the street generally understands the opportunity generally right as best thing because they see high growth they see big Tim they see great management they see happy customers I mean what more do you need very own investment right and his valuation metrics obviously in cash flow but I think that that what what the street does understand is that there is a big opportunity here so i think that scarpelli and slew been communicated in a way that scared the street a little bit because they were being conservative they gave a little lighter guidance right and this street is used to service now just blowing away its numbers i said i said on friday this is a really healthy taking some air out of the bubble great love it very good good good it's a really healthy thing I like to see this kind of dynamic you get scared when companies start to you know expand beyond their their cam so so this to answer your question specifically and it sounds like cliche but I really do see that service nows headwinds and risks are execution risks I think they control their own destiny it's like a football team that can win out and make the playoffs I think that's the situation that service now is in right now its execution we heard from jay anderson i think i t scale internal IT scale is a risk and that's that's he's got a very very important job number one number two is I think you know we heard from dan McGee on the availability piece they are making some very bold claims about availability focus on security so that obviously is something that they've got to pay attention to the ability to scale their cloud but I really do see it as execution risk I don't speak competition right now as if everybody you know has said for the last 70 s all we got the ServiceNow killer we're not seeing the ServiceNow killer emerged nothing close to it you talk to customers it's very clear they're not spitting on there just admin seats and then what do you think in terms of is now we've seen you know amazon kind of lift up the covers on their cloud business and now expose that a little bit more to the street and start to break those numbers out and the impact of that on on these cloud based businesses and how they continue to to grow I think that's interesting so amazon today announced earnings in a broke out AWS 1.56 billion in revenue 256 million dollars in operating profit that's a 17-percent operating profit I have been saying for two or three years now that AWS is far more profitable than people realize everybody calls it a race 2 0.o race 20 race 20 race 20 the guys are say it's a race 20 the guys who can't compete with Amazon's cost structure seventeen percent operating profit is not erased 20 now what Jeff Bezos and Andy Jassy decide to do with that operating profit is a different story they'll pour it back into the business they'll expand their capex because the Amazon is one big lifestyle business for Jeff Bezos so but that's fine but so I have been saying and I've drawn the curves that what essentially Amazon is doing is they're they're taking the old outsourcing marginal economics of outsourcing which was my mess for less as you grow scale as you do more volume your marginal economics actually get worse there's diseconomies of scale the opposite of software and software we learned from Microsoft and the PC era the more volume you do the better your marginal economics and essentially your cost your economic marginal costs go to zero what Amazon is doing is they're taking the outsourcing line the provisioning of services you know technology services infrastructure services servers and storage and they're bringing that they're they're tracking the software curve so that means they're driving costs down lower than any I tea shop on the planet I don't care if the big banks think that they can compete with Amazon on on cost structure a long term they can't in my opinion now they can compete in other ways right you know with proprietary sort of you know value-added IP but on cost amazon google microsoft they are going to have a volume advantage and we're seeing it now in the numbers it's not a coincidence than amazon is seventeen percent AWS operating profits is because it's not a race to 0 they've got better marginal economics and so now does that have to do with service now we've heard a lot about multi-tenant versus multi-instance i think on balance from a pure infrastructure standpoint amazon is going to have better cost structure than service now but companies like service now an Oracle who have differentiable advantage through software it can sell software subscriptions or software licenses in the case of Oracle can make up that cost when my opinions that cost disadvantage in higher margin software and that's exactly what you see with service now I don't think they'll have the marginal economics of Microsoft but it's a great great business model long term yeah and the other two pieces of it that I think are really important and with bezels especially I mean the guy's a visionary and he's making enough money to execute what he wants to do and people don't believe it but they haven't believed it for 20 20 years and he continues to evolve the business and the other thing that still people have been outsourcing their payroll for how long why'd it take so long to start to outsource your IT infrastructure when people been outsourcing payroll forever I mean if you are focused on a particular business you can out execute people trying to do the same thing and that's the other advantage natick service now is they're very focused and I think some of the guests this week's agenda be a general purpose cloud we run our application and we run our application better than anyone else and it oh by the way just so happens that our application is really a platform and there's a whole lot of other applications that you can build on and beyond the ones that we did so I think it's I think it's really good opportunity I kind of like the data point that we heard this week I don't if you picked up on the nuance but several executives at servicenow said that their intelligence says that most customers are saying we want to place most of our workload over time into the public cloud now you could say service now is biased okay emc is gonna say the exact in vmware they can say the exact opposite right ibm's going to say the up no most most of the world is going to be hybrid okay so you got Andy Jassy on one side say the whole world's going to the public cloud you got you know joe tucci and the other end say and the most of the world's going to be hybrid you know how do you square that circle and i think that the growth workloads are very clearly going into the to the public cloud Andy there's no question about that and you know it's just the way numbers work if you got public cloud workloads growing at twenty thirty fifty percent a year and you got a private cloud workloads growing at zero percent a year a two percent a year at some point they're going to catch up right so I think the vast majority of work is going to be done over time in in the public cloud that's not to say everybody's going to you know big do a big switch there's still plenty of applications there they're 20 years old that are going to stay you know behind the four walls of the the data center within a company but the economics of doing that are not going to be as good so you have to have other reason there's got to be whether it's you know really good business value reasons competitive advantage reasons security or compliance compliance i think is up in is a huge one well i mean amazon has great security the issue with amazon is they won't do one offs service now you know we'll go belly to belly with customers and bend over backwards and do things for the enterprise customers that amazon won't this is why you saw when workday launched its analytics service on AWS nobody bought it because they said well i just negotiated an SLA and a security you know deal with you and and we've agreed on the parameters of that now you're saying to access my analytics piece I got to go with Amazon's SLA that's not cool I can't get that by my lawyers forget it it's too hard right so yeah so I think people really kind of need to think about that service now is in an interesting position to be able to do those things for the enterprise that are what Amazon would consider on natural amazon strategy is any color you want as long as it's black let's add things over time that everybody can take advantage of by the way I think that's a great strategy and it's going to it's a long term winning strategy but so the way you compete with Amazon it's interesting somebody tweeted it's it's it's kind of weird to see Dan McGee compare infrastructure-as-a-service from amazon with service now okay yes that's true on the other hand you know from a conceptual standpoint I'm putting stuff in the cloud why not think about it so what does that mean how do you compete with Amazon's ecosystem the way you compete is you have differentiable advantage with IP that allows you to capture margins that reflect the value that you're delivering service now has that I think very clearly you know Oracle has that I'd mentioned Oracle even though they don't have the volume that many of the people have in and there are many many others you know that have niches that Amazon doesn't want to try and it's for cle and it's worth a little specific right it's really it's a good focus on something well i think i'm at salesforce very clearly has that differentiable advantage in may and a work day i mean many many you know companies out there that have that but workdays winning sorry at work days winning but service now is winning you're clearly seeing amazon when the cloud ification thus asif occation of IT is here it's now and it's not going to stop no it's like a stop so we've been here for three days i think we had 45 or so interviews you're fine i'm going to get you with the i won't go bumper sticker because we know you got to fly back to boston so it would be a long drive what's your what's the flag that hangs off the back of the of the year playing your banner as you leave after 40-some odd interviews three days on our third consecutive service now knowledge show so to me it's attacking the productivity problem within organizations which by the way is a whole nother vector of discussion focused our MIT of cube action right you know so that's a whole nother discussion i have concerns about that you know what are we going to do with all this increased productivity we better put it into innovation and we better educate our young people so that they can create you know new value so that's sort of one piece i think the second to me is the innovation on the software platform the developer focus the technology behind service now and the mobile capabilities and emphasis on new tech in on real time very very impressive and then i think the third is the cloud the cloud piece the devops the cloud the the the developer ecosystem adding value for the enterprise big opportunity and I guess that stuff really that that ecosystem to me is my big takeaway of service now knowledge 15 no 15 is that ecosystem development that expansion of the ecosystem that's where this company this community gets its leverage and I think that's a winning formula yeah my takes is a slightly different angle and really just go back to dine are less guest is is people are always chasing innovation for their internal how do I get my own people not necessarily who are building our core products but who are executing our strategy we're how do i get innovation and to me what we've seen so many things in initial specifically is if you simply enable more people to be able to innovate and you lower the barriers for them to try to execute ideas just a simple math by having more people contributing you're going to get more innovation and the other piece that's really important for that is it needs to be a low cost of entry to try and if it fails you need to be able to fast fail and get out so now and you've got all these people in all these departments seeing an opportunity to build a new application that that that saves time it is a little bit more efficient than what they were doing that before you multiply that by hundreds and thousands of people suddenly you're really getting significant improvements in efficiency and met Beth what I think is the most exciting about these cloud baths cloud-based applications the software world in which we live in where the barriers to actually develop things you know a coder lyst a codeless developer is a really exciting opportunity that will enable companies to expose more innovation within their own workforce I think it's for good stuff all right I think we wrap I think we're at I want to thank service now our awesome hosts for this conference will holding this conference creating a great event and having us here now for the for the third year in a row really is a pleasure for us and the cube team to be a part of this Greg Stewart shut up a great job Patrick Leonard Thank You Matthew we hear you back there doing the countdown to thank you awesome awesome job you know as always the entire cube team John my co-host as well John furrier John is getting everything up on on YouTube and on SiliconANGLE SiliconANGLE TV go to SiliconANGLE TV where all the action is go to SiliconANGLE calm kristen nicole and her team or pumping out content Bert Lattimore's on the crowd chat Crouch at net / no 15 great job thank you for all your help and check out Wikibon premium dot Wikibon comm check out all the research will be summarized in this show you know we're always on top of things they're really appreciate everybody you know watching sending in your comments your tweets we're app thanks everybody thank you we will see you next time let's see what's next is a easy world yeah emc world two weeks back here in Vegas so again thanks to everybody in the ServiceNow knowledge community that's a wrap this is dave vellante with Jeff Frick for John furrier we'll see you next time