but cute at servicenow knowledge 14 is sponsored by service now here are your hosts Dave vellante and Jeff Creek we're back hi everybody this is Dave vellante with Jeff Frick we're here live at knowledge 14 this is service now it's big customer event about 6,600 people up from about four thousand last year as we've been saying it's kind of tracking the growth of service now which has been pretty meteoric we heard from Mike scarpelli the CFO Frank's loot men they're really doubling down and it's exciting to see we're here in San Francisco where all the action is Jeffrey Moore is here author consultant pundits all-around smart guy cube alum greatly again thank you here so um so you're speaking at the CIO decisions i love the fact that they got so many CIOs here who real CIA a lot of times these conferences you get to you know the infrastructure guys but so what's the vibe like over there well you know it's kind of cool because if you think about service now and you go back to say 10 years this was all about how to make IT more productive around the ITIL model and you know and you'd use these automated services to do this stuff what's happening and Frank nailed it in the keynote he said look this infrastructure can be turned inside out and you can service enable the entire enterprise not just IT need a service enterprise you know HR you can decision a marketing eight-day any other shared service you can turn into a bunch of services that you can sort of call in and use service now as a platform so so the cios it was all about well that that's a different that's a different vision and so how do we map from the old way of sort of thinking about this is an internal productivity facility to this new way of saying no this is an enterprise enablement platform that's a big that's a big move a little bit like Salesforce going to force calm that same flavor yes sir frank's keynote was talking about how the CIO has to become you know more business savvy and of course we've heard that a lot for years and years and years but in fact a number of the folks that we've had on here at the service now are actually of that hill maybe they came from the business but most CIOs didn't necessarily come from the business they weren't P&L managers they weren't running sales do you see that changing yeah I think what happened in the 20th century was IT was sufficiently complex that frankly you had to be a technical person to do it it just it was just really hard and and yes you needed business consultants but the end of the day you needed ten percent business consultants and ninety percent technical people I think we've come a long way since then in the next generation of stuff is more around systems of engagement these things that that communicate with each other as opposed to systems of record and so the profile the winning IT strategy is migrating from help us run information about our business in the back office to help us actually re-engineer the dynamics of our business in the world in the present and that's like going from from data to behavior them it's a big we call it going from systems of record to systems of engagement it's a big show and is that that transition in your mind is very disruptive so what happens to all those purveyors and buyers of systems of engagement to they morph into obsessive record do they morph into systems of engagement do they just get blown away no it's interesting so so so first of all you're never going to get rid of your systems of record but at the margin we've probably extracted most of the lifetime value from that investment already so you need to maintain them and so the industry is consolidating a round of an anchor set of vendors who we trust to do that but the growth is going to be like if you look at systems of engagement we might have gotten five percent of the lifetime value there so at their margin if you have a dollar to spend people want to spend it in there so the challenge of being an incumbent is I'm not going to lose my base but man the growth is happening over here so the real challenge for that for the incumbent vendors is how can i participate in the new world and still maintain my relationships in the old world whereas the new guys are just coming and saying i don't i'll leave the old world of you guys i just want to play over here i can get your take on the structure of the IT business is you've observed as have i sort of these disruptions and these changes over time so obviously we went from being framed at pc you saw that the competitive line started to get more disintegrated yes i could use that that term a competition occurred on those I see that Intel's ascendancy in Microsoft and Oracle the best database companies the emc was the storage company and everything was sort of you know siloed and but leadership the leadership matrix has largely stayed intact I mean even IBM and okay HP said its ends up and down but it's largely stayed intact do you see the cloud changing that fundamentally changing the economic yes I think yes I think what happened is so in the client server error we did we built the stack what you're just described and every layer of the stack had a leader now I think since 2000 y2k that stack is being compressed meaning there are fewer and fewer vendors that are still in the in that in that leadership cadre and as we go to like cloud and computing the service you start saying well yeah i still have cisco in there i still have IBM in there but maybe i'm buying them as a service rather than as a set of equipment so you kind of can feel that world just I think compressing this look is the right word and where is the experimentation the opportunity to sort of find new places to go to it's very much in this world outboard of the IT data center where it it is about engaging engaging with your customer engaging with your employee engaging with your supply chain and using mobile things and social and you know analytics and cloud and all these new technologies the freedom to do that is is actually outboard of the of the old style I show you what you described as sort of an oligopoly and you've got these big whales and I've always asking you know guys who follow this it are we going to see somebody to disrupt that Amazon is the obvious you have to go to them a three billion dollar you know company growing at sixty percent a year with marginal economics of services that look like software yep but at the same time it's okay they've got this huge lead but it doesn't just make sense to me that it's sustainable I mean because hardware economics never will go to 0 so you would think that somebody was almost like the IBM early pc days remember IBM heavily yep we're domin to play that's kind of what kind of way amazon is now do you do you see that you see more competition from amazon why is it that they don't have direct competition so the less of the last book i wrote in the last the thing i've been working on most recently is around why is it so hard for the established incumbents to catch the next wave and the problem is so you look at why amazon's why is Amazon so unopposed in many of its initiatives well their business model in the economic model is completely divorced from the incumbent model and so you look at the incumbent in there going it's not that I don't see what the guys are doing I get what they're doing I just don't see how I can get my investors or my my whole infrastructure on to that new place in my example that was code at so you know Antonio Perez came from HP he knew what he was getting into he understood digital everybody at Kodak understood digital but they couldn't get to the other place so in this it would call it escape velocity how do you free yourself from your own paths and you you really do have to take a pretty dramatic approach to it and I think by the way i think i'm looking at microsoft in particular i think it I think Microsoft's going to give a very very big run at doing it and but I think that they're still more the exception than the rule you would wish that every one of those vendors would say look you know because every CIO here if any of those vendors came to him and said hey we're going to really try to play here will you help they'd say yes they don't want to change their relationships but but we get trapped in these business models and then you sort of grind and you grind and grind and after a while it's like well man you've just ground yourself to do I owe the classic label Christensen right individuals dilemma and it also makes a question is d said David's been the same characters kind of changing companies had not Jeff Bezos and Amazon come in with a completely different model to drive cloud with the other people who still has to transfer so they want to give credit to you want to bet it to be so so you want to give credit to Benioff by the way Benioff has been has been the kind of prow of a ship that brings in the illusory at work day brings in netsuite brings in service service now you know so the software-as-a-service thing is coming in at one level and remember if you were an on-premise guy it's very very how many years did did SI p commit an enormous amount of money to say we're going to have a great cloud offering and it just it's so hard so so it is so and then you're looking now at this sort of this next layer of collaborative IT and you're seeing box and octant hang all these cool thing and analytics and splunk consumer logic and all these companies going really I mean I you know I mean if your fear of my age is like okay you have a t-shirt they got love to you think I'm a teacher but but but the point is this free space and they're saying there's these cool problems to solve we're not encumbered by any of the legacy we're going to race ahead and so if you're a CIO well we spent most of our time with the cios today was ok i have established set of relationships here i'm not going to abandon them but at the margin i need them to help me think about the future I thought these really start sparkly new startups some i'm sure not going to exist next year but some are going to be the leaders so how play that game right now and and the pressure it's putting on the IT organization is the people I know that are good at this are not the people that are good at this and so how do I so we had to talk about talent and how do you manage and how do you create career paths and and is it or do you have a infrastructure officer vs an innovation office I'm it was all around that same prob right and then oh by the way there's Hadoop and mobile and big data and some of these other just open source innovations that are being just thrown all these guys played it is so from a technology plate from a technology play if you're technologists it's like bring it on right but I think the interesting thing is and most of my career aighty was about the business so you ran a business and you had IT systems which gave you information about your business what's happened in the last 15 years is that more and more sectors of the economy i T is becoming the business so you saw what happened the newspapers in facilitate with IT isn't about the newspaper business IT is displacing the newspaper business Google is displaced in the media business amazon is displacing retail you know mobile banking is displacing banking Airbnb uber I mean this so there we have the taxi guys are worried them it and so you start saying it isn't IT isn't about the business it's a digital world and and so all of us and that was it i think that was probably at the core of the discussion so which cio am i what do I have permission to be would do my colleagues get this you know am I competent to do it if they do I mean you've talked about this a lot and you've given a number of examples so so was nicked car just dead wrong in 2003 or just to a narrow it is to keep what he was saying I believe is that systems of record okay are dead I think at that time by the way it wasn't obvious there was anything else because it no serious i can remember to you know the whole venture community kind of abandoned itv4 about researcher ivan on 101 yeah it was and even in the end even in the physical infrastructure there's still the idea is the basis of the competitive and about the reporting system yeah and i think this issue about so i think there's still a few businesses we're really IT still is about the business and you know what you can kind of stick with whatever you were doing you'll be okay but if your business is under an existential threat meaning the new IT model eviscerates your business model which arguably you could say all those both those incumbent stack vendors you know I mean cloud does eviscerate the on-premise hardware data center business model which was the fundamental foundation of IT as I knew it for all my business career and now all this it's like holy how do i how do i how do I deal with it so we talk about Amazon as a potential you know new you know big whale Salesforce is obviously he's got it but they've been around since 99 there's going to be exception mm-hmm proves the rule I don't maybe a service now or a workday you know we'll see if this market is big enough it looks like it it might be what often happens is they these guys let's get gobbled up or Larry Ellison writes a check you say these to denigrate people who write write checks not code I think the biggest matter and they got such mass never was afraid to reinvent himself change the game change the dynamics of the industry so do you think we will see a another big player and where will that comfort will it be the SAS guys will it be the sum of the guys out of the hadoop world what I don't think it will so here here's what I don't think will work I don't think you can be an established incumbent vendor under this compression power and write a check and get yourself back I think what happens when you write a check if you just bring a hot property into cold molecules and it loses its exactly exactly so I don't think that will work I think if you want to be one of these incumbents and succeed over here you have to actually pull part of your own DNA and capability and we literally just jump and then I think you can acquire it to it to build a thing there but what Larry did was he consolidate he basically was the first guy to figure out Nick Carr is right I need to buy up all the properties yep and brother George ball and run a maintenance business which by the way came to read and Georgia computer associates had that play up in the eighties it's the same play with this is a different plan well I love what you say in emc is an interesting one to watch the way to chi is setting up this Federation with pivotal and VMware you know who see we'll see what happens with the quarry NC and I think VI 3 of 8 yeah I think that that is I mean VMware's one of the wonderful examples of think we're a company did not cause the hot molecules become the cold molecules the thing you wonder there though is it feels a little bit like a like a holding company if you will and so and by the way vmware is in a curious tweener right like they kind of were the most they made the old stack incredibly productive so in some sense they can feel like they're part of the old world right they're probably the newest kid on the old world but then you think well yeah but I want to look at their plan now they want to be into software-defined networks they wanted me to software-defined data centers they definitely want to play over here and what it's in this case so state partners Wow one could argue that that was it because of what big in the cloud virtualize computing absolutely absolutely so what're you working on these days that's exciting well so that I think this issue of working with management teams to say okay look this is a self-imposed exile that we're putting ourselves under you know we get it i'll call it the Kodak problem because I don't want to talk about anybody in high tech specifically at the moment but the point is every management team in the established vendor group puts itself on a self imposed discipline to make you know certain kinds of eps things certain kinds of growth you know whatever it is the expectations of their investors and you look at the situation you say guys that is a slope glide path to extinction we all know that and by the way off the record they know it's no it's not that that is this is not a failure of it like this is a failure of will so then the question is well so how do you negotiate a different path and part of it is you have to make you have you have to be able to tell a story of your investors part of it is you have to negotiate a different operating model inside the company and what they've done so far is they said well okay we've got our established businesses and we've got our innovative businesses and we know enough to keep them apart so that part is not the problem and they actually come up with cool stuff the the moment of truth is when can you scale any of these innovative businesses to compete to actually be a material part of your historical portfolio meaning in my terminology at least ten percent of your total revenue going to twenty percent in what happens in that journey is it a key point you have to draw on the resources of your established business and all the people that make their living and they're compensated on getting the next quarter in the next quarter go guys I can't make the quarter and do this and you've got it you've got to find a way to say you know if we don't figure out a way to pull some of that resource over here and play our next hand will invent everything in the world but we'll never get it to scale and so there's there's a bunch of stuff around business model planning and then Investor Relations organizational development it's all around saying and the key there's two key ideas idea number one is it's a go-to-market problem not an RD problem you do not have an innovation problem you can't get your thing to market and the second cool idea is you can only do one of the time and everybody says well but give have the risk to so high you got a three or four or five of these things maybe want to work it's like know the sacrifice is so great if you put two or more horses in the race people people won't even run so the other one that's a focus and don't it's ok not to make the quarter that's like on American looking like michael dunn right i mean that's obsessively what he's hoping to be able to do and i think one of the reasons you see people go private is to say i can't play this game bye-bye normal public company protocol i mean i like to but i can't get there from here now i actually don't think every company ought to have to go private to do this but i think they do have to change their playboys all right Jeff we have to leave it there hey great to see you thank you very much me feel smarter just hanging out with you right there buddy we'll be right back after this is the cube you