Bloomberg Audio Studios, podcasts, radio news. Well, I'm thrilled to welcome Bill McDermott, Chairman CEO of Service Now. Hot of the heels of your earnings, which, let's just say it, beat expectations across the board. You're raising your forecast. We've got analysts raising price targets left, right and center, and in particular they seem to love the current remaining performance obligations. Why is there such resilience? What's driving this?
Bill? It's all about AI.
And thank you first of all for acknowledging the performance. I know all the teammates of Service Now will be honored by very nice remarks. AI has become the new UI, and we have that platform that is the leading enterprise platform in the world, which provides a single pane of glass that connects any agent, any model, any cloud, and any data source.
To the platform.
So the companies that we serve can run a lot better.
And it's an AI world and we're here to win.
It told us about the kind of customers. Are they global in nature? What kind of industry groups are particularly looking for your help?
Right now?
Yeah, these are the most significant brands in the world. Brands like Nvidia who is live on our AI platform, Starbucks, Exxon Mobile Standard chartered into it, the state of California, Banco do Nordeste do Brasil, very interesting one, al Raji Group, Burla Group, Tokyo Gas, a mercant company.
So it's truly a global situation.
And what's really happened and I've tried to be very clear on this. We don't live in a cloud SaaS neighborhood. We actually invented our own space in this market. That highly differentiates Service Now because AI work is cross functional, it goes across functions, and today everyone's selling agents for departments.
But the problem is eighty.
Five percent of the digital transformation projects out there don't deliver a positive ROI today because of integration problems. So if you just throw agents in a department, you're going to have a bigger mess. And that's why service Now takes all your investments, integrates it into one beautiful platform and gives you an experience for your people, your customers, and your network that drives performance.
And that's what it's all about.
But Bill, who are you kicking out? Who are you replacing? And is it existential to those that you are replacing.
Yeah, it's a really important question because Agenic AI is an extinction level event for traditional CRM systems of record, and the reason for that is ninety percent of the market we'll move to a system of action with a front end or autonomous engine by twenty twenty nine, and we are that provide We handle the order management process with a world class configure, price and quote, all powered by AI.
We fulfill and we service the.
Customer all on one AI platform, and that's the only one in the world like it, and that's what the world wants.
To meet that demand, you need the infrastructure. We understand that you've just secured a new cloud deal about four billion dollars. Can you tell us who you've gone with? We understand maybe it's a Google Cloud deal.
Yeah.
We have great relationships with all of the hyperscalers and they're all fantastic companies and they're all going to do amazingly well, and our customers rely on them, and some
do better in certain geographies than others. Some have certain services perhaps that are stronger than others, but they're all some of the greatest companies ever, and so we integrate with all of them and we'll move workloads for our customers to all of them, and the customer if they want to run service now in those cloud formations, they may do so.
If they want us to connect to.
Their data sources, of course we do that, or any other data source and any other cloud. And so we're the open architecture that makes it all come together and work, and Caroline, that's exactly what the world needs.
Okay, I'm interested in what the world needs. Also is sort of clarity on reskilling, because I'm just looking at what you're projecting one hundred million dollars in projecting cost savings for this year alone. Is that about replacing people with the AI the productivity. If you're hiring less, what does that mean when you start to scale that out across the world.
Well, what we're doing is we're slowing down the hiring in jobs that are quite frankly soul crushing jobs.
I mean, just think about like it support.
You know, ninety seven percent of standard software automatically generated by AI now, and the pressure on supporting function and people has been cut in half. Customer support, eighty percent of the customer inquiries in cases now are fully managed by agentic AI. And think about security and risk management in real time. All the patch work and the change management is done by agents now. And the same is true go to market. You know, think about people that
talk to customers. There's no prep work anymore. Their AI teammate is doing that for them at service now, So the speed of the company has accelerated dramatically. The supporting cast of the soul crushing work is now being done by agents. They work hard twenty four by seven. You don't have to pay them, and they don't need any lunch, and they don't have any healthcare benefits, so they're very affordable and that really complements our workforce. So we're still hiring,
but we're hiring less in those supporting functions. And I suppose that's going to happen to all well run companies. And I say that because we now need to think about how you've run a corporation on service Now, how you change the w where you run your business processes.
It could be ordered a cash, procure to pay.
Hire to retire, designed to product. These are all processes that go across functions and we need to have those twentieth century ORG charts obliterated.
We now need to work in teams.
Teams need to work across processes, and the agents need to be the best friend to humans. And if we do this right, the GDP of the world will go up. Companies will outperform not just on the op X, cost takeout and productivity, but they will be building new horizons, new business models, and new dreams on the service now platform. And we're excited.
Someone else is excited right now about AI, and it's the administration. We've got the new AI Action pan.
What did you make of it?
What do you think about perhaps the light to touch in terms of regulation.
I think it's outstanding. We need less regulation and more innovation. And I think the President and the administration are doing a very good job on AI. They dedicated a whole symposium to it yesterday and I fully support it. You know, government has to run more efficiently, more transparently, with greater accountability, and that's what the service now platform has been doing in the public sector, especially in the US for many
years now. And now that we'll bring an AI to the forefront, we're just going to accelerate the pace in getting behind the President's agenda and do even better work. And I think this is going to happen in governments around the world. You know, I travel to countries all the time, and when I meet them, they all want to understand what the US government is doing. They're very interested in this AI movement, the efficiency movement, the effectiveness
of technology. So I think it's a pace setting move and I'm fully behind it.
Within that, of course, you mentioned how you're winning contracts with the government of the State of California. How has federal spending been within service now? How you looking at that as an opportunity to scale because many had worried that they were shutting down perhaps some of the services to you.
And yeah, of course, I mean if a department shuts down, obviously that's not great. But at the same time, we got six net new logos within the government in the current quarter. And you also have state and local governments too, So yes, we're winning in federal but we also have like the North Carolina Department of Transportation for example, the
State of California. They're doing many, many things with this AI platform for business transformation because they have to give the citizens better service, they have to lower their cost base, they have to do a lot more with less head count, and Frankly, the unreported truth of the matter is there's millions of technically related jobs in the global economy that
are unfilled today, and AI needs to fill those jobs. Similarly, we need to train, certify, and get the workforce ready for this AI revolution because it will not stop, it will intensify greatly, and we can't leave people behind. So we've developed service Now University where we're training three million people this year. We have rise Up where we rise up with governments and communities around the world, especially those that don't have access to some.
Of these services.
And we're not even charging for this because we have a big heart, a big culture, and we want to be the defining enterprise software company the twenty first century, and this is how we intend to do it. We will continue the pace of innovation, we will win an AI and our company will set the standard for all other enterprise participants bill.
With tackling talent. But is there any other bottleneck or anything else that perhaps limits the growth in the business that clearly is pretty stellar right now? Is it macro environment? Is it certainty? Is it interest rates?
Imagination is the limit? So we have to have dream big people. And similarly, we need everybody in the workforce fully engaged, not just in our company, but in every company. You can't leave people behind because right now, if I look at the biggest challenge with AI, AI is magic. It's fantastic, but a small percentage of the workforce today understands it, knows how to use it, and as being
encouraged to prosper with it. And so a lot of times the headlines read AI as a negative and as a concern, And I look at AI as the best friend to humans and the best teammate a human ever had, because it'll give you access to knowledge and information that you would have never had without AI, and so having that can make everybody better. And we have to lift these companies up, and we have to have every department in these companies work together, collaborate together with AI, work
with AI to transform. So the human element is the biggest limitation all the other things, alike the weather. You know, some days the weather's great, some days it's not so sunny, And you've got to operate in all environments.
And we're ready for that. Old Weather Company