Three of our anchor businesses, when you combine Pro and Enterprise, that is still a high-growth business and the new add Pro Plus, that’s what allows us, at this scale of 2.52 billion to grow at 24.5%.
Tyler Radke: Thank you.
Operator: We’ll take our next question from Gregg Moskowitz with Mizuho.
Gregg Moskowitz: Thank you very much for taking the question. Bill, getting back to the topic of IT budgets as it relates to ServiceNow broadly, you took a sense of how much of GenAI software spend is incremental today as opposed to perhaps coming from other areas of IT. Thank you.
Bill McDermott: Yes. It’s a really important question, Gregg. I really believe the IT budgets in their own right will go up on a standard rate basis as we’ve seen now for many, many years. The business executives, however, are inserting their will into the Generative AI revolution because the CEO is in a boardroom with her senior team, sitting around a table with the Board of Directors, and they’re like, hey, what are you guys doing on GenAI, and they know now that they got to go into that room with a story because this is a lot like when we had the internet, then we had the iPhone moment, everything went mobile. Everything is going GenAI. It’s just a question of how quickly you get there. So I believe that a lot of the business operating spend will be moved to GenAI technology use cases that serve the business.
And the reason I believe I’m right on that, if you look at great companies, some of them in this quarter like Microsoft and Novartis, so Hitachi Energy or Equinix or IBM, they’re looking at this as, hey, what does this mean to my employees, to my customers, to my partners and they’re very well aware of the fact that inflation is sticky and rates are high, and they’re on their own. They’ve got to deal with this stuff. And the only way to change the game is to rethink the game and move from checkers to chefs and GenAI is now opening up the window for transformational conversations. And that’s why I say we are the AI platform for business transformation, because we’re using technology to transform the business, how can the business run at a lower cost.
They’re asking questions like, why am I on several different leases on-premise and in cloud and why do I have all these systems? I need a system for every 1,000 employees, it’s ridiculous. So they want to rethink things and so I think there’s two things that are going to happen. One, is business budget is going to move into the GenAI category, and it’s not going to take away from the IT spend in the end; and two, there’s going to be real winners and real losers and real winners and real losers has already begun its formation, because if you don’t plant the AI flag in the ground in the next eight months, there’s not going to be an AI flag to put in the ground and ours are getting put in the ground all over the global economy. And the company that I see out there doing extremely well in that regard is what Microsoft is doing with Copilot.
And I see what we are doing with Now Assist AI. And I think it’s the combination of those two players in the enterprise. And obviously, you’ve got the great ones like NVIDIA and so forth that’s building the GPU force, but that is really what I’m seeing. And I’m also super honored this quarter to see IBM really jump in as a friend and a partner with ServiceNow, and we feel the same way about Watson X. And we’re very open all the participants that are making LLMs and they can all integrate with ServiceNow and we’ll own the domain specific to ServiceNow, but we welcome all participants. And I think that’s another unique part of ServiceNow that we’re not interested in shutting anybody out. We’re actually technology capable enough to open up to everybody and that’s really turning on the whole ecosystem in our favor.
So plans are being put in flags in the ground in the Kingdom of Saudi Arabia, all the way to Japan and beyond. We are winning.
Gregg Moskowitz: Perfect. Thanks, Bill.
Bill McDermott: Thank you, Gregg.
Operator: We’ll take our next question from Mark Murphy with JPMorgan.
Gina Mastantuono: Mark?
Operator: I do apologize. It looks like Mark has disconnected. We’ll take our next question from Brad Zelnick with Deutsche Bank.
Brad Zelnick: Great. Thanks so much for taking the question. It’s great to hear all the traction in international. You called out deals in Australia, Italy, Brazil. But I want to focus, Bill, on what you just mentioned about the Kingdom of Saudi Arabia, where in your press release, you called out a $500 million investment in that market given obviously it’s a massive, massive opportunity. Gina, can you double-click into the $500 million investment you’re making over what time period where it lands on the financials? And maybe more generally, how should we think about your strategic use of capital and CapEx for these types of deals? Thanks.
Gina Mastantuono: Brad, thanks so much for the question. So, we’re really excited about the investment in Saudi. And rest assured, that $500 million is a long-term investment over a long horizon period. It will be in — most of that investment is in data center, so it will be in cost of sales, but you’ll — again, we manage our margin very tightly. And the growth that we’re from that investment is huge. The opportunity that we see in Riyadh and Saudi, NEOM, is great. And Bill spent a nice time there at the LEAP Conference, and we’re really excited about really pulling our technology to really help that society grow and become a digital-first economy. And they’re leaning in very heavy with ServiceNow and are really excited about our product portfolio, not only our gen AI, but really the breadth of the entirety of the portfolio.
So, it will be within our CapEx guide that you have always seen, it’s not on top of, and we’re just really excited about planning flags more in the Middle East.
Brad Sills: Awesome. Thanks for the color.
Gina Mastantuono: Thanks Brad.
Operator: And Mark Murphy has dialed back in, we will go to Mark Murphy with JPMorgan.
Mark Murphy: Thank you. Make sure to not hang-up the phone this time. Bill, I’m curious how you’re looking at the onboarding of talent into the ServiceNow ecosystem because we’re being told that the demand for ServiceNow consultants, is that a multiyear high. We’re wondering if the economy can create those jobs quickly enough to keep up with the bookings that you’re driving. And just also, is there a pivot point coming where you would want to crank up your own hiring engine within ServiceNow to keep up with the top line growth?
Bill McDermott: Yes. First of all, Mark, thank you very much. Incidentally, my compliments on the research that you put out. I read your e-mail this morning and you called the quarter exactly as it was. So, super well done on your part, not surprising considering the great company you work for. I will give you a couple of things. Leadership is everything. We just hired a great leader who is leading our training initiatives globally, both internally and externally, world renowned and she is going to drive not only a knowledge revolution within our own company but also within the ecosystem. And no, we’re not going to build a services company here. We’re very comfortable with the ecosystem and building out the ecosystem. We made a commitment with RiseUp with ServiceNow that we have 1 million people trained around the world on the ServiceNow platform, and we’re well on our way to achieving that goal.
I talked about Platformation as one company that probably not everybody on this call ever heard of, but you know all the big ones, and they’re all investing huge human capital contributions and some of them have literally multi, multibillion business plans built with ServiceNow. So, we really like the fact that we can impact the customers’ value case with our ServiceNow Six Sigma knowledge team and then we can extend the feet on the street through the ecosystem and also the trust that we have with the ecosystem where they know we’re not trying to duplicate their business models on the contrary. We need them to invest in their business models to move our ambition to be the defining one forward. So it’s a really good question actually. And you are right, we’re working really hard at it, but it’s also true for you to know that the partners see the opportunity like never before.
and they’re doubling down on ServiceNow. So we think we got a good formed strategy, and we think that we are going to be able to cover this global economy, and we’re moving at warp speed to do so.
Mark Murphy: Thank you so much. Really appreciate it.
Bill McDermott: Thank you, Mark.
Operator: We’ll take our next question from Samad Samana with Jefferies.
Samad Samana: Hi. Good morning. Thanks for taking my question.
Gina Mastantuono: Hi, Samad.
Samad Samana: Hey. How are you? I hope everybody is doing well. Thank you as always for squeezing me in. I guess, Bill, I wanted to follow up a little bit to Mark’s question because sales and marketing hiring in the first quarter was basically as many heads as you did the last three quarters of 2023. And I know there’s some seasonality to it, but is that you guys ramping hiring back up as you see more demand? Is it a certain type of salesperson that you need as you think of more AI-driven sales? Just maybe help us understand what you saw in 1Q and maybe the philosophy around it.
Bill McDermott: Yeah. Samad, we see the biggest opportunity we’ve ever seen. And we know the Gen AI revolution is real, and we’re doubling down. What you’re seeing our investments are very focused on building the best software in the world, and selling the best software in the world. So we have great leadership on both the engineering side and the go-to-market side and we’re going to have more clarity of focus in the way we drive the go-to-market. Now, we’re getting to size and scale the calls for that. So there are various motions to market that will have single line of sight accountability and responsibility for a number and the accountability can’t be stressed highly enough because we need leaders that can run businesses here.
And that’s what really big leaders want to do anyway. And Gina rightfully pointed out, we don’t do anything without the margin in mind. So we have a pipeline. We manage the whole company on something we call the CEO of dashboard. We are in real time with a rolling four quarter average pipe. We have our Gen AI use cases that are against that pipe based on the stage of the sales cycle. So we know how many we can afford to hire based on probability of closure within 1% to 2%. That is how we drive the financial performance of the company and how many people we let in the door. I do want to stress because we run a clean platform here and we run a Gen AI company here. That’s our absolute commitment. We are going to run a super efficient company. So on the G&A side of the equation, we continue to be lean and as we get bigger as a percent of revenue, that will drop even further.
So I think you’re going to like that. And I think a lot of companies now are showing up here at our doorstep, they want to see the Now on Now story because they’re like, how is it that you could have one financial system for thousands and thousands and one HR system and one CRM system, when my company has hundreds and I can’t even keep track of them all. And I think a lot of what I’m trying to explain to you is we’re in the beginning stages of the end of one era and the beginning of another.
Gina Mastantuono: And I would just add to that, Samad.
Samad Samana: Yeah. Yeah.
Gina Mastantuono: I would just add that last year, might have looked like we slowed down sales and marketing, but there’s a lot in that number, and we talked about this, a lot of operations ops. And we actually were very focused even last year on continuing to hire quota-bearing feet on the street sales folks. We’re entering — we entered 2024 with the higher — the highest increase in ramp reps that we have in a while. So yes, we will be reaccelerating. We feel really good about pipe. We feel really good about demand. And so — but I want to make clear that we didn’t stop hiring salespeople feet on the street last year. We continue to hire and we will continue to do that, because our pipe looks strong and demand looks great.
